We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Johnston Press | LSE:JPR | London | Ordinary Share | GB00BRK8Y334 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.745 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
RNS Number:9063I
Johnston Press PLC
19 March 2003
FOR IMMEDIATE RELEASE 19 March 2003
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Johnston Press plc, one of the UK's leading regional newspaper publishers, is
pleased to announce record results for the year ended 31 December 2002.
KEY FINANCIALS
Notes 2002 2001 % Change
Turnover (#'m) 428.4 300.6 +42.5
Operating Profit (#'m) 129.5 89.5 +44.7
Profit before tax and non-operating
exceptional items (#'m) 4a 97.2 73.6 +32.1
Free cash flow (#'m) 4b 86.1 38.0 +126.6
Earnings per share
- headline (p) 26.75 23.65 +13.1
- basic (p) 24.65 21.68 +13.7
Dividend*
- interim (p) 1.80 1.65 +16.9*
- final (p) 3.60 3.25 +18.7*
- total (p) 5.40 4.90 +18.2*
*As adjusted for the 2 for 5 Rights Issue
HIGHLIGHTS
(*) Like-for-like advertising revenue growth of 2.1% on existing businesses
and 1.4% on acquired businesses
(*) Like-for-like operating profit excluding RIM up 7.1%
(*) Operating margins on existing businesses, pre-exceptionals up 1.5% to 31.7%
(*) RIM operating margin up to 28% - included in Group results for 37 weeks -
prior year operating margin of 23%
OUTLOOK
Chairman, Roger Parry said:
"We have made a satisfactory start to 2003. We have achieved further modest
revenue growth, despite advertising markets remaining subdued. The price of
newsprint, our largest purchase item, has reduced and costs in the business
remain well controlled. During the year we will also see further benefits from
the full integration of RIM.
The outlook is clouded by events overseas and their potential impact on the UK
economy, including business and consumer confidence. Whilst it is impossible to
predict the economic consequences with certainty, we remain confident that
Johnston Press is in good shape to respond to whatever challenges the future may
bring."
For further information please contact:
Tim Bowdler, Chief Executive Tel: 020 7466 5000 (today) or
Stuart Paterson, Finance Director 0131 225 3361 (thereafter)
Buchanan Communications Tel: 020 7466 5000
Richard Oldworth/ Richard Darby/Suzanne Dunne
CHAIRMAN'S STATEMENT
Johnston Press has enjoyed a very satisfactory year with cash generation,
profits and turnover all at record levels. We have seen the early benefits of
the acquisition of Regional Independent Media Holdings Limited (RIM), and all of
our businesses have done well on a like-for-like basis. The growth we have
achieved is a function of steady trading and well-controlled costs. This
reflects a single-minded focus on the provision of information and entertainment
to local communities and to meeting the needs of local advertisers. This
approach underpins all of our strategic and tactical decisions.
For most media companies the past two years have been very difficult -
particularly for those dependent on selling display advertising. For many, this
has resulted in reduced profits and a declining share price. I am pleased to
report that Johnston Press was an exception in both respects and notably we were
one of the best performing European media shares in 2002. But we are not
remotely complacent, recognising that each week brings new challenges as well as
opportunities. We benefit from having a robust advertising business but, to
sustain this, we must remain focused on serving our customers well.
The theme of this statement, as it was last year, is "life is local". It is our
guiding principle. Our investment in people, equipment, technology and
acquisitions is aimed at enhancing our service to local communities and, in
particular, to our principal customers - our readers and our advertisers.
It is the policy of the Board to be editorially neutral and community biased. We
recognise that our daily, weekly and less frequent publications with their
associated special supplements and web sites will only thrive if they make a
strong connection with the communities they serve. This is why we place such
store by editorial independence and a single-mindedly local approach.
Britain is very well served by national media. Our role is to understand and
meet the needs of people in the areas where they live, work and play. For most
of us, what happens in our immediate local environment is of far more importance
than more remote events. It is in the local community that we spend most of our
time and in which we have our greatest interests. Most of us eat out, seek
entertainment, go shopping, buy cars, look for a job and move house close to our
homes. We have continued to do this even in recent economically uncertain times
which is why our advertising revenues have remained resilient.
Following our successful acquisition of RIM, we now publish and distribute more
than 480 million newspapers each year and have an average weekly readership of
11.8 million. Our web sites receive more than 100 million page impressions
annually. We reach deeply into numerous local communities around the country.
RESULTS
In 2002 we achieved turnover of #428 million up 43%, profit before tax of #93
million up 35% and free cash flows of #86 million up 127%, all against 2001.
The consolidation of RIM from 12 April 2002 contributed to this growth but it is
especially pleasing to report operating profit margins of 30% for the enlarged
Group, with good growth from both the existing and acquired activities. Free
cash flow in the business is excellent with a conversion of 66% from operating
profit compared to 42% last year. Headline earnings per share were 26.75p, up
13% on 2001 when adjusted for the Rights Issue associated with the acquisition
of RIM.
The circulations of our paid-for weekly newspapers have been strong, growing by
1.5%. Our daily titles, in line with industry trends, have shown circulation
declines but newspaper sales revenues and advertising sales have continued to
grow as the communications value of our publications remains great.
DIVIDEND
The Board proposes a final dividend of 3.6p per share making a total of 5.4p per
share compared to 4.9p last year, an increase of 18% when allowing for the
discount element of the Rights Issue. Dividend cover is 4.5 times.
STRATEGY
We believe that industry consolidation and the emergence of a small number of
large, well-resourced publishers has resulted in better local newspapers than
would have been the case from a fragmented and undercapitalised industry. Local
focus comes through the efforts of editors and managers not as an accident of
ownership.
We continue to seek opportunities to expand our business and we remain hopeful
that the Government's stated objective to lighten the burden of regulation will
facilitate further consolidation in the regional press. We have no doubt that
the process will continue regardless.
BOARD
We have noted the proposals of Derek Higgs on the role of non-executive
directors. Various concerns on the practical implications of these have been
expressed, many of which we share.
We place great store by good governance. We have benefited from informal
feedback from shareholders, both large and small, on governance and I welcome
any comments, particularly if people have any concerns.
Sir Harry Roche plans to step down from the Board at the AGM in 2004, which
coincides with his 70th birthday. Harry has been a director since 1993 and
Deputy Chairman since 1996. Throughout that time he has brought a wealth of
newspaper industry knowledge and business expertise. I wish him well in what
will be a very active retirement. Peter Cawdron will replace Harry as Senior
Independent Director next year. We have appointed external consultants to seek
Harry's replacement.
The Board consists of six non-executive and two executive directors. Freddy
Johnston and his brother Harry, both non-executives, are not regarded as
independent as they represent a substantial shareholding in the Company and due
to their length of service on the Board. However, I am sure it will not be
surprising to learn that they very definitely have shareholders' interests at
heart and are passionate about the Group's success.
I would like to congratulate Tim Bowdler, our Chief Executive, on his
appointment in July 2002 as President of the Newspaper Society, a position which
he will hold until the middle of this year. It has enabled him to play a leading
role in matters of concern and interest to the industry as a whole.
PROSPECTS
We have made a satisfactory start to 2003, achieving further modest revenue
growth, despite advertising markets remaining subdued. The price of newsprint,
our largest purchase item, has reduced and costs in the business remain well
controlled. During the year we will also see further benefits from the full
integration of RIM.
The outlook is clouded by events overseas and their potential impact on the UK
economy, including business and consumer confidence. Whilst it is impossible to
predict the economic consequences with certainty, we remain confident that
Johnston Press is in good shape to respond to whatever challenges the future may
bring.
ROGER PARRY
Chairman
19 March 2003
CHIEF EXECUTIVE'S REVIEW
During a year in which Johnston Press again outperformed market expectations,
the undoubted highlight was the successful acquisition of Regional Independent
Media Holdings Limited (RIM), consolidating the Group's position as one of the
UK's four leading publishers of regional and local newspapers. In contrast to
the difficulties encountered by many media businesses, the enlarged Group
achieved modest advertising revenue growth in the year. Coupled with the early
benefits of the RIM acquisition, continued tight control of costs and reduced
newsprint prices, this enabled the Group to make further excellent progress and
to report increased levels of profitability.
LIFE IS LOCAL ... STRATEGIC FOCUS
This theme again emphasises the essential dependence of our business on the
local nature of our markets. Our publishing activities are a reflection of
numerous local economies across the United Kingdom and, in turn, the behaviour
of local consumers and advertisers. During the year, consumer confidence at the
local level remained positive, undoubtedly assisted by low levels of inflation
and unemployment, reduced interest rates and the buoyancy of the property
market. With some local variations, this has been reflected in continued modest
advertising growth for the Group as a whole.
It is this dependence on local markets which differentiates the regional and
local press from so many other branches of the media and which has enabled
Johnston Press to grow in terms of profit and margins during 2002. The Group
enjoys a leading position in almost all of its local markets and this enables
our companies to offer readers extensive local news coverage and advertisers
high levels of local market penetration.
This focus on meeting the needs of local marketplaces is the cornerstone of the
Group's business strategy. Through a combination of organic and acquisitive
means, Johnston Press is committed to building on its position as one of the
UK's market leading local publishers. This was clearly demonstrated by our
purchase of RIM but, although the Group remains actively interested in further
acquisitive growth, this will only be pursued on a selective basis. For this
reason, we decided not to make an offer for the newspaper titles owned by
Scottish Media Group plc, since we did not believe that, for Johnston Press,
they represented the right opportunity at the right time.
REGIONAL INDEPENDENT MEDIA (RIM)
The acquisition of RIM has consolidated the position of Johnston Press as one of
the four leading UK regional publishers with a market share of 14.3% of total
copies circulated. With 244 titles, Johnston Press now has more newspapers than
any other UK regional publisher and is the largest owner of paid-for weeklies
which represent half of the Group's portfolio. The ex-RIM titles include a
strong mix of market leading paid-for daily, weekly and free newspapers
representing an excellent complement to the Group's existing publications. As a
result, Johnston Press is now the market leading regional newspaper publisher in
Yorkshire, has acquired an extensive presence in Lancashire and has made a
useful addition to our existing Scottish businesses.
The post-acquisition integration process is now substantially complete although
there will be continuing benefits as we progressively take advantage of
opportunities at the operating level.
The key changes were achieved rapidly following completion of the deal and
included closure of the RIM head office, termination of advisory arrangements,
savings on newsprint as well as other major purchase items and closure or
rationalisation of the RIM central functions of accounting, payroll, marketing,
IT, national sales, personnel, training and new media. The resultant loss of
approximately 250 jobs was minimised following extensive consultation with those
affected.
Several non-core activities have been disposed of including Writers News, a
specialist publication for aspiring authors. We also sold four Scottish-based
newspaper titles which did not represent a good fit with our existing
activities. The Stornoway, Galloway and Carrick Gazettes were sold to Scottish
Radio Holdings plc and the Alloa-based Wee County News to its management. During
the year, we also took steps to withdraw from all RIM local radio initiatives,
leaving a 33% holding in Two Boroughs Radio in Burnley, which we expect to
dispose of in due course.
Immediately following the acquisition and in order to facilitate rapid
integration, we made a number of organisational changes. Two enlarged publishing
divisions were formed, one based in Leeds creating an expanded North division
and the other in Sheffield to bring together the South Yorkshire and North
Midlands-based companies. In addition, we established a new division based in
Preston covering the Lancashire operations of RIM. In each case, appointments
were made such that one or other of the Managing Director or Finance Director
was an existing Johnston Press employee. These organisational changes have
facilitated the achievement of operational savings through rationalisation of
backroom activities at the regional level. A good example of this has been the
closure of printing and pre-press activities in Harrogate with the reallocation
of work primarily to Leeds but with some printing also transferring to other
Group presses. We have also incorporated Letterbox Direct, RIM's leaflet sales
and distribution management company, into the Group's structure and we will use
this to drive revenue, particularly from national clients and to regionalise
related administration.
The excellent progress which has been made with the integration of RIM could not
have been achieved without the cooperation and support of our new colleagues and
their willingness to embrace the changes which a new ownership inevitably
brings. In overall terms, we are totally confident of delivering the #9 million
annual savings in 2003 which were envisaged at the time of the acquisition.
TRADING REVIEW - EXISTING BUSINESSES
Advertising revenue growth on a like-for-like basis was 2.1%, comprising 1.2% in
the first half and increasing to 3.0% in the second. Growth was achieved in
every advertising category in the second half and over the year as a whole, an
improvement on the first six months when there were modest declines in both
motors and recruitment advertising.
The performance of recruitment advertising with growth of 0.3%, surpassed our
expectations, which were influenced by challenging comparatives in 2001,
especially in the early months, and caution over general market conditions. This
encouraging outcome reflects the fact that unemployment remains low in many of
our marketplaces and provides evidence that business and consumer confidence at
the local level held up better than anticipated. There was a disparity in
performance between the north and south of the country with revenue declining
slightly in the south where the impact of the economic slowdown was most marked.
Property advertising also experienced geographic disparity but with performance
in the south, buoyed by stronger new homes building programmes, faring better
than further north. Overall, growth of 3.7% was achieved despite property prices
and sales being so buoyant that in many markets the necessity for advertising,
certainly on a repeat basis, was somewhat diminished.
After a marginal decline in the first half, motors advertising returned to
growth in the second six months, ending the year 2.3% ahead. Performance across
the country was patchy with no discernable trends. The major influence has
continued to be the process of consolidation amongst motor dealerships.
The performance of other classified advertising was particularly encouraging
with strong growth recorded in each half resulting in a full year increase of
4.5%. Whilst there were variations in performance around the Group, good growth
was achieved in the majority of markets, in part reflecting a recovery from the
foot and mouth affected outcome in 2001.
Display advertising was stronger in the first half with growth of 2.9% against
0.5% in the second half, resulting in a year-on-year increase of 1.7%. Again,
most markets experienced growth although there was a marginal decline in the
south, reflecting more difficult local conditions compared with the previous
year.
Operating margins for the Group were once again ahead of the previous year, with
a like-for-like increase of 1.5% to 31.7%. On a comparable basis and with the
sole exception of our South division, every one of our publishing divisions
matched or exceeded the prior year's operating margins, a reflection of
excellent control over costs in a more challenging market than for some time.
Market conditions were more difficult in the south of the country than elsewhere
and our South division did well to come very close to matching the prior year's
performance.
Despite the more difficult trading environment, the Scottish businesses again
performed well producing a further improvement in profitability. The Tweeddale
Press in the Scottish borders was strengthened by the successful integration of
the south of Edinburgh-based Bonnyrigg operation acquired with RIM and this will
bring further benefits in 2003. In a market which produced no overall
advertising revenue growth, Isle of Man Newspapers also performed well to
increase profit.
Excellent progress was again made by Northeast Press which benefited from a
healthy increase in recruitment advertising and further improvements in
operating efficiency. The four companies comprising the North division were also
assisted by good growth in recruitment advertising and the continued progress of
the Doncaster and Scarborough-based businesses was particularly noteworthy. The
Dewsbury operation acquired with RIM has been merged with Wakefield-based
Yorkshire Weekly Newspaper Group and this will bring benefits in 2003.
Doncaster-based South Yorkshire Newspapers has been transferred into the
enlarged North Midlands and South Yorkshire division which will also create
operational efficiencies. The Chesterfield and Mansfield-based businesses, which
comprised the North Midlands division, had another excellent year, building on
the good progress already made in 2001. In a trading environment which improved
after a slow start to the year, the three companies comprising the East Midlands
division all made good progress. The launch of the Lincolnshire Citizen, a new
free newspaper, and the merging of several small weekly paid-for titles in the
region, are beginning to pay dividends. We have announced plans to split Welland
Valley Newspapers into two separate businesses and we expect the resulting
improved market focus to bring about a further improvement in performance.
In the more difficult market conditions which prevailed in the South Midlands
area, the four companies which make up that division did well to improve
profitability. The reorganisation of Central Counties Newspapers into two
separate businesses, based in Aylesbury and Banbury respectively, also helped to
improve market focus. The challenging market conditions which prevailed on the
south coast led to a modest reduction in both recruitment and local display
revenues. This was substantially mitigated as the reorganisation of the South
Division implemented in 2001 helped to maximise revenues and contain cost
levels.
TRADING REVIEW - NEWLY ACQUIRED BUSINESSES
To enable meaningful comparison, the figures quoted below reflect full year
growth rates despite the fact that RIM was only part of Johnston Press for 37
weeks.
Over the full year, advertising revenue growth on a like-for-like basis was
1.4%, comprising 1.1% in the first half and 1.8% in the second. Apart from a
marginal decline in motors advertising, growth was achieved in every category.
With its northerly focus, RIM fared better than the overall existing business
for recruitment advertising with growth of 2.3%. This was despite a marginal
decline at Yorkshire Post Newspapers due to its greater dependence on more
senior job advertisements where the effect of the downturn has been most marked.
Property and other classified advertising saw very similar performances to the
existing businesses with growth rates of 1.3% and 3.0% respectively. A marginal
decline of 2.1% in motors advertising reflected a difficult marketplace in
Leeds where dealer consolidation and related advertising retrenchment held back
performance.
Display advertising grew by 1.0%. Following the acquisition, we closed the RIM
national sales operation and transferred the business to Mediaforce Ltd which
represents all Johnston Press titles. The transfer was achieved without
disruption to the business.
Against an operating margin before exceptional items of 23% in 2001, the newly
acquired business is already performing strongly under Johnston Press ownership,
reflecting the substantial savings which have been achieved since acquisition.
This has resulted in a pre-exceptional operating margin of 28% although, as this
only relates to a 37-week period, an accurate year-on-year comparison is
impossible. Every RIM business has achieved an improvement in both operating
margin and absolute operating profit.
For the reasons outlined above, the Leeds marketplace proved challenging with
advertising revenues remaining flat. A significant improvement in profitability
was driven by cost savings following acquisition. The Dewsbury market was also
difficult, although in Harrogate more buoyant conditions helped that company to
a good profit increase. The improved performance in Sheffield was assisted by
modest growth in recruitment advertising. The companies comprising the Northwest
division did particularly well with every company making good progress and
achieving strong revenue growth in almost every category.
CIRCULATIONS
A 1.3% increase in the circulation of our existing weekly paid-for titles for
the six months to 31 December 2002 means that we have now experienced six years
of unbroken growth in our average weekly sale. Circulations of the acquired
weekly titles also increased, by 2.9% in the second six months following growth
of 1.8% in the first half. This positive performance demonstrates the underlying
strength of local weekly newspapers and reflects our continued investment in
content and colour in order to increase reader appeal and to meet advertisers'
needs. We now publish 119 weekly paid-for newspapers representing half of the
Group's total portfolio and circulating more than 1.5 million copies per week.
We also have 109 free weekly newspapers which distribute almost 4.2 million
copies each week.
Considerable focus continues to be placed on the sale of our daily newspaper
titles of which we now sell approaching 600,000 copies six days per week. In
overall terms, their contribution to like-for-like newspaper sales revenues rose
by 3.6%, despite the underlying trend of modest circulation decline. During the
six months to 31 December 2002, average circulations of our nine existing
evening titles fell by 2.5% although the underlying trade sale performed better
with a reduction of 1.8% after stripping out a further reduction in bulk sales
which now account for only 2% of the total sale. The acquired titles including
the Yorkshire Post and five evening paid-for newspapers also experienced a
decline with circulations falling by 3.3% after adjusting for a significant
reduction in bulk sales which still account for 5.4% of the total.
Group policy is to pursue a programme of gradual reduction in the inclusion of
bulk sales in the circulation figures, despite this having a detrimental effect
on the reported headline ABC performance whilst that takes place. Although the
use of promotional copies continues where appropriate, the Johnston Press policy
encourages newspaper sales departments to concentrate on their primary task of
building the single copy sale.
During the period, a considerable amount of work has been done to seek ways of
improving the circulation performance of our daily titles. This will be assisted
by the completion of the press development projects at Northampton, Peterborough
and Portsmouth and the improved reliability which is now being achieved. The
year has seen improved circulation performances in a number of cases, most
notably the growth achieved in Blackpool where the sale of the Gazette increased
by 1.4% and 0.7% in the first and second halves respectively. We remain
confident that real improvements in the daily sale can be achieved and this
remains a top priority for the Group.
ELECTRONIC PUBLISHING
Following the acquisition of RIM, we now have over 140 websites which together
cover almost every local marketplace in which we publish. Further launches are
planned in 2003 to cover the few remaining gaps. All websites are an integral
part of the local publishing mix and come under the commercial and editorial
control of the respective local newspaper management. News content is generally
updated at least daily by newsroom staff with advertisers being encouraged to
place advertisements on-line as well as in our local newspapers.
Revenue growth of 14% has been achieved on a like-for-like basis and, as in
2001, our existing on-line activities have made a positive contribution to
profit. Considerable progress has been made in the design and functionality of
our sites with improved use of database technology. Electronic publishing is a
key part of our portfolio with organisational focus and resourcing set
accordingly. Total page impressions are now running at around 10 million per
month.
PRINTING
2002 was a further year of transition for the printing division with completion
of the major press development programme and the closure of the Burgess Hill
pressroom. The integration of the major RIM printing plants in Leeds and
Sheffield and the closure of the Harrogate press also took place during the
year. Profitability of the division fell slightly, primarily as a result of a
significant change in the mix of throughput with an increase in internal work
offsetting a reduction of external contract printing, a change which is
beneficial for the Group as a whole.
The major press development programme, which has cost approximately #40 million
over three years, gives us a substantial increase in colour capacity and press
capability at the three major pressrooms in Northampton, Peterborough and
Portsmouth. In addition to major enhancements to the existing double width
presses at Northampton and Peterborough, an old press at Peterborough has been
replaced and a new press has also been installed at Portsmouth. Additional costs
were incurred during the commissioning process including significantly increased
overtime but we are now experiencing much greater reliability. During the year,
we also introduced computer-to-plate technology into the same three pressrooms
and, after a period of commissioning, this is now giving greatly increased
efficiency and improved print quality.
During the year, we had the advantage of a significant reduction in newsprint
prices, effectively reversing the increases experienced in 2001. Prices for 2003
have seen a further modest reduction. In part, this reflects our increased
purchasing power as a result of the RIM acquisition, accompanied by a reduction
in the number of suppliers to the enlarged Group.
2003 will be a year of consolidation for the major pressrooms in Northampton,
Peterborough and Portsmouth. However, we have plans to introduce additional
colour capacity at Leeds and Sunderland and have also placed orders for a full
conversion to computer-to-plate technology at Leeds. These projects, coupled
with others around the Group, will result in total capital expenditure exceeding
depreciation in 2003. We have also initiated a feasibility study into the
development of the Sheffield-based printing facilities which could well result
in a major greenfield investment in 2004/5.
Given our increased dependence on fewer, larger pressrooms, we have taken steps
to strengthen our management capabilities with four new senior management
appointments in early 2003.
ORGANISATION AND PEOPLE
Our senior management team has remained unchanged throughout 2002 with the
exception of the addition of a Group Business Development Manager, Henry Faure
Walker, who joined us in March. It is that team which has carried the primary
responsibility for the integration of RIM and the excellent progress we have
made is greatly to their credit. Following the acquisition, we also strengthened
our Group management structure with the appointment of Graham Gould as Group
Head of IT. Graham has been with the Group for some years and was previously
Managing Director, North of England division, based in Halifax.
The acquisition of RIM has strengthened the pool of talent available to the
Group to meet both our current and future needs. Indeed, we have been impressed
with the general calibre and commitment of all the staff within the newly
acquired business. A number of senior appointments have been made since the
acquisition and many of these have been filled by former RIM staff.
Continued improvements have been made to the scope and delivery of in-house
training programmes of both skill-based and management development courses. Our
training programmes are highly regarded and where appropriate are supplemented
by external resources, particularly for the training of journalists where we use
a number of accredited courses including one at Darlington College of Technology
which has been designed specifically for Johnston Press. Improvements have also
been made to our induction courses for new employees, part of our successful
efforts to reduce levels of staff turnover.
We remain acutely aware that our staff are our most critical and valuable
resource. We acknowledge their considerable contribution to the success of the
Group.
TIM BOWDLER
Chief Executive
19 March 2003
FINANCIAL REVIEW
Johnston Press had another successful and eventful year in what has been a
difficult period in most areas of the media sector. We completed the acquisition
of Regional Independent Media Holdings Limited (RIM), grew our existing
businesses, refinanced the enlarged Group through both equity and debt, and
finally, but most importantly, delivered value to shareholders.
FINANCIAL REVIEW
In comparing operating profit with 2001, the acquisition of RIM on 12 April 2002
needs to be excluded.
The operating profit on a like-for-like basis can be summarised as follows:
2002 2001
#'000 #'000
Operating profit before exceptionals 97,120 90,710
Contribution from RIM 34,097 -
131,217 90,710
This demonstrates that the organic growth in the businesses which have been part
of Johnston Press throughout both years was #6.4 million, an increase of 7%.
ACQUISITIONS
The acquisition of RIM for #555 million, excluding fees, was funded by raising
#220 million (net of expenses) through a 2 for 5 Rights Issue at 280 pence and
by increased debt. RIM's 37 weeks' post-acquisition trading generated turnover
of #122 million and operating profit before exceptional items of #34 million.
This represents a margin of 28%, which is a significant improvement on the full
year margin of 22.9% reported by RIM in 2001.
There have been exceptional costs of #4.4 million associated with the
fundamental re-organisation of the activities of the acquired companies. The
Board is confident that the indicated full year cost savings of #9.0 million per
annum will be delivered in 2003, based on the cost savings already achieved in
2002, which contributed #4.8 million to the improved performance.
Excluding the fair value of publishing titles, fair value adjustments of #12.1
million have been made to the assets of the acquired Group. The major
adjustments were to write-down the value of the investments, property, plant and
machinery to reflect consistent accounting treatment with Johnston Press or,
where relevant, current valuations. As well as these write-downs, Johnston Press
is required to provide for the RIM pension fund deficit at the date of
acquisition. These fair value adjustments were partially offset by increased
land values and recognition of a deferred tax asset representing the tax losses
held within the RIM companies, which are now available to the enlarged Group.
REVENUES
Advertising revenues on a like-for-like basis (excluding acquisitions as noted
above) were as follows:
2002 2001 Increase
#'000 #'000 %
Existing business
Employment 60,686 60,521 0.3
Property 32,555 31,386 3.7
Motors 32,737 31,990 2.3
Other classified 36,016 34,452 4.5
Total classified 161,994 158,349 2.3
Display 72,310 71,129 1.7
Total advertising revenue 234,304 229,478 2.1
The Chief Executive's report provides a summary of advertising performance by
division.
Although RIM was only consolidated for the 37 weeks since acquisition, the table
below shows the like-for-like advertising revenues for the full year to better
demonstrate the comparable performance:
2002 2001 Increase
#'000 #'000 %
Acquired business*
Employment 40,977 40,049 2.3
Property 11,973 11,814 1.3
Motors 12,803 13,074 (2.1)
Other classified 18,113 17,579 3.0
Total classified 83,866 82,516 1.6
Display 38,576 38,189 1.0
Total advertising revenue 122,442 120,705 1.4
* Excludes Stornoway Gazette Ltd, Galloway Gazette Ltd , Writers News Ltd and
Wee County News Ltd, which were sold during 2002.
Both the existing and acquired businesses experienced advertising revenue growth
in the year. Every category of advertising in the existing businesses grew
including employment where a stronger second half, albeit against weaker
comparatives, offset the declines in the first half. In the acquired companies,
the same pattern was not as pronounced, due to the first half market weaknesses
occurring mainly in the Southern regions of the country and, therefore, having
less effect on the acquired businesses which are focused on Yorkshire and
Lancashire. The only category to decline in the acquired business was motors
which was adversely impacted by the consolidation of the dealership base in
Yorkshire.
A breakdown of the advertising revenues for both the existing and acquired
businesses, again on a like-for-like basis, for the two half years is as
follows:
Half year to 31 December Half year to 30 June
Existing Business 2002 2001 Increase 2002 2001 Increase
#'000 #'000 % #'000 #'000 %
Employment 28,819 28,050 2.7 31,867 32,471 (1.9)
Property 15,759 14,745 6.9 16,796 16,641 0.9
Motors 16,160 15,387 5.0 16,577 16,603 (0.2)
Other classified 17,775 17,128 3.8 18,241 17,324 5.3
Total classified 78,513 75,310 4.3 83,481 83,039 0.5
Display 36,206 36,029 0.5 36,104 35,100 2.9
Total advertising
revenue 114,719 111,339 3.0 119,585 118,139 1.2
Half year to 31 December Half year to 30 June
Acquired Business 2002 2001 Increase 2002 2001 Increase
#'000 #'000 % #'000 #'000 %
Employment 19,473 18,507 5.2 21,504 21,542 (0.2)
Property 5,639 5,526 2.0 6,334 6,288 0.7
Motors 6,169 6,373 (3.2) 6,634 6,701 (1.0)
Other classified 8,978 8,818 1.8 9,135 8,761 4.3
Total classified 40,259 39,224 2.6 43,607 43,292 0.7
Display 19,436 19,426 0.1 19,140 18,763 2.0
Total advertising
revenue 59,695 58,650 1.8 62,747 62,055 1.1
Circulation revenue has increased by 66% with the acquisition. In the existing
business, the increase over 2001 was 5% as the continued increases in
circulation of our weekly titles, plus a limited number of cover price
increases, more than offset the impact of reduced circulations of our evening
titles.
Contract printing revenues increased by 30% due to the acquired printing
operations at Leeds and Sheffield, however, the like-for-like comparison is a
decline year-on-year of 6%. This was the result of the Group's continued
strategy of rationalising the printing operations and replacing third party
contracts with Group work previously printed externally. The pressroom in
Burgess Hill was closed in March 2002 as was the acquired printing facility in
Harrogate in October 2002. These press closures will result in full year cost
savings in the business of approximately #2.0 million of which #1.1 million
benefited 2002. The vast majority of the Group's titles were being printed
internally by the end of the period.
Other revenue categories, including leaflets, new media and sundry revenues grew
satisfactorily in the year by 5% on a like-for-like basis.
MARGINS
With revenue growth of 2% in the existing business and continued emphasis on the
control of costs and increased efficiency, operating margins improved from 29.8%
to 31.5%. For the enlarged Group, the consolidated results show a total
operating margin of 30.2% despite the dilutive impact of the lower margin
acquired businesses and this represents a 0.4% increase over the already
industry leading margins of 2001. Apart from people-related costs, the largest
single cost category for the Group is newsprint. The management of costs in 2002
benefited from an 11% reduction in newsprint prices and there will be a further
benefit in 2003 with another reduction.
CASH FLOW/NET DEBT
In common with the regional press as an industry, Johnston Press has strong cash
flows. The Group entered 2002 with net debt of #237 million and, after paying
#555 million for RIM plus associated fees of #18 million, of which #220 million
was financed by a Rights Issue, still managed to close the year with net debt of
#503 million - an effective reduction of #87 million in the year. Debt levels at
the end of December were impacted by the seasonality of the business as December
has the lowest monthly revenues. In December 2002, the cash flows were
particularly strong with the net inflow being #16.1 million, partly as a result
of interest payments of #2.6 million being deferred until January 2003 to
coincide with the receipt of funds from our private placement (see below). To
finance the increased debt requirement, the Group entered into a new #643
million five-year facility with a syndicate of banks. This required the
unamortised arrangement fees of #1.5 million on the old facility to be expensed
as an exceptional interest cost in the period.
Subsequent to the year-end, and to further strengthen the Group's balance sheet,
the #100 million 364-day portion of this debt, together with an additional #33
million of the amortising facility, was replaced by #133 million of 10-year
Senior Notes which were placed privately.
Interest cover for the period was 4.3 times.
FINANCIAL INVESTMENTS
Being an entirely UK-based Group, the main financial risk is that associated
with interest rates. The Group's policy is to arrange borrowings at the lowest
possible cost and with covenants it can operate comfortably within. It
stipulates that a minimum of 50% should be hedged against interest rate
movements with the balance being kept under continuous review. As at 31 December
2002, #453 million of the debt was hedged at an effective rate of 5.1% for an
average period of 4 years.
At the end of the year, the Directors reviewed the carrying value of its
investments. The listed investments were written down to market value at a cost
of #0.2 million and the unlisted investment in Mirago plc, the UK internet
search engine, was written down by 10%, #0.4 million, based on the valuation of
the Directors.
PENSION FUND/FRS17
The issues facing defined benefit pension schemes have been well documented in
the financial press and are faced by Johnston Press in both its existing scheme
and that acquired with RIM, despite both of the schemes being closed to new
entrants since 1998. The decline in stock market values since December 2000,
when both schemes were fully funded taking account of subsequent one-off
payments, and the lack of investment returns in subsequent periods has resulted
in both funds having FRS17 deficits at 31 December 2002. The total deficit for
both schemes at that date was #75 million. In both schemes, employer and
employee contributions have been increased during the year to ensure that the
ongoing service accrual is adequately funded. The FRS17 valuations are contained
in the Annual Report and the Group's view is that the deficits at 31 December
2002 are essentially the result of short to medium-term fluctuations and has not
sought to address these through one-off payments. It is however recognised that,
if the Minimum Funding Requirement falls below 90% on either fund, then any
deficit below that percentage will require to be addressed over a three-year
period.
The Group also carries accruals for unfunded ex-gratia pension arrangements for
certain former employees. This liability is subject to an annual actuarial
valuation and this resulted in a reduction in the accrual of #0.3 million, which
is recorded as an operating exceptional credit.
DIVIDENDS AND EARNINGS PER SHARE
Headline earnings per share at 26.75p were 13% up on 2001 when allowing for the
bonus element of the Rights Issue. Subject to approval at the Annual General
Meeting, the total dividend per share for the year will be 5.4p, an increase of
18.2% when adjusted for the Rights Issue. In recognising the importance of
Corporate Social Responsibility, a separate report has been included in the
Annual Report.
STUART PATERSON
Finance Director
19 March 2003
GROUP PROFIT AND LOSS ACCOUNT
Year to 31 December 2002 2002 2001
Before
exceptional Exceptional
items items Total Total
Notes #'000 #'000 #'000 #'000
Turnover
Existing operations 306,401 - 306,401 300,615
Acquisitions 120,414 - 120,414 -
Continuing operations 426,815 - 426,815 300,615
Discontinued operations 1,579 - 1,579 -
Total turnover 1 428,394 - 428,394 300,615
Cost of sales (204,129) - (204,129) (152,481)
Gross profit 224,265 - 224,265 148,134
Other operating expenses (net) (93,048) (1,747) (94,795) (58,673)
Operating profit 2 131,217 (1,747) 129,470 89,461
Existing operations 97,120 (751) 96,369 89,461
Acquisitions 33,863 (996) 32,867 -
Continuing operations 130,983 (1,747) 129,236 89,461
Discontinued operations 234 - 234 -
Operating profit 131,217 (1,747) 129,470 89,461
Share of associates' operating profit 401 - 401 397
131,618 (1,747) 129,871 89,858
Exceptional items - fundamental 3 - (4,438) (4,438) (5,014)
reorganisation
Profit on ordinary activities before
interest and taxation 131,618 (6,185) 125,433 84,844
Net interest (30,901) (1,807) (32,708) (16,298)
Profit on ordinary activities
before taxation 100,717 (7,992) 92,725 68,546
Taxation on profit on ordinary activities (29,259) 2,398 (26,861) (19,958)
Profit for the financial year 71,458 (5,594) 65,864 48,588
Dividends on equity and non-equity shares (15,464) - (15,464) (10,015)
Retained profit for year 55,994 (5,594) 50,400 38,573
Earnings per share 5 Restated
Headline 26.75p 23.65p
Headline diluted 26.61p 23.53p
Basic 24.65p 21.68p
Diluted 24.52p 21.57p
The earnings per share for 2001 have been restated to reflect the discount
element of the Rights Issue.
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year to 31 December 2002 2002 2001
#'000 #'000
Profit for the financial year 65,864 48,588
Revaluation deficit (57) (33)
Total recognised gains and losses for the financial year 65,807 48,555
GROUP RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year to 31 December 2002 2002 2001
#'000 #'000
Profit for the financial year 65,864 48,588
Dividends (15,464) (10,015)
Other recognised gains and losses relating to the year (net) (57) (33)
New share capital subscribed, including share premium 223,145 472
Net increase in shareholders' funds 273,488 39,012
Opening shareholders' funds 288,009 248,997
Closing shareholders' funds 561,497 288,009
GROUP NOTE OF HISTORICAL COST PROFITS AND LOSSES
Year to 31 December 2002 2002 2001
#'000 #'000
Reported profit on ordinary activities before taxation 92,725 68,546
Difference between historical cost depreciation charge and the actual
depreciation charge for the year calculated on the revalued amount 87 89
Historical cost profit on ordinary activities before taxation 92,812 68,635
Historical cost profit for the year retained after taxation and dividends 50,487 38,662
GROUP BALANCE SHEET
As at 31 December 2002 2002 2001
#'000 #'000
Fixed assets
Intangible 927,557 425,494
Tangible 154,084 118,541
Investments 5,195 5,137
1,086,836 549,172
Current assets
Stocks 2,703 2,030
Debtors - due within one year 54,645 35,503
- due after more than one year 7,062 6,501
Cash at bank and in hand 10,735 9,138
75,145 53,172
Creditors: amounts falling due within one year (121,973) (89,826)
Net current liabilities (46,828) (36,654)
Total assets less current liabilities 1,040,008 512,518
Creditors: amounts falling due after more than one year (472,559) (212,016)
Provisions for liabilities and charges (5,952) (12,493)
Net assets 561,497 288,009
Capital and reserves
Called-up share capital
Equity 28,339 20,136
Non-equity 1,106 1,106
29,445 21,242
Reserves-equity 532,052 266,767
Shareholders' funds 561,497 288,009
GROUP CASH FLOW STATEMENT
Year to 31 December 2002 2002 2001
Notes #'000 #'000
Net cash inflow from operating activities 7a 151,457 97,622
Returns on investments and servicing of finance (33,466) (15,993)
Taxation (17,713) (19,317)
Capital expenditure and financial investment (14,218) (24,296)
Acquisitions and disposals (567,726) (6,005)
Equity dividends paid (11,654) (9,353)
Cash (outflow)/inflow before financing (493,320) 22,658
Financing 497,582 (28,544)
Increase/(decrease) in cash in the year 4,262 (5,886)
NOTES TO THE FINANCIAL INFORMATION
1. Turnover/Net Assets Analysis
Turnover Net Assets
2002 2001 2002 2001
#'000 #'000 #'000 #'000
Continuing operations
Newspapers and contract printing
Existing operations 306,401 300,615 320,238 288,009
Acquisitions 120,414 - 241,259 -
Continuing operations 426,815 300,615 561,497 288,009
Discontinued operations 1,579 - - -
428,394 300,615 561,497 288,009
2. Operating Profit
2002 2001
#'000 #'000
Continuing operations
Newspapers and contract printing
Existing operations 96,369 89,461
Acquisitions 32,867 -
Continuing operations 129,236 89,461
Discontinued operations 234 -
Total operating profit 129,470 89,461
3. Exceptional Items Reported after Operating Profit
2002 2001
#'000 #'000
Closure of Southern Web operation - 5,014
Fundamental reorganisation following acquisition of new titles 4,438 -
4,438 5,014
The aggregate effect of the exceptional items on the amount charged to the
Profit and Loss Account for taxation was to reduce the charge by #1,331,000
(2001 - #1,504,000).
4. Key financials are defined as:
a) Profit on ordinary activities before taxation adding back non-operating
exceptional items of #4.4 million (2001 - #5.0 million).
b) Cash flow excluding acquisitions, disposals, equity dividends and
financing.
5. Earnings per Share
The calculations of earnings per share are based on the following profits and
weighted average number of shares:
Headline Basic/Diluted
2002 2001 2002 2001
#\'000 #'000 #'000 #'000
Profit for the financial year 65,864 48,588 65,864 48,588
Exceptional items 7,992 6,263 - -
Tax effect of exceptional items (2,398) (1,879) - -
Preference dividends (152) (152) (152) (152)
71,306 52,820 65,712 48,436
2002 2001
No. of shares No. of shares
Restated
Weighted average number of shares
For headline/basic earnings per share 266,532,825 223,372,088
Exercise of share options 1,445,334 1,147,719
For diluted earnings per share 267,978,159 224,519,807
Headline figures are presented to show the effect of excluding exceptional items
from earnings per share. The weighted average number of shares for 2001 have
been amended to reflect the discount element of the Rights Issue.
6. Dividend
The Directors recommend a final dividend of 3.6p per share making a total
dividend of 5.4p per share for the year. Subject to approval by members the
final dividend will be paid on 16 May 2003 to those ordinary shareholders on the
register at 25 April 2003.
7. Notes to Cash Flow Statement
2002 2001
#'000 #'000
a) Net cash inflow from operating activities
Operating profit 129,470 89,461
Exceptional items (4,976) (621)
Depreciation charges 16,718 11,600
Development grant amortisation (14) (14)
Loss on sale of tangible fixed assets 81 79
Amount written off Employee share option trust 111 -
Decrease in stocks 56 936
Decrease/(increase) in debtors 9,026 (279)
Increase/(decrease) in creditors 1,279 (3,540)
Decrease in unfunded pension provision (294) -
Net cash inflow from operating activities 151,457 97,622
7 b) Analysis and reconciliation of net debt
1 January Other 31 December
2002 Cash flow non-cash changes 2002
#'000 #'000 #'000 #'000
Cash at bank and in hand 9,138 1,597 - 10,735
Overdrafts (5,877) 2,665 - (3,212)
3,261 4,262 - 7,523
Bank loans (179,881) (292,749) - (472,630)
Loan stock (61,742) 18,269 - (43,473)
Finance leases (133) 43 - (90)
Term debt issue costs 1,627 6,845 (2,644) 5,828
(240,129) (267,592) (2,644) (510,365)
Net debt (236,868) (263,330) (2,644) (502,842)
Of the #10,735,000 cash at bank and in hand, #1,645,000 is held on deposit to
guarantee the 1999/2006 Loan Stock interest for one year.
2002 2001
#'000 #'000
Increase/(decrease) in cash in the year 4,262 (5,886)
Issue of debt and movement in lease financing (267,592) 29,016
Change in net debt resulting from cash flows (263,330) 23,130
Amortisation of term debt issue costs (2,644) (684)
Movement in net debt in year (265,974) 22,446
Net debt at beginning of year (236,868) (259,314)
Net debt at end of year (502,842) (236,868)
8. Statutory Accounts
The financial information set out above does not comprise the Company's
statutory accounts for the years ended 31 December 2001 and 31 December 2002.
The accounts for the year ended 31 December 2001 have been filed and those for
the year ended 31 December 2002 will be filed with the Registrar of Companies
following the annual general meeting. The Company's auditors, Andersen in 2001
and Deloitte & Touche in 2002 gave unqualified reports on the accounts for those
periods and the reports did not contain a statement under section 237 (2) or (3)
of the Companies Act 1985.
The Directors are responsible in accordance with the Listing Rules and
applicable United Kingdom accounting standards for preparing and issuing this
preliminary announcement. Deloitte & Touche has reviewed the announcement having
regard to Bulletin 1998/7 issued in the United Kingdom by the Auditing Practices
Board.
9. Financial Statements and Annual General Meeting
Audited financial statements and the annual report will be posted to
shareholders on 19 March 2003. The Annual General Meeting will be held on 25
April 2003.
10. Accounting Policies
The accounting policies adopted in this preliminary announcement are consistent
with the most recent published set of annual accounts.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UWVWROSROAAR
1 Year Johnston Press Chart |
1 Month Johnston Press Chart |
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
