TIDMJPR
RNS Number : 0659Z
Johnston Press PLC
29 August 2018
Johnston Press plc
Interim unaudited results for the 26 week period ended 30 June
2018
Johnston Press plc and its subsidiaries ('the Group'), (LSE:
JPR), announces its results for the 26 week period ended 30 June
2018.
Operational Highlights(1)
-- A strong performance from the i newspaper, which saw a 61.0%
increase in adjusted EBITDA on H1 2017 to GBP6.0m(2) , has helped
to mitigate a broader decline in revenues.
-- The Group has posted a statutory operating profit of GBP7.4m
compared to GBP4.9m in the same period last year while delivering
an adjusted EBITDA of GBP19m at a margin of 20.4%.
-- Consistent with pressures seen across the industry, adjusted
advertising revenues from continuing operations have fallen by
15.0% with revenue from classified advertising showing a decline of
28.5% compared to the same period last year.
-- Digital audiences grew to a record 27.3m average unique users
per month. However, the effects of algorithm and news feed changes
by Google and Facebook contributed to total digital advertising
revenues declining by 7.4% (down 4.3% excluding classifieds) on H1
2017 to GBP12.2m.
-- Adjusted newspaper sales circulation revenues have proven
resilient, falling by 1.7% on H1 2017 to GBP38.9m, with price rises
broadly off-setting the impact of circulation declines.
-- The Group's adjusted net debt position(3) , which excludes
mark-to-market gains on our Bonds, is GBP203.2m - with interest
payments consuming GBP9.5m of cash in the period.
Financial Highlights
Statutory results for the Group:
-- Total revenue was GBP93.0m (H1 2017: GBP103.3m) down 10.0%
-- Operating profit was GBP7.4m (H1 2017: GBP4.9m) up 50.1%
-- Profit before tax was GBP6.2m (H1 2017: loss before tax of
GBP10.2m) includes a non-cash impairment of GBP3.5m (H1 2017:
GBP4.5m) and mark-to-market gain on the Bond of GBP8.8m (H1 2017:
loss of GBP4.4m)
Adjusted(1) results for the Group:
-- Total adjusted revenue was GBP93.0m (H1 2017: GBP101.3m) down
8.2%, (down 4.1% excluding classifieds)
-- Adjusted operating profit was GBP16.6m (H1 2017: GBP16.2m) up 2.4%
-- Adjusted Group EBITDA was GBP19.0m (H1 2017: GBP19.7m) down 3.7%
-- Adjusted EBITDA margin of 20.4% (H1 2017: 19.5%)
-- Adjusted net debt(3) was GBP203.2m at 30 June 2018 (as at 30 December 2017: GBP195.9m)
Strategic Review
-- The Strategic Review is ongoing, and we will provide an update as soon as possible.
Commenting on the results, Chief Executive Officer David King
said:
"There are two sets of issues affecting Johnston Press. The
first is the Group's historical debts, including its pension
obligations, which continue to weigh on our Balance Sheet. The
second is the tough market conditions affecting the performance of
our newspapers and websites. However, our resilient performance
allowed us to generate an operating profit of GBP7.4m in the
period, up from GBP4.9m in H1 2017.
"The strong performance of the i demonstrates that it is
possible to grow a newspaper brand, despite the prevailing
headwinds. The i grew its circulation revenues by 17% and its
advertising revenues by 20% compared to H1 2017. The digital
audience for inews.com grew to 4.2m in June, up from 1.3m in
December last year.
"The market backdrop for regional/local newspapers is extremely
difficult, as evidenced by the 15% drop in our adjusted advertising
revenues from H1 2017. We have continued to make progress growing
digital audiences to a record 27.3m average unique users per month.
However, the continued challenges posed by Google and Facebook,
seen most recently through algorithm and news feed changes, has
contributed to total digital revenue decline, while Balance Sheet
constraints has restricted the Group's ability to invest, and
counter these effects. We will engage with the Cairncross Review
into the future of high quality journalism with a view to helping
address the challenges faced by local news organisations in
monetising its content.
"As part of the Strategic Review, the Group continues to explore
its options for the refinancing or restructuring of the Group's
debt but, as yet, no decisions have been made nor agreements
reached. We will provide an update as soon as possible."
GBP'm Continuing Operations Continuing Operations
- Statutory - Adjusted(1)
26 weeks ended: 30 June % change(4) 30 June Re-stated(6) % change(4)
2018 2018
1 July 1 July
2017 2017
======== ======== ============ ======== ============= ============
Total revenue (combined
print and digital) - Group
(5) 93.0 103.3 (10.0%) 93.0 101.3 (8.2%)
======== ======== ============ ======== ============= ============
Total advertising revenue
(combined print and digital)
- Group 43.2 52.7 (17.8%) 43.2 50.8 (15.0%)
======== ======== ============ ======== ============= ============
Total advertising revenue
(combined print and digital)
- the i 17.2 14.5 18.3% 17.2 14.5 18.3%
======== ======== ============ ======== ============= ============
Print advertising
(ex classifieds) 21.4 25.3 (15.4%) 21.4 23.8 (10.0%)
======== ======== ============ ======== ============= ============
Digital advertising(,)
(ex classifieds) 9.7 10.0 (3.1%) 9.7 10.1 (4.3%)
======== ======== ============ ======== ============= ============
Circulation revenue 38.9 39.6 (1.9%) 38.9 39.6 (1.7%)
======== ======== ============ ======== ============= ============
Contract Print revenue 6.6 6.9 (3.2%) 6.6 6.9 (3.2%)
======== ======== ============ ======== ============= ============
Operating profit 7.4 4.9 50.1% 16.6 16.2 2.4%
======== ======== ============ ======== ============= ============
EBITDA - Group incl the
i 19.0 19.7 (3.7%)
======== ======== ============ ======== ============= ============
EBITDA - the i(2) 6.0 3.7 61.0%
======== ======== ============ ======== ============= ============
EBITDA margin - Group incl
the i 20.4% 19.5% n/a
======== ======== ============ ======== ============= ============
Profit/(loss) before tax 6.2 (10.2) - 7.1 6.7 5.7%
======== ======== ============ ======== ============= ============
Basic earnings/(loss) per
share 3.6 (5.4) - 3.9 5.1 (23.1%)
======== ======== ============ ======== ============= ============
Net Debt (3) 203.2 191.7 (6.0%)
======== ======== ============ ======== ============= ============
1 The results are presented on a continuing adjusted basis which exclude
the following items: mark-to-market movement on the Bonds, impairment
of intangible and tangible assets, restructuring costs, strategic review
costs, items related to the defined benefit pension plan, share based
payment costs, trading and write downs relating to the closure and disposal
of titles and digital operations, one-off legal and acquisition costs
and disposal gains.
2 No corporate costs have been allocated to the i for the purposes of
the results presentation.
3 Net debt is a non-statutory term presented to show the Group's borrowings
net of cash equivalents and Bonds fair value movements and includes finance
leases. Adjusted net debt is stated excluding fair value mark-to-market
valuation adjustments on the Bonds.
4 The % change variance has been calculated based on unrounded numbers.
5 Adjusted Classified advertising (print and digital) and other advertising
revenue for the period is GBP12.1m (H1 2017: GBP16.9m), a decline of
28.5% and represented 13.0% of total adjusted revenue in H1 2018 (H1
2017: 16.7%).
6 Prior period comparative revenue has been restated to adjust out amounts
relating to the Yorkshire Metro closed during 2018. This ensures that
adjusted results for H1 2018 and both prior periods are presented on
a consistent basis, including only the operations of the Group that are
continuing from 30 June 2018.
Statutory and adjusted basis
The statutory results are for the Group and include closed
titles and businesses, exceptional items, asset impairment and
mark-to-market movements on the Group's Bonds. The adjusted
measures represent trading results before adjusting items which are
defined in the Alternative Performance Measures section. The
Directors present this supplemental financial information to
provide a consistent view on the underlying trading of the
Group.
The adjusted figures are not a financial measure defined or
specified in the applicable financial reporting framework, and
therefore may not be comparable to similar measures presented by
other entities. When reviewing and selecting these adjusting items,
the Directors considered the guidelines issued by the European
Securities and Markets Authority ('ESMA'). A reconciliation of the
statutory to adjusted figures is provided within the Financial
Review and within the Adjusted Performance Measures section.
Forward-looking statements
The report contains forward looking statements. Although the
Group believes that the expectation reflected in these forward-
looking statements are reasonable, it can give no assurance that
the expectations will prove to have been correct. Due to the
inherent uncertainties, including both economic and business risk
factors underlying such forward looking information, actual results
may differ materially from those expressed or implied by these
forward looking statements. The Group undertakes no obligation to
update any forward-looking statements, whether as a result of new
information, future events, or otherwise.
Market abuse regulation
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
For more information, contact:
Johnston Press plc
David King, CEO 020 7612 2600
Panmure Gordon
Dominic Morley
Charles Leigh-Pemberton 020 7886 2500
Liberum
Neil Patel 020 3100 2000
Edelman
Alex Simmons
Ben Fenton 020 3047 2000
Johnston Press will host a conference call for institutional
investors and analysts this morning at 9.30am (GMT). The
presentation will be available through our partner Arkadin
(https://event.on24.com/wcc/r/1823919-1/9D2D293F62993577FD1EFD5473E98289).
To dial in to the conference call, participants should dial:
United Kingdom Toll-Free: No: 08003589473
PIN: 87374769#
United Kingdom Toll: No: +44 3333000804
PIN: 87374769#
Johnston Press Legal Entity Identifier: 213800JFIBCR4LGUA242
About Johnston Press
Johnston Press is a leading multimedia business with a vibrant
mix of news brands that reach national, regional and local
audiences. We provide news and information services to local and
regional communities through our extensive portfolio of hundreds of
publications and websites.
Sharing information and opinion remains at the heart of what we
do and our titles, which include iconic publications such as the i
newspaper, The Scotsman, The Yorkshire Post and News Letter in
Northern Ireland are read via traditional print, online platforms
and mobile devices by an average of 39.5(1) million people every
month.
We are experts in combining national reach with local targeting
and are better equipped than ever to help advertisers tell their
stories, too, through our trusted platforms.
(1)Total average audience consists of 27.3m unique users (H1
2017: 26.5m) and print audience of 12.2m (H1 2017: 13.7m).
FINANCIAL REVIEW
Introduction
This Financial Review provides commentary on the Group's
Statutory and Adjusted (Alternative Performance Measures or "APMs")
results for the 26 week period ended 30 June 2018 (H1 2017: 26 week
period ended 1 July 2017).
Strategic Review
The Group's net debt (excluding mark-to-market) at period end
was GBP203.2m. The Group's GBP220.0m 8.625% high yield bonds (the
'Bonds'), which become due for repayment on 1 June 2019, have been
classified as current in the 2018 interim report. The Group also
operates a defined benefit pension scheme, which was closed to
future accrual on 30 June 2010. At 30 June 2018 it had a net
deficit of GBP40.7m.
The Strategic Review process continues to be a key focus for the
Group. The impact of this matter on the Directors' determination of
the appropriateness of preparing the 2018 interim financial
statements on a going concern basis, and their review of the
Group's viability over the medium term is discussed in the
'Liquidity and going concern' section and the 'Viability Statement'
section.
Basis of presentation of results
The statutory results are presented for the continuing Group.
The East Anglia and East Midlands titles, disposed of in January
2017 and the Yorkshire Metro title publishing contract terminated
on 30 June 2018 are included in the prior year statutory results
but removed for comparability with the continuing business in the
adjusted figures(1) . Continuing statutory results include closed
titles and businesses, adjusting items, impairment of asset
carrying values and mark-to-market gains/(losses) on the Group's
Bonds.
To provide investors and other users of the Group's financial
statements with additional clarity and understanding of both the
cost of this business change program, and the resulting impact on
the Group's underlying trading, the Directors believe that it is
appropriate to additionally present the Alternative Performance
Measures used by management in running the business and in
determining management and executive remuneration.
In preparing commentary on performance, the financial impact of
a number of significant accounting and operational items has been
adjusted to determine the adjusted results included in this
Financial Review. The adjusted results provide supplementary
analysis of the 'underlying' trading of the Group.
A reconciliation of statutory to adjusted figures is provided
below and in the Alternative Performance Measures section.
1 Prior period comparative adjusted revenue, adjusted cost of
sales and adjusted operating costs have been restated to adjust out
amounts relating to the Yorkshire Metro closed during 2018. This
ensures that adjusted results for H1 2018 and both prior periods
are presented on a consistent basis, including only the operations
of the Group that are continuing from 30 June 2018.The impact is an
increase in cost of sales adjusting item (H1 2017: GBP0.8m, FY
2017: GBP1.8m) and operating cost adjusting item (H1 2017: GBP0.8m,
FY 2017: GBP1.6m). Refer to Adjusted Performance Measures section
for details.
Reconciliation of statutory and adjusted results
Adjusted operating profit of GBP16.6m (H1 2017: GBP16.2m) has
been calculated after adjusting for restructuring, impairment,
Strategic Review and other non-trading related costs.
Continuing statutory revenue has been adjusted for disposed
titles, closed titles and digital products. During the period the
Group terminated its contract to publish the Yorkshire Metro and
has treated this publication as closed. As an onerous provision was
recorded at 30 December 2017 for the 2018 losses expected from the
Yorkshire Metro publishing contract, until termination on 30 June
2018, the adjustment to revenue relating to this closed title is
GBPnil for H1 2018 (H1 2017: GBP1.5m and GBP3.2m for the full
comparative year). On 17 January 2017, the Group sold its East
Anglia and East Midlands titles to Iliffe Media Ltd. Adjustments
made in the comparative periods in respect of these titles relate
to revenue earned in the two-week period up to the date of disposal
of GBP0.3m. This adjustment is necessary in order to present
results for the Group's ongoing business portfolio.
Reconciliations of the statutory to adjusted figures are
provided below and explained within the Financial Review and within
the Statutory to Adjusted reconciliation in the APM's section.
Reconciliation of adjusted revenue
Revenue
============================================= ======================================
2018 Restated(1) Restated(1)
26 weeks
GBPm 2017 2017
26 weeks 52 weeks
GBPm GBPm
============================================= ========== ============ ============
Statutory Revenue 93.0 103.3 201.6
============================================= ========== ============ ============
Adjustments
Disposed and closed titles/digital products - (2.0) (3.6)
Adjusted Revenue 93.0 101.3 198.0
============================================= ========== ============ ============
1 The prior year comparative figures have been restated to
exclude revenue for the titles and products closed during H1 2018,
in order to present results for the Group's ongoing business
portfolio. Prior year total revenue of GBP1.5m for H1 2017 and
GBP3.2m for FY 2017 has been adjusted on a like-for-like basis. The
revenue on these related products has been adjusted so as to
present the Group's underlying performance on a comparable basis as
they do not earn revenue once closed.
Reconciliation of adjusted operating profit and adjusted
EBITDA
Operating profit/(loss)
================================================ ==================================
2018 2017 2017
26 weeks 26 weeks 52 weeks
GBPm GBPm GBPm
================================================ ========== ========== ==========
Statutory operating profit/(loss) 7.4 4.9 (51.2)
================================================ ========== ========== ==========
Restructuring costs 2.0 3.7 13.7
Strategic review costs 3.2 1.4 3.4
Impairment of publishing titles, print presses
and assets held for sale 3.5 4.5 64.4
Pensions 0.6 0.6 1.9
Disposals/acquisitions (0.1) (0.3) (1.3)
Long-term incentive plan (LTIP) costs - 1.2 1.4
Accelerated depreciation - 0.2 0.9
Disposed and closed titles/digital products - - (0.1)
Adjusted operating profit 16.6 16.2 33.2
================================================ ========== ========== ==========
Adjusted depreciation and amortisation 2.4 3.5 7.0
================================================ ========== ========== ==========
Adjusted EBITDA 19.0 19.7 40.2
================================================ ========== ========== ==========
Reconciliation of net debt to net debt excluding
mark-to-market
2018 2017 2017
26 weeks 26 weeks 52 weeks
GBPm GBPm GBPm
========================================= ========= ========= =========
Gross bonds debt (at inception) 225.0 225.0 225.0
Bonds repurchase (5.0) (5.0) (5.0)
Finance leases 0.8 0.5 0.9
Cash and cash equivalents (17.6) (28.8) (25.0)
========================================= ========= ========= =========
Net debt excluding mark-to-market 203.2 191.7 195.9
========================================= ========= ========= =========
Mark-to-market on Bonds (from inception) (58.6) (68.2) (49.8)
Bonds discount (net) (4.4) (4.4) (4.4)
========================================= ========= ========= =========
Net debt 140.2 119.1 141.7
========================================= ========= ========= =========
Statutory(1) Adjusted
====================================== ==========================================
Re-stated(5)
26 weeks 26 weeks 26 weeks 26 weeks
to to to to
30 June 1 July 30 June 1 July
2018 2017 Change Change(2) 2018 2017 Change Change(2)
GBPm GBPm GBPm % GBPm GBPm GBPm %
======================= ======== ======== ======= ========= ======== ============ ======= =========
Newspaper sales 38.9 39.6 (0.7) (1.9%) 38.9 39.6 (0.7) (1.7%)
Contract printing 6.6 6.9 (0.3) (3.2%) 6.6 6.9 (0.3) (3.2%)
Print advertising
excluding classified 21.4 25.3 (3.9) (15.4%) 21.4 23.8 (2.4) (10.0%)
Digital advertising
excluding classified 9.7 10.0 (0.3) (3.1%) 9.7 10.1 (0.4) (4.3%)
======================= ======== ======== ======= ========= ======== ============ ======= =========
Print and Digital
advertising excluding
classified 31.1 35.3 (4.2) (12.0%) 31.1 33.9 (2.8) (8.3%)
Classified and other
advertising 12.1 17.4 (5.3) (30.3%) 12.1 16.9 (4.8) (28.5%)
======================= ======== ======== ======= ========= ======== ============ ======= =========
Total advertising
revenue 43.2 52.7 (9.5) (17.8%) 43.2 50.8 (7.6) (15.0%)
Leaflet, syndication
and other revenue 4.3 4.1 0.2 5.5% 4.3 4.0 0.3 6.2%
======================= ======== ======== ======= ========= ======== ============ ======= =========
Total continuing
revenues 93.0 103.3 (10.3) (10.0%) 93.0 101.3 (8.3) (8.2%)
======================= ======== ======== ======= ========= ======== ============ ======= =========
Total costs(3) (83.2) (94.6) 11.4 12.1% (74.0) (81.6) 7.6 9.3%
======================= ======== ======== ======= ========= ======== ============ ======= =========
EBITDA(4) n/a n/a - - 19.0 19.7 (0.7) (3.7%)
======================= ======== ======== ======= ========= ======== ============ ======= =========
EBITDA margin - - - - 20.4% 19.5% - -
======================= ======== ======== ======= ========= ======== ============ ======= =========
Depreciation and
amortisation (2.4) (3.8) 1.4 35.1% (2.4) (3.5) 1.1 31.4%
======================= ======== ======== ======= ========= ======== ============ ======= =========
Operating profit 7.4 4.9 2.5 50.1% 16.6 16.2 0.4 2.4%
======================= ======== ======== ======= ========= ======== ============ ======= =========
Operating profit
margin 8.0% 4.7% - - 17.9% 16.0% - -
======================= ======== ======== ======= ========= ======== ============ ======= =========
Profit/(loss) before
tax 6.2 (10.2) 16.4 - 7.1 6.7 0.4 6.0%
======================= ======== ======== ======= ========= ======== ============ ======= =========
1 The statutory results include the trading performance of the
Midlands titles (H1 2017: 2 weeks), which were disposed of in
January 2017.
2 The % change variance has been calculated based on unrounded numbers.
3 Total costs include cost of sales and are stated before depreciation and amortisation.
4 EBITDA is earnings before interest, tax, depreciation and
amortisation. A reconciliation of Adjusted EBITDA is provided in
the Alternative Performance Measures section.
5 Prior period comparative revenue, and total costs have been
restated to adjust out amounts relating to the Yorkshire Metro
closed during 2018. This ensures that adjusted results for H1 2018
and both prior periods are presented on a consistent basis,
including only the operations of the Group that are continuing from
30 June 2018.The impact is an increase in total cost adjusting item
(H1 2017: GBP0.8m).
Revenue
Total adjusted revenues of GBP93.0m were down 8.2% for the
period. Revenue declines reflect the continued downward pressure on
revenue, with adjusted classified and other advertising down 28.5%
period-on-period and a slowdown in digital revenue during the
period. Total statutory revenues were down 10.0% for the
period.
Newspaper sales
Statutory newspaper sales revenue was GBP38.9m for the 26 weeks
30 June 2018, compared to GBP39.6m for the 26 weeks to 1 July 2017.
This performance reflected price rises of 10p on the Monday to
Friday and 20p on the Saturday editions of the i from September
2017. The strategy of investing in our largest titles has also
allowed us to increase prices without a material detrimental impact
on circulation numbers, which have seen modest falls during the
period.
Contract printing
Statutory contract print revenues were GBP6.6m in the first half
of the year, a 3.2% decline on the prior period. The Group has
continued to win new contract work, benefiting from additional
revenues of GBP0.5m generated from new contracts in H1 2018, which
has helped mitigate the decline in print volumes from existing
contracts and the impact of the change in format of the Guardian
and Observer printed by the Group in Northern Ireland. There have
been no print contract losses since October 2014.
Advertising Revenue
Total adjusted advertising revenue was down 15.0%
period-on-period, reflecting challenging industry conditions.
Print and Digital publishing advertising adjusted revenue
analysis
The sharpest fall in advertising continued to be in classified,
down 28.5% or GBP4.8m of the GBP7.6m decrease in adjusted
advertising revenue for H1 2018. Classifieds revenue now represents
13.0% of the total revenue of the Group (H1 2017: 16.7%).
Adjusted Revenue
======================================
26 weeks 26 weeks
to to
30 June 1 July
2018 2017 Change Change
GBPm GBPm GBPm %(2)
=============================================== ======== ========== ======= =======
Display - local and national 19.0 21.4 (2.4) (11.3%)
Transaction revenues 9.5 9.8 (0.3) (2.7%)
Digital marketing services and Partnership(1) 2.6 2.7 (0.1) (4.1%)
Print and digital publishing advertising
excluding classified 31.1 33.9 (2.8) (8.3%)
Classifieds and other advertising 12.1 16.9 (4.8) (28.5%)
=============================================== ======== ========== ======= =======
Total advertising revenue 43.2 50.8 (7.6) (15.0%)
=============================================== ======== ========== ======= =======
Print publishing advertising excluding
classified 21.4 23.8 (2.4) (10.0%)
Digital publishing advertising excluding
classified 9.7 10.1 (0.4) (4.3%)
=============================================== ======== ========== ======= =======
Total Print and digital publishing advertising
excluding classified 31.1 33.9 (2.8) (8.3%)
=============================================== ======== ========== ======= =======
1 Partnership revenues include partnership revenues, reader
holidays and other B2B services (formerly described as
Enterprise).
2 The % change variance has been calculated based on unrounded numbers.
The table below presents the total print and digital revenues,
for the purpose of reconciling to the Group's statutory breakdown
in the notes to the financial statements.
Adjusted revenue & average
audience
26 weeks 26 weeks
to to
30 June 1 July
2018 2017 Change Change
GBPm GBPm GBPm %(1)
====================================== ======== ======== ====== =======
Print revenue 31.0 37.7 (6.7) (17.7%)
Digital revenue(2) 12.2 13.1 (0.9) (7.4%)
====================================== ======== ======== ====== =======
Total advertising revenue 43.2 50.8 (7.6) (15.0%)
====================================== ======== ======== ====== =======
Total average audience (millions) (3) 39.5 40.2 (0.7) (1.7)%
====================================== ======== ======== ====== =======
1 The % change variance has been calculated based on unrounded numbers.
2 In addition, digital syndication revenue of GBP0.6m (H1 2017:
GBP0.5m) are included in Leaflet, syndication and other
revenue.
3 Total average audience consists of 27.3m unique users (H1
2017: 26.5m) and print audience of 12.2m (H1 2017: 13.7m).
The continued challenges posed by Google and Facebook, seen most
recently through algorithm and news feed changes, has contributed
to total digital revenue decline, while Balance Sheet constraints
has restricted the Group's ability to invest, and counter these
effects.
Leaflets, syndication and other revenues
Leaflets, syndication and other revenues, (which includes
Transitional Services Agreement (TSA) income, events, reader offers
and waste sales) improved by 6.2% period on period, on an adjusted
basis.
Operating profit
The Group achieved adjusted operating profit of GBP16.6m in the
first half (H1 2017: GBP16.2m), an improvement of 2.6% on the prior
period and a strong adjusted EBITDA margin of 20.4% (H1 2017:
19.5%).
Adjusted total costs (excluding depreciation and amortisation)
of GBP74.0m have been achieved, representing a GBP7.6m cost
reduction compared to the prior period. The adjusted depreciation
charge of GBP2.4m compares to GBP3.5m in the prior period. Cost
savings continue to be made across all parts of the business
including production, editorial, sales and overheads.
A statutory operating profit of GBP7.4m (H1 2017: GBP4.9m
profit), is reported after an impairment charge in the period of
GBP3.5m (H1 2017: GBP4.5m).
i performance
The i's first half adjusted EBITDA performance increased 61.0%
to GBP6.0m on H1 2017 as a result of strong statutory revenue
performance - up 18.3% on H1 2017. Within this, statutory newspaper
sales revenue grew to GBP12.9m, an increase of 16.9% on H1 2017,
whilst total advertising revenues were GBP3.6m, an increase of
20.0% from H1 2017. Management has continued its focus on the cost
base and margins.
The i newspaper has continued to thrive, following its
acquisition in April 2016 for GBP24.0m. Since acquisition, it has
generated GBP18.6m of adjusted EBITDA for the Group.
In the period total revenue was up 18.3%, with circulation
revenue up 16.9% and advertising up 20.0%.
Overall circulation of Monday to Friday maintained a 19.5% share
of the quality market.
The i has also seen significant growth in its digital traffic,
with unique users hitting 4.2m in June, up from 1.3m in December
2017.
i performance
26 weeks 26 weeks
to to
30 June 1 July
2018 2017 Change Change
GBPm GBPm GBPm %(2)
=========================== ======== ======== ====== ======
Newspaper sales 12.9 11.0 1.9 16.9%
Print advertising 3.2 2.8 0.4 13.2%
Digital advertising 0.4 0.2 0.2 132.8%
Other revenue 0.7 0.5 0.2 40.1%
=========================== ======== ======== ====== ======
Total Statutory Revenue 17.2 14.5 2.7 18.3%
Statutory Total costs (11.3) (10.8) (0.5) (3.7%)
=========================== ======== ======== ====== ======
Statutory Operating profit 5.9 3.7 2.2 61.8%
=========================== ======== ======== ====== ======
Adjusted EBITDA(1,3) 6.0 3.7 2.3 61.0%
=========================== ======== ======== ====== ======
1 No corporate costs have been allocated to the i for the purposes of the results presentation.
2 The % change variance has been calculated based on unrounded numbers.
3 EBITDA is not a statutory measure and therefore has been
labelled as Adjusted EBITDA. However, there are no adjusting items
included in this figure.
Finance income and costs
Adjusted net finance costs were GBP9.5m in the period, flat
period-on-period. In the period, a fair value gain on the Bonds
amounted to GBP8.8m as a result of a drop in market prices in the
period (H1 2017: GBP4.4m gain).
Net financing (expense)/income(1) 26 weeks 26 weeks
to to
30 June 1 July
2018 2017 Change
GBPm GBPm GBPm
=================================================== ========= ========= =======
Interest on Bonds (9.5) (9.5) -
Total adjusted net operating finance expenses (9.5) (9.5) -
Revolving Credit Facility issuance costs - (0.4) 0.4
Net finance expense on pension liabilities/assets (0.5) (0.9) 0.4
Change in fair value of borrowings 8.8 (4.4) 13.2
Total statutory net financing expense (1.2) (15.2) 14.0
=================================================== ========= ========= =======
1 Adjusted finance costs exclude the Bonds mark-to-market and
pension finance costs. A reconciliation and explanation of
statutory to adjusted figures is provided in the Alternative
Performance Measures section.
Asset impairment
The carrying value of assets is reviewed for impairment at least
annually or more frequently if there are indications that they
might be impaired. In light of the adverse trading conditions
impacting the sector an impairment review was undertaken resulting
in a write-down of GBP3.5m in the first half of 2018 (H1 2017:
GBP4.5m). The impairment is largely a function of the downward
pressure on revenue. The write-down reduces the asset carrying
value of publishing units to GBP82.3m and the carrying value of
print presses to GBP18.3m at period-end. Refer to Note 8 and 9 in
the financial statements.
Taxation
Corporation tax for the interim period is charged at 39.4% (H1
2017: credited at 45.0%), including deferred tax. The tax charge of
GBP2.4m in the period includes a deferred tax charge of GBP2.5m, of
which GBP2.2m arises on the Bonds due to different accounting
treatment adopted at Group and subsidiary levels due to statutory
requirements.
The Group expects that, subject to the uncertain outcome of the
Strategic Review, the effective tax rate will remain relatively
consistent with the current and prior year and reflect the
reduction of UK corporate tax rates over the next few years.
In November 2017, the UK government introduced new rules with
effect from 1 April 2017 which would restrict the deductibility of
net interest costs. In the current year the GBP2.0m tax impact of
these new restrictions is included in the calculation of the
current year tax charge. Due to uncertainty regarding the Group's
ability to recover the disallowed interest which can be carried
forward under these rules, no deferred tax asset has been
recognised in relation to the disallowed amount.
The Group published its tax strategy on the Group's website on
14 December 2017, and is available at
http://www.johnstonpress.co.uk/tax-strategy.
Earnings per share and dividends
Statutory Adjusted
Basic EPS Basic EPS
================== ==================
26 weeks 26 weeks 26 weeks 26 weeks
to to to to
Earnings/(loss) per share for continuing 30 June 1 July 30 June 1 July
operations 2018 2017 2018 2017
========================================= ======== ======== ======== ========
Earnings/(loss) (GBPm) 3.7 (5.7) 4.1 5.4
========================================= ======== ======== ======== ========
Number of ordinary shares (m) 105.3 105.3 105.3 105.3
========================================= ======== ======== ======== ========
EPS (pence)(1) 3.6 (5.4) 3.9 5.1
========================================= ======== ======== ======== ========
1 Rounded to the nearest million. Refer to Note 7 for further
disclosure on Statutory to Adjusted EPS.
No ordinary or preference share dividends were declared or paid
in the period, due to restrictions in the Bonds terms and the Group
having insufficient distributable reserves. The provisions of the
Group's Bonds restrict the Company's ability to pay dividends on
the Company's ordinary shares until certain conditions, including
that net leverage is below 2.25x EBITDA, are met.
Disposal
On 17 January 2017, the Group completed the disposal of the
entire issued capital of Johnston Publishing East Anglia Limited,
which owned 13 publishing titles and associated websites in East
Anglia and East Midlands (Midlands titles), to Iliffe Media Limited
for cash consideration of GBP17.0m.
Cash flow/Net debt
The Group's net debt position was GBP203.2m on 30 June 2018
excluding Bonds mark-to-market and Bonds discounts totalling
GBP63.0m. In the period, a GBP8.8m fair value movement gain has
been recognised (H1 2017 GBP4.4m loss) (Note 5b). The net debt
after mark-to-market adjustments was GBP140.2m (Note 12).
Cash generated from operations of GBP3.9m is after pension
contributions of GBP5.3m.
Cash held at 30 June 2018 was GBP17.6m. The decrease from 30
December 2017 was due to the costs incurred in relation to the
Strategic Review of GBP3.2m and the reduction in trade creditors of
GBP3.0m during the period. The Group continues to maintain tight
control of capital expenditure with GBP2.1m having been spent on
asset purchases (H1 2017: GBP1.6m).
Cash interest paid in the first half was GBP9.5m (H1 2017:
GBP9.5m).
Reconciliation of net debt to net debt excluding
mark-to-market
2018 2017 2017
26 weeks 26 weeks 52 weeks
GBPm GBPm GBPm
========================================= ========= ========= =========
Gross bonds debt (at inception) 225.0 225.0 225.0
Bonds repurchase (5.0) (5.0) (5.0)
Finance leases 0.8 0.5 0.9
Cash and cash equivalents (17.6) (28.8) (25.0)
========================================= ========= ========= =========
Net debt excluding mark-to-market 203.2 191.7 195.9
========================================= ========= ========= =========
Mark-to-market on Bonds (from inception) (58.6) (68.2) (49.8)
Bonds discount (net) (4.4) (4.4) (4.4)
========================================= ========= ========= =========
Net debt 140.2 119.1 141.7
========================================= ========= ========= =========
Net liabilities position
At the period end, the Group had net liabilities of GBP88.3m, an
improvement of GBP5.2m since 30 December 2017 due to the reduction
in the pension deficit in the period of GBP6.4m, movements in the
market value of the Bonds (GBP8.8m) and a reduction in trade
creditors of GBP2.7m, offset by reduction in the cash balance of
GBP7.4m following the payment of Bonds interest, impairment charges
to assets of GBP3.5m and increases to deferred tax liabilities of
GBP2.8m during the period.
Pensions
The Group's defined benefit pension plan deficit has reduced by
GBP6.4m to GBP40.7m since 31 December 2017 reflecting contributions
in the period of GBP5.3m and the benefit of a higher discount rate
due to corporate bond yields rising during the period. This has
enabled us to increase the discount rate by 0.20% to 2.70% at 30
June 2018. Applying the updated CMI 2017 model increased the life
expectancy of males and females currently aged 65 years, and
females currently aged 50 years by 0.1 years to 19.8, 21.5 and 22.4
respectively.
All other assumptions are materially consistent with the
year-end.
The Pension Framework Agreement and the required level of
contributions are subject to review as part of the 31 December 2015
triennial valuation which will be settled as part of the Strategic
Review conclusion (Note 13).
Events after the balance sheet date
Refer to Note 18 for details of significant post balance sheet
events.
Related party transactions
During the period the Group paid GBP0.5m in retention bonuses to
retain key employees as part of the Strategic Review. No Directors
received retention bonuses. Refer to Note 17 and the Alternative
Performance Measures section for further details.
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.
The Directors do not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report for the 52 week period ended 30 December 2017. A detailed
explanation of the risks summarised below, and information about
how the Group seeks to mitigate the risks can be found on pages 20
to 21 of the Annual Report, available at
http://www.johnstonpress.co.uk/investors/reports-results-presentations.
The most significant risks are summarised below:
Refinancing June 2019
Failure to repay, refinance, satisfy or otherwise retire the
Bonds at their maturity would give rise to a default under the
indenture and could have a material impact on the Group's
operations and its ability to continue as a going concern. Media
speculation around the Strategic Review could have a negative
impact on employees, customers and suppliers.
Print-based revenues
Print advertising and circulation revenues continue to decline
at current levels, or accelerate further.
New revenue streams
Digital revenues decline, or do not grow at the rate needed to
offset print decline over the short to medium term.
Pension scheme
The Company is engaged in negotiations with the trustees of its
final salary pension scheme as part of the scheme's triennial
review. The Company agreed with Trustees to put its triennial
negotiations on hold, while it carried out its strategic review. An
affordable revised schedule of contributions dealing effectively
with the scheme's deficit is to be agreed.
Liquidity
The Group is expected to have full year interest costs of
GBP19.0m and pension contributions of GBP10.6m. Further downward
pressure on revenues could reduce operating cash flow below the
level required to service interest and pension commitments.
Cost reduction
The Group is required to invest in cost reduction and is
constrained in its ability to invest in development.
Data security
The Company's systems and data integrity could be vulnerable to
disruption and/or loss of, or loss of access to, data. Poor quality
data or data which the Company cannot lawfully process could limit
the realisation of marketing and business opportunities.
The Group is required to comply with the new General Data
Protection Regulation (GDPR) requirements which came into effect in
May 2018.
Economy
The impact of changes in the economy and United Kingdom economic
performance, including from Brexit, may have an impact on the
Group's operations.
Investment in growth
The Company's ability to invest in new digital product
development and technology is limited. This hinders its ability to
stay competitive and invest in the digital products necessary in a
rapidly changing environment.
Liquidity and going concern
As at 30 June 2018, the Group had net debt of GBP203.2m
(excluding mark-to-market accounting adjustment), comprising cash
of GBP17.6m and borrowings of GBP220.0m. The borrowings comprise
GBP220.0m of high yield bonds ('the Bonds'), which are repayable on
1 June 2019 and are not subject to any financial maintenance
covenants.
On 29 March 2017, the Group announced it had commenced a
Strategic Review, working with its advisers NM Rothschild &
Sons and Ashurst LLP, to assess the financing options open to the
Group in relation to the Bonds. As a key part of this Strategic
Review process, the Board has engaged with its major stakeholders,
including shareholders, holders of the Bonds, the Pension Trustees
and the Pensions Regulator.
On 10 October 2017, the Group announced that it was approaching
its largest bondholders regarding the formation of an ad hoc
committee of bondholders ('the Bondholder Committee') to consider
in greater detail certain potential amendments to the Group's
capital structure, combined with certain proposed amendments to the
Group's pension scheme. On 2 November 2017, the Group confirmed
that the Bondholder Committee had been formed.
As announced by the Group on 5 June 2018, no agreement on those
potential amendments has been reached. However, the Group is
continuing to work with the Bondholder Committee and its other
stakeholders on a number of alternative strategic options for the
repayment, restructuring, refinancing, satisfaction or other
retirement of the Bonds prior to June 2019. As clarified in a
further announcement on 5 June 2018, one of the strategic options
being explored is a Regulated Apportionment Arrangement in relation
to the Group's defined benefit pension scheme, in respect of which
the Group has recently commenced discussions with the relevant
parties, including the Pension Trustees and the Pension
Regulator.
The Board is satisfied with the constructive engagement of the
Group's major stakeholders during the Strategic Review process.
However, there can be no certainty that any formal proposal will be
forthcoming from the Group's continued discussions with these
stakeholders, and any formal proposal that may result will remain
subject to negotiation and the consent of relevant
stakeholders.
In conducting its review of the appropriateness of adopting the
going concern basis, the Group has made the assumption that it can
secure an appropriate restructuring or refinancing of the Bonds on,
or before, 1 June 2019 and that there would be no reduction in
interest payments and pension contributions during the twelve month
period of the review. The Group has performed the review of its
financial resources taking into account, inter alia, the cash
currently available to the Group, the absence of financial
maintenance covenants in the Bonds, and the Group's cash flow
projections for the twelve month period from the date of this
report, and, based on these assumptions and this review, and after
considering reasonably possible trading downside sensitivities and
uncertainties, the Board is of the opinion that, subject to the
material uncertainty surrounding the Group's ability to refinance
the Bonds at par in the market on commercially acceptable terms
(referred to below), the Group has adequate financial resources to
meet its operational cash flow requirements for the next twelve
months from the date of this report. Subject to that same material
uncertainty, the Directors also anticipate that the Group will
remain in a position to meet its obligations in respect of the
Bonds, including with regard to the payment of interest, in the
period prior to their maturity.
However, given the challenges faced by the newspaper and
printing industry as a whole, the current trading experience of the
Group, and the likely financial position of the Group at the time
the Bonds are due for repayment in June 2019, there is material
uncertainty surrounding the Group's ability to restructure or
refinance the Bonds at par in the market on commercially acceptable
terms. Failure to repay, restructure, refinance, satisfy or
otherwise retire the Bonds at their maturity would give rise to a
default under the indenture governing the Bonds dated 16 May 2014,
and this possibility indicates a material uncertainty that may cast
significant doubt on the Group's ability to continue as a going
concern and if the Strategic Review does not deliver a solution for
the Group then it may be unable to realise its assets and discharge
its liabilities in the normal course of business.
The Group's ability to continue as a going concern is directly
dependent on the outcome and timing of the Strategic Review. Taking
into account that (i) the Strategic Review is ongoing, (ii) subject
to the material uncertainty surrounding the Group's ability to
refinance the Bonds at par in the market on commercially acceptable
terms (referred to above), the Group has adequate financial
resources to meet its operational cash flow requirements for the
twelve month period from the date of this report, and (iii) subject
to that same material uncertainty the Group is, and is anticipated
to remain, in a position to meet its obligations in respect of the
Bonds in the period prior to their maturity, the Directors have
concluded it is appropriate to prepare the Group financial
statements on a going concern basis.
Viability Statement
In the 2017 Annual Report and Accounts dated 16 April 2018, the
Directors presented a Viability Statement in accordance with
provision C.2.2 of the Corporate Governance Code. A Viability
Statement is not formally required to be presented in interim
results announcements. The Viability Statement is included on pages
46 and 47 of the 2017 Annual Report and Accounts dated 16 April
2018. The Directors confirm that, subject to the material
uncertainty surrounding the Group's ability to refinance the Bonds
at par in the market on commercially acceptable terms, the
Viability Statement covering the period to1 June 2019 included in
the 2017 Annual Report remains valid as at the date of this
announcement.
Responsibility statement
The Directors confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first 26 weeks and description of principal risks and
uncertainties for the remaining 26 weeks of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board,
David King
Chief Executive Officer
28 August 2018
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial information differs from
legislation in other jurisdictions.
Address of Registered office
Johnston Press plc,
Orchard Brae House
30 Queensferry Road
Edinburgh EH4 2HS
Group Income Statement
for the 26 week period ended 30 June 2018
26 weeks 52 weeks
26 weeks ended ended ended
30 June 1 July 30 December
2018 2017 2017
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------------- ----- -------------- ---------- -------------
Continuing operations
Revenue 4a 92,990 103,302 201,616
Cost of sales (61,686) (70,340) (135,726)
-------------------------------------------------- ----- -------------- ---------- -------------
Gross profit 31,304 32,962 65,890
-------------------------------------------------- ----- -------------- ---------- -------------
Operating expenses before impairments
and write-downs(1) (20,429) (23,510) (52,677)
Impairment and write downs 4a,c (3,462) (4,513) (64,426)
-------------------------------------------------- ----- -------------- ---------- -------------
Total operating expenses (23,891) (28,023) (117,103)
-------------------------------------------------- ----- -------------- ---------- -------------
Operating profit/(loss) 4a 7,413 4,939 (51,213)
-------------------------------------------------- ----- -------------- ---------- -------------
Financing
Interest receivable 45 19 45
Net finance expense on pension liabilities/assets 5a,13 (553) (873) (1,690)
Change in fair value of borrowings 5b,12 8,833 (4,400) (22,825)
Finance costs 5c (9,557) (9,902) (19,286)
Total net financing expense (1,232) (15,156) (43,756)
-------------------------------------------------- ----- -------------- ---------- -------------
Profit/(loss) before tax 6,181 (10,217) (94,969)
Tax (charge)/credit 6 (2,434) 4,600 16,389
-------------------------------------------------- ----- -------------- ---------- -------------
Profit/(loss) from continuing operations 3,747 (5,617) (78,580)
-------------------------------------------------- ----- -------------- ---------- -------------
Consolidated profit/(loss) for the
period 3,747 (5,617) (78,580)
-------------------------------------------------- ----- -------------- ---------- -------------
The accompanying notes are an integral part of these financial
statements. The comparative period is for the 26 week period ended
1 July 2017.
52 weeks
26 weeks ended 26 weeks ended ended
30 June 1 July 30 December
2018 2017(1) 2017
Notes GBP'000 GBP'000 GBP'000
--------------------------------- ----- -------------- -------------- -------------
From continuing and discontinued
operations
Profit/(loss) per share (p)
Basic (p)(1) 7 3.6 (5.4) (74.6)
--------------------------------- ----- -------------- -------------- -------------
Diluted (p)(1) 7 3.5 (5.4) (74.6)
--------------------------------- ----- -------------- -------------- -------------
1 Rounded to the nearest million.
Group Statement of Comprehensive Income
for the 26 week period ended 30 June 2018
Translation Retained
reserve earnings Total
GBP'000 GBP'000 GBP'000
---------------------------------------------------- --- ------------ ---------- --------
Profit for the period - 3,747 3,747
Items that will not be reclassified subsequently
to profit or loss :
Actuarial gain on defined benefit pension
schemes - 1,715 1,715
Deferred tax on pension balances - (292) (292)
Total items that will not be reclassified
subsequently to profit or loss - 1,423 1,423
--------------------------------------------------------- ------------ ---------- --------
Items that may be reclassified subsequently
to profit or loss :
Exchange differences on translation of
foreign operations(1) 8 - 8
Total items that may be reclassified subsequently
to profit or loss 8 - 8
--------------------------------------------------------- ------------ ---------- --------
Total other comprehensive gain for the
period 8 1,423 1,431
--------------------------------------------------------- ------------ ---------- --------
Total comprehensive gain for the period 8 5,170 5,178
--------------------------------------------------------- ------------ ---------- --------
1 Movements in the translation reserve relate to the translation
of interests in dormant Irish subsidiaries.
Group Statement of Comprehensive Income
for the 26 week period ended 1 July 2017
Translation Retained
reserve earnings Total
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------------ ------------- --------
Loss for the period - (5,617) (5,617)
Items that will not be reclassified subsequently
to profit or loss :
Actuarial gain on defined benefit pension
schemes - 10,373 10,373
Deferred tax on pension balances - (1,763) (1,763)
Total items that will not be reclassified
subsequently to profit or loss - 8,610 8,610
---------------------------------------------------- ------------ ------------- --------
Items that may be reclassified subsequently
to profit or loss :
Exchange differences on translation of
foreign operations(1) (18) - (18)
Total items that may be reclassified subsequently
to profit or loss (18) - (18)
---------------------------------------------------- ------------ ------------- --------
Total other comprehensive (loss)/gain
for the period (18) 8,610 8,592
---------------------------------------------------- ------------ ------------- --------
Total comprehensive (loss)/gain for the
period (18) 2,993 2,975
---------------------------------------------------- ------------ ------------- --------
1 Movements in the translation reserve relate to the translation
of interests in dormant Irish subsidiaries.
Group Statement of Comprehensive Income
for the 52 week period ended 30 December Translation Retained
2017 reserve earnings Total
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------------ ---------- ---------
Loss for the period - (78,580) (78,580)
Other items of comprehensive income
Items that will not be reclassified subsequently
to profit or loss :
Actuarial gain on defined benefit pension
schemes - 11,942 11,942
Deferred tax on pension balances - (2,030) (2,030)
Total items that will not be reclassified
subsequently to profit or loss - 9,912 9,912
---------------------------------------------------- ------------ ---------- ---------
Items that may be reclassified subsequently
to profit or loss :
Exchange differences on translation of
foreign operations(1) (26) - (26)
Total items that may be reclassified
subsequently to profit or loss (26) - (26)
---------------------------------------------------- ------------ ---------- ---------
Total other comprehensive (loss)/gain
for the period (26) 9,912 9,886
---------------------------------------------------- ------------ ---------- ---------
Total comprehensive loss for the period (26) (68,668) (68,694)
---------------------------------------------------- ------------ ---------- ---------
1 Movements in the translation reserve relate to the translation
of interests in dormant Irish subsidiaries.
Group Statement of Changes in Equity
for the 26 week period ended 30 June 2018
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 116,171 312,702 2,128 1,728 (3,331) 9,232 (532,114) (93,484)
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Profit for the
period - - - - - - 3,747 3,747
Other
comprehensive
profit for the
period - - - - - 8 1,423 1,431
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Total
comprehensive
profit for the
period - - - - - 8 5,170 5,178
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Recognised
directly
in equity:
Return of
unclaimed
dividends - - - - - - 44 44
Share-based
payments
credit - - (61) - - - - (61)
Release of
share-based
payments reserve - - (919) - - - 919 -
Net change
directly
in equity - - (980) - - - 963 (17)
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Total movements - - (980) - - 8 6,133 5,161
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Equity/(deficit)
at end of the
period 116,171 312,702 1,148 1,728 (3,331) 9,240 (525,981) (88,323)
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Group Statement of Changes in Equity
for the 26 week period ended 1 July 2017
Share-based Restated(1)
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
- per published
H1 2017 results 116,171 312,702 8,200 1,728 (3,331) 9,258 (469,349) (24,621)
------------------ --------- -------- ------------ ------------- -------- ------------- ------------- ---------
Restatement -
credit
note write
off(1) - - - - - - (1,459) (1,459)
Opening balances
- restated 116,171 312,702 8,200 1,728 (3,331) 9,258 (470,808) (26,080)
Loss for the
period - - - - - - (5,617) (5,617)
Other
comprehensive
(loss)/profit
for
the period - - - - - (18) 8,610 8,592
------------------ --------- -------- ------------ ------------- -------- ------------- ------------- ---------
Total
comprehensive
(loss)/profit
for
the period - - - - - (18) 2,993 2,975
------------------ --------- -------- ------------ ------------- -------- ------------- ------------- ---------
Recognised
directly
in equity:
Preference share
dividends - - - - - - (76) (76)
Share-based
payments
charge - - 933 - - - - 933
Release of
share-based
payments reserve - - (3,049) - - - 3,049 -
Net change
directly
in equity - - (2,116) - - - 2,973 857
------------------ --------- -------- ------------ ------------- -------- ------------- ------------- ---------
Total movements - - (2,116) - - (18) 5,966 3,832
------------------ --------- -------- ------------ ------------- -------- ------------- ------------- ---------
Equity/(deficit)
at end of the
period 116,171 312,702 6,084 1,728 (3,331) 9,240 (464,842) (22,248)
------------------ --------- -------- ------------ ------------- -------- ------------- ------------- ---------
1 Prior period comparatives have been restated, refer to Note 2.
Group Statement of Changes in Equity
for the 52 week period ended 30 December 2017
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 116,171 312,702 8,200 1,728 (3,331) 9,258 (470,808) (26,080)
Loss for the
period - - - - - - (78,580) (78,580)
Other
comprehensive
(loss)/profit
for
the period - - - - - (26) 9,912 9,886
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Total
comprehensive
loss for the
year - - - - - (26) (68,668) (68,694)
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Recognised
directly
in equity:
Share-based
payments
charge - - 1,290 - - - - 1,290
Release of
share-based
payments reserve
for expired
warrants - - (3,798) - - - 3,798 -
Release of
share-based
payments reserve - - (3,564) - - - 3,564 -
Net change
directly
in equity - - (6,072) - - - 7,362 1,290
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Total movements - - (6,072) - - (26) (61,306) (67,404)
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Equity/(deficit)
at end of the
period 116,171 312,702 2,128 1,728 (3,331) 9,232 (532,114) (93,484)
------------------ --------- --------- ------------ ------------- -------- ------------- ---------- ----------
Group Statement of Financial Position
As at 30 June 2018
Restated(1)
and
re-presented(2)
30 June 1 July 30 December
2018 2017 2017
Notes GBP'000 GBP'000 GBP'000
-------------------------------- ------ ---------- ----------------- -----------------
Non-current assets
Intangible assets 8 87,160 146,741 89,611
Property, plant and equipment 9 27,733 33,408 29,249
Available for sale investments 970 970 970
Trade and other receivables 10 1 1 1
115,864 181,120 119,831
-------------------------------- ------ ---------- ----------------- -----------------
Current assets
Assets classified as held
for sale 165 21 178
Inventories 1,835 2,017 2,490
Trade and other receivables 10 28,864 31,412 27,658
Cash and cash equivalents 17,595 28,823 25,028
48,459 62,273 55,354
-------------------------------- ------ ---------- ----------------- -----------------
Total assets 164,323 243,393 175,185
-------------------------------- ------ ---------- ----------------- -----------------
Current liabilities
Trade and other payables 11 31,411 36,198 34,146
Current tax liabilities 51 179 113
Borrowings 12 157,178 102 180
Short-term provisions 14 1,406 1,032 1,602
-------------------------------- ------ ----------------- -----------------
190,046 37,511 36,041
-------------------------------- ------ ---------- ----------------- -----------------
Non-current liabilities
Borrowings 12 584 147,808 166,505
Retirement benefit obligation 13 40,738 53,092 47,187
Deferred tax liabilities 12,301 20,965 9,509
Trade and other payables 11 3,494 3,487 3,484
Long-term provisions 14 5,483 2,778 5,943
-------------------------------- ------ ----------------- -----------------
62,600 228,130 232,628
-------------------------------- ------ ---------- ----------------- -----------------
Total liabilities 252,646 265,641 268,669
-------------------------------- ------ ---------- ----------------- -----------------
Net liabilities (88,323) (22,248) (93,484)
-------------------------------- ------ ---------- ----------------- -----------------
Equity
Share capital 116,171 116,171 116,171
Share premium account 312,702 312,702 312,702
Share-based payment reserve 1,148 6,084 2,128
Revaluation reserve 1,728 1,728 1,728
Own shares (3,331) (3,331) (3,331)
Translation reserve 9,240 9,240 9,232
Retained earnings (525,981) (464,842) (532,114)
Total equity (88,323) (22,248) (93,484)
-------------------------------- ------ ---------- ----------------- -----------------
1 Prior half year comparatives have been restated, refer to Note 2.
2 Prior half year comparatives have been re-presented, refer to Note 12.
Group Statement of Cash Flows
for the 26 week period ended 30 June 2018
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017(1) 2017
Notes GBP'000 GBP'000 GBP'000
--------------------------------------------- ------ --------- --------- --------------
Cash flows from operating activities
Cash generated from operations 15 3,890 4,361 12,182
Income tax received - 217 217
Net cash inflow from operating activities 3,890 4,578 12,399
--------------------------------------------- ------ --------- --------- --------------
Investing activities
Interest received 45 19 45
Proceeds on disposal of subsidiary - 17,000 17,000
Proceeds on disposal of property,
plant and equipment - 7 11
Proceeds on disposal of assets held
for sale (excluding sale of subsidiaries) 192 3,973 5,183
Acquisition of publishing titles - (2,000) (2,000)
Expenditure on digital intangible
assets (786) (799) (1,680)
Purchases of property, plant and equipment (1,301) (802) (2,961)
Net cash (used in)/from investing
activities (1,850) 17,398 15,599
--------------------------------------------- ------ --------- --------- --------------
Financing activities
Interest paid (9,488) (9,497) (18,985)
Interest element of finance lease
rental payments (29) (19) (43)
Dividends refunded 44 - -
--------------------------------------------- ------ --------- --------- --------------
Net cash used in financing activities (9,473) (9,516) (19,028)
--------------------------------------------- ------ --------- --------- --------------
Net (decrease)/increase in cash and
cash equivalents (7,433) 12,765 8,970
Cash and cash equivalents at beginning
of period 25,028 16,058 16,058
Cash and cash equivalents at end of
period 17,595 28,823 25,028
--------------------------------------------- ------ --------- --------- --------------
1 Prior half year comparatives have been re-presented, refer to Note 12
Notes to the Condensed Financial Statements
for the 26 week period ended 30 June 2018
1. General information
The condensed financial information for the 26 weeks to 30 June
2018 does not constitute statutory accounts for the purposes of
Section 434 of the Companies Act 2006 and has not been audited. No
statutory accounts for the period have been delivered to the
Registrar of Companies. This interim financial report (Interim
Report) constitutes a dissemination announcement in accordance with
Rule 6.3 of the Disclosure and Transparency Rules of the United
Kingdom Listing Authority.
The condensed financial information in respect of the 52 weeks
ended 30 December 2017 has been produced using extracts from the
statutory accounts for this period. Consequently, this does not
constitute the statutory information (as defined in section 434 of
the Companies Act 2006) for the 52 weeks ended 30 December 2017,
which was audited. The statutory accounts for this period have been
filed with the Registrar of Companies. The auditor's report was
unqualified with a material uncertainty relating to going concern
and did not contain a statement under Sections 498 (2) or 498 (3)
of the Companies Act 2006.
The next annual financial statements of the Group for the 52
weeks to 29 December 2018 will be prepared in accordance with
International Financial Reporting Standards as adopted by the EU
("IFRS"). The condensed set of financial statements included in
this Interim Report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting'.
The financial information in this Interim Report has been prepared
in accordance with the recognition and measurement criteria of IFRS
and the disclosure requirements of the Listing Rules and Disclosure
and Transparency Rules. The auditor has reviewed the financial
information in this Interim Report and their report is included in
this report.
The Interim Report was approved by the Directors on 28 August
2018 and is being made available to shareholders on the same date
on the Company's website at www.johnstonpress.co.uk.
Going Concern
As at 30 June 2018, the Group had net debt of GBP203.2m
(excluding mark-to-market accounting adjustment), comprising cash
of GBP17.6m and borrowings of GBP220.0m. The borrowings comprise
GBP220.0m of high yield bonds ('the Bonds'), which are repayable on
1 June 2019 and are not subject to any financial maintenance
covenants.
On 29 March 2017, the Group announced it had commenced a
Strategic Review, working with its advisers NM Rothschild &
Sons and Ashurst LLP, to assess the financing options open to the
Group in relation to the Bonds. As a key part of this Strategic
Review process, the Board has engaged with its major stakeholders,
including shareholders, holders of the Bonds, the Pension Trustees
and the Pensions Regulator.
On 10 October 2017, the Group announced that it was approaching
its largest bondholders regarding the formation of an ad hoc
committee of bondholders ('the Bondholder Committee') to consider
in greater detail certain potential amendments to the Group's
capital structure, combined with certain proposed amendments to the
Group's pension scheme. On 2 November 2017, the Group confirmed
that the Bondholder Committee had been formed.
As announced by the Group on 5 June 2018, no agreement on those
potential amendments has been reached. However, the Group is
continuing to work with the Bondholder Committee and its other
stakeholders on a number of alternative strategic options for the
repayment, restructuring, refinancing, satisfaction or other
retirement of the Bonds prior to June 2019. As clarified in a
further announcement on 5 June 2018, one of the strategic options
being explored is a Regulated Apportionment Arrangement in relation
to the Group's defined benefit pension scheme, in respect of which
the Group has recently commenced discussions with the relevant
parties, including the Pension Trustees and the Pension
Regulator.
The Board is satisfied with the constructive engagement of the
Group's major stakeholders during the Strategic Review process.
However, there can be no certainty that any formal proposal will be
forthcoming from the Group's continued discussions with these
stakeholders, and any formal proposal that may result will remain
subject to negotiation and the consent of relevant
stakeholders.
In conducting its review of the appropriateness of adopting the
going concern basis, the Group has made the assumption that it can
secure an appropriate restructuring or refinancing of the Bonds on,
or before, 1 June 2019 and that there would be no reduction in
interest payments and pension contributions during the twelve month
period of the review. The Group has performed the review of its
financial resources taking into account, inter alia, the cash
currently available to the Group, the absence of financial
maintenance covenants in the Bonds, and the Group's cash flow
projections for the twelve month period from the date of this
report, and, based on these assumptions and this review, and after
considering reasonably possible trading downside sensitivities and
uncertainties, the Board is of the opinion that, subject to the
material uncertainty surrounding the Group's ability to refinance
the Bonds at par in the market on commercially acceptable terms
(referred to below), the Group has adequate financial resources to
meet its operational cash flow requirements for the next twelve
months from the date of this report. Subject to that same material
uncertainty, the Directors also anticipate that the Group will
remain in a position to meet its obligations in respect of the
Bonds, including with regard to the payment of interest, in the
period prior to their maturity.
However, given the challenges faced by the newspaper and
printing industry as a whole, the current trading experience of the
Group, and the likely financial position of the Group at the time
the Bonds are due for repayment in June 2019, there is material
uncertainty surrounding the Group's ability to restructure or
refinance the Bonds at par in the market on commercially acceptable
terms. Failure to repay, restructure, refinance, satisfy or
otherwise retire the Bonds at their maturity would give rise to a
default under the indenture governing the Bonds dated 16 May 2014,
and this possibility indicates a material uncertainty that may cast
significant doubt on the Group's ability to continue as a going
concern and if the Strategic Review does not deliver a solution for
the Group then it may be unable to realise its assets and discharge
its liabilities in the normal course of business.
The Group's ability to continue as a going concern is directly
dependent on the outcome and timing of the Strategic Review. Taking
into account that (i) the Strategic Review is ongoing, (ii) subject
to the material uncertainty surrounding the Group's ability to
refinance the Bonds at par in the market on commercially acceptable
terms (referred to above), the Group has adequate financial
resources to meet its operational cash flow requirements for the
twelve month period from the date of this report, and (iii) subject
to that same material uncertainty the Group is, and is anticipated
to remain, in a position to meet its obligations in respect of the
Bonds in the period prior to their maturity, the Directors have
concluded it is appropriate to prepare the Group financial
statements on a going concern basis.
2. Restatements
Sales ledger credit write-offs
In the 52 week prior comparative period ended 30 December 2017,
it was noted that there had been historic releases of sales ledger
credit balances made up predominantly of overpayments by customers.
These should not be released unless six years has passed under the
Limitations Act of 1980. The comparative 26 week period ended 1
July 2017 has been restated to reflect this. The impact of the
restatement on the comparative figures for the 26 week period to 1
July 2017 has been to:
-- decrease opening retained earnings by GBP1.4m with a
corresponding increase to trade and other creditors at 1 January
2017; and
-- increase closing trade and other creditors by GBP1.6m and
increase trade and other receivables by GBP0.2m at 1 July 2017,
resulting in a decrease in closing retained earnings of GBP1.4m.
There was no impact on net profit after tax and therefore EPS for
the 26 weeks to 1 July 2017.
3. Accounting policies
Basis of preparation
The interim financial information has been prepared on the
historical cost basis, except for the revaluation of certain
properties, pension balances and financial instruments including
borrowings. Historical cost is generally based on the fair value of
the consideration given in exchange for the assets.
The Directors are satisfied, subject to the material uncertainty
disclosed within the Going Concern section, that it is appropriate
to prepare the Group financial statements on a going concern basis.
Accordingly, the unaudited condensed consolidated interim financial
statements have been prepared on a going concern basis (discussed
further in the Financial Review section 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.
Basis of accounting
The accounting policies, significant judgments and key sources
of estimation adopted in the preparation of the Condensed set of
Consolidated Financial Statements are consistent with those applied
by the Group in its Consolidated Financial Statements for the year
ended 30 December 2017.
New and amended standards applicable for annual periods
beginning in 2018 and beyond
The following new standards, which are applicable to the Group,
have been published but are not yet effective and have not yet been
adopted by the EU:
Accounting standard Requirements Mandatory application date
--------------------------- ------------------------------------ ----------------------------------
Annual improvements Minor amendments to a number For periods beginning on or
to IFRS Standards of standards. after 1 January 2018. No material
2014-2016 Cycle* impact on the Group's net
results
or net assets.
--------------------------- ------------------------------------ ----------------------------------
IFRS 9 - Financial Sets out the principles For periods beginning on or
Instruments and Amendments of the recognition, de-recognition, after 1 January 2018. The
to IFRS 9 classification and measurement Group had previously said
of financial assets and it would early adopt for the
financial liabilities together period beginning on 31 December
with requirements relating 2017 however the Directors
to the impairment of financial have chosen to defer the adoption
assets and hedge accounting. until the period commencing
30 December 2018 being the
first period the Group is
required comply. Management
are in the process of performing
a detailed review of the impact
of IFRS 9.
--------------------------- ------------------------------------ ----------------------------------
IFRS 15 - Revenue Establishes when revenue For periods beginning on or
from Contracts should be recognised, how after 1 January 2018. The
with Customers and it should be measured Group had previously said
Clarifications to and what disclosures about it would early adopt for the
IFRS 15 contracts period beginning on 31 December
with customers are needed. 2017 however the Directors
have chosen to defer the adoption
The clarifications relate until the period commencing
to the application and provide 30 December 2018 being the
transitional relief regarding first period the Group is
first time adoption of the required to comply. Management
standard. are in the process of performing
a detailed review of the impact
of IFRS 15.
---------------------------- ------------------------------- ----------------------------------
Amendments to IFRS Clarifies how to account For periods beginning on or
2 - Classification for certain types after 1 January 2018. No material
and of share based payment impact on the Group's net
Measurement of Share-based transactions. results
Payment Transactions* or net assets.
---------------------------- ------------------------------- ----------------------------------
IFRIC Interpretation Addresses the exchange rate For periods beginning on or
22 - to use after 1 January 2018. Minimal
Foreign Currency in transactions that involve impact anticipated.
Transactions and advance consideration paid
Advance Consideration* or received in
a foreign currency.
---------------------------- ------------------------------- ----------------------------------
IFRIC 23 - Uncertainty Sets out how to determine For periods beginning on or
over Income Tax Treatments* the accounting after 1 January 2019. Minimal
tax position when there impact anticipated.
is uncertainty over income
tax treatments.
---------------------------- ------------------------------- ----------------------------------
IRFS 16 - Leases* Establishes principles for For periods beginning on or
the recognition, measurement, after 1 January 2019. IFRS
presentation and disclosure 16 will require the Group
of leases for both lessees to recognise a lease liability
and lessors. and a right-of-use asset for
most of those leases previously
treated as operating leases.
The Group is currently going
through an exercise to evaluate
the impact of this standard
on our business. Whilst it
is too early to conclude what
the impact will be, IFRS 16
may have a material impact
given the amount of leases
entered into by the Group.
The Group will be in a better
position to report what the
expected impact will be in
next year's Annual Report
once the impact assessment
has been finalised.
---------------------------- ------------------------------- ----------------------------------
* Not yet EU endorsed.
4. Operating 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 Group operates solely in the UK. The segment
analysis has not been adjusted to reflect disposed or closed titles
or products.
a) Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment:
Contract
Publishing printing Eliminations Group
26 week period ended 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- ---------- ------------- ---------
Revenue
Print advertising 31,020 - - 31,020
Digital advertising 12,149 - - 12,149
Newspaper sales 38,871 - - 38,871
Contract printing - 6,639 - 6,639
Other 3,815 496 - 4,311
--------------------------------------------------- ----------- ---------- ------------- ---------
Total external sales 85,855 7,135 - 92,990
Inter-segment sales(1) - 9,784 (9,784) -
Total revenue(2) 85,855 16,919 (9,784) 92,990
--------------------------------------------------- ----------- ---------- ------------- ---------
Impairment and write downs(3) (2,825) (637) - (3,462)
Adjustments (excluding impairment
and write downs)(3) (5,690) (4) - (5,694)
Operating costs(3,4) (60,778) (15,643) - (76,421)
Net segment result 16,562 635 (9,784) 7,413
--------------------------------------------------- ----------- ---------- ------------- ---------
Interest receivable 45
Net finance expense on pension liabilities/assets (553)
Change in fair value of borrowings 8,833
Finance costs (9,557)
Profit before tax 6,181
Taxation charge 2,434
--------------------------------------------------- ----------- ---------- ------------- ---------
Profit after tax for the period 3,747
--------------------------------------------------- ----------- ---------- ------------- ---------
1 Inter-segment sales are charged at market rates.
2 Revenue from sale of goods and services for H1 2018 was
GBP93.0m (H1 2017: GBP103.3m, FY 2017: GBP201.6m). There was other
operating income in the period of GBP0.4m (H1 2017: GBP0.4m, FY
2017: GBP0.8m) relating to rental income on sub-let properties.
This means total revenue as defined by IAS 18 is GBP93.4m (H1 2017:
GBP103.7m, FY 2017: GBP202.4m).
3 Total adjustments presented in the Alternative Performance
Measures section of GBP9.2m (H1 2017: GBP11.1m, FY 2017: GBP83.5m)
consists of impairment and write downs of GBP3.5m (H1 2017:
GBP4.5m, FY 2017: GBP64.4m) and adjustments (excluding impairment
and write downs) of GBP5.7m (H1 2017: GBP6.6m, FY 2017: GBP19.1m).
The comparative figures for the 26 week period ended 1 July 2017
have been re-presented to separately present impairment and write
downs, adjustments (excluding impairment and write downs) and
operating costs. The financial statements for the 26 week period
ended 1 July 2017 disclosed total operating costs of GBP93.9m. In
the disclosure below this amount has been split into adjustments
(excluding impairment and write downs) of GBP6.6m and operating
costs GBP87.3m.
4 Includes depreciation and amortisation.
Re-presented(3)
Re-presented(3) Contract Re-presented(3) Re-presented(3)
Publishing printing Eliminations Group
26 week period ended 1 July
2017 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------------- ---------------- ---------------- ----------------
Revenue
Print advertising 39,435 - - 39,435
Digital advertising 13,280 - - 13,280
Newspaper sales 39,643 - - 39,643
Contract printing - 6,857 - 6,857
Other 3,620 467 - 4,087
------------------------------------ ---------------- ---------------- ---------------- ----------------
Total external sales 95,978 7,324 - 103,302
Inter-segment sales(1) - 10,665 (10,665) -
Total revenue(2) 95,978 17,989 (10,665) 103,302
------------------------------------ ---------------- ---------------- ---------------- ----------------
Impairment and write downs(3) (4,513) - - (4,513)
Adjustments (excluding impairment
and write downs)(3) (6,578) (14) - (6,592)
Operating costs (3,4) (70,932) (16,326) - (87,258)
------------------------------------ ---------------- ---------------- ---------------- ----------------
Net segment result 13,955 1,649 (10,665) 4,939
------------------------------------ ---------------- ---------------- ---------------- ----------------
Interest receivable 19
Net finance expense on pension
liabilities/assets (873)
Change in fair value of borrowings (4,400)
Finance costs (9,902)
Loss before tax (10,217)
Taxation credit 4,600
------------------------------------ ---------------- ---------------- ---------------- ----------------
Loss after tax for the period (5,617)
------------------------------------ ---------------- ---------------- ---------------- ----------------
1 Inter-segment sales are charged at market rates.
2 Revenue from sale of goods and services for H1 2018 was
GBP93.0m (H1 2017: GBP103.3m, FY 2017: GBP201.6m). There was other
operating income in the period of GBP0.4m (H1 2017: GBP0.4m, FY
2017: GBP0.8m) relating to rental income on sub-let properties.
This means total revenue as defined by IAS 18 is GBP93.4m (H1 2017:
GBP103.7m, FY 2017: GBP202.4m).
3 Total adjustments presented in the Alternative Performance
Measures section of GBP9.2m (H1 2017: GBP11.1m, FY 2017: GBP83.5m)
consists of impairment and write downs of GBP3.5m (H1 2017:
GBP4.5m, FY 2017: GBP64.4m) and adjustments (excluding impairment
and write downs) of GBP5.7m (H1 2017: GBP6.6m, FY 2017: GBP19.1m).
The comparative figures for the 26 week period ended 1 July 2017
have been re-presented to separately present impairment and write
downs, adjustments (excluding impairment and write downs) and
operating costs. The financial statements for the 26 week period
ended 1 July 2017 disclosed total operating costs of GBP93.9m. In
the disclosure below this amount has been split into adjustments
(excluding impairment and write downs) of GBP6.6m and operating
costs GBP87.3m.
4 Includes depreciation and amortisation.
Contract
Publishing printing Eliminations Group
52 week period ended 30 December 2017 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- ---------- ------------- -----------
Revenue
Print advertising 74,265 - - 74,265
Digital advertising 25,976 - - 25,976
Newspaper sales 79,102 - - 79,102
Contract printing - 13,321 - 13,321
Other 8,002 950 - 8,952
--------------------------------------------------- ----------- ---------- ------------- -----------
Total external sales 187,345 14,271 - 201,616
Inter-segment sales(1) - 20,486 (20,486) -
Total revenue 187,345 34,757 (20,486) 201,616
--------------------------------------------------- ----------- ---------- ------------- -----------
Impairment and write downs(3) (63,668) (758) - (64,426)
Adjustments (excluding impairment
and write downs() 3 (18,690) (295) - (19,055)
Operating costs(3,4) (138,230) (31,187) - (169,348)
--------------------------------------------------- ----------- ---------- ------------- -----------
Net segment result (33,244) 2,517 (20,486) (51,213)
--------------------------------------------------- ----------- ---------- ------------- -----------
Interest receivable 45
Net finance expense on pension liabilities/assets (1,690)
Change in fair value of borrowings (22,825)
Finance costs (19,286)
Loss before tax (94,969)
Taxation credit 16,389
--------------------------------------------------- ----------- ---------- ------------- -----------
Loss after tax for the period (78,580)
--------------------------------------------------- ----------- ---------- ------------- -----------
1 Inter-segment sales are charged at market rates.
2 Revenue from sale of goods and services for H1 2018 was
GBP93.0m (H1 2017: GBP103.3m, FY 2017: GBP201.6m). There was other
operating income in the period of GBP0.4m (H1 2017: GBP0.4m, FY
2017: GBP0.8m) relating to rental income on sub-let properties.
This means total revenue as defined by IAS 18 is GBP93.4m (H1 2017:
GBP103.7m, FY 2017: GBP202.4m).
3 Total adjustments presented in the Alternative Performance
Measures section of GBP9.2m (H1 2017: GBP11.1m, FY 2017: GBP83.5m)
consists of impairment and write downs of GBP3.5m (H1 2017:
GBP4.5m, FY 2017: GBP64.4m) and adjustments (excluding impairment
and write downs) of GBP5.7m (H1 2017: GBP6.6m, FY 2017: GBP19.1m).
The comparative figures for the 26 week period ended 1 July 2017
have been re-presented to separately present impairment and write
downs, adjustments (excluding impairment and write downs) and
operating costs. The financial statements for the 26 week period
ended 1 July 2017 disclosed total operating costs of GBP93.9m. In
the disclosure below this amount has been split into adjustments
(excluding impairment and write downs) of GBP6.6m and operating
costs GBP87.3m.
4 Includes depreciation and amortisation.
The accounting policies of the reportable segments are the same
as the Group's accounting policies described in the Group's annual
consolidated financial statements for the 52 weeks to 30 December
2017. Segment result represents the profit earned by each segment,
investment income, finance costs (including in relation to pension
assets and liabilities) and income tax expense or credit. This is
the measure reported to the Group's Chief Executive Officer for the
purpose of resource allocation and assessment of segment
performance.
The Group, in common with the rest of the publishing industry,
is subject to the main holiday periods of Easter, summer and
Christmas as well as school and bank holidays. Since these fall
across both half years, the Group's financial results are not
usually subject to significant seasonal variations from
period-to-period.
b) Segment assets
Restated(1)
30 June 1 July
30 December
2018 2017(1) 2017
GBP'000 GBP'000 GBP'000
-------------------------------- ---- -------- ------------ ------------
Assets
Publishing 140,503 216,943 149,097
Contract printing 23,820 26,450 26,088
-------------------------------------- -------- ------------ ------------
Total segment and consolidated
assets 164,323 243,393 175,185
-------------------------------------- -------- ------------ ------------
1 Prior period comparatives have been restated, refer to Note 2.
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 and unless specifically part of contract
printing business, they are allocated to publishing, with the
exception of available for sale investments and derivative
financial instruments.
c) Other segment information
26 weeks to 30 June 26 weeks to 1 July 52 weeks to 30 December
2018 2017 2017
Contract Contract Contract
Publishing printing Group Publishing printing Group Publishing printing Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ----------- --------- -------- ----------- --------- -------- ----------- --------- --------
Additions
to property,
plant and
equipment 1,127 174 1,301 588 214 802 2,114 847 2,961
Depreciation
and
amortisation
expense(1) 1,804 611 2,415 3,119 627 3,746 6,614 1,295 7,909
Impairment
of property,
plant and
equipment 412 637 1,049 - - - 3,103 758 3,861
Impairment
of
intangible
assets 2,413 - 2,413 4,513 - 4,513 60,453 - 60,453
Impairment
of assets
held for
sale - - - - - - 112 - 112
-------------- ----------- --------- -------- ----------- --------- -------- ----------- --------- --------
1 Includes amortisation of digital intangible assets (Note 8)
and depreciation charge on property plant and equipment (Note
9).
5. Finance costs
a) Net finance expense on pension (liabilities)/assets
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- --------- --------- -------------
Interest on assets 6,928 7,304 14,597
Interest on liabilities (7,481) (8,177) (16,287)
-------------------------------- ----- --------- --------- -------------
Net finance expense on pension
liabilities/assets 13 (553) (873) (1,690)
-------------------------------- ----- --------- --------- -------------
b) Fair value adjustment
The fair value movement on the 8.625% Senior Secured Bonds due 1
June 2019 was as follows:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
Note GBP'000 GBP'000 GBP'000
---------------------------- ----- --------- --------- -------------
Fair value gain/(loss) on
the 8.625% Senior Secured
Bonds 12 8,833 (4,400) (22,825)
---------------------------- ----- --------- --------- -------------
c) Finance costs
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- -------------
Interest on Bonds (9,488) (9,488) (18,764)
Interest on bank overdrafts
and loans - (6) (6)
Amortisation of term debt
issue costs - (8) (8)
Finance leases (29) (19) (43)
Financing fees (40) - (85)
Total operational finance
costs (9,557) (9,521) (18,906)
Term debt issue costs(1) - (381) (380)
------------------------------ --------- --------- -------------
Total Exceptional fees - (381) (380)
Total finance costs (9,557) (9,902) (19,286)
------------------------------ --------- --------- -------------
1 RCF issuance costs written off as a consequence of termination of the facility in 2017.
6. Tax
The tax charge/(credit) comprises:
26 weeks 52 weeks
26 weeks to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------------------------------------------- ---- ------------ --------- -------------
Current tax
Corporation tax (credit)/charge - - -
Adjustment in respect
of prior periods (64) (64) (129)
----------------------------------------------------- ------------ --------- -------------
Total current tax credit (64) (64) (129)
----------------------------------------------------- ------------ --------- -------------
Deferred tax
Total deferred tax charge/(credit) 2,498 (4,536) (16,260)
----------------------------------------------------- ------------ --------- -------------
Total tax charge/(credit) 2,434 (4,600) (16,389)
----------------------------------------------------- ------------ --------- -------------
Reconciliation of tax charge/(credit) % % %
Standard rate of corporation tax 19.0 (19.3) (19.3)
Disposal of publishing title - (31.3) (3.1)
Tax effect of corporate interest reduction 50.9 - 1.9
Tax effect of items that are not deductible
or not taxable in determining taxable profit (2.2) 8.4 (0.2)
Fixed asset related differences - - (0.5)
Unrecognised deferred tax assets (18.0) (13.5) 3.3
Prior period adjustment (6.4) 4.8 (0.5)
Effect of difference between deferred and
current tax rate (3.9) 5.9 1.1
Tax charge/(credit) 39.4 (45.0) (17.3)
----------------------------------------------------- ------------ --------- -------------
UK corporation tax is calculated at 19.0% (H1 2017: 19.5%, FY
2017: 19.25%) of the estimated assessable profit for the period.
The corporation tax rate of 19.0% will apply throughout 2018. The
19.25% basic tax rate applied for the 2017 accounting year was a
blended rate, being a mix of 20% up to 31 March 2017 and 19% from 1
April 2017. Taxation for other jurisdictions is calculated at the
rates prevailing in the relevant jurisdiction.
Corporation tax for the interim period is charged at 39.4% (H1
2017: credited at 45.0%, FY 2017 credited at 17.3%), including
deferred tax. This represents the best estimate of the average
annual effective tax rate expected for the full year, applied to
the pre-tax income of the six month period.
In the period, the effective tax rate was higher than the
prevailing UK corporation tax rate of 19.0% largely due to the
disallowance of corporate interest restriction amounts, the
difference between current and deferred tax rates and the impact of
deferred tax not recognised overall increasing the effective tax
rate by 29.0%.
In November 2017, the UK government introduced new rules with
effect from 1 April 2017 which would restrict the deductibility of
net interest costs. In the current year the GBP2.0m tax impact of
these new restrictions is included in the calculation of the
current year tax charge. Due to uncertainty regarding the Group's
ability to recover the disallowed interest which can be carried
forward under these rules, no deferred tax asset has been
recognised in relation to the disallowed amount.
The Income Statement includes a tax charge of GBP2.4m which
comprises a current tax credit of GBP0.1m and deferred tax charge
of GBP2.5m. GBP2.2m of the deferred tax charge has arisen on the
Group's Bonds due to different accounting treatment applied on the
Bonds at the Group level in contrast with that applied at the
subsidiary entity level due to statutory reporting
requirements.
The Group expects that, subject to the uncertain outcome of the
strategic review, the effective tax rate will remain relatively
consistent with the current and prior year and reflect the
reduction of UK corporate tax rates over the next few years.
At the reporting date the Group has recorded GBP0.1m of
uncertain tax positions where tax could become payable in the
future.
7. Earnings per Share
The calculation of Earnings per Share is based on the following
loss and weighted average number of shares:
Continuing and discontinued operations
26 weeks 26 weeks 52 weeks
too to to
30 June 1 July 30 December
2018 2017(1) 2017
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- --------- ---------------
Profit/(loss)
Profit/(loss) for the period 3,747 (5,617) (78,580)
Preference dividend(2) - (76) -
Profit/(loss) for the purposes of basic
and diluted Earnings per Share 3,747 (5,693) (78,580)
------------------------------------------ ------------- --------- ---------------
Profit/(loss) per Share (p)
Basic 3.6 (5.4) (74.6)
Diluted(3) 3.5 (5.4) (74.6)
------------------------------------------ ------------- --------- -------------
1 The prior period comparatives have been restated. Refer to Note 2 for details.
2 In line with IAS 33, the preference dividend and the number of
preference shares are excluded from the calculation of Earnings per
Share.
3 Diluted Earnings per Share are presented when a company could
be called upon to issue shares that would decrease net profit or
increase profit/loss per Share.
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
--------------------------------------- ------------ --------- -------------
Number of shares
Weighted average number of ordinary
shares 105,878 105,878 105,878
Less shared held by Employee Share
Trust (552) (552) (552)
---------------------------------------- ------------ --------- -------------
Number of shares for the purpose of
ordinary profit/(loss) per share 105,326 105,326 105,326
Effect of dilutive potential ordinary 894 - -
shares
Number of shares for the purposes of
diluted profit/(loss) per share 106,220 105,326 105,326
---------------------------------------- ------------ --------- -------------
Adjusted
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------- --------- -------------
Adjusted profit
Adjusted profit for the period(1) 4,146 5,483 7,279
Preference dividend(2) - (76) -
--------------------------------------- ------------- --------- -------------
Adjusted profit for the purposes of
basic and diluted Earnings per Share 4,146 5,407 7,279
---------------------------------------- ------------- --------- -------------
Adjusted Profit per share (p)
Adjusted Basic 3.9 5.1 6.9
Adjusted Diluted(3) 3.9 5.1 6.9
--------------------------------- ---- ---- ----
1 Prior year adjusted earnings used in the adjusted EPS
calculation has been restated so that they are presented on a
consistent basis with current year adjusted earnings. For a
reconciliation from statutory (loss)/earnings refer to the
Alternative Performance Measures section within this financial
information.
2 In line with IAS 33, the preference dividend and the number of
preference shares are excluded from the calculation of Earnings per
Share.
3 Diluted Earnings per Share are presented when a company could
be called upon to issue shares that would decrease net profit or
increase profit/loss per Share.
8. Intangible assets
Digital
Publishing intangible
titles assets Total
GBP'000 GBP'000 GBP'000
----------------------------------------------- ---------- ----------- ---------
Cost
At 31 December 2017 1,121,984 12,865 1,134,849
Additions - 788 788
Disposals - (3,531) (3,531)
----------------------------------------------- ---------- ----------- ---------
At 30 June 2018 1,121,984 10,122 1,132,106
----------------------------------------------- ---------- ----------- ---------
Accumulated impairment losses and amortisation
At 31 December 2017 1,037,613 7,625 1,045,238
Amortisation for the period(1) - 826 826
Disposals - (3,531) (3,531)
Impairment losses for the period 2,036 377 2,413
----------------------------------------------- ---------- ----------- ---------
At 30 June 2018 1,039,649 5,297 1,044,946
----------------------------------------------- ---------- ----------- ---------
Carrying amount
----------------------------------------------- ---------- ----------- ---------
At 30 June 2018 82,335 4,825 87,160
----------------------------------------------- ---------- ----------- ---------
Publishing brands
The carrying amount of publishing brands by cash generating unit
(CGU) is as follows:
31 December 30 June
2017 Impairment 2018
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ---------- --------
Scotland(1) 8,223 - 8,223
North(2) 35,655 (1,432) 34,223
North West(3) - - -
Midlands 2,903 - 2,903
South(4) - - -
Northern Ireland(5) 13,590 (604) 12,986
The i 24,000 - 24,000
------------------------------------------- ----------- ---------- --------
Total carrying amount of publishing titles 84,371 (2,036) 82,335
------------------------------------------- ----------- ---------- --------
1 As at 30 June 2018 the recoverable amount of the Scottish CGU
is GBP14.7m. This is its value in use.
2 As at 30 June 2018 the recoverable amount of the North CGU is
GBP39.8m. This is its value in use.
3 As at 30 June 2018 the recoverable amount of the North West
CGU is GBP0.5m. This is its value in use.
4 As at 30 June 2018 the recoverable amount of the South CGU is
GBP2.9m. This is its value in use.
5 As at 30 June 2018 the recoverable amount of the Northern
Ireland CGU is GBP15.2m. This is its value in use.
Impairment assessment
The Group tests the carrying value of publishing brands held
within the publishing operating segment for impairment annually or
more frequently if there are indications that they might be
impaired. If an impairment charge is required this is allocated
first to reduce the carrying amount of any goodwill allocated to
the CGU and then to the other assets of the CGU but subject to not
reducing any asset below its recoverable amount. The impairment
reviews of the carrying value of the intangible assets, performed
during the period, resulted in impairment charges recorded against
publishing title intangible assets of GBP2.0m, corporate digital
intangible assets of GBP0.4m and corporate tangible assets of
GBP0.4m (refer to Note 9).
The Directors consider that publishing brands have an indefinite
economic life. Their economic life will in large part be determined
by their ability to adapt over time to market requirements in the
changing media landscape. The publishing brands are grouped by CGU,
being the lowest levels for which there are separately identifiable
cash flows independent of the cash inflows from other groups of
assets. The recently acquired i newspaper, which serves a national
market, is held in a separate CGU. For the remaining regional
brands in the Group it is not practicable to review individual
publishing rights and titles due to the interdependencies of
revenues and cash inflows within the CGUs.
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;
-- corporate and central cost allocations;
-- growth rates; and
-- the discount rate.
The Group prepares discounted cash flow forecasts using:
-- the latest forecast for 2018 and the projections for 2019 and
2020 which reflects 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 by
reference to the Groups own experience and, where appropriate,
publicly available market estimates. 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
2020 based on the Board's view of the estimated annual long-term
performance. A long-term decline rate between 0% and 4% reflecting
the Groups experience and best estimate of future trends has been
included for all CGUs. The long-term decline rates used are based
on the Directors view of the market conditions for the CGU and its
titles and brands in their current form; and
-- management estimate discount rates using post-tax rates that
reflect current market assessments of the time value of money, the
risks specific to the CGUs and the risks that the regional media
industry is facing. The post-tax discount rate applied to the
future cash flows for the period ended 30 June 2018 was 11.0% (H1
2017: 11.0%, FY17: 11.0%).
Some CGUs impacted by the impairment charge in the period have
limited or no headroom of value in use over the carrying value of
assets. Therefore, the impairment review is highly sensitive to
reasonable possible changes in key assumptions used in the value in
use calculations. A combination of reasonably possible changes in
key assumptions to the CGUs, such as digital growth being slower
than forecast or the decline in print revenues, could lead to a
further impairment.
The total publishing title impairment charge recognised for the
period ended 30 June 2018 was GBP2.0m (H1 2017: GBP4.5m, FY17:
GBP59.1m).
The Group has conducted sensitivity analysis on the impairment
test of each CGUs carrying value.
A decrease in the long-term decline rate of 1.0% (which has the
effect of increasing the decline rate from between 0% and 4% to
between 1% and 5%), beyond 2020, would result in a further Group
impairment of GBP2.4m and erosion of GBP8.0m of headroom in the
combined Scotland, Midlands, South and i CGUs. An increase in the
long-term decline rate is possible if the advertising market
conditions do not improve.
A decrease in the operating profit (after central cost
allocation) of 1.0% in each of the three years in the forecast
period from 2018-2020, would result in a further Group impairment
of GBP0.6m and erosion of GBP1.3m of headroom in the combined
Scotland, Midlands, South and i CGUs. A decrease in the operating
profit after central cost allocation is possible if revenues or
costs do not meet forecasted numbers.
An increase in the discount rate of 1.0%, from 11.0% to 12.0%
would result in an additional impairment of GBP3.0m, and erosion of
GBP9.4m of headroom in the combined Scotland, Midlands, South and i
CGUs. An increase in the risk-free interest rate or risk premium
could result in a higher discount rate being applied to the
impairment assessment.
Decline Discount
rate Performance rate
sensitivity sensitivity sensitivity
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ------------ ------------ ------------
Scotland - - -
North (1,730) (398) (2,176)
North West 33 (5) 33
Midlands - - -
South - - -
Northern Ireland (688) (152) (861)
The i - - -
----------------------------------------------------- ------------ ------------ ------------
Total potential impairment from sensitivity analysis (2,385) (555) (3,003)
----------------------------------------------------- ------------ ------------ ------------
Digital intangible assets
Digital intangible assets primarily relate to the Group's local
websites, which form the core platform for the Group's digital
revenue activities. These assets are being amortised using the
straight-line method over the expected life, of three to five
years. Amortisation for the year has been charged through cost of
sales. Digital intangible assets are tested for impairment at each
reporting date or more frequently where there is an indication that
the recoverable amount is less than the carrying amount.
Costs incurred in the development of websites are only
capitalised if the criteria specified in IAS38 are met.
9. Property, plant & equipment
Freehold
land and Leasehold Plant and Motor
buildings buildings machinery Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- ---------- ---------- --------- --------
Cost
At 31 December 2017 51,951 5,477 106,052 225 163,705
Additions - 260 1,041 - 1,301
Disposals - (242) (1,691) (8) (1,941)
Transfers to assets held for sale (98) (412) (349) - (859)
At 30 June 2018 51,853 5,083 105,053 217 162,206
---------------------------------- ---------- ---------- ---------- --------- --------
Depreciation
At 31 December 2017 40,891 1,738 91,602 225 134,456
Disposals - (242) (1,691) (8) (1,941)
Charge for the period 124 325 1,140 - 1,589
Impairment 260 86 703 - 1,049
Transfers to assets held for sale (62) (292) (326) - (680)
At 30 June 2018 41,213 1,615 91,428 217 134,473
---------------------------------- ---------- ---------- ---------- --------- --------
Carrying amount
---------------------------------- ---------- ---------- ---------- --------- --------
At 30 June 2018 10,640 3,468 13,625 - 27,733
---------------------------------- ---------- ---------- ---------- --------- --------
During the period the Group carried out a review of the
recoverable amount of its print manufacturing plant and related
equipment, which are used in the Group's print segment. The Group
has three print presses in Dinnington, Portsmouth and Carn. Each
print site is assessed independently for impairment, as separate
CGUs. The recoverable amount of each CGU is 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 latest forecast for 2018 and the projections for 2019 and
2020 which reflects 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 by
reference to the Groups own experience and, where appropriate,
publicly available market estimates. 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
2020 based on the Board's view of the estimated annual long-term
performance. A long-term decline rate of 0% (H1 2017: 0%; FY 2017:
0%) has been included on presses for all CGUs, reflecting the
Groups experience and best estimate of future trends has been
included for all CGUs; 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 30 June 2018 was
11.0% (H1 2017: 11.0%, FY17: 11.0%).
Impairment charges totalling of GBP1.0m have been recognised
against property, plant and equipment for the period ended 30 June
2018. This consists of:
-- a GBP0.4m impairment charge allocated against corporate
assets arising out of the impairment assessment performed over the
publishing title intangible asset CGUs (refer to Note 8 for
details); and
-- a GBP0.6m impairment charge arising out of the impairment
assessment performed in relation to the Portsmouth print site CGU.
As at 30 June 2018 the recoverable amount of the Portsmouth print
site CGU is GBP3.5m. This is its value in use.
10. Trade and other receivables
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
------------------------------------------ -------- -------- -----------
Current:
Trade receivables 21,052 23,644 21,755
Allowance for doubtful debts (840) (1,133) (793)
------------------------------------------ -------- -------- -----------
20,212 22,511 20,962
Prepayments 2,559 3,068 1,392
Other debtors 6,093 5,833 5,304
------------------------------------------ -------- -------- -----------
Total current trade and other receivables 28,864 31,412 27,658
------------------------------------------ -------- -------- -----------
Non-current receivables 1 1 1
------------------------------------------ -------- -------- -----------
Total trade and other receivables 28,865 31,413 27,659
------------------------------------------ -------- -------- -----------
11. Trade and other payables
Restated(1)
and re-presented(2)
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------------- -------- -------------------- -----------
Current:
Trade creditors and accruals(1) 23,812 26,482 26,833
Accrual for redundancy costs 507 1,894 1,129
Other creditors(2) 7,092 7,822 6,184
--------------------------------------- -------- -------------------- -----------
Total current trade and other payables 31,411 36,198 34,146
--------------------------------------- -------- -------------------- -----------
Non-current trade and other payables 3,494 3,487 3,484
--------------------------------------- -------- -------------------- -----------
1 Prior period comparatives have been restated, refer to Note 2.
2 Prior period comparatives have been re-presented, refer to Note 12.
12. Borrowings
The borrowings at 30 June 2018 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 due 1 June 2019 ('the
Bonds') have been charged to the Income Statement. The breakdown of
the 8.625% Senior Secured Notes due 1 June 2019 is as follows:
Re-presented(3)
30 June 1 July
30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------------------- --------- ---------------- ------------
Principal amount(1) 220,000 220,000 220,000
Bonds discount - initial (4,400) (4,400) (4,400)
Fair value gain from inception(2) (58,608) (68,200) (49,775)
Total borrowings (including mark-to-market)
(4) 156,992 147,400 165,825
--------------------------------------------- --------- ---------------- ------------
Finance leases(3) 770 510 860
--------------------------------------------- --------- ---------------- ------------
Total borrowings 157,762 147,910 166,685
--------------------------------------------- --------- ---------------- ------------
1 The principal amount remaining is stated after a GBP5.0m Bonds buy back in August 2015.
2 The fair value gain for the period to 30 June 2018 amounted to
GBP8.8m (H1 2017: GBP4.4m loss, period to FY 2017: GBP22.8m
loss).
3 In the prior half year period to 1 July 2017, finance lease
obligations were reported within other creditors, which were
considered immaterial and not separately disclosed. However,
following the inception of new finance leases during the 30
December 2017 period, finance leases are now considered material
and are disclosed separately. Therefore the finance lease liability
has been re-presented in the prior period to borrowings and the
associated finance lease disclosure comparatives have been added
for comparability with the new current year disclosures. There is
no effect on EPS.
4 The Bonds have been reclassified in the balance sheet from
non-current to current during the 6 month period ended 30 June
2018.
The borrowings are disclosed in the financial statements as:
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Current borrowings 157,178 102 180
Non-current borrowings 584 147,808 166,505
Total borrowings 157,762 147,910 166,685
The Group's net debt(1) is:
30 June 1 July
2018 2017 30 December 2017
GBP'000 GBP'000 GBP'000
Gross borrowings as above 157,762 147,910 166,685
Cash and cash equivalents (17,595) (28,823) (25,028)
Net debt(2) 140,167 119,087 141,657
1 The principal amount remaining is stated after a GBP5.0m Bonds buy back in August 2015.
2 Net debt is a non-statutory term presented to show the Group's
borrowings net of cash equivalents and Bonds fair value
movements.
Finance leases
The Group leases some of its equipment under finance leases. The
average lease term is five years (H1 2017: five years, FY 2017:
five years) and the Group, in some cases, has the option to
purchase the equipment at the end of the lease term. There is no
contingent rent payable or restrictions imposed by these finance
lease agreements, such as those concerning dividends, additional
debt and further leasing. Future minimum lease payments under
finance leases together with the present value of minimum lease
payments are as follows:
30 June 2018 1 July 2017 30 December 2017
GBP'000 GBP'000 GBP'000
----------------------- ----------------------- -----------------------
Present Present Present
value Minimum value Minimum value Minimum
of payments payments of payments payments of payments payments
------------ --------- ------------ --------- ------------ ---------
Less than one year 186 226 111 148 180 234
One to five years 584 634 399 471 680 764
------------ --------- ------------ --------- ------------ ---------
Total 770 860 510 619 860 998
------------ --------- ------------ --------- ------------ ---------
Less amounts representing
finance charges (90) (109) (138)
Present value of minimum lease
payments 770 510 860
13. Retirement benefit obligation
Characteristics of the Group's pension related liabilities
The Johnston Press Retirement Savings Plan
The Johnston Press Retirement Savings Plan is a defined
contribution Master Trust arrangement for current employees,
operated by Zurich. Contributions by the Group are a percentage of
basic salary. Employer contributions range from 1% of qualifying
earnings, 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 Plan')
The Johnston Press Pension Plan is a defined benefit pension
plan closed to new members and closed to future accrual. There was
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 Plan operates under trust law, applying in the relevant
parts of the United Kingdom, and the assets of the Plan are held
separately from those of the Group. The Plan is managed and
administered by independent Trustees on behalf of the members.
Trustees have a duty to act in the best interests of the members
and must act in accordance with the Plan's Trust Deed and Rules and
UK pensions legislation.
There are seven Trustees, four are appointed by the Company
(including an independent professional trustee as Chairman) and
three are nominated by members of the Plan.
A valuation of the Johnston Press Pension Plan as at 31 December
2012 was commissioned by the Trustees and took account of the 2014
Capital Refinancing Plan.
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 was removed. In return for the removal of this security and
the aforementioned guarantee, an unsecured cross-guarantee was
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 Plan. Each claim made under the unsecured cross-guarantee is
capped at an amount equal to the aggregate Section 75 (s.75) 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 (see below).
-- Settlement of previously incurred Pension Protection Fund (PPF) levies and s.75 debts.
-- The Plan was entitled to receive 25% of net proceeds from
business or asset disposals up to and including 31 August 2015
exceeding GBP1m in a single transaction or GBP2.5m 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 would also pay additional contributions to the Plan
in the event that the 2014/2015 PPF levy and/or the 2015/2016 PPF
levy was less than GBP3.2m, equal to the amount the levy falls
below GBP3.2m, up to a maximum of GBP2.5m.
-- Additional contributions would 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 Plan, and subsequently it was submitted to The
Pensions Regulator.
The Pension Framework Agreement and the required level of
contributions are subject to review as part of the triennial
valuation as at 31 December 2015.
Discussions are currently ongoing between the Trustees and the
Company. The statutory deadline for sign off of the valuation was
31 March 2017 and the Trustees have informed the Pensions Regulator
(tPR) that the valuation has not been signed off due to ongoing
discussions with the Company. The Trustees and the Plan's advisers
have met with tPR and had regular conference call updates over the
course of the year to keep tPR updated on the progress of the
discussions.
In the meantime, the Schedule of Contributions and Recovery Plan
dated 29 July 2014 remain in force. Under these, the Group will pay
the following annual contributions to the Plan: GBP10.6m in the
year to 31 December 2018 increasing by 3% per annum with a final
payment of GBP12.7m in the year to 31 December 2024.
Difference between funding valuation and IAS19 valuation
A funding valuation is carried out every three years by a
qualified actuary on behalf of the Board of Trustees, the purpose
of which is to determine the money that needs to be put into the
Plan.
IAS19 is an accounting rule covering employee benefits under
which the deficit shown on the balance sheet of the financial
statements is determined.
The purpose of the funding valuation is therefore different to
the IAS19 valuation. And the approach to each of these
valuations
is different too, meaning the funding and IAS19 deficits are
different:
-- The IAS19 accounting standard requires all companies to
assess their liabilities by assuming that future investment returns
will be in line with yields on high-quality corporate bonds.
-- The Plan invests in a range of assets which are expected to
deliver higher returns than the yields currently available on
corporate bonds. The Trustees can take account of these higher
expected returns in setting the liabilities under the funding
valuation.
-- Other assumptions used differ between the IAS19 and funding
valuations. The Trustees are required to use prudent assumptions
for funding whereas IAS19 requires best estimate assumptions.
Whilst discussions with the Trustees on the latest triennial
funding valuation as at 31 December 2015 are ongoing, the latest
estimate of the funding deficit is GBP45.9m at 30 June 2017. This
compares with the IAS19 deficit at the same date of GBP53.1m.
Maturity profile
The weighted average term of the liabilities (known as 'the
duration') is 16 years.
The table below shows the split of the Defined Benefit
Obligation by member type:
30 June 1 July 30 December
2018 2017 2017
Defined benefit obligation GBP'000 GBP'000 GBP'000
--------------------------- -------- -----------
Deferred pensioners 285,897 292,292 300,416
--------------------------- -------- -----------
Pensioners 294,779 308,563 308,196
--------------------------- -------- -----------
Total 580,676 600,855 608,612
--------------------------- -------- -----------
Risks
The Plan exposes the Group to a number of risks, the most
significant of which are described below:
Interest The IAS19 liabilities are calculated using a discount rate
rate risk based on the yields available on AA corporate bonds. A reduction
in bond yields (and hence the discount rate) will increase
the Plan's liabilities.
The Plan invests in Liability Driven Investment (LDI) assets
to hedge the majority of this risk - see Investment Strategy
below.
Inflation Pension increases in payment and revaluation of deferred members'
risk benefits before retirement are linked to inflation. Higher
levels of inflation will lead to higher liabilities.
The Plan's LDI investments provide a hedge against the majority
of this risk - see Investment Strategy below.
Pension increases in payment and deferred revaluation are
both subject to caps which limit the inflation risk to an
extent. And the Plan offers members the option of a Pension
Increase Exchange at retirement, where members can give up
future increases on some of their pension for an immediate,
one-off uplift to the initial pension. This further reduces
the level of inflation risk.
Investment Whilst the IAS19 liabilities are calculated by reference to
risk AA corporate bond yields, the Plan invests in a range of different
asset classes with the aim of balancing the objectives of
targeting investment growth and managing risk.
The Plan's assets include some growth assets that are expected
to perform better than corporate bonds in the long-term, but
the value of these assets will fluctuate due to changes in
market prices. To limit this risk, the Trustees invest in
a diverse portfolio of instruments across various markets.
The mismatch between assets and liabilities does mean there
will be some short-term volatility between asset and liability
values. The Plan's LDI investments limit the extent of this
volatility - see Investment Strategy below. All else being
equal, if the returns are less than the discount rate then
the deficit will increase.
The Trustees will monitor and review the investment strategy
with respect to the liabilities in conjunction with each actuarial
valuation. The investment strategy will be set with consideration
to the appropriate level of risk required
for the funding strategy as set out in the Plan's Statement
of Funding Principles.
Longevity Increases in life expectancy will lead to higher liabilities.
risk The Company will keep the life expectancy assumptions under
review, taking into account the results of the medically underwritten
health study, information from the Trustee's actuary on the
Plan's actual mortality experience and mortality trends in
the wider population.
IFRIC 14
Under the Rules of the Plan the Group has an unconditional right
to any surplus assuming the gradual settlement of liabilities over
time until all members have left the Plan.
Therefore under IFRIC 14 the Group is neither required to
reflect any additional liabilities in relation to deficit funding
commitments nor restrict any Plan surplus that arises.
IFRIC 14 is currently in the process of being amended and the
Company will review its IFRIC 14 position when the amendment is
published.
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 30 June 1 July 30 December
other pension related liabilities 2018 2017 2017
costs GBP'000 GBP'000 GBP'000
----------------------- ---------------------- ------------
Employment costs:
Defined contribution scheme (1,921) (1,842) (3,732)
Defined benefit scheme:
Plan expenses (IAS19)(1) (446) (374) (1,289)
Pension Protection Fund Levy (203) (144) (270)
Net finance cost on Johnston Press
Pension Plan (IAS19) (553) (873) (1,690)
----------------------- ---------------------- ------------
Total defined benefit scheme (1,202) (1,391) (3,249)
----------------------- ---------------------- ------------
Total pension costs (3,123) (3,233) (6,981)
----------------------- ---------------------- ------------
1 Relates to administrative expenses incurred in managing the pension fund.
30 June 1 July 30 December
Other comprehensive income - (loss)/gain 2018 2017 2017
on pension GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- --------- ------------
(Losses)/gains on plan assets in excess
of interest (20,872) (894) 13,587
Gains/(losses) from changes to financial
assumptions 23,289 - (13,071)
(Losses)/gains from changes to demographic
assumptions (702) 11,267 11,420
Actuarial gain recognised in the statement
of comprehensive income 1,715 10,373 11,936
(292)
Deferred tax(2) - (1,763) (2,029)
--------- --------- ------------
Actuarial gain recognised in the statement
of comprehensive income net of tax 1,423 8,610 9,907
2 Deferred tax adjustment in the period arises due to the
reduction in corporate tax rate and increase in pension deficit. A
17% deferred tax rate has been applied to the deferred tax movement
in respect of the defined benefit scheme.
During 2015 a medically underwritten study was carried out by
KPMG to identify the current health of a sample group of existing
Plan members, assessed via telephone interviews targeted towards
members with the most significant liabilities in the Plan. The
results of the study continue to be used to inform the mortality
assumptions for use in calculating the IAS19 scheme
liabilities.
Group statement of financial position 30 June 1 July 30 December
- net defined benefit pension deficit 2018 2017 2017
and other pension related liabilities GBP'000 GBP'000 GBP'000
Amounts included in the Group Statement
of Financial Position :
Fair value of scheme assets 539,938 547,763 561,425
Present value of defined benefit obligations (580,676) (600,855) (608,612)
Amount included in non-current liabilities (40,738) (53,092) (47,187)
---------- ---------- ------------
There was a change in accounting policy in the 52 week period
ended 30 December 2017 to present all of the net defined benefit
obligation as a non-current liability, which is in line with common
practice. The impact on the retirement benefit obligation as at 1
July 2017 has been to move GBP10.3m from current liabilities to
non-current liabilities. This has resulted in no change in the
total retirement benefit obligation as at 1 July 2017.
Analysis of amounts recognised of the net defined benefit
pension deficit
30 June 1 July 30 December
2018 2017 2017
Note GBP'000 GBP'000 GBP'000
Net defined benefit pension deficit
at beginning of period (47,187) (67,725) (67,725)
----- ---------- ---------- ------------
Defined benefit obligation at beginning
of period (608,612) (615,610) (615,610)
Income statement:
Interest cost (7,481) (8,177) (16,287)
Re-measurement of defined benefit
obligation:
Arising from changes in demographic
assumptions (702) 11,267 11,420
Arising from changes in financial
assumptions 23,289 - (13,071)
Cash flows:
Benefits paid (by fund and Group) 12,830 11,665 24,936
----- ---------- ---------- ------------
Defined benefit obligation at end
of the period (580,676) (600,855) (608,612)
Fair value of plan assets at beginning
of period 561,425 547,885 547,885
Income statement:
Interest income on plan assets 6,928 7,304 14,597
Other comprehensive income:
Return on plan assets less interest (20,872) (894) 13,587
Cash flows:
Company contributions(1) 15 5,287 5,133 10,292
Benefits paid (by fund and Group) (12,830) (11,665) (24,936)
----- ---------- ---------- ------------
Fair value of plan assets at end
of period 539,938 547,763 561,425
Net defined benefit pension deficit
at end of period (40,738) (53,092) (47,187)
----- ---------- ---------- ------------
1 Comprises employer contributions of GBP5.3m (H1 2017: GBP5.1m).
Analysis of fair value of plan assets
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Equities - 92,962 -
Volatility Controlled Synthetic Equity 22,579 - 22,294
Multi-asset credit 167,339 113,783 169,718
Diversified Growth Funds 186,843 201,557 204,977
Liability Driven Investments 122,566 115,527 122,645
Cash and cash equivalents 39,301 22,566 40,419
Insured benefits 1,310 1,368 1,372
--------- ------------
Total fair value of plan assets 539,938 547,763 561,425
--------- ------------
The Volatility Controlled Synthetic Equity is a structure that
has been set up to provide volatility controlled exposure to global
equity markets. The volatility target is 10% and the underlying
allocation is split between equity and cash to target this. The
fair value of this mandate has been determined by the investment
manager based on relevant guidance and represents the Net Asset
Value of the underlying cash and derivatives providing equity
exposure.
Insured Benefits are annuities held in the name of the Trustees
with various providers. These annuities have been valued using
the IAS19 assumptions.
Multi Asset Credit represents holdings in pooled investment
vehicles investing in a range of credit assets such as loans,
high-yield bonds and asset backed securities. The investment
managers have full discretion in the selection of the underlying
assets.
Diversified Growth Funds represent holdings in pooled investment
vehicles investing in a range of growth assets such as equities,
property, commodities, bonds and cash with managers having full
discretion in the selection of the underlying assets.
Liability Driven Investment (LDI) consists of investments in the
Aberdeen Standard Investments ILPS and State Street LDI funds,
which use swap-based and gilt-based derivatives to hedge
movements in the Plan's liabilities (discussed in more detail
below).
The fair values of the investments in the Multi Asset Credit,
Diversified Growth and LDI funds are provided by the investment
managers, based on the values of the assets underlying these funds.
The manager's use quoted prices where available and determine the
fair value of the unquoted investments based on relevant
guidance.
The Plan does not directly invest in any of the Company's own
transferable financial instruments or any property occupied by, or
other assets used by, the Company. The Plan does invest into funds
that do have the discretion to purchase Company financial
instruments (these are pooled funds with large numbers of
investors), but the level from time to time would be expected to
make up a very small proportion of overall Plan assets -
significantly below the 5% self-investment threshold for UK pension
schemes as set out in the Section 40 of the Pensions Act 1995.
Investment strategy
Investment managers are appointed by the Trustees to manage the
Plan's assets. The Trustees agree the strategic investment strategy
after taking appropriate advice. Subject to the investment strategy
laid down by the Trustees, day-to-day management of the Plan's
portfolio, which includes full discretion over stock selection, is
the responsibility of the investment managers.
Over the course of 2017, the Trustees took a series of decisions
regarding the investment strategy, with three main aims: to
increase
the level of interest rate and inflation hedging, to improve the
cash flow generation of the Plan's assets and to manage the equity
downside risk.
-- Between June 2014 and July 2016, the Plan's liability
matching assets were solely invested in a range of leveraged (fixed
interest and inflation-linked) single gilt funds managed by State
Street Global Advisors (SSGA).
-- Between August 2016 and February 2017, the Plan's investment
in liability matching assets was increased by introducing an
allocation in the Aberdeen Standard Investments ILPS fund range
alongside the SSGA LDI portfolio. The ILPS fund range provides
leveraged interest rate and inflation exposure using a mixture of
gilt-based and swap-based derivatives. The leverage in the ILPS
holdings is also used to provide diversified growth exposure on top
of the hedging.
-- Since February 2017, the SSGA LDI portfolio and the Aberdeen
Standard Investments ILPS allocation have broadly hedged the Plan's
funded liabilities (as measured on a gilts + 0.5% pa basis).
-- The other assets of the Plan are designed to provide growth
and income over time, to meet the benefit payments as they fall
due. Over the course of 2017, the Plan has added more
income-focused assets (including investing GBP56m into the
TwentyFour Strategic Income Fund) and has added protection to the
equity portfolio (replacing the Fidelity actively-managed physical
equity funds, with a synthetic equity mandate with downside
protection and volatility control).
-- Overall, the changes to the investment strategy (both LDI and
growth changes) should reduce the level of volatility in the Plan's
funding level.
Liability Driven Investments (LDI)
The Johnston Press Pension Plan invests in leveraged Liability
Driven Investment (LDI) funds which use swap-based and gilt-based
derivatives in order to match a proportion of the interest rate and
inflation sensitivity of the Plan's liabilities. The current
leverage on the LDI mandates is around 2x-3x. This means that every
GBP1 invested in LDI funds hedges GBP2-GBP3 of liabilities.
Under these strategies, if interest rates fall the value of the
investments will rise to help match the increase in actuarial
liabilities arising from the fall in the discount rate. Similarly,
if interest rates rise, the investments will fall in value, as will
the actuarial liabilities because of an increase in the discount
rate.
If inflation rates rise the value of the investments will rise
to help match the increase in actuarial liabilities arising from
the rise in the inflation rate. Similarly, if inflation rates fall,
the investments will fall in value, as will the actuarial
liabilities because of a decrease in the inflation rate.
The LDI mandate targets 100% interest rate and inflation hedging
of the funded liabilities calculated using a discount rate of 0.5%
pa above gilt yields. This means that changes in interest rates and
inflation will leave the funding level (calculated on a gilts +
0.5% basis) broadly unchanged.
At the year end, the total allocation to Liability Driven
Investment strategies represented 39.3% of the total investment
portfolio. This excludes a 7% allocation to a cash fund which sits
alongside the leveraged LDI funds with State Street.
The Plan hedges its interest rate risk on a gilts basis whereas
the IAS19 discount rate is based on AA corporate bond yields. There
is therefore some mismatching risk should the yields on gilts and
corporate bonds diverge. As a result of this mismatch, the funding
level under IAS19 remains volatile to changes in corporate bond
credit spreads that have not been hedged.
Valuation
at Valuation at Valuation at
30 December
Analysis of financial assumptions 30 June 2018 1 July 2017 2017
--------------------
Discount rate 2.70% 2.70% 2.50%
Future pension increases
Deferred revaluations (where linked
to inflation (CPI)) 2.20% 2.40% 2.30%
Pensions in payment (where linked
to inflation (RPI)) 3.20% 3.40% 3.30%
LPI 2.5% pension increases (RPI) 2.05% 2.15% 2.10%
LPI 5% pension increases (RPI) 3.05% 3.20% 3.15%
Future life expectancy
Male currently aged 50 (years) 20.7 20.7 20.7
Female currently aged 50 (years) 22.4 22.3 22.3
Male currently aged 65 (years) 19.8 19.7 19.7
Female currently aged 65 (years) 21.5 21.4 21.4
Mortality assumption 100% of S2PxA 100% of S2PxA 100% of S2PxA
tables, rated tables, rated tables, rated
up by two years up by two years up by two years
with allowance with allowance with allowance
for the CMI for the CMI 2016 for the CMI 2016
2017 projections projections (smoothing projections (smoothing
(smoothing parameter 6.5) parameter 6.5)
parameter 6.5) and long-term and long-term
and long-term rate of improvement rate of improvement
rate of improvement of 1.25% pa for of 1.25% pa for
of 1.25% pa males and 1.0% males and 1.0%
for males and pa for females pa for females
1.0% pa for
females
Pension increase exchange at retirement
Allowance for 45% of members to exchange their non-statutory
pension increases for a higher level pension at retirement for
those sections where this is automatically offered at
retirement.
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:
Decrease / (increase)
in defined benefit
obligation
GBP'000
Discount rate
+0.10% discount rate 9,329
Inflation rate
+0.10% inflation rate (4,687)
Mortality
+10.0% to base table mortality rates 20,689
Pension increase exchange
Allowance for 25% take up for sections where automatically
offered 138
The sensitivities above show the impact on the defined benefit
obligation only, and not any offsetting impact on the value of Plan
assets from the interest rate and inflation hedging strategies.
The sensitivity analysis is based on a change in one assumption
while holding all other assumptions constant, therefore
interdependencies between assumptions are excluded. In line with
previous periods, the methodology applied is consistent to that
used to determine the recognised pension liability.
The inflation assumption sensitivity above factors in the impact
of a change in inflation on increases to deferred benefits
and pensions in payment.
Other pension-related obligations
The Group has agreed to pay the expenses of the Plan and the PPF
levy as they fall due.
News Media Association Pension Scheme
The Group is a member of the News Media Association (NMA), it
was formerly a member of the 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 to 2038 or until
such time as the deficit has been addressed, if earlier. The
provision has been made on the former since we have no reliable
estimate about the likelihood of the deficit being addressed before
2038 or, if it was, when this might happen. Applying a discount
rate of 12.0%, the Group's best estimate of this at present value
is GBP0.7m.
News Media Association Pension Scheme liabilities have been
included within provisions (refer to Note 14).
Other pension-related liabilities
The closing provision relating to unfunded pensions for senior
employees was GBP0.5m (H1 2017: GBP0.5m, FY 2017: GBP0.5m). The
unfunded pension provision is assessed by a qualified actuary at
each year end.
Post-retirement medical benefit pension-related liabilities for
former Portsmouth and Sunderland members of GBP0.1m (H1 2017:
GBP0.1m, FY 2017: GBP0.1m). The post-retirement medical benefits
represent management's best estimate of the liability
concerned.
Other pension-related liabilities have been included within
provisions (refer to Note 14).
14. Provisions
News Media Other pension
Onerous Association related
leases Pension -
and dilapidations Scheme(1) liabilities(1) Total
As at 30 June 2018 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------
Current provisions 1,316 90 - 1,406
Non-current provisions 4,268 621 594 5,483
--------------- --------
Total provisions 5,584 711 594 6,889
--------------- --------
As at 1 July 2017
------ --------
Current provisions 942 90 - 1,032
Non-current provisions 1,634 520 624 2,778
------ --------
Total provisions 2,576 610 624 3,810
------ --------
As at 30 December 2017
--- -----
Current provisions 1,512 90 - 1,602
Non-current provisions 4,655 671 617 5,943
--- -----
Total provisions 6,167 761 617 7,545
--- -----
1 For details of other pension related liabilities see Note 13.
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 provided for at the point of exit as an onerous lease.
Where exited properties are sublet to a third party, an estimate of
the expected future rental income is deducted from the provision
balance.
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
leases expiring or expected to be terminated and has also assessed
the entire portfolio and made provisions depending on the state of
the property and the duration of the lease and likely rectification
requirements.
In the prior year there was a change in the estimate for the
anticipated total future cost payable for onerous leases and
dilapidations, arising from a change in the Group's property
strategy. This resulted in an additional provision of GBP4.4m being
charged in the 52 week period ended 30 December 2017.
15. Notes to the Cash flow statement
Restated(1)
and
re-presented(2)
30 June 1 July
30 December
2018 2017 2017
Notes GBP'000 GBP'000 GBP'000
-------- --------------------
Operating profit/(loss) 7,413 4,939 (51,213)
Adjustments for non-cash items:
Impairment of intangible assets 8 2,413 4,513 60,453
Impairment of property, plant and equipment 9 1,049 - 3,861
Impairment of assets held for sale - - 112
10,875 9,452 13.213
Amortisation of intangible assets 824 1,595 3,666
Depreciation charges 1,589 2,151 4,243
(Credit)/charge for share-based payments (59) 933 1,290
Profit on disposal of assets held for
sale - (1,790) (2,952)
Loss on disposal of Midlands titles - 538 611
Profit on disposal of property, plant
and equipment - (6) (11)
Currency differences 10 (66) (24)
-------- --------------------
13,239 12,807 20,036
Operating items before working capital
changes:
Net pension funding contributions -
cash 13 (5,287) (5,133) (10,292)
Movement in provisions (698) (767) 2,891
-------- --------------------
Cash generated from operations before
working capital changes 7,254 6,907 12,635
Working capital changes :
Decrease/(increase) in inventories 656 245 (229)
(Decrease)/increase in receivables (1,206) (1,621) 2,720
Decrease in trade creditors (3,033) (194) (1,152)
Increase/(decrease) in other payables 219 (976) (1,792)
-------- --------------------
Cash generated from operations 3,890 4,361 12,182
-------- --------------------
1 Prior half year comparatives have been restated, refer to Note 2.
2 Prior half year comparatives have been re-presented, refer to Note 12.
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.
16. Commitments, guarantees and contingent liabilities
Bond accounting treatment
The Group is currently in discussions with HMRC with regard to
the accounting and tax treatment of the Bonds under FRS 102 Section
11.9, which could result in an additional UK Corporation tax
liability for the Group, arising from a potential unrealised
accounting gain in the company only financial statements for
Johnston Press Bond plc. The Group has engaged its advisers to
assist in responding formally to HMRC on this matter having
recently met HMRC in July 2018 to further discuss the judgements
applied and conclusion reached.
In the consolidated accounts a deferred tax liability related to
the Bonds is already recorded. However, to the extent HMRC's
challenge is sustained the deferred tax liability would be
released, resulting in a potential cash tax outflow. The best
estimate of the cash tax outflow which could arise in regards to
this matter at 30 June 2018 has been determined, and the exposure
has been estimated to be GBP8.3m (excluding potential penalties and
interest) covering all accounting periods subsequent to the
issuance of the Bonds in 2014.
Iliffe Media
On 17 January 2017, the Group entered into a sale agreement to
dispose of certain publishing titles to Iliffe Media. As a
condition of the sale, Johnston Press plc will incur costs
associated with the refurbishment of property included within
assets disposed of to Iliffe Media Ltd. The maximum obligation that
the Group can possibly incur is GBP0.2m, expiring in 2024, and no
provision has been included in the Group Statement of Financial
Position.
Assets pledged as security
Under the capital refinancing agreement completed on 23 June
2014, the Group and all its material subsidiaries entered into new
security arrangements in connection with the Bonds issued and the
revolving credit facility. The security provided includes fixed and
floating charges over all or substantially all of the assets of
certain members of the Group and share security over shares of
certain members of the Group. Whilst the Bonds remain outstanding,
the revolving credit facility was cancelled on completion of the
sale of the East Anglia and the East Midlands titles to Iliffe
Media Limited.
17. Related party transactions
During the period the Group paid GBP0.5m in retention bonuses to
retain key employees (no Directors received retention bonuses) as
part of the Strategic Review. Refer to the Alternative Performance
Measures section for further details.
Other than the transaction above there have been no other
related party transactions that have occurred during the first 26
weeks of the financial year that have materially affected the
financial position or performance of the Group during that period
and there have been no other changes in the related party
transactions described in the 2017 Annual Report and Accounts that
could do so.
18. Post balance sheet events
There were no material post balance sheet events requiring
disclosure
Alternative Performance (Non-GAAP) Measures
The Directors assess the performance of the Group using both
statutory accounting measures and a variety of alternative
performance measures (APMs). The key APMs monitored by the Group
are:
-- adjusted revenue;
-- adjusted EBITDA;
-- adjusted EBITDA margin %;
-- adjusted operating profit;
-- adjusted operating profit margin %; and
-- cash and net debt (excluding mark-to-market). Refer to
Financial Review section for calculation of net debt (excluding
mark-to-market).
The business has been through a period of enormous change over
an extended period. This has resulted from structural change in the
sector. Audiences have increased their use of online and mobile
platforms to access information and news, resulting in accelerated
newspaper circulation volume decline. Advertisers have also
increasingly sought to use digital services to reach their target
audiences. Most recently we have also seen further significant
change in algorithms used by social media platforms and search
engine tools. Together, this structural shift has resulted in
year-on-year declines in the Group's income.
The Group has initiated a series of restructuring programs to
remove cost from the business with the objective of designing a
sustainable print publishing business model, while at the same time
investing in building a digital income stream.
The resulting restructuring projects have seen a substantial
redesign of each area of the business, including management layers
and structures, products and services, content creation and our
sales routes to market. In streamlining the organisation, a
significant investment in redundancy has seen numerous posts closed
over the last four and a half years. The Group has also sought to
reflect its change in shape and scale in support areas including
making substantial reductions in its property portfolio, technology
licences and fleet. The speed of its action, both in anticipating
and responding to recent changes in the sector has meant that some
existing contracts no longer reflect the current needs of the
business.
In 2017, the Group initiated new changes to its business model,
including how it allocated resources to different brands, its mix
of field and call centre based sales staff, while also adopting a
clear policy of downsizing its property portfolio, taking advantage
of natural lease breaks, typically moving to smaller short-term
serviced offices in local towns and cities, while maintaining
larger hubs in Preston, Leeds, Edinburgh, Peterborough, Sheffield
and Portsmouth. In 2018 the costs of the Strategic Review have
grown as options relating to funding the maturity of the Bonds on 1
June 2019 are being considered in conjunction with the Group's
advisers.
To provide investors and other users of the Group's financial
statements with additional clarity and understanding of both the
cost of this business change programme, and the resulting impact on
the Group's underlying trading, the Directors believe that it is
appropriate to additionally present the alternative performance
measures used by management in running the business and in
determining management and executive remuneration.
Although management believes the alternative performance
measures are important in considering the performance of the Group,
they are not intended to be considered in isolation, or as a
substitute for, or superior to financial information on a statutory
basis. The adjusted figures are not a financial measure defined or
specified in the applicable financial reporting framework, and
therefore may not be comparable to similar measures presented by
other entities. When reviewing and selecting these adjusting items,
the Directors considered the guidelines issued by the European
Securities and Markets Authority (ESMA).
A reconciliation between the statutory and the adjusted results
is provided under Alternative Performance Measures within the
financial information. The reconciliation includes explanations
each 'adjusting item' and why they been adjusted for. An adjusting
item is one that is judged to require separate presentation to
enable a better understanding of the trading performance of the
business in the period. Items are adjusted if they are significant
in value and/or do not form part of ongoing underlying trading.
They will in many cases be 'one-off', and include items that span
more than one financial period.
Prior year comparatives have been restated so that the adjusted
results are presented on a consistent basis between periods.
Restated figures have been disclosed in footnotes below. In the
opinion of the Directors, disclosing the adjusting items provides
supplementary information to aid understanding of the Group's
trading performance and also provides a basis of comparison between
periods.
Consolidated Income Statement - Reconciliation of Statutory and Adjusted
Results
26 weeks ended 30 26 weeks ended 1 July 52 weeks ended 30
June 2018 2017 December 2017
Restated(2) Restated(2)
Adjusting Restated(1) Adjusting Restated(1,2) Adjusting Restated(2)
Statutory items Adjusted Statutory items Adjusted Statutory items Adjusted
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Print advertising A 31,020 - 31,020 39,435 (1,721) 37,714 74,265 (3,345) 70,920
Digital advertising A 12,149 - 12,149 13,815 (156) 13,659 27,119 (156) 26,963
Total advertising
revenue 43,169 - 43,169 53,250 (1,877) 51,373 100,241 (3,501) 96,740
Newspaper sales A 38,871 - 38,871 39,643 (92) 39,551 79,102 (92) 79,010
Contract printing A 6,639 - 6,639 6,857 - 6,857 13,321 - 13,321
Other A 4,311 - 4,311 3,552 (6) 3,546 7,808 (6) 7,802
Non advertising revenue 49,821 - 49,821 50,052 (98) 49,954 101,375 (98) 101,277
Total continuing revenue 92,990 - 92,990 103,302 (1,975) 101,327 201, 616 (3,599) 198,017
Cost of sales B (59,271) - (59,271) (66,594) 1,000 (65,594) (127,817) 1,965 (125,852)
Operating costs B (23,891) - (23,891) (28,023) 903 (27,120) (117,103) 1,707 (115,396)
Restructuring C - 1,955 1,955 - 3,719 3,719 - 13,745 13,745
Acquisitions/(disposals) D - (100) (100) - (327) (327) - (1,314) (1,314)
Impairment of assets E - 3,462 3,462 - 4,513 4,513 - 64,426 64,426
Strategic review F - 3,190 3,190 - 1,377 1,377 - 3,365 3,365
Pensions G - 649 649 - 607 607 - 1,898 1,898
Long-term incentive
plan (LTIP) costs H - - - - 1,216 1,216 - 1,361 1,361
Total adjustments - 9,156 9,156 - 11,105 11,105 - 83,481 83,481
Total operating costs (23,891) 9,156 (14,735) (28,023) 12,008 (16,015) (117,103) 85,188 (31,915)
Total costs (83,162) 9,156 (74,006) (94,617) 13,008 (81,609) (244,920) 87,153 (157,767)
EBITDA N/A N/A 18,984 N/A N/A 19,718 N/A N/A 40,251
EBITDA Margin% N/A N/A 20.4% N/A N/A 19.5% N/A N/A 20.3%
Depreciation and
amortisation I (2,415) - (2,415) (3,746) 207 (3,539) (7,909) 872 (7,037)
Operating profit/(loss) 7,413 9,156 16,569 4,939 11,240 16,179 (51,213) 84,427 33,214
Operating profit/(loss)
margin% N/A N/A 17.8% N/A N/A 16.0% N/A N/A 16.8%
Finance (costs) /
income J (1,232) (8,280) (9,512) (15,156) 5,654 (9,502) (43,756) 24,896 (18,860)
Profit/(loss) before
tax 6,181 876 7,057 (10,217) 16,894 6,677 (94,969) 109,323 14,354
Tax credit/(expense)(2) K (2,434) (477) (2,911) 4,600 (5,794) (1,194) 16,389 (23,302) (6,913)
Consolidated profit/(loss)
for the period 3,747 399 4,146 (5,617) 11,100 5,483 (78,580) 86,021 7,441
1 Prior period comparatives have been restated, refer to Note 2.
2 Prior period comparative revenue, cost of sales and operating
costs have been restated to adjust out amounts relating to the
Yorkshire Metro closed during 2018. This ensures that adjusted
results for H1 2018 and both prior periods are presented on a
consistent basis, including only the operations of the Group that
are continuing from 30 June 2018.The impact is an increase in cost
of sales adjusting item (H1 2017: GBP0.8m, FY 2017: GBP1.8m) and
operating cost adjusting item (H1 2017: GBP0.8m, FY 2017:
GBP1.6m).
A Total continuing revenues
As part of the ongoing review of the Group's business portfolio
titles, digital products and other items considered to be
underperforming or not in line with the Group's strategic
objectives have been closed. Other titles have also been disposed.
Revenue relating to the closed titles and products has been
adjusted out to provide users with a view of the results of the
Group's continuing business portfolio. The cost of sales and
operating costs associated with the adjusted disposed titles
revenue has also been adjusted. Refer to Note B below for
details.
The two categories of adjustments to revenue are:
Closed titles, digital products and other
As part of the ongoing review of the Group's portfolio, the
Yorkshire Metro publishing contract was closed during the first
half of the year (H1 2017: 4 titles. FY 2017: 4 titles). As an
onerous provision was recorded at 30 December 2017 for the 2018
losses expected from the Yorkshire Metro publishing contract until
termination on 30 June 2018, no adjustment has been recorded in H1
2018 (H1 2017: GBP1.5m, FY 2017: GBP3.1m).
Prior year total revenue of GBP1.5m for H1 2017 and GBP3.2m for
FY 2017 has been adjusted on a like-for-like basis. The revenue on
these related products has been adjusted so as to present the
Group's underlying performance on a comparable basis as they do not
earn revenue once closed. The prior year comparative figures have
been restated to exclude revenue for the titles and products closed
during H1 2018, in order to present results for the Group's ongoing
business portfolio.
On 17 January 2017, the Group sold its East Anglia and East
Midlands titles to Iliffe Media Ltd. Adjustments made in the
comparative periods in respect of these titles relate to revenue
earned in the two-week period up to the date of disposal of
GBP0.3m. This adjustment is necessary in order to present results
for the Group's ongoing business portfolio.
The table below provides a breakdown of adjusting items across
revenue categories:
Restated(1) Restated(1)
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
Print advertising - (1,721) (3,345) Print advertising revenue adjusting items
comprise: Yorkshire Metro and other closed
titles, digital products and other of
GBPnil (H1 2017: GBP1.6m, FY 2017: GBP3.1m)
and disposed East Anglia and Midlands
titles of GBPnil (H1 2017: GBP0.2m, FY
2017: GBP0.2m).
Digital advertising - (156) (156) Digital advertising adjusting items comprise:
adjustments to transfer digital credits
into the correct period of GBPnil (H1
2017: GBP0.1m debit, FY 2017: GBP0.0m
debit) and disposed East Anglia and Midlands
titles of GBPnil (H1 2017: GBP0.1m, FY
2017: GBP0.0m).
Newspaper sales - (92) (92) Newspaper sales revenue adjusting items
comprise: closed titles, digital products
and other of GBPnil (H1 2017: GBPnil,
FY 2017: GBP0.1m) and disposed East Anglia
and Midlands titles of GBPnil (H1 2017:
GBP0.1m, FY 2017: GBP0.1m).
Other - (6) (6) Other revenue adjusting items comprise:
closed titles, digital products and other
of GBPnil (H1 2017: GBP0.0m, FY 2017:
GBP0.0m) and disposed East Anglia and
Midlands titles of GBPnil (H1 2017: GBP0.0m,
FY 2017: GBP0.0m).
Total adjusting
items - (1,975) (3,599)
-------- ------------
B Cost of sales and operating costs
The cost of sales and operating costs associated with the
adjusted closed titles and products revenue detailed above in note
A has also been adjusted as follows:
Cost of sales Operating costs
Restated(1) Restated(1) Restated(1) Restated(1)
26 weeks to 26 weeks to 52 weeks to 26 weeks to 26 weeks to 52 weeks to
30 June 1 July 30 December 30 June 1 July 30 December
2018 2017 2017 2018 2017 2017
Adjusting items GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Closed titles, digital products and
other - 865 1,830 - 844 1,648
Disposed titles - 135 135 - 59 59
Total adjusting items - 1,000 1,965 - 903 1,707
1 Prior period comparative revenue, cost of sales and operating
costs have been restated to adjust out amounts relating to the
Yorkshire Metro closed during 2018. This ensures that adjusted
results for H1 2018 and both prior periods are presented on a
consistent basis, including only the operations of the Group that
are continuing from 30 June 2018.The impact is an increase in cost
of sales adjusting item (H1 2017: GBP0.8m, FY 2017: GBP1.8m) and
operating cost adjusting item (H1 2017: GBP0.8m, FY 2017:
GBP1.6m).
C Restructuring costs
Business transformation, restructuring and redundancy-related
costs that are incurred in order to streamline individual
components of the Group's business, reduce cost and support
long-term strategy are recorded as adjusting items. In treating
these costs as adjusting items, management assesses whether the
redundancies relate to a fundamental restructure of individual
components of the business. The Group adjusts for and reports the
cost of each years' restructuring program to assist the users of
the financial statements in understanding both the cost of the
restructuring programme, and the resulting trading performance in
the year. A breakdown
of the adjustments for restructuring costs is provided in the
table below:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
Redundancy 857 2,035 6,357 These costs are material and incurred
costs to transform and restructure the business
cost base resulting in a reduction in
headcount. Redundancy costs include the
employee costs from the point the individual
notified that their role is at risk,
together with the final termination payment
for the individual made redundant. The
Group has consistently applied this policy
historically. This reflects its impact
of the disruption caused to the individual
involved and the impact on short-term
productivity within affected business
units.
Adjustments for redundancy costs do not
include those incurred in the ordinary
course of business, which are treated
as operating costs, or that may lead
to a direct replacement being appointed.
-------- -------- ------------
Business and 1,098 1,140 1,974 These costs are material, and are incurred
sales transformation in engaging specialist consultants to
advise on the strategic restructuring
of the publishing portfolio, as part
of the redesign of the business to create
a sustainable publishing model. Management
considers carefully that these costs
do not represent costs that support the
underlying running of the business which
would not be adjusted items. This item
also includes costs incurred to permanently
restructure and streamline the Group's
field sales operation and move activity
into the media sales centre (MSC).
-------- -------- ------------
Property-related - 291 4,369 The Group has incurred property costs
restructuring as a result of decisions taken to reduce
head count and streamline its operating
locations. During the period to 30 June
2018 the Group exited leases of 9 properties
(H1 2017: 16 properties, FY 2017: 25
properties) covering 15 thousand square
feet (H1 2017: 199 thousand square feet,
FY 2017: 228 thousand square feet).
In the FY 2017 comparative period an
empty property provision of GBP3.2m was
charged, which included an additional
GBP1.3m charge in the period following
a reassessment of the Irish property
provision. The Group no longer occupies
these properties following the disposal
of the Irish operations in 2014 but retains
the head leases, and sublets properties
to Iconic. A GBP1.2m dilapidations provision
was charged in the FY 2017 comparative
period following a reassessment of estimates
used in determining the provision requirements.
Of these charges GBP0.3m was charged
during H1 2017.
-------- -------- ------------
Onerous contracts - 253 1,045 As a result of the Group's restructuring
activities, aimed at cutting the cost
base of the Group, certain IT licences,
phones and vehicles have become surplus
to operational requirements following
reductions in staff numbers. The GBPnil
(H1 2017: GBP0.3m, FY 2017: GBP1.0m)
profit and loss impact of these onerous
costs has been adjusted for.
-------- ------------
Total adjusting
items 1,955 3,719 13,745
-------- ------------
D Acquisitions/(disposals)
Acquisition costs and gains and losses on disposal of
subsidiaries and properties can be significant in size, irregular
in nature and fluctuate from period-to-period. Subsidiary and large
property disposals and acquisitions are not ordinary trading
activities as they relate to structural changes to the Group's
business. As a result the gains realised and losses and costs
incurred on these items have been treated as adjusting items. This
is done to provide results that are reflective of the Group's
continuing trading operations. The adjusting items are detailed in
the table below:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
-------- -------- ------------
(Gain)/loss (100) (1,372) (2,433) This gain adjusted for in the current
on disposals period consists of a GBP0.1m cash receipt
arising from a change in control of the
Newark Advertiser's share capital - this
entity was previously disposed of by
the Group. This item has been adjusted
for, as it does not relate to the trading
operations of the Group and relates to
a historic contingent receivable dating
back to 2000. Gains adjusted in the FY
2017 comparative period were realised
on sales of two properties in Sheffield
GBP1.9m and one property in Peterborough
GBP0.5m. One of the Sheffield properties
was disposed in H1 2017 for GBP1.4m and
represents the amount adjusted for in
that period.
-------- -------- ------------
i acquisition - 508 508 The prior period adjusting item represents
acquisition costs incurred to purchase
the i newspaper on 10 April 2016 and
a further one-off contractual payment
to ESI in April 2017 and are adjusted
so as not to distort the Group's trading
results. The payment was disclosed in
Part V, clause 9 of the 'Proposed acquisition
of the business and certain assets of
I Circular to Shareholders' document.
-------- -------- ------------
Loss on disposal - 538 611 Represents the loss on sale of Johnston
of subsidiary Publishing East Anglia Ltd in the prior
period, which included the East Anglia
and East Midlands titles, to Iliffe Media
Ltd on 17 January 2017. The loss has
been classified as an adjusting item
as it is individually significant, relates
to divestment of titles and is not reflective
of the Group's ongoing trading results.
The loss represents the differences between
book value and net proceeds. The revenue,
cost of sales and other costs in relation
to the disposed titles have also been
treated as adjusting items for the two
weeks of trading in 2017 and the prior
period comparative. Refer to Notes A2
and B for details.
-------- -------- ------------
Total adjusting
items (100) (327) (1,314)
--------
E Impairment of assets
Impairment charges relating to non-current assets are non-cash
items and can be significant in amount. The Group treats impairment
charges as adjusting items as they relate to the difference between
the remaining carrying value of historic investment costs, and
estimated future value, and are not part of underlying trading. The
valuation is calculated based on judgement of estimated future cash
flows, discounted using a post-tax discount rate of 11.0% (H1 2017:
11.0%, FY 2017: 11.0%), which is a market determined discount rate,
not the Group's cost of capital.
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
Intangible 2,413 4,513 60,453 Impairment charges of GBP2.0m (H1 2017:
assets GBP4.5m, FY 2017: GBP59.2m) against publishing
titles and GBP0.4m (H1 2017: GBPnil,
FY 2017: GBP1.3m) against digital intangible
assets have been recognised during the
period.
-------- -------- ------------
Property, plant 1,049 - 3,861 An impairment charge has been recognised
and equipment against print presses of GBP0.4m (H1
2017: GBPnil, FY 2017: GBP0.4m), property
(print sites) of GBP0.2m (H1 2017: GBPnil,
FY 2017: GBP0.4m) and corporate assets
GBP0.4m (H1 2017: GBPnil, FY 2017: GBP0.4m).
-------- -------- ------------
Assets held - - 112 An impairment charge of GBPnil (H1 2017:
for sale GBPnil, FY 2017: GBP0.1m) has been recognised
against properties classified as held
for sale prior to disposal during the
period.
Total adjusting
items 3,462 4,513 64,426
F Strategic review
The costs reported in our accounts in relation to the Strategic
Review, include financial adviser fees, fees for legal and pensions
advice to the company, legal and actuarial and financial advice to
the pension trustees borne by the company, and legal and financial
advice for the ad hoc bondholder committee, also borne by the
company. The adjusting items are detailed in the table below:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
Legal and advisory 2,683 1,377 3,365 Legal and advisory costs of GBP2.7m
costs (H1 2017: GBP1.4m, FY 2017: GBP3.4m)
in relation to the Strategic Review
disclosed in the Liquidity and going
concern and Viability Statement sections
of the Interim management report,
have been adjusted for. This includes
costs incurred on advisers to the
Group, and advisers to the ad hoc
committees and pension Trustees, which
the Group is obliged to fund including
financial, pension, tax, legal and
other specific advice.
-------- -------- ------------
Retention bonus 507 - - As a result of the potential uncertainty
created by the Strategic Review process,
a one off retention bonus scheme was
put in place for a small number of
staff members. The bonuses were put
in place by the Board based on the
employee staying in the organisation
and is not related to ongoing trading.
The bonus is payable in two instalments,
42% in April and 58% in December 2018.
This scheme does not include executive
and non-executive Directors of the
Group.
These amounts have been removed from
underlying trading due to them being
one off in nature and paid in relation
to of the Strategic Review process.
--------
Total adjusting
items 3,190 1,377 3,365
--------
G Pensions
The Johnston Press Pension Plan ('the Plan') is a defined
benefit pension plan that closed to new members and future accrual
in June 2010 (for details refer to Note 13). At 30 June 2018, the
membership base was as follows:
30 June 2018
Deferred Pension
members members Total
-------- -------- -----
Plan members employed by the Group 230 25 255
-------- -------- -----
Total Plan members 2,570 2,310 4,880
-------- -------- -----
% of total Plan members employed by the Group 8.9% 1.1% 5.2%
-------- -------- -----
94.8% of the Plan members are no longer employed by the Group.
The number of staff working in the business, who are members of the
Plan has reduced over time, both as the result of restructuring
activity, but also resignation and retirement. Costs associated
with operating the Plan are treated as adjusting items because they
are not incurred in running the business, nor in generating its
revenue, and do not form part of underlying trading. In contrast,
contributions made by the Group to the defined contribution schemes
nominated by the Group's employees, in respect of their employment
by the Group are not treated as adjusting items. This is because
they are deemed to be part of the cost of employing the Group's
continuing workforce.
The nature of the pension costs that have been adjusted are
detailed in the table below:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
Defined 446 468 1,289 The Group is required to pay the costs
benefit pension incurred by its trustees in administrating
scheme costs the pension plan, which was closed
to new members and future accrual
in June 2010. Given that the vast
majority of the members of the Plan
are no longer employed by the Group,
costs associated with operating the
Plan are treated as adjusting items.
The costs include GBP0.3m (H1 2017:
GBP0.4m, FY 2017: GBP0.6m) of ongoing
Plan operational costs.
-------- -------- ------------
Pension Protection 203 144 270 The levy is a charge by the PPF who
Fund (PPF) become responsible for scheme members'
levy pensions if the Group becomes unable
to meet its pension obligations. This
cost is significant and can fluctuate
from period to period and is material,
with historic PPF levy costs being
as high as GBP3.2m in 2013/2014.
The Group has limited ability to influence
this cost, which is determined by
PPF by reference to the balance sheet
of Johnston Publishing Limited.
-------- -------- ------------
Pension - (5) 339 The FY 2017 adjustment is the impact
equalisation of the Scottish pension equalisation
litigation of GBP0.3m, which was concluded
and cash settled during 2017.
--------
Total adjusting
items 649 607 1,898
--------
In 2014, the Group agreed to a schedule of contributions to the
scheme. In the first half of 2018, the Group paid GBP5.3m (H1 2017:
GBP5.1m, FY 2017: GBP10.3m) to the Plan as part of the deficit
reduction program. These payments are not charged to the Group
income statement, in line with IAS19 Employee Benefits, and so are
not adjusting items, and so are not shown here.
H Long-term incentive plan (LTIP) costs
The items listed in the table below have been adjusted as they
are significant, and do not form part of underlying trading:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
-------- -------- ------------
Long-term incentive - 1,216 1,361 LTIP expenses are material and have
plan (LTIP) been classified as an adjusting item
(credit)/cost from the point at which it was clear
that the performance conditions would
not be met. A credit to the profit and
loss account of GBPnil in H1 2018 (H1
2017: GBP1.2m charge, FY 2017: GBP1.4m
charge) relating to share based payment
credits / charges and associated National
Insurance accruals have been adjusted
for.
-------- -------- ------------
Total adjusting
items - 1,216 1,361
--------
I Depreciation and amortisation
The current period operating profit adjusting items includes
accelerated depreciation and amortisation of GBPnil. The FY 2017
adjusted depreciation and amortisation arose from the results of a
review of the carrying value of the consumer database (FY2017:
GBP0.6m) and on properties (FY 2017: GBP0.3m). Of this amounts
GBP0.2m occurred in H1 2017.
J Finance cost
Finance costs adjusted for comprise:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000 Explanation
Net finance 553 873 1,690 Net pension interest expense required
expense on under IAS 19 relating to the net interest
pension assets/liabilities on the pension scheme liabilities
less assets has been adjusted as it
does not relate to underlying trading
activities. It is a non-cash item
under IAS19 Employee Benefits. This
treatment is consistent with cash
pension costs incurred in respect
of the closed defined benefit pension
scheme (refer to section G Pensions).
-------- -------- ------------
Fair value (8,833) 4,400 22,825 The fair value movement on the Group's
movement of Bonds required under IAS 39 is volatile.
borrowings It does not reflect the gross debt
outstanding and it is treated as an
adjusting item to provide the user
with clarity of the gross Bonds liability.
Therefore, the fair value gain of
GBP8.8m, resulting from an increase
in the Bonds market value, (FY 2017:
loss of GBP22.8m) has been treated
as an adjusting item.
-------- -------- ------------
Finance costs - 381 381 The H1 2017 and FY 2017 of GBP0.4m
relates to the write-off of revolving
credit facility issuance costs in
2014 required as a result of the termination
of the facility in January 2017, following
the disposal of the East Anglia and
East Midlands titles. The cost related
to the period after termination was
treated as an adjusting item as it
did not relate to the operating performance
of the Group in 2017. There have not
been any similar adjusting items in
H1 2018.
--------
Total adjusting
items (8,280) 5,654 24,896
--------
K Tax (charge)/credit
The taxation impact of the adjusting items of GBP0.5m (H1 2017:
of GBP5.8m, FY 2017: of GBP23.3m) has been adjusted for. The
de-recognition of GBPnil (H1 2017: GBPnil, FY 2017: GBP2.2m) worth
of deferred tax assets due to the Directors no longer deeming them
to be recoverable has been treated as an adjusting item.
Adjusted cash flow analysis
The table below sets out the way in which management reviews its
cash flows:
26 weeks 26 weeks 52 weeks
to to to
30 June 1 July 30 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
-------- -------- ------------
Movements in cash and cash equivalents during the
period:
Cash and cash equivalents generated before adjusting
items 19.4 18.9 34.4
Cash cost of adjusting items (6.2) (6.1) (14.3)
Cash and cash equivalents generated after adjusting
items 13.2 12.8 20.0
Movements in working capital (3.2) (2.8) 1.5
Long-term provisions (0.7) (0.8) 2.9
-------- -------- ------------
Total 9.3 9.2 24.4
-------- -------- ------------
Defined benefit plan pension contributions (5.3) (5.1) (10.3)
Taxation refunded - 0.2 0.2
Acquisition costs - the i - - (2.5)
Net impact of other investing activities (1.9) 2.4 0.6
Financing costs (9.5) (9.5) (19.0)
Net proceeds on disposal of the East Midlands titles - 15.6 15.6
-------- -------- ------------
Total movements in cash and cash equivalents during
the period: (7.4) 12.8 9.0
-------- -------- ------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LFFEVTSITFIT
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