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| 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 |
From Apr 2019 to Apr 2024
TIDMJPR
RNS Number : 8218M
Johnston Press PLC
02 August 2017
Johnston Press plc
Interim unaudited results for the 26 week period ended 1 July 2017
Strong i performance and further digital revenue growth
Johnston Press plc, (LSE: JPR), announces its results for the 26 week period ended 1 July 2017. Whilst the wider publishing industry continues to experience sharp declines, the Group is pleased to report that strong growth in digital revenues and the i newspaper combined to offset print decline in the business (excluding classifieds). The Board remains confident in the outlook for the rest of 2017.
Financial Highlights (adjusted including the i newspaper)(1)
-- Revenue grew by 4.6% during the period (excluding classifieds)(2) -- Digital advertising revenues were up 14.8% (excluding classifieds)(3)
-- Print and digital advertising revenues combined were flat for the period (excluding classifieds)(4)
-- The i newspaper delivered strong performance: H1 revenue of GBP14.5m (up 28.6% in the comparable 12 week period post acquisition) and EBITDA of GBP3.7m(6) (up 42% to proforma)
-- Transactional media sales centre (telesales) revenues were up 1% to GBP10.3m(5) -- Operating costs reduced 7.3% before full period effect of the i newspaper -- The Group delivered Adjusted EBITDA of GBP19.7m
-- As of 1 July 2017, the Group had total cash of GBP28.8m, with net debt(7) down 8.7% in the period.
Financial Highlights - Statutory
-- Total revenues declined by GBP9.5m to GBP103.3m, of which GBP5.4m related to the sale of the Midlands titles. Excluding the Midlands titles revenues fell 4%
-- Operating profit of GBP4.9m compares to a H1 16 loss of GBP211.7m GBP'm Continuing Operations - Adjusted Continuing Operations - Statutory* ====================================== ===================================== ======================================= 26 weeks ended: 1 July 2017 2 July 2016 % change 1 July 2017 2 July 2016 % change ====================================== ============ ============ ========= ============= ============= ========= Total Revenues 102.9 106.2 (3.1) 103.3 112.8 (8.4) ====================================== ============ ============ ========= ============= ============= ========= Revenues (including the i newspaper, excluding classifieds) 85.6 81.9 4.6 n/a n/a - ====================================== ============ ============ ========= ============= ============= ========= Operating profit/(loss) 16.2 19.4 (16.8) 4.9 (211.7) - ====================================== ============ ============ ========= ============= ============= ========= EBITDA - Group (inc i newspaper) 19.7 22.8 (13.7) n/a n/a - ====================================== ============ ============ ========= ============= ============= ========= EBITDA - i newspaper 3.7 0.4 745.0 n/a n/a - ====================================== ============ ============ ========= ============= ============= ========= Profit/(loss) before tax 6.7 9.7 (31.4) (10.2) (184.0) 94.4 ====================================== ============ ============ ========= ============= ============= ========= Net Debt(7) 191.2 209.4 (8.7) 118.6 137.7 13.9 ====================================== ============ ============ ========= ============= ============= ========= *Statutory results include the Midlands titles disposed of on 17 January 2017 which contributed revenue of GBP0.3m (H1 16 GBP5.4m) ======================================================================================================================
Strategic Headlines(1)
Business Trends Improving
-- Stronger digital revenue performance combined with 6 months of i newspaper revenues has outweighed other declines enabling the Group to grow revenues by 4.6% (excluding classifieds)(2)
-- Advertising revenues were flat for the period (print and digital combined excluding classifieds)(4) having experienced heavy declines during 2016.
Digital Audience & Revenue Growth
-- Digital advertising revenues up 14.8%(3) year on year (YoY), with growth accelerating through the period, driven by growing audiences and stronger yields both locally and nationally (via the 1XL network), as demand for trusted, quality, targetable news increases
-- Digital audiences grew 15% to a record high of 26.5m unique users a month, and with increased engagement, page views were up 20% to over 110m average page views per month.
Success of the i newspaper(6)
-- Acquired on 10 April 2016, increased contribution from the newspaper, with circulation revenue increase from GBP4.4m to GBP11.0m and advertising revenues from GBP0.8m to GBP3.0m(6)
-- The i newspaper delivered GBP3.7m EBITDA for the 6 months, compared to GBP2.6m pro-forma 6 month EBITDA at acquisition (up 42%)
-- In the comparable 12 weeks period post acquisition (from 10 April to end of each half year), total i newspaper revenue increased 28.6%.
Operational Performance
GBP'm Continuing Operations - Adjusted Continuing Operations - Statutory* ====================================== ===================================== ======================================= 26 weeks ended: 1 July 2017 2 July 2016 % change 1 July 2017 2 July 2016 % change ====================================== ============ ============ ========= ============= ============= ========= Revenues (inc i, ex classifieds) 85.6 81.9 4.6 85.9 85.6 0.4 ====================================== ============ ============ ========= ============= ============= ========= Circulation revenue (inc i newspaper) 39.5 36.6 7.9 39.6 38.1 4.0 ====================================== ============ ============ ========= ============= ============= ========= Print and digital advertising ex classifieds 35.2 35.2 - 35.3 37.3 (5.3) ====================================== ============ ============ ========= ============= ============= ========= Print advertising ex classifieds 25.2 26.4 (4.9) 25.3 28.3 (10.5) ====================================== ============ ============ ========= ============= ============= ========= Digital advertising ex classifieds 10.0 8.7 14.8 10.0 9.0 10.8 ====================================== ============ ============ ========= ============= ============= ========= Classified revenues 17.3 24.3 (28.9) 17.4 27.2 (36.0) ====================================== ============ ============ ========= ============= ============= ========= Total advertising revenue (combined print and digital) 52.5 59.5 (11.8) 52.7 64.5 (18.2) ====================================== ============ ============ ========= ============= ============= ========= Total Group revenues 102.9 106.2 (3.1) 103.3 112.8 (8.4) ====================================== ============ ============ ========= ============= ============= =========
*Statutory results include the Midlands titles disposed of on 17 January 2017 which contributed revenue of GBP0.3m (H1 16 GBP5.4m)
Operational Highlights - Publishing & Sales strategy execution
-- Our focus on the larger titles that have significant print and digital reach in their geographies and communities has resulted in strong profit contributions led by the 'Nationals', i.e. The Scotsman, The Newsletter (Northern Ireland) and The Yorkshire Post, and by the 'Big City Dailies' such as The Sheffield Star and the Portsmouth News
-- The Media Sales Centre (transactional revenues including central digital display, BMDs & Public Notices), which now accounts for 20% of advertising revenues, was in growth during the period, as a result of the ongoing sales transformation programme
-- In January 2017, the Group sold 13 titles in the Midlands for a total consideration of GBP17m
Strategic Review
On 29 March 2017 we announced that the Group had commenced a strategic review, working with our advisers Rothschild and Ashurst LLP, to assess the financing options open to the Group in relation to the GBP220 million 8.625% senior secured notes which become due for repayment on 1 June 2019. As a key part of the strategic review process, the Board has engaged with its major stakeholders, including shareholders, holders of senior secured notes, Pension Trustees and the Pensions Regulator.
After a period of initial consultations with the largest shareholders and bondholders we are currently focused on discussions with the Pension Trustees. The Board is pleased by the continued support of the major stakeholders during the review process.
Current trading
Trading conditions across the industry continue to be difficult, especially in classified advertising.
Encouragingly, whilst print advertising revenues will continue to decline, we are seeing the monetisation of our growing digital audience gain momentum which combined with the transformation of our products (including targeted advertising and sponsored content) in 2016 has seen digital display advertising up 25% YoY across June and July. Digital as a proportion of local display revenue has now reached nearly 30%.
The continuing improvements in trading trend seen in the i newspaper in H1 are expected to continue in H2 as advertisers seek out a quality, impartial, concise, daily national news provider.
Ashley Highfield, Chief Executive Officer, commented,
"In the context of the broader industry trading environment where print classifieds in particular are in continued significant structural decline, we are focused on creating a business for the future. Our core business provides advertising and digital marketing solutions to companies, large and small, around our trusted, quality, brands that have significant reach into their communities.
This is a business which we have long believed needed to transform, but once done, could return to growth. Thus, since 2012 we have been making the necessary and at times painful changes to transform Johnston Press into a truly cross-platform business. Whilst trading remains challenging, the business has responded and, as a result of our substantial efforts and clear strategic focus, I am very pleased to announce that we have posted revenue growth in the business (excluding classifieds) of 4.6% during the half.
Digital revenues (excluding classifieds) have outweighed the declines of print advertising revenues, helped by an editorial focus that has resulted in digital audiences at a record high, and by a fantastic performance from the i newspaper which has achieved significantly enhanced performance during the sixteen months since acquisition .
The Group delivered Adjusted EBITDA of GBP19.7m in the first six months, in line with the Board's expectations. Having implemented the next phase of planned cost reduction initiatives aligned to the Group's wider publishing strategy, the Board remains confident in the outlook for the rest of 2017."
Notes
1 The results are presented on a continuing adjusted basis which exclude the following items: mark-to-market gain on the Group's bonds, impairment of intangible and tangible assets, restructuring costs, items related to the defined benefit pension plan, share based payment costs, trading and write downs relating to the closure of titles and digital operations, one-off legal costs and disposal gains. It includes the results from the acquisition of the i newspaper from April 2016 and excludes the results of the Isle of Man operations disposed in August 2016. The statutory continuing operations also include the results from the Midlands titles disposed of 17 January 2017. For additional information refer to the Non-GAAP measures included as supplementary information for the financial statements. We focus on revenue figures excluding classifieds in order to provide relevant information on those aspects of the business which are anticipated to have the greatest potential for future growth
2 Including classifieds, total revenue decline narrowed to 3.1%
3 Including classifieds, digital revenues grew 2.5%, with gaining momentum during the period
4 Including classifieds, total advertising revenues declined by 11.8%. Classified and other advertising for the period is GBP17.3m, down 29% for the period. Classified and other advertising includes property, motors, jobs and other advertising including features, entertainment and other classifieds
5 Transactional revenues in the MSC include BMD's (births, marriages and deaths), public notices and central digital display
6 2017 includes 26 weeks of the i newspaper revenues versus 12 weeks in the period to 2 July 2016
7 Adjusted net debt is stated excluding fair value mark to market valuation adjustments on the Bonds- refer to Note 12 of the financial statements for additional information.
Statutory and adjusted basis
In the Management Report, performance is stated on an adjusted basis to provide a more meaningful comparison of the Group's performance taking account of the closure of businesses and other non-trading items. The adjusted results aim to demonstrate the performance of the Group without the volatility created by non-recurring items, restructuring charges in respect of cost reduction measures and accounting items such as the impairment of intangible assets, pension finance and administrative expenses, the impact of fair value changes on the value of the Bonds. A reconciliation between the statutory and the adjusted results is provided under Non-GAAP measures within this financial information.
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
Ashley Highfield, CEO
David King, CFO 020 7612 2600
Panmure Gordon
Dominic Morley
Charles Leigh-Pemberton 020 7886 2500
Liberum
Neil Patel 020 3100 2000
Powerscourt
Juliet Callaghan
John Elliott 020 7250 1446
Johnston Press will host a presentation for institutional investors and analysts this morning at 9.30am (GMT). The presentation will be webcast through our partner Northcote.
https://secure.emincote.com/client/johnston_press/johnston007
and a conference call facility will also be available. To dial into the conference call, participants should dial +44 20 3059 8125. No password is required.
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 37.8 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.
CONTENTS
Hot Features
Premium
Strategic Report Financial Statements
Interim Management Group Cash Flow
Report 1 Group Income Statement 17 Statement 23
==================== ====================== ======================
Group Statement
Principal Risks of Comprehensive Notes to the Condensed
and Uncertainties 13 Income 18 Financial Statements 24
==================== ====================== ======================
Independent Review
Liquidity and Group Statement Report of Johnston
going concern 13 of Changes in Equity 20 Press Plc 42
==================== ====================== ======================
Group Statement
Viability Statement 14 of Financial Position 22
==================== ====================== ======================
Non-GAAP measures
- Reconciliation
Responsibility of Statutory and
Statement 16 Adjusted 43
==================== ====================== ======================
FINANCIAL REVIEW
Introduction
This Financial Review provides commentary on the Group's Statutory and Adjusted performance for the 26 week period ended 1 July 2017 (H1 2016: 26 weeks period ended 2 July 2016).
Basis of presentation of results
The statutory results are presented for the continuing Group and the prior period comparative has been restated to exclude the Isle of Man business disposed of in August 2016. Continuing statutory results include the i from acquisition date, closed titles and businesses, exceptional items and mark-to-market gains/(losses) on the Group's Bond.
The adjusted results provide a more meaningful comparison of the Group's performance taking account of the closure of businesses and other non-trading items. The adjusted results aim to demonstrate the performance of the Group without the volatility created by non-recurring items, restructuring charges in respect of cost reduction measures and accounting items such as the impairment of intangible assets, pension finance and administrative expenses, the impact of fair value changes on the value of the Bond. A reconciliation between the statutory and the adjusted results is provided under Non-GAAP measures within this financial information.
The i newspaper is included in statutory and adjusted results from the date of acquisition in April 2016(1) .
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. A reconciliation of Statutory to Adjusted figures is provided on page 11, and further disclosure is provided on page 43.
Statutory(2) Adjusted
===================================== =====================================
26 weeks 26 weeks 26 weeks 26 weeks
to to to to
1 July 2 July 1 July 2 July
2017 2016 Change Change(3) 2017 2016 Change Change(3)
GBPm GBPm GBPm % GBPm GBPm GBPm %
==================================== ======== ======== ====== ========= ======== ======== ====== =========
Newspaper sales 39.6 38.1 1.5 4.0 39.5 36.6 2.9 7.9
Contract printing 6.9 6.6 0.3 3.2 6.8 6.6 0.2 3.2
Print advertising excluding
classified 25.3 28.3 (3.0) (10.5) 25.2 26.5 (1.3) (4.9)
Digital advertising excluding
classified 10.0 9.0 1.0 10.8 10.0 8.7 1.3 14.8
==================================== ======== ======== ====== ========= ======== ======== ====== =========
Print and Digital advertising
excluding classified 35.3 37.3 (2.0) (5.3) 35.2 35.2 0.0 0.0
Classified and other advertising 17.4 27.2 (9.8) (36.0) 17.3 24.3 (7.0) (28.9)
==================================== ======== ======== ====== ========= ======== ======== ====== =========
Total advertising revenue 52.7 64.5 (11.8) (18.2) 52.5 59.5 (7.0) (11.8)
Leaflet, syndication and other
revenue 4.1 3.6 0.5 16.0 4.1 3.5 0.6 18.2
==================================== ======== ======== ====== ========= ======== ======== ====== =========
Total continuing revenues 103.3 112.8 (9.5) (8.4) 102.9 106.2 (3.3) (3.1)
==================================== ======== ======== ====== ========= ======== ======== ====== =========
Total continuing revenues (excluding
classified) 85.9 85.6 0.3 0.4 85.6 81.9 3.7 4.6
Total costs (4) (94.6) (320.9) 226.3 70.5 (83.2) (83.4) 0.2 0.2
==================================== ======== ======== ====== ========= ======== ======== ====== =========
EBITDA(5) n/a n/a - - 19.7 22.8 (3.1) (13.7)
==================================== ======== ======== ====== ========= ======== ======== ====== =========
Depreciation and amortisation (3.8) (3.6) (0.2) (5.3) (3.5) (3.4) (0.1) (4.1)
==================================== ======== ======== ====== ========= ======== ======== ====== =========
Operating profit/(loss) 4.9 (211.7) 216.6 102.3 16.2 19.4 (3.2) (16.8)
==================================== ======== ======== ====== ========= ======== ======== ====== =========
1 The i is included for 26 weeks in H1 2017 (H1 2016: 12 weeks, FY 2016: 38 weeks).
2 The statutory results include the trading performance of the Midlands titles (H1 2017: 2 weeks, H1 2016: 26 weeks, FY2016: 52 weeks), which were disposed of in January 2017 (Note 9).
3 The % change variance has been calculated based on unrounded numbers.
4 Total costs include cost of sales and are stated before depreciation and amortisation.
5 EBITDA is earnings before interest, tax, depreciation and amortisation. EBITDA is a key internal performance measure to deliver the Group's strategy, and is often used externally as a measure of cash generation. EBITDA is calculated as Operating profit /(loss) with depreciation and amortisation added back. A reconciliation of Adjusted EBITDA is provided on page 11 and 43.
Revenue
Including the benefit of the i for 26 weeks (H1 2016: 12 weeks) total adjusted revenues of GBP102.9 million were down 3.1% for the period, while total adjusted revenues excluding classified were up 4.6%.
Newspaper sales
Statutory Newspaper sales revenues have improved by 4.0% period-on-period to GBP39.6 million, including revenues generated from the i newspaper title which have been incorporated since acquisition on 10 April 2016.
Adjusted newspaper sales revenues including the i were up 7.9% to GBP39.5 million and excluding the i were GBP28.5 million for the period (H1 2016: GBP32.2 million), a 11.5% decline reflecting the continued structural challenges faced by the publishing industry.
Contract printing
Statutory contract print revenues were GBP6.9 million in the first half of the year, a 3.2% improvement on the prior period. The Group has benefited from the additional revenues generated from the Metro and Daily Mail contract printing, which the Group commenced printing in late 2016 and early 2017 respectively.
Advertising Revenue
Total statutory print and digital publishing advertising revenue (excluding classified) declined by GBP2.0 million (5.3%) period-on-period, with adjusted performance of GBP35.2 million flat period-on-period. Statutory advertising revenue for the comparative period included 26 weeks of trading for the Midlands titles disposed of in mid-January 2017 (H1 2017: GBP0.2 million, H1 2016: GBP3.9 million, both including classifieds).
Adjusted Digital advertising (excluding classified) grew 14.8% to GBP10.0 million as monetisation of increased audiences gained momentum while Adjusted Print revenues (excluding classifieds) declined 4.9% period-on-period, including the benefit of the i. Adjusted Display performance continued to be impacted by industry conditions but there was a narrowing of declines with focus on sales teams in the Media Sales Centre (MSC), with the Group excluding i down 12.5%, which narrowed to 3.3% with the benefit of the i. Adjusted Transactional revenues from the MSC continued to perform well, up 1% benefiting from strong performance in BMD's and Public Notices in particular, and are unaffected from the inclusion of the i.
Adjusted Digital Marketing Services performed particularly well with a 34.4% improvement compared to the prior period in large part the result in increased Partnership revenues.
In line with the market Adjusted Classified (jobs, property, motors, features and other classified categories) advertising revenue performance was down 28.9%, with the property category heavily hit by structural changes in the property market and continued low transaction volumes resulting in performance down 37.3% in print and 23.3% in digital.
Excluding the i, total adjusted advertising revenue (excluding classifieds) were 6.1% down for the period.
Adjusted Print and digital publishing advertising revenue analysis, including and excluding the i newspaper.
Adjusted revenue Adjusted revenue
First half (including First half (excluding
i) i)
================================== ==================================
26 weeks 26 weeks 26 weeks 26 weeks
to to to to
1 July 2 July 1 July 2 July
2017 2016 Change Change 2017 2016 Change Change
GBPm GBPm GBPm %(3) GBPm GBPm GBPm %(3)
============================== ======== ======== ====== ====== ======== ======== ====== ======
Display - local
and national 22.3 23.1 (0.8) (3.3) 19.7 22.5 (2.8) (12.5)
Transaction revenues 10.3 10.2 0.1 1.0 10.3 10.2 0.1 1.0
Digital marketing
services(1) & Partnership(2) 2.6 1.9 0.7 34.4 2.5 1.9 0.6 32.2
============================== ======== ======== ====== ====== ======== ======== ====== ======
Print and digital
publishing advertising
excluding classified 35.2 35.2 - - 32.5 34.6 (2.1) (6.1)
Classifieds and
other advertising 17.3 24.3 (7.0) (28.9) 17.0 24.1 (7.1) (29.6)
============================== ======== ======== ====== ====== ======== ======== ====== ======
Total advertising
revenue 52.5 59.5 (7.0) (11.8) 49.5 58.7 (9.2) (15.7)
============================== ======== ======== ====== ====== ======== ======== ====== ======
Print publishing
advertising 25.2 26.5 (1.3) (4.9) 22.6 25.9 (3.3) (12.8)
Digital publishing
advertising 10.0 8.7 1.3 14.8 9.9 8.7 1.2 14.0
============================== ======== ======== ====== ====== ======== ======== ====== ====== Total Print and digital publishing advertising excluding classified 35.2 35.2 - - 32.5 34.6 (2.1) (6.1) ============================== ======== ======== ====== ====== ======== ======== ====== ======
1 Digital marketing services, formerly Digital Kitbag (DKB).
2 Partnership revenues includes partnership revenues, reader holidays and other B2B services (formerly described as Enterprise).
3 The % change variance has been calculated based on unrounded numbers.
Adjusted Print and digital publishing advertising revenue
analysis, including and excluding the i newspaper,
(continued)
Adjusted revenue Adjusted revenue
First half (including i) First half (excluding
i)
================================== ==================================
26 weeks 26 weeks 26 weeks 26 weeks
to to to to
1 July 2 July 1 July 2 July
2017 2016 Change Change 2017 2016 Change Change
GBPm GBPm GBPm %(1) GBPm GBPm GBPm %(1)
================== ======== ======== ====== ====== ======== ======== ====== ======
Print revenue 39.3 46.6 (7.3) (15.8) 36.4 45.8 (9.4) (20.6)
Digital revenue 13.2 12.9 0.3 2.5 13.1 12.9 0.2 1.6
------------------ -------- -------- ------ ------ -------- -------- ------ ------
Total advertising
revenue 52.5 59.5 (7.0) (11.8) 49.5 58.7 (9.2) (15.8)
------------------ -------- -------- ------ ------ -------- -------- ------ ------
(1) The % change variance has been calculated based on unrounded numbers.
Leaflets, syndication and other revenues
Leaflets, syndication and other revenues, (which includes Transitional Services Agreement (TSA) income, events, reader offers and waste sales) improved GBP0.6 million period on period. The improvement is due to TSA income with Iliffe Media Ltd which commenced following the disposal of the Midlands titles on 17 January 2017 (refer Note 9).
i performance
Following the acquisition of the i on 10 April 2016, the Group has seen improving revenue trends and increased profitability as a result of management actions to reduce cost and grow revenues (including the benefit of a 10 pence cover price rise effect in September 2016). On a like-for-like basis(2) for the 12-week period for which the i was owned in 2016, the Group has seen a GBP1.6m profit improvement.
i performance i performance
Like-for-like
================================== ==================================
26 weeks 12 weeks 12 weeks 12 weeks
to to to to
1 July 2 July 1 July 2 July
2017 2016 Change Change 2017 2016 Change Change
GBPm GBPm GBPm % GBPm GBPm GBPm %
=================== ======== ======== ====== ====== ======== ======== ====== ======
Statutory Revenue 14.5 5.3 9.2 172.7 6.8 5.3 1.5 28.6
Statutory Total
costs (10.8) (4.9) (5.9) 122.1 (4.8) (4.9) 0.1 (0.5)
Adjusted EBITDA(1) 3.7 0.4 3.3 745.0 2.0 0.4 1.6 365.3
=================== ======== ======== ====== ====== ======== ======== ====== ======
(1) No corporate costs have been allocated to the i for the purposes of adjusted and proforma results presentation.
(2) Like-for-like performance is reported for a 12 week period in both H1 2017 and H1 2016 to provide meaningful performance comparison. The 12-week period is the number of weeks from acquisition on 10 April 2016 to the 2 July 2016.
Gross margin and operating profit
The Group achieved adjusted operating profit of GBP16.2 million in the first half (H1 2016: GBP19.4 million), a reduction of 16.8% on the prior period. The trading conditions have remained difficult, particularly in May leading up to the UK general election. Cost mitigations have gone some way to reduce the overall operating profit decline.
Adjusted total costs (excluding depreciation and amortisation) of GBP83.2 million, include a marginal reduction on the prior period, after absorbing a full 6 months of i operating costs in 2017. The adjusted depreciation charge of GBP3.5 million compares to GBP3.4 million in the prior period. Savings continue to be made across all parts of the business including production, editorial, sales and overheads. Excluding the i, operating costs reduced GBP6.0 million, by 7.3%.
A statutory loss before tax of GBP10.2 million (H1 2016: GBP184.0 million loss; FY 2016: GBP300.3 million loss), is reported after an impairment charge in the period of GBP4.5 million (H1 2016: GBP216.9 million; FY 2016: GBP336.9 million), and fair value loss recorded on the Group's bond (the Bond) of GBP4.4 million (H1 2016: GBP38.4 million gain; FY 2016: GBP43.6 million gain).
Finance income and costs
Adjusted net finance costs were GBP9.5 million in the period, a decrease of GBP0.2 million period-on-period, is largely due to the termination of the Revolving Credit Facility (RCF) on completion of the Johnston Publishing East Anglia Limited disposal announced on 17 January 2017 and reduced interest receivable. In the period, a fair value loss on the Bond amounted to GBP4.4 million as a result of market price rises in the period (H1 2016: GBP38.4 million gain; FY 2016: GBP43.6 million gain) (Note 4b).
Adjusted net finance costs(2) 26 weeks 26 weeks
to to
1 July 2 July
2017 2016 Change
GBPm GBPm GBPm
-------------------------------------- --------- --------- -------
Interest on Bond (9.5) (9.5) -
Interest on bank overdrafts and
loans - (0.2) 0.2
Amortisation of term debt issue
costs - (0.1) 0.1
Interest receivable - 0.1 (0.1)
-------------------------------------- --------- --------- -------
Total adjusted net operating finance
costs (9.5) (9.7) 0.2
-------------------------------------- --------- --------- -------
(2) Adjusted finance costs exclude the Bond mark-to-market, pension finance costs and exceptional finance charges. A reconciliation and explanation of statutory to adjusted figures is provided on page 43.
Reconciliation of statutory net debt to net debt excluding mark-to-market
1 July 2 July 31 December
2017 2016 2016
GBPm GBPm GBPm
---------------------------------- ------ ------ -----------
Outstanding principal amount 220.0 220.0 220.0
---------------------------------- ------ ------ -----------
Cash and cash equivalents (28.8) (10.6) (16.1)
---------------------------------- ------ ------ -----------
Net debt excluding mark-to-market 191.2 209.4 203.9
---------------------------------- ------ ------ -----------
Mark-to-market on Bond(1) (68.2) (67.3) (72.6)
Bond discount (net) at launch (4.4) (4.4) (4.4)
---------------------------------- ------ ------ -----------
Statutory net debt 118.6 137.7 126.9
---------------------------------- ------ ------ -----------
(1) The outstanding principal amount is stated after GBP5 million Bond buy back in August 2015. Mark-to-market on Bond represents movement in valuation from inception.
Taxation
Corporation tax for the interim period is credited at 45.0% (H1 2016: credited at 19.7%, FY 2016: credited at 17.7%), including deferred tax. The tax credit of GBP4.6 million in the period includes a GBP4.0 million of deferred tax credit relating to the publishing titles disposal in the period of GBP16.0m (Note 9 and 11) and impairment of the Group's publishing titles of GBP4.5 million (Note 8).
UK corporation tax changes relating to tax losses and the deductibility of corporate interest expense have not been factored into the income tax calculations as the Finance Bill 2017 (substantively enacted April 2017) excluded these provisions. The Group is continuing to assess the impact of the proposed legislation with its advisors.
Earnings per share and dividends
Statutory Adjusted
Basic EPS Basic EPS
================== ==================
26 weeks 26 weeks 26 weeks 26 weeks
to to to to
(Loss)/earnings per share for continuing 1 July 2 July 1 July 2 July
operations 2017 2016 2017 2016
========================================= ======== ======== ======== ========
(Loss)/earnings (GBPm) less preference
dividend (5.7) (148.3) 5.4 7.7
========================================= ======== ======== ======== ========
Number of ordinary shares (m) 105.3 105.3 105.3 105.3
========================================= ======== ======== ======== ========
EPS (pence)(1) (5.4) (140.8) 5.1 7.3
========================================= ======== ======== ======== ========
(1 Rounded to the nearest million. Refer to Note 6 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 Bond terms and insufficient distributable reserves. As described in Note 7, preference share dividends of GBP0.1 million were accrued in the period. The provisions of the Group's Bond restrict the Company's ability to pay dividends on the Company's ordinary shares until certain conditions, including that net leverage is below 2.25x EBITDA, are met.
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 GBP17.0 million. Refer Note 9 to the financial statements for additional disclosure.
Cash flow/Net debt
The Group's net debt position was GBP191.2 million on 1 July 2017 excluding Bond mark-to-market and Bond discounts totalling GBP72.6 million. In the period, a GBP4.4 million fair value movement loss has been recognised (H1 2016 GBP38.4 million gain; FY 2016 GBP43.6 million gain) (Note 4b). The net debt after mark-to-market adjustments was GBP118.6 million. Refer table above for a reconciliation between Statutory net debt and net debt excluding mark-to-market (Note 12).
Cash generated from operations of GBP4.6 million is after payment of GBP1.3 million in professional fees in relation to the disposal of Midlands titles (Note 9) and pension contributions of GBP5.1 million.
Cash held at 1 July 2017 was GBP28.8 million, with the increase from the year end due to disposal proceeds of GBP17.0 million received from Iliffe Media Limited (Note 9) and GBP3.6 million received for the freehold property Telegraph House in Sheffield from Toscafield Property 2 Limited (Note 11) in the period. The Group continues to maintain tight control of working capital and capital expenditure with GBP1.6 million having been spent on asset purchases (H1 2016: GBP3.2 million; FY 2016: GBP6.1 million), including GBP0.8m outlay on digital platforms and other equipment. In addition the Group received GBP0.4 million from non-essential asset sales (H1 2016: GBP1.8 million; FY 2016: GBP2.3 million) in the period.
Cash interest paid in the first half was GBP9.5 million (H1 2016: GBP9.7 million; FY 2016: GBP19.4 million).
Strategic Review
On 29 March 2017 we announced that the Group had commenced a strategic review, working with our advisers Rothschild and Ashurst LLP, to assess the financing options open to the Group in relation to the GBP220 million 8.625% senior secured notes which become due for repayment on 1 June 2019. As a key part of the strategic review process, the Board has engaged with its major stakeholders, including shareholders, holders of senior secured notes (the Bonds), Pension Trustees and the Pensions Regulator. After a period of initial consultations with the largest shareholders and bondholders we are currently focused on discussions with the Pension Trustees. The Board is pleased by the continued support of the major stakeholders during the review process.
Net liabilities position
At the period end, the Group had net liabilities of GBP20.8 million, an improvement of GBP3.8 million on the prior period-end due to the reduction in the pension deficit in the period of GBP14.6m, improvement in the cash balance of GBP12.8m following the disposals in the period offset in part by movements in the market value of the Bonds (GBP4.4 million), reduction in assets held for sale of GBP16.0 million and a reduction in publishing title intangibles of GBP4.5 million following the impairment in the period.
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 trading conditions impacting the industry sector that have continued into the first half of 2017 an impairment review was undertaken resulting in a write-down of GBP4.5 million in the first half of 2017 (H1 2016: GBP216.9 million, FY 2016: GBP336.9 million). The impairment is largely a function of the change in mix of profit by cash-generating unit. The write-down reduces the asset carrying value of publishing units to GBP139.0 million at period-end. In the period, there is no impairment required for the print press assets, which have a carrying value of GBP19.3 million. Refer to Note 8 and 10 in the financial statements.
Pensions
The Group's defined benefit pension plan deficit has reduced by GBP14.6 million to GBP53.1 million since 31 December 2016 reflecting contributions in the period of GBP5.1 million and the benefit of applying updated demographic assumptions based on the CMI 2016 model (as compared to the estimate made at 31 December 2016). This has enabled us to reflect life expectancy of 19.7 years for a male aged 65, down from 20.1 at year end. All other assumptions are unchanged from 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 is currently underway (Note 13).
Reconciliation of statutory and adjusted results
Adjusted operating profit of GBP16.2 million (H1 2016: GBP19.4 million) has been calculated after adjusting for revenue and cost of sales for the disposed Midlands titles, closed titles and digital brands and adjustments made to operating costs include restructuring, impairment and other non-trading related costs.
Continuing statutory revenue has been adjusted for closed titles and digital products. The adjustment to revenue is a GBP0.4 million reduction in 2017, and a reduction of GBP6.6 million in the comparative period and GBP11.9 million for the full year.
A reconciliation of the statutory to adjusted figures, including adjusted revenue adjustments is provided below and explained within the Financial Review and within the Statutory to Adjusted reconciliation on page 43.
2017 2016 2016
Statutory to Adjusted reconciliation 26 weeks
of operating profit/(loss) GBPm 26 weeks 52 weeks
GBPm GBPm
======================================= ========== ========== ==========
Statutory operating profit/(loss)
- as reported 4.9 (211.4) (323.1)
======================================= ========== ========== ==========
Isle of Man - disposed of August
2016(1) - (0.3) -
======================================= ========== ========== ==========
Statutory operating profit/(loss)
- Continuing Group(2) 4.9 (211.7) (323.1)
======================================= ========== ========== ==========
Disposed and closed titles/digital
products(3) (0.1) (2.4) (4.6)
Restructuring costs 3.4 5.3 9.3
Strategic review costs 1.3 - -
Impairment of publishing titles,
print presses and assets held for
sale 4.5 223.9 344.3
Other(4) 2.0 4.1 10.9
Accelerated depreciation 0.2 0.2 0.5
======================================= ========== ========== ==========
Adjusted operating profit 16.2 19.4 37.3
======================================= ========== ========== ==========
Depreciation and amortisation 3.5 3.4 7.0
======================================= ========== ========== ==========
Adjusted EBITDA 19.7 22.8 44.3
======================================= ========== ========== ==========
(1) The prior period comparative has been restated by GBP0.3m to exclude the Isle of Man business disposed of in August 2016. No restatement is required to the full year comparative, as the Isle of Man business was excluded from the continuing statutory results and reported as discontinued.
(2) No adjustment is made to reflect the differing period of ownership of the i in 2017 (26 weeks), H1 2016 12 weeks, FY 2016 38 weeks.
(3) Adjusted comparatives have been restated to remove the operating profit generated by the Midlands titles which were disposed of in January 2017 (H1 2016: GBP2.3m, FY 2016:
GBP4.3m) and operating profit generated by closed titles / businesses (H1 2016: GBP0.1m and FY 2016: GBP0.5m).
(4) FY2016 includes GBP4.1m of Portsmouth and Sunderland pension equalisation court order and related professional fees that was finalised by the year ended 31 December 2016 (H1
2017: nil, HY 2016: GBP0.2m).
Events after balance sheet date
Refer to Note 19 for details of significant post balance sheet events.
Related party transactions
Related party transactions are disclosed in Note 18. There have been no material changes in the related party transactions described in the last annual report.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which have been identified by the 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 31 December 2016. A detailed explanation of the risks summarised below, and information about how the Group seeks to mitigate the risks can be found on pages 18 to 19 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. The Company is exploring strategic options available (refer to the Viability Statement on page 14).
Further reductions in print advertising
Print advertising revenues could decline at a faster rate than anticipated due to further migration of customer spending to online media, a lack of consumer confidence in some of the markets in which we operate, and structural change in some classified categories.
New revenue streams
On-line advertising revenues decline, or do not grow at the rate needed to offset print decline over the short to medium term.
Cost reduction
The Group is required to invest in cost reduction and is constrained in its ability to invest in development.
Liquidity
The Group is expected to have full year adjusted interest costs of c.GBP19.0 million (H1 2017: c.GBP9.5 million, H1 2016: c.GBP9.7 million) and pension contributions of c.GBP10.3 million (H1 2017: GBP5.1 million, H1 2016: GBP4.7 million, FY 2016: GBP9.7 million). Further downward pressure on revenues could reduce operating cashflow below the level required to service interest and pension commitments.
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.
Pension deficit funding
The Company is engaged in negotiations with the trustees of its final salary pension scheme as part of the scheme's triennial review. An affordable revised schedule of contributions dealing effectively with the scheme's deficit requires agreement to be reached with the trustees.
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.
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 could limit the realisation of marketing and business opportunities.
Liquidity and going concern
As at 1 July 2017, the Group had net debt (excluding mark to market) of GBP191.2 million, comprising cash of GBP28.8 million and borrowings of GBP220 million. The borrowings comprise GBP220 million of high yield Bonds (senior secured notes), which are repayable in full on 1 June 2019 and are not subject to any financial maintenance covenants.
The Group has performed a review of its financial resources taking into account, inter alia, the cash currently available to the Group, the lack of financial maintenance covenants in the high yield Bonds, and the Group's cash flow projections for at least the 12 month period from the date of this report. Based on this review, and after considering reasonably possible downside sensitivities and uncertainties, the Board is of the opinion that the Group has adequate financial resources to meet its operational needs for at least the next 12 months from the date of this report and, as a result, the Directors have concluded that it is appropriate to prepare the Group's financial statements on a going concern basis.
Consideration has been given by the Directors to the financial position of the Group over a longer period of time in the Viability Statement below.
Viability Statement
In the 2016 Annual Report and Accounts dated 29 March 2017, 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. However, in light of the ongoing Strategic Review of financing options, the directors believe it is useful to reproduce below the statement that was included in the 2016 Annual Report & Accounts for the three year period from 29 March 2017. The directors confirm that the Viability Statement included in the 2016 Annual Report & Accounts remains valid as at the date of this announcement.
The Viability Statement, as included on page 46 of the 2016 Annual Report and Accounts dated 29 March 2017, is reproduced in full below:
"In accordance with provision C.2.2. of the Corporate Governance Code, the directors have assessed the prospects of the Group over a period of time longer than the 12 months required to determine the going concern basis for the preparation of the Group's financial statements.
The directors have determined that the period of three years from the balance sheet date is appropriate for the purposes of conducting this review. This period was selected with reference to the Group's strategy and planning cycle. The Board formally reviews strategy twice a year, normally in May and September, with a view to informing the subsequent annual budget setting. The budget forms year one of the three year plan, with projections for years two and three.
The annual budget provides a more detailed reflection of the Group's immediate plans and is reviewed and approved by the Board before the start of the financial year.
In setting the annual budget and three year plan the Board considers the current trading position and the principal operating and financial risks and opportunities identified by the Group. In particular:
-- The opportunity to invest and grow its audiences and its digital revenue streams;
-- The ability of the Group to continue to reduce costs, to mitigate the continuing decline in print based circulation and advertising revenues;
-- The level of capital expenditure required to support investment in growth, and the level of restructuring costs needed to support further cost reduction initiatives;
-- The funding required to support the recovery plan of the historic closed defined benefit pension scheme obligations; and
-- The cash generated to meet Bond interest commitments as they fall due.
The Group operates in an industry which is undergoing a sustained period of significant structural change. This is driven in part by
new competitors and new methods of accessing content which are provided by rapidly-changing technology and which are in turn facilitating very significant and ongoing changes in consumer behaviour. The Group's ability to adapt to this constantly changing environment will affect its prospects over the three year period.
In reviewing its plan the Group conducts sensitivity analysis, to understand the impact of continued or accelerated decline in revenues, and considers what actions the Group might take to mitigate those risks. The future assessments and plans adopted by the Board are subject to change and a level of market uncertainty. As a result of the risks and uncertainties faced by the business (including those outlined in the Principal Risks and Uncertainties section on page 18) the outcomes reflected in its plan cannot be guaranteed.
The Group's trading performance in 2016 reflected a period of difficult trading in the summer, prompted by Brexit-related uncertainty, but with an improvement in trading in the fourth quarter as a result of both strategic initiatives implemented during the first half of 2016 and signs of improving business confidence. However, for the year as a whole, and in line with the industry, the Group has seen increased volatility and accelerated decline rates in print advertising and newspaper sales. If the rates of decline experienced in 2016 continue into 2017 and beyond, then anticipated digital revenue growth and cost reduction initiatives may not be sufficient to mitigate the effect of the lost revenues, impacting the Group's ability to return to growth.
As noted in the review of Liquidity and Going Concern on page 45, as at 31 December 2016 the Group had net debt of GBP204 million, comprising cash of GBP16 million and borrowings of GBP220 million. The borrowings comprise GBP220 million of high yield Bonds (senior secured notes), which are repayable in full on 1 June 2019. Subsequent to year end, on 17 January 2017 the Group received gross cash proceeds of GBP17 million arising from the completion of the disposal of its East Anglia and East Midlands businesses. These cash proceeds were used to increase the level of cash held by the Group for working capital purposes.
The repayment of the GBP220 million of high yield Bonds on 1 June 2019 falls within the three year period of this viability review. The Directors 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 to their maturity. However, in light of the challenges faced by the 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 uncertainty surrounding the Group's ability to refinance the Bonds at par in the debt markets on commercially acceptable terms. Failure to repay, 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 could have a material impact on the Group's operations and its ability to continue as a going concern. As a result, the Directors, along with the Group's advisors, are currently exploring the strategic options available to the Group in the event that a refinancing of the Bonds in the debt markets prior to June 2019 is not possible.
Based on the above, and subject to the uncertainty around the repayment, refinancing, satisfaction or retirement of the Bonds in June 2019, the board confirms it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period under review."
Viability Statement (continued)
On 29 March 2017 when the Group presented the Viability Statement above it also announced a Strategic Review working with our advisers Rothschild and Ashurst LLP, to assess the financing options open to the Group in relation to the GBP220 million 8.625% senior secured notes which become due for repayment on 1 June 2019. As a key part of the strategic review process, the Board has engaged with its major stakeholders, including shareholders, holders of senior secured notes, Pension Trustees and the Pensions Regulator.
After a period of initial consultations with the largest shareholders and bondholders we are currently focused on discussions with the Pension Trustees. The Board is pleased by the continued support of the major stakeholders during the review process.
Responsibility statement
The directors confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board,
Ashley Highfield David King Chief Executive Officer Chief Financial Officer 2 August 2017 2 August 2017
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
JOHNSTON PRESS PLC INTERIM REPORT 2017
Group Income Statement
for the 26 week period ended 1 July 2017
26 weeks
ended 26 weeks 52 weeks ended
1 July ended 31 December
2017 2 July 2016(2) 2016(2)
Notes GBP'000 GBP'000 GBP'000
----------------------------------- ----- -------- ---------------- ----------------
Continuing operations
Revenue 3 103,302 112,763 222,699
Cost of sales (70,340) (71,005) (143,054)
----------------------------------- ----- -------- ---------------- ----------------
Gross profit 32,962 41,758 79,645
----------------------------------- ----- -------- ---------------- ----------------
Operating expenses (23,510) (29,560) (58,385)
Impairment and write downs 3c (4,513) (223,870) (344,326)
----------------------------------- ----- -------- ---------------- ----------------
Total operating expenses (28,023) (253,430) (402,711)
----------------------------------- ----- -------- ---------------- ----------------
Operating profit/(loss) 3 4,939 (211,672) (323,066)
----------------------------------- ----- -------- ---------------- ----------------
Net finance expense on pension
liabilities/assets 4a (873) (457) (831)
Change in fair value of borrowings 4b (4,400) 38,368 43,619
Finance costs 4c (9,902) (10,271) (20,056)
Interest receivable 4d 19 60 73
----------------------------------- ----- -------- ---------------- ----------------
Total net financing (costs)/income (15,156) 27,700 22,805
----------------------------------- ----- -------- ---------------- ----------------
Loss before tax (10,217) (183,972) (300,261)
Tax credit 5 4,600 35,743 53,371
----------------------------------- ----- -------- ---------------- ----------------
Loss from continuing operations (5,617) (148,229) (246,890)
----------------------------------- ----- -------- ---------------- ----------------
Net profit from discontinued
operations(1) - 257 28
----------------------------------- ----- -------- ---------------- ----------------
Consolidated loss for the
period (5,617) (147,972) (246,862)
----------------------------------- ----- -------- ---------------- ----------------
(1) Net loss from discontinued operations relates to the results of the IOM titles that were disposed of on 18 August 2016 to Tindle Newspapers Ltd.
(2) On 17 January 2017, the Group disposed of the Midlands titles. The results of these titles are included in the Group's results reported for the 26 and 52 week periods ending 2 July 2016 and 31 December 2016 respectively.
The accompanying notes are an integral part of these financial statements. The comparative period is for the 26 week period ended 2 July 2016.
26 weeks 52 weeks
ended 26 weeks ended
1 July ended 31 December
Notes 2017 2 July 2016 2016
--------------------------------- ----- -------- ------------ ------------
From continuing and discontinued
operations
Earnings per share (p)
Earnings (GBPm) 6 (5.7) (148.0) (247.0)
Weighted average number
of shares (m) 6 105.3 105.3 105.3
--------------------------------- ----- -------- ------------ ------------
Basic (p)(1) (5.4) (140.6) (234.6)
--------------------------------- ----- -------- ------------ ------------
Diluted (p)(1) (5.4) (140.6) (234.6)
--------------------------------- ----- -------- ------------ ------------
From continuing operations
Earnings per share (p)
Earnings (GBPm) 6 (5.7) (148.3) (247.0)
Weighted average number
of shares (m) 6 105.3 105.3 105.3
--------------------------------- ----- -------- ------------ ------------
Basic (p)(1) (5.4) (140.8) (234.6)
--------------------------------- ----- -------- ------------ ------------
Diluted (p)(1) (5.4) (140.8) (234.6)
--------------------------------- ----- -------- ------------ ------------
(1 Rounded to the nearest million.)
Revaluation Translation Retained
reserve reserve earnings Total
GBP'000 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)
Current tax on pension contribution - - - -
relating to actuarial valuation
loss
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 : Revaluation adjustment - - - - 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 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 26 week period ended 2 July 2016
Revaluation Translation Retained
reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ------------- -------------
Loss for the period - - (147,972) (147,972)
Items that will not be reclassified
subsequently to profit or loss
:
Actuarial loss on defined benefit
pension schemes - - (463) (463)
Deferred tax on pension balances - - 88 88
Current tax on pension contribution - - - -
relating to actuarial valuation
loss
-------------------------------------- ------------ ------------ ------------- -------------
Total items that will not be
reclassified subsequently to
profit or loss - - (375) (375)
-------------------------------------- ------------ ------------ ------------- -------------
Items that may be reclassified
subsequently to profit or loss
:
Revaluation adjustment (2) - (33) (35)
Exchange differences on translation
of foreign operations(1) - (46) - (46)
Total items that may be reclassified
subsequently to profit or loss (2) (46) (33) (81)
-------------------------------------- ------------ ------------ ------------- -------------
Total other comprehensive loss
for the period (2) (46) (408) (456)
-------------------------------------- ------------ ------------ ------------- -------------
Total comprehensive loss for
the period (2) (46) (148,380) (148,428)
-------------------------------------- ------------ ------------ ------------- -------------
(1) Movements in the translation reserve relate to the translation of interests in dormant Irish subsidiaries.
Revaluation Translation Retained
reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ---------- ----------
Loss for the period - - (246,862) (246,862)
Other items of comprehensive
income
Items that will not be reclassified
subsequently to profit or loss
:
Actuarial loss on defined benefit
pension schemes - - (45,799) (45,799)
Deferred tax on pension balances - - 6,337 6,337
Current tax on pension contribution
relating to actuarial valuation
loss - - 1,073 1,073
Total items that will not be
reclassified subsequently to
profit or loss - - (38,389) (38,389)
-------------------------------------- ------------ ------------ ---------- ----------
Items that may be reclassified
subsequently to profit or loss
:
Revaluation adjustment (3) - - (3)
Exchange differences on translation
of foreign operations(1) - (62) - (62)
Total items that may be reclassified
subsequently to profit or loss (3) (62) - (65)
-------------------------------------- ------------ ------------ ---------- ----------
Total other comprehensive loss
for the period (3) (62) (38,389) (38,454)
-------------------------------------- ------------ ------------ ---------- ----------
Total comprehensive loss for
the period (3) (62) (285,251) (285,316)
-------------------------------------- ------------ ------------ ---------- ----------
(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 1 July 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 (469,349) (24,621)
--------------- ---------- --------- ------------ ------------- -------- -------------- ----------- ----------
Loss for the
period - - - - - - (5,617) (5,617)
Other
comprehensive
gain for the
period - - - - - (18) 8,610 8,592
--------------- ---------- --------- ------------ ------------- -------- -------------- ----------- ----------
Total
comprehensive
gain for the
period - - - - - (18) 2,993 2,975
--------------- ---------- --------- ------------ ------------- -------- -------------- ----------- ----------
Recognised
directly in
equity:
Preference
share
dividends
(Note 7) - - - - - - (76) (76)
Provision for
share-based
payments
(Note
15) - - 933 - - - - 933
Release of
SBP reserve
(1) - - (3,049) - - - 3,049 -
Net change
directly in
equity - - (2,116) - - - 2,973 857
--------------- ---------- --------- ------------ ------------- -------- -------------- ----------- ----------
Total
movements - - (2,116) - - (18) 5,966 3,832
--------------- ---------- --------- ------------ ------------- -------- -------------- ----------- ----------
Equity at end
of the period 116,171 312,702 6,084 1,728 (3,331) 9,240 (463,383) (20,789)
--------------- ---------- --------- ------------ ------------- -------- -------------- ----------- ----------
(1) Release of reserve on lapse to distributable reserves. VCPs lapsed due to performance conditions not being met at this half year.
Group Statement of Changes in Equity
for the 26 week period ended 2 July 2016
Share-based
Share Share payments Revaluation Own Translation Retained
capital premium reserve reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
Opening
balances 116,171 312,702 6,963 1,731 (3,582) 9,320 (184,290) 259,015
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
Loss for the
period - - - - - - (147,972) (147,972)
Other
comprehensive
loss for the
period - - - (2) - (46) (408) (456)
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- ----------- Total comprehensive loss for the period - - - (2) - (46) (148,380) (148,428) --------------- ---------- --------- ------------ ------------- -------- ------------- ----------- ----------- Recognised directly in equity : Preference share dividends (Note 7) - - - - - - (76) (76) Provision for share-based payments (Note 15) - - 1,029 - - - - 1,029 Options exercised - - (14) - 14 - - - Release of SBP reserve(1) - - (554) - - - 554 - Release of own shares(2) - - - - 251 - (251) - --------------- ---------- --------- ------------ ------------- -------- ------------- ----------- ----------- Net change directly in equity - - 461 - 265 - 227 953 --------------- ---------- --------- ------------ ------------- -------- ------------- ----------- ----------- Total movements - - 461 (2) 265 (46) (148,153) (147,475) --------------- ---------- --------- ------------ ------------- -------- ------------- ----------- ----------- Equity at end of the period 116,171 312,702 7,424 1,729 (3,317) 9,274 (332,443) 111,540 --------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
(1) Release of reserve on lapse to distributable reserves.
(2) Revaluation of own shares reserve to reflect the weighted average price of shares purchased, released to reserves.
Group Statement of Changes in Equity
for the 52 week period ended 31 December 2016
Share-based
Share Share payments Revaluation Own Translation Retained
capital premium reserve reserve shares reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
Opening
balances 116,171 312,702 6,963 1,731 (3,582) 9,320 (184,290) 259,015
Loss for the
period - - - - - - (246,862) (246,862)
Other
comprehensive
loss for the
period - - - (3) - (62) (38,389) (38,454)
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
Total
comprehensive
loss for the
year - - - (3) - (62) (285,251) (285,316)
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
Recognised
directly
in equity :
Preference
share
dividends
(Note
7) - - - - - - (152) (152)
Share-based
payments
charge
(Note 15) - - 1,832 - - - - 1,832
Deferred bonus
plan
exercised(1) - - (64) - 251 - (187) -
Release of
SBP(2) - - (531) - - - 531 -
Net change
directly
in equity - - 1,237 - 251 - 192 1,680
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
Total
movements - - 1,237 (3) 251 (62) (285,059) (283,636)
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
Equity at end
of the year 116,171 312,702 8,200 1,728 (3,331) 9,258 (469,349) (24,621)
--------------- ---------- --------- ------------ ------------- -------- ------------- ----------- -----------
(1) Includes release of own shares to retained earnings on exercise of options in the current financial period.
(2) Release of reserve on lapse to distributable reserves.
JOHNSTON PRESS PLC INTERIM REPORT 2017
Group Statement of Financial Position
Restated(1) Restated(1)
1 July 2 July 31 December
2017 2016 2016
Notes GBP'000 GBP'000 GBP'000
----------------------------- ------ ---------- ------------- -------------
Non-current assets
Intangible assets 8 146,741 286,072 152,050
Property, plant and
equipment 10 33,408 42,789 36,684
Available for sale
investments 970 970 970
Trade and other receivables 1 2 1
181,120 329,833 189,705
----------------------------- ------ ---------- ------------- -------------
Current assets
Assets classified as
held for sale 11 21 1,811 16,384
Inventories 2,017 2,110 2,262
Trade and other receivables 31,260 33,721 30,757
Current tax asset - 1,178 -
Cash and cash equivalents 28,823 10,593 16,058
62,121 49,413 65,461
----------------------------- ------ ---------- ------------- -------------
Total assets 243,241 379,246 255,166
----------------------------- ------ ---------- ------------- -------------
Current liabilities
Trade and other payables 35,099 38,586 37,245
Current tax liabilities 179 - 25
Retirement benefit
obligation 13 10,316 10,166 10,316
Short-term provisions 1,032 1,849 1,606
----------------------------- ------ ------------- -------------
46,626 50,601 49,192
----------------------------- ------ ---------- ------------- -------------
Non-current liabilities
Borrowings 12 147,400 148,254 143,000
Retirement benefit
obligation 13 42,776 13,001 57,409
Deferred tax liabilities 20,965 49,296 23,739
Trade and other payables 3,485 3,346 3,477
Long-term provisions 2,778 3,208 2,970
----------------------------- ------ ------------- -------------
217,404 217,105 230,595
----------------------------- ------ ---------- ------------- -------------
Total liabilities 264,030 267,706 279,787
----------------------------- ------ ---------- ------------- -------------
Net (liabilities)/assets (20,789) 111,540 (24,621)
----------------------------- ------ ---------- ------------- -------------
Equity
Share capital 14 116,171 116,171 116,171
Share premium account 312,702 312,702 312,702
Share-based payment
reserve 15 6,084 7,424 8,199
Revaluation reserve 1,728 1,729 1,728
Own shares (3,331) (3,317) (3,331)
Translation reserve 9,240 9,274 9,259
Retained earnings (463,383) (332,443) (469,349)
Total equity (20,789) 111,540 (24,621)
----------------------------- ------ ---------- ------------- -------------
(1) Prior year-end comparatives have been restated, refer Note 2.
JOHNSTON PRESS PLC INTERIM REPORT 2017
Group Cash Flow Statement
for the 26 week period ended 1 July 2017
26 weeks
to 26 weeks to 52 weeks to
1 July
2017 2 July 2016 31 December 2016
Notes GBP'000 GBP'000 GBP'000
--------------------------------- ------ --------- ------------ -------------------
Cash flows from operating
activities
Cash generated from operations 16 4,647 3,113 16,268
Income tax 217 - 600
Cash consumed by discontinued
operations - 73 (395)
Net cash inflow from operating
activities 4,864 3,186 16,473
--------------------------------- ------ --------- ------------ -------------------
Investing activities
Interest received 19 60 73
Proceeds on disposal of
intangible fixed assets 17,000 90 90
Proceeds on disposal of
subsidiary - - 4,250
Proceeds on disposal of
property, plant and equipment 7 720 716
Proceeds on disposal of
assets held for sale 3,973 1,007 1,526
Acquisition of publishing
titles (2,000) (22,000) (22,000)
Expenditure on digital
intangible assets (799) (353) (2,690)
Expenditure on property,
plant and equipment (802) (2,879) (3,432)
Expenditure incurred on
disposal of discontinued
operations - (37) (73)
Net cash from/(used in)
investing activities 17,398 (23,392) (21,540)
--------------------------------- ------ --------- ------------ -------------------
Financing activities
Dividends paid - (76) (76)
Interest paid (9,497) (9,689) (19,363)
Net cash used in financing
activities (9,497) (9,765) (19,439)
--------------------------------- ------ --------- ------------ -------------------
Net increase/(decrease)
in cash and cash equivalents 12,765 (29,971) (24,506)
Cash and cash equivalents
at beginning of period 16,058 40,564 40,564
Cash and cash equivalents
at end of period 28,823 10,593 16,058
--------------------------------- ------ --------- ------------ -------------------
JOHNSTON PRESS PLC INTERIM REPORT 2017
Notes to the Condensed Financial Statements
for the 26 week period ended 1 July 2017
1. General information
The condensed financial information for the 26 weeks to 1 July 2017 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 31 December 2016 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 31 December 2016, which was audited. The statutory accounts for this period have been filed with the Registrar of Companies. The auditor's report was unqualified and did not contain a statement under Sections 498 (2) or 498 (3) of the Companies Act 2006.
The next annual financial statements of the Group for the 52 weeks to 30 December 2017 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 set out on page 42.
The Interim Report was approved by the Directors on 2 August 2017 and is being made available to shareholders on the same date on the Company's website at www.johnstonpress.co.uk.
2. Accounting policies
Basis of preparation
The interim financial information has been prepared on the historical cost basis, except for the revaluation of certain properties, pension balances and financial instruments including borrowings. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this Interim Report. Accordingly, the unaudited condensed consolidated interim financial statements have been prepared on a going concern basis (discussed further in the Financial Review on page 7 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.
Restatement
The group statement of financial position at 2 July 2016 has been restated to correct an overstatement of Trade and Other receivables and Trade and other payables. The impact has been to reduce Trade and other receivables by GBP0.6 million and to reduce Trade and other payables by GBP0.6 million. There is no impact on net assets.
The group statement of financial position as 31 December 2016 has been restated to reflect the correct allocation of onerous lease and dilapidations provisions to between current and non-current liabilities. The impact has been to reduce short term provisions by GBP1.4 million and increasing long term provisions by GBP1.4 million. There is no impact on total liabilities or net liabilities.
The Operating Segment results in the Operating Segment note has been restated to reflect the correct allocation of operating costs between the Publishing and Contract Printing segments for the 52 week period ended 31 December 2016. For the 52 week period ended 31 December 2016, the impact has been to reduce the Publishing Net Segment Loss by GBP38 million and to increase the Contract Printing Net Segment Loss by GBP38 million. There is no impact on the Group net segment result.
Basis of accounting
The financial statements have been prepared on the basis of the significant accounting policies set out in the financial statements for the 52 week period ended 31 December 2016 with the exception of the adoption of new or amended standards and interpretations in the current year as follows:
Adoption of new or amended standards and interpretations in the current year for the 26 week period ended 1 July 2017
The following new standards, which are applicable to the Group, have not yet been adopted by the EU:
Impact on financial
Accounting standard Requirements statements
---------------------- ---------------------------- ---------------------------
Amendments to Clarifies how to account None - no fair value
IAS 12 - Recognition for deferred tax assets movement giving rise
of Deferred Tax related to debt instruments to consideration
Assets for Unrealised measured at fair value. of these technical
Leases* changes. Refer Note
13 - Borrowings
---------------------- ---------------------------- ---------------------------
Amendments to Requires companies None - no financing
IAS 7 - Disclosure to disclosure information movement giving
Initiative* about changes in their rise to consideration
financing liabilities. of these technical
changes. Refer Note
13 - Borrowings
====================== ============================ =========================
Annual improvements Minor amendments to Minor revisions taken
to IFRS Standards IFRS 12. into consideration
2014 - 2016 Cycle* when applying standards.
---------------------- ---------------------------- ---------------------------
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 some have not yet been adopted by the EU:
Impact on financial
Accounting standard Requirements statements
------------------------ --------------------------------- ------------------------------
Annual improvements Minor amendments to 1 January 2018. No
to IFRS Standards a number of standards. material impact on
2014 - 2016 the Group's net results
Cycle* or net assets.
IFRS 9 - Financial Sets out the principles 1 January 2018. We
Instruments of the recognition, are currently going
de-recognition, classification through an exercise
and measurement of to evaluate the impact
financial assets and of this standard
financial liabilities on our business.
together with requirements Whilst it is too
relating to the impairment early to conclude
of financial assets what the impact would
and hedge accounting. be, our initial view
is that IFRS 9 will
not have a material
impact on the Group's
net results or net
assets. We will be
in a better position
to report what the
expected impact will
be in this year's
annual report once
our impact assessment
has been finalised.
------------------------ --------------------------------- ------------------------------
Amendments to Introduces two voluntary 1 January 2018. The
IFRS 4: Applying options designed to Group is currently
IFRS 9 Financial address insurers' concerns conducting an impact
Instruments about issues arising assessment.
with IFRS 4 from implementing IFRS
Insurance Contracts* 9 before the yet to
be published new insurance
contracts standard
comes into effect.
------------------------ --------------------------------- ------------------------------
IFRS 15 - Revenue Establishes when revenue 1 January 2018. We
from Contracts should be recognised, are currently going
with Customers how it should be measured through an exercise
and Clarifications and what disclosures to evaluate the impact
to IFRS 15 about contracts with of this standard
customers are needed. on our business.
We will be in a better
The Clarifications position to report
relate to the application what the expected
and provide transitional impact will be in
relief regarding first this year's annual
time adoption of the report once our impact
standard. assessment has been
finalised.
------------------------ --------------------------------- ------------------------------
Amendments to Clarifies how to account 1 January 2018. No
IFRS 2 - Classification for certain types of material impact on
and Measurement share-based payment the Group's net results
of Share-based transactions. or net assets.
Payment Transactions*
------------------------ --------------------------------- ------------------------------
Amendments to Clarifies the requirements 1 January 2018. No
IAS 40 - Transfers on transfers to, or material impact on
of Investment from, investment property. the Group's net results
Property* or net assets.
------------------------ --------------------------------- ------------------------------
IFRIC Interpretation Addresses the exchange 1 January 2018;
22 - Foreign rate to use in transactions minimal impact anticipated.
Currency Transactions that involve advance
and Advance consideration paid
Consideration* or received in a foreign
currency.
======================== ================================= ============================
IRFS 16 - Leases* Establishes principles 1 January 2019. IFRS
for the recognition, 16 will require the
measurement, presentation Group to recognise
and disclosure of leases a lease liability
for both lessees and and a right-of-use
lessors. asset for most of
those leases previously
treated as operating
leases. We are 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 would
be, IFRS 16 may have
a material impact
given leases around
the group. We will
be in a better position
to report what the
expected impact will
be in this year's
annual report once
our impact assessment
has been finalised.
------------------------ --------------------------------- ------------------------------
* Not yet EU endorsed.
Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the Group's accounting policies
In the process of applying the Group's accounting policies, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).
Valuation of pension liabilities
The Group records in its Statement of Financial Position a liability equivalent to the deficit on the Group's defined benefit pension schemes. The pension liability is determined with advice from the Group's actuarial advisers each year and can fluctuate based on a number of factors, some of which are outside the control of management. The main factors that can impact the valuation include:
-- the discount rate used to discount future liabilities back to the present date, determined each year from the yield on corporate Bonds;
-- the actual returns on investments experienced as compared to the expected rates used in the previous valuation;
-- the actual rates of salary and pension increase as compared to the expected rates used in the previous valuation;
-- the forecast inflation rate experienced as compared to the expected rates used in the previous valuation; and
-- mortality assumptions based on standard base table adjusted to reflect specific conclusions and conditions based on a study of the actual scheme members.
Details of the assumptions used to determine the liability at 1 July 2017 are set out in Note 13.
Impairment of publishing titles, print presses and other intangible assets
Determining whether publishing titles are impaired requires an estimation of the value in use of the cash generating units (CGUs) to which these assets are allocated. Key areas of judgement in the value in use calculation include the identification of appropriate CGUs, estimation of future cash flows of CGUs affected by expected changes in underlying revenues and direct costs during the period as well as corporate and central cost allocations, the long-term growth rates and a suitable discount rate to apply to the aforementioned cash flows in order to calculate the net present value. The Group has identified its CGUs based on the six geographic regions plus the i (based in London) in which it operates. This is considered to be the lowest level at which cash inflows generated are largely independent of the cash inflows from other groups of assets and has been consistently applied in the current and prior periods.
Determining whether print presses are impaired requires an estimation of the value in use of each print site. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the print sites and a suitable discount rate in order to calculate present value (Note 8).
Details of the impairment reviews that the Group performs in relation to other intangible assets are provided in Note 8.
Key sources of estimation uncertainty
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The key assumptions concerning the future and other key sources of estimation uncertainty at the period end date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Fair value measurements and valuation processes:
Impairment of publishing titles
The Group is required to test, on an annual basis or more frequently if there are indications that they might be impaired, whether intangible assets have suffered any impairment based on the recoverable amount of its cash generating units. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a pre-tax discount rate in order to calculate the present value of the cash flows. More information is included in the Critical judgements in applying the Group's accounting policies section above and within Note 8.
Pensions
The liabilities of the defined benefit pension schemes operated by the group are determined using methods relying on actuarial estimates and assumptions, including rates in increase in pensionable salaries and pensions, expected returns on scheme asserts, life expectancies and discount rates. Details of the key assumptions are set out included in the Critical judgements in applying the Group's accounting policies section above and within Note 13. The Group takes advice from independent actuaries relating to the appropriateness of the assumptions. Changes in assumptions used may have a significant effect on the group statement of comprehensive income and the group balance sheet.
3. Operating segments
Information reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance is focused on the two operating segments of Publishing (in print and online) and Contract Printing. These are the only two operating segments of the Group.
a) Segment revenues and results
Contract
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 95,978 17,989 (10,665) 103,302
------------------------------------ ----------- ---------- ------------- ---------
Impairment (4,513) - - (4,513)
Operating costs(2) (77,510) (16,340) - (93,850)
Net segment result 13,955 1,649 (10,665) 4,939
------------------------------------ ----------- ---------- ------------- ---------
Investment income 19
Net finance expense on pension
liabilities/assets (873)
Change in fair value of borrowings (4,400)
Net finance costs (9,902)
Loss before tax (10,217)
Tax credit 4,600
------------------------------------ ----------- ---------- ------------- ---------
Loss from continuing operations (5,617)
------------------------------------ ----------- ---------- ------------- ---------
Net loss from discontinued -
operations
------------------------------------ ----------- ---------- ------------- ---------
Consolidated loss for the
period (5,617)
------------------------------------ ----------- ---------- ------------- ---------
(1) Inter segment sales are charged at prevailing market prices.
(2) Includes depreciation and amortisation.
Restated Contract
Publishing printing Eliminations Group
26 week period ended 2 July
2016 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------- ---------- ------------- -----------
Revenue
Print advertising 50,432 - - 50,432
Digital advertising 14,043 - - 14,043
Newspaper sales 38,121 - - 38,121
Contract printing - 6,643 - 6,643
Other 3,049 475 - 3,524
------------------------------------ ------------- ---------- ------------- -------------
Total external sales 105,645 7,118 - 112,763
Inter-segment sales(1) - 12,511 (12,511) -
Total revenue 105,645 19,629 (12,511) 112,763
------------------------------------ ------------- ---------- ------------- -------------
Impairment - (5,391) - (5,391)
Operating costs(2) (300,894) (18,150) - (319,044)
------------------------------------ ------------- ---------- ------------- -------------
Net segment result (restated)(3) (195,249) (3,912) (12,511) (211,672)
------------------------------------ ------------- ---------- ------------- -------------
Investment income 60
Net finance expense on pension
liabilities/assets (457)
Change in fair value of borrowings 38,368
Net finance costs (10,271)
Loss before tax (183,972)
Tax credit 35,743
------------------------------------ ------------- ---------- ------------- -------------
Loss from continuing operations (148,229)
------------------------------------ ------------- ---------- ------------- -------------
Net profit from discontinued
operations 257
------------------------------------ ------------- ---------- ------------- -------------
Consolidated loss for the
period (147,972)
------------------------------------ ------------- ---------- ------------- -------------
(1) Inter segment sales are charged at prevailing market prices.
(2) Includes depreciation and amortisation.
3. Operating segments (continued)
Restated(3)
Restated(3) Contract
Publishing printing Eliminations Group
52 week period ended 31 December
2016 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ ------------- ----------
Revenue
Print advertising 95,674 - - 95,674
Digital advertising 26,950 - - 26,950
Newspaper sales 79,849 - - 79,849
Contract printing - 12,788 - 12,788
Other 6,735 703 - 7,438
------------------------------------ ------------ ------------ ------------- ------------
Total external sales 209,209 13,491 - 222,699
Inter-segment sales(1) - 23,597 (23,597) -
Total revenue 209,209 37,088 (23,597) 222,699
------------------------------------ ------------ ------------ ------------- ------------
Impairment (341,246) (3,080) - (344,326)
Operating costs(2,3) (166,809) (34,631) - (201,540)
------------------------------------ ------------ ------------ ------------- ------------
Net segment result (restated)(3) (298,846) (623) (23,597) (323,066)
------------------------------------ ------------ ------------ ------------- ------------
Investment income 73
Net finance expense on pension
liabilities/assets (831)
Change in fair value of borrowings 43,619
Net finance costs (20,056)
Loss before tax (300,261)
Tax credit 53,371
------------------------------------ ------------ ------------ ------------- ------------
Loss from continuing operations (246,890)
------------------------------------ ------------ ------------ ------------- ------------
Net profit from discontinued
operations 28
------------------------------------ ------------ ------------ ------------- ------------
Consolidated loss for the
period (246,862)
------------------------------------ ------------ ------------ ------------- ------------
(1) Inter segment sales are charged at prevailing market prices.
(2) Includes depreciation and amortisation.
(3) Net segment result for the 52 weeks ended 31 December 2016 has been restated to reflect operating costs. Refer to note 2 for more detail.
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 31 December 2016. 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. Publishing and printing business are reported to the Group's Chief Executive for the purposes of resource allocation and assessment of 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
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
---------------------- -------- --------- ------------
Assets
Publishing 216,791 349,867 229,315
Contract printing 26,450 30,013 25,851
----------------------- -------- --------- ------------
Total segment assets 243,241 379,880 255,166
----------------------- -------- --------- ------------
Consolidated total
assets 243,241 379,880 255,166
----------------------- -------- --------- ------------
For the purposes of monitoring segment performance and allocating resources between segments, the Group's Chief Executive monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments and unless specifically part of contract printing are allocated to publishing with the exception of available-for-sale investments and derivative financial instruments.
c) Other segment information
26 weeks to 1 26 weeks to 2 52 weeks to 31
July 2017 July 2016 December 2016
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 588 214 802 2,798 84 2,882 4,562 764 5,326
Depreciation
expense(1) 3,119 627 3,746 2,909 810 3,719 6,021 1,394 7,415
Impairment
of property,
plant and
equipment
and assets
held for
sale(2) - - - 1,537 5,391 6,928 4,396 3,080 7,476
Impairment
of publishing
titles
intangibles(2) 4,513 - 4,513 216,942 - 216,942 336,850 - 336,850
----------------- ----------- --------- -------- ----------- --------- --------- ----------- --------- ---------
(1)Includes amortisation of digital intangible assets (Note 8), depreciation charge on property plant and equipment (Note 10) and depreciation charge on assets classified as held for sale (Note 11).
(2) The allocation of the impairment charges between publishing and contract printing has been represented for the 52 weeks ended 31 December 2016.
4. Finance costs
a) Net finance expense on pension (liabilities)/assets
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31 December
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- --------- --------- -------------
Interest on assets 7,304 8,733 17,514
Interest on liabilities (8,177) (9,190) (18,345)
-------------------------------- ----- --------- --------- -------------
Net finance expense
on pension liabilities/assets 13 (873) (457) (831)
-------------------------------- ----- --------- --------- -------------
b) Fair value adjustment
The fair value movement on the 8.625% Senior Secured Bond due 1 June 2019 was as follows:
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31 December
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
----------------------- ----- --------- --------- -------------
Fair value movement
on the 8.625% Senior
Secured Bond 12 (4,400) 38,368 43,619
----------------------- ----- --------- --------- -------------
c) Finance costs
26 weeks 52 weeks
to to
26 weeks to 2 July 31 December
1 July 2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------- ------------- --------- --------------
Interest on Bond (9,488) (9,488) (18,975)
Interest on bank
overdrafts and loans (6) (199) (382)
Amortisation of
term debt issue
costs (8) (97) (194)
Financing fees (19) - (18)
Total operational
finance costs (9,521) (9,784) (19,569)
Refinancing fees(1) - (487) (487)
Term debt issue (381) - -
costs(2)
----------------------- ------------- --------- --------------
Total Exceptional
fees (381) (487) (487) Total finance costs (9,902) (10,271) (20,056) ------------------------ ------------- --------- --------------
(1) (Exceptional refinancing fees charged in the period relate to VAT on 2014 refinancing fees.)
(2) (RCF issuance costs written off as a consequence of termination of the facility.)
d) Interest receivable
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
--------------------- -------- -------- ------------
Interest receivable 19 60 73
---------------------- -------- -------- ------------
Net finance costs (15,156) (27,700) (22,805)
-------------------- --------- --------- ---------
5. Tax
The tax (credit)/charge comprises:
26 weeks 52 weeks
to to
26 weeks to 2 July 31 December
1 July 2017 2016 2016
GBP'000 GBP'000 GBP'000
------------------------------------------- ---- ------------- --------- --------------
Current tax
Corporation tax
(credit)/charge - (867) 1,073
Adjustment in respect
of prior periods (64) (64) (329)
------------------------------------------------- ------------- --------- --------------
Total current tax
credit (64) (931) 744
------------------------------------------------- ------------- --------- --------------
Deferred tax
Total deferred tax
credit (4,536) (34,812) (54,115)
------------------------------------------------- ------------- --------- --------------
Total tax credit (4,600) (35,743) (53,371)
------------------------------------------------- ------------- --------- --------------
Reconciliation of tax (credit)/charge % % %
Standard rate of corporation tax (19.3) (20.0) (20.0)
Disposal of publishing title (31.3)
Tax effect of items that are not
deductible or not taxable in determining
taxable profit 8.4 0.3 -
Unrecognised deferred tax assets (13.5) - -
Prior period adjustment 4.8 - 0.1
Effect of difference between deferred
and current tax rate 5.9 - 2.3
Adjustment for change in rate - - (0.1)
Effect of other tax rates - - -
Tax credit (45.0) (19.7) (17.7)
------------------------------------------------- ------------- --------- --------------
Corporation tax for the interim period is credited at 45.0% (H1 2016: credited at 19.7%, FY 2016 credited at 17.7%), including deferred tax, this represents the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six month period.
The tax credit of GBP4.6 million in the period includes a GBP4.0 million of deferred tax credit relating to the publishing titles disposal in the period of GBP16.0m (Note 9 and 11) and impairment of the Group's publishing titles of GBP4.5 million (Note 8).
The basic rate tax applied for the 2017 period is 19.25% (2016: 20.0%). The 2017 tax rate is a blended rate due to the tax rate of 20% in effect for the first quarter of 2017, changing to 19% from 1 April 2017 under the 2015 Finance Act.
6. Earnings per share
The calculation of earnings per share is based on the following profits/(losses) and weighted average number of shares:
Continuing and discontinued operations
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------------- ------------- ---------- --------------
Earnings
Loss for the period (5,617) (147,972) (246,862)
Preference dividend(1) (76) (76) (152)
------------------------------ ------------- ---------- --------------
Loss for the purposes of
diluted earnings per share (5,693) (148,048) (247,014)
------------------------------ ------------- ---------- --------------
Loss per share (p)
Basic(4) (5.4) (140,6) (234.5)
Diluted(3,4) (5.4) (140.6) (234.5)
--------------------- ------ -------- --------
Continuing operations
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------------- ------------- ---------- --------------
Earnings
Loss for the period (5,617) (148,229) (246,890)
Preference dividend(1) (76) (76) (152)
------------------------------ ------------- ---------- --------------
Loss for the purposes of
diluted earnings per share (5,693) (148,305) (247,042)
------------------------------ ------------- ---------- --------------
Loss per share (p)
Basic(4) (5.4) (140.8) (234.5)
Diluted(3,4) (5.4) (140.8) (234.5)
---------------------- ------ -------- --------
Number of shares
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31 December
2017 2016 2016
----------------------------------- ---- ------------- --------- --------------
Weighted average number
of ordinary shares for
the purposes of basic earnings
per share 105,878 105,878 105,878
Effect of dilutive potential
ordinary shares
- warrants and employee
share options(2) (552) (552) (552)
----------------------------------------- ------------- --------- --------------
Earnings for the purposes
of diluted earnings per share(4) 105,326 105,326 105,326
------------------------------------ --- ------------- --------- --------------
Based on the current share price, awards under the Company's share schemes and warrants representing a total of 8,488,274 shares which are currently outstanding will not vest or crystallise and no dilution from these warrants or awards is reflected.
Adjusted continuing operations
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
-------------------------------- ------------- --------- --------------
Earnings
Profit for the period 5,465 7,818 13,899
Preference dividend(1) (76) (76) (152)
--------------------------------- ------------- --------- --------------
Earnings for the purposes
of diluted earnings per share 5,389 7,742 13,747
--------------------------------- ------------- --------- --------------
Earnings per share (p)
Basic(4) 5.1 7.3 13.1
Diluted(3,4) 5.1 7.3 13.1
-------------------------- ---- ---- -----
(1) In line with IAS 33, the preference dividend and the number of preference shares are excluded from the calculation of earnings per share.
(2) The weighted average number of ordinary shares are shown excluding share held by the Employee Benefit Trust.
(3) Diluted earnings per share are presented when a company could be called upon to issue shares that would decrease net profit or increase loss per share.
(4) Rounded to the nearest thousand
7. Dividends
26 weeks 52 weeks
to to
26 weeks to 2 July 31 December
1 July 2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------- ------------- --------- -------------
Amounts recognised as
distributions in the
period
Preference dividends
accrued 76 76 152
----------------------- ------------- --------- -------------
Pence Pence Pence
------------------- ------ ------ ------
Dividend paid per
share
Preference 6.88 6.88 13.75
-------------------- ------ ------ ------
Due to the significant impairment that arose during the financial year ended 31 December 2016 that extinguished distributable reserves, preference share dividends cannot be paid and have therefore been accrued for in the 26 week period ended 1 July 2017.
The provisions of the Group's Bond restrict the Company's ability to pay dividends on the Company's Ordinary Shares until certain conditions are met, including that net leverage is below 2.25x EBITDA,. Although the Board wishes to resume dividend payments as soon as is appropriate, no ordinary dividend is declared for the period.
8. Intangible assets
Digital
Publishing intangible
titles assets Total
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ------------ ----------
Cost
At 1 January 2017 1,134,480 15,312 1,149,792
Additions - 799 799
Disposals - (823) (823)
At 1 July 2017 1,134,480 15,288 1,149,768
------------------------------------ ----------- ------------ ----------
Accumulated impairment losses and
amortisation
At 1 January 2017 990,935 6,807 997,742
Amortisation for the period - 1,595 1,595
Disposals - (823) (823)
Impairment losses for the period 4,513 - 4,513
------------------------------------ ----------- ------------ ----------
At 1 July 2017 995,448 7,579 1,003,027
------------------------------------ ----------- ------------ ----------
Carrying amount
At 1 January 2017 143,545 8,505 152,050
At 1 July 2017 139,032 7,709 146,741
------------------------------------ ----------- ------------ ----------
The carrying amounts of the publishing titles by cash generating unit (CGU) is as follows:
31 December 1 July
2016 Impairment 2017
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ----------- --------
Scotland 9,436 - 9,436
North 64,430 - 64,430
Northwest 9,734 - 9,734
Midlands 2,903 - 2,903
South 19,452 (4,513) 14,939
Northern Ireland 13,590 - 13,590
The i 24,000 - 24,000
------------------------------------- ------------ ----------- --------
Total carrying amount of publishing
titles 143,545 (4,513) 139,032
------------------------------------- ------------ ----------- --------
8. Intangible assets (continued)
Impairment assessment
The Group tests the carrying value of publishing titles held within the publishing operating segment for impairment annually or more frequently if there are indications that they might be impaired. The publishing titles are grouped by CGUs, being the lowest levels for which there are separately identifiable cash flows independent of the cash inflows from other groups of assets.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are:
-- expected changes in underlying revenues and direct costs during the period; -- corporate and central cost allocations; -- decline or growth rates; and -- the discount rate.
The Group prepares discounted cash flow forecasts using:
-- the Board approved budget for 2017, updated for 2017 forecast, and the projections for 2018 and 2019 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. 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 2019 based on the Board's view of the estimated annual long-term performance. A long-term decline rate between 0% and 2% has been included for all CGU's; 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 1 July 2017 was 11.0% (2 July 2016 and 31 December 2016: 11.0%). The pre-tax discount rate is a range between 13.6% and 14.4% (31 December 2016: 13.5% and 14.6%, 2 July 2016: 13.7%). The present value of the cash flows is then compared to the carrying value of the asset to determine if there is any impairment loss.
The total impairment charge recognised for the period ended 1 July 2017 was GBP4.5 million (H1 2016: GBP216.9 million, FY 2016: GBP336.9 million).
The Group has conducted sensitivity analysis on the impairment test of each CGUs carrying value. A decrease in the long-term growth rate of 0.5%, beyond 2018, would result in a further Group impairment of GBP0.6 million and an increase in the discount rate of 0.5% would result in an additional impairment of GBP1.0 million.
Growth Discount
rate rate
sensitivity sensitivity
GBP'000 GBP'000
----------------------------------------------------- ------------ ------------
Scotland - -
North - (290)
Northwest - -
Midlands - -
South (623) (742)
Northern Ireland - -
The i - -
Total potential impairment from sensitivity analysis (623) (1,032)
----------------------------------------------------- ------------ ------------
Digital intangible assets
Digital intangible assets primarily relate to the Group's local websites and the development of the Customer Relationship Management (CRM) capability. The websites form the core platform for the Group's digital revenue activities whereas the CRM capability will enable the Group to accelerate the growth of its subscriber base. These assets are being amortised using the straight-line method over the expected life, of two 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. Disposal of Midland's titles
The Group completed the disposal of the entire issued share capital of Johnston Publishing East Anglia Limited, which owned 13 publishing titles and associated websites in East Anglia and the East Midlands, to Iliffe Media Limited for gross cash consideration of GBP17.0 million less associated disposal costs of GBP1.3 million. The Group's revolving credit facility was cancelled on completion of the sale, and as a consequence the Group is no longer subject to any covenants. The disposal was approved by shareholders of Johnston Press at a general meeting on 11 January 2017.
As part of the sale agreement, the Group has entered in to a Transitional Services Agreement (TSA) to provide services including pre-press, editorial, IT, finance and project management, for a period of 12 months commencing 17 January 2017.
The net assets related to the sale of the East Anglian and Midlands titles that were disposed of are as follows:
Net assets: GBP'000 --------------------------------- ------- Publishing titles 16,000 Tangible assets 143 Deferred newspaper sales revenue 88 Net assets disposed of 16,231 ---------------------------------- ------- Cash consideration: -------------------- ------- Gross cash received 17,000 Disposal costs (1,307) Net cash received 15,693 --------------------- -------
Net loss on disposal (538)
The trading results of the titles on the Group's consolidated results have been adjusted for in the "Consolidated Income Statement - Reconciliation of Statutory and Adjusted Results" on page 43 of these interim accounts, so that the Group's performance can be viewed on a like-for-like basis.
10. 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 1 January 2017 56,899 6,086 114,280 440 177,705
Additions - 22 780 - 802
Disposals - (1,026) (7,154) (181) (8,361)
Transferred to assets held
for sale during the period (4,341) - (240) - (4,581)
Exchange differences - 19 - - 19
At 1 July 2017 52,558 5,101 107,666 259 165,584
---------------------------- ---------- ---------- ---------- --------- --------
Depreciation
At 1 January 2017 41,304 2,150 97,127 440 141,021
Disposals - (940) (7,096) (181) (8,217)
Charge for the period 165 202 1,677 - 2,044
Transferred to assets held
for sale during the period (2,481) - (210) - (2,691)
Exchange differences - 19 - - 19
---------------------------- ---------- ---------- ---------- --------- --------
At 1 July 2017 38,988 1,431 91,498 259 132,176
---------------------------- ---------- ---------- ---------- --------- --------
Carrying amount
At 1 January 2017 15,595 3,936 17,153 - 36,684
---------------------------- ---------- ---------- ---------- --------- --------
At 1 July 2017 13,570 3,670 16,168 - 33,408
---------------------------- ---------- ---------- ---------- --------- --------
11. Assets classified as held for sale
Freehold
land
and Leasehold Plant and Publishing
buildings buildings Machinery titles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
--------------------------- ---------- ---------- ---------- ---------- --------
At 1 January 2017 156 568 8 34,710 35,442
Transferred from property,
plant and equipment 4,341 - 240 - 4,581
Disposals (4,341) (582) (187) (34,710) (39,820)
Exchange differences - 14 - - 14
At 1 July 2017 156 - 61 - 217
--------------------------- ---------- ---------- ---------- ---------- --------
Depreciation
At 1 January 2017 29 311 8 18,710 19,058
Transferred from property,
plant and equipment 2,481 - 210 - 2,691
Disposals (2,481) (319) (158) (18,710) (21,668)
Charge for the period(1) 106 - 1 - 107
Exchange differences - 8 - - 8
At 1 July 2017 135 - 61 - 196
--------------------------- ---------- ---------- ---------- ---------- --------
Carrying amount
At 1 January 2017 127 257 - 16,000 16,384
--------------------------- ---------- ---------- ---------- ---------- --------
At 1 July 2017 21 - - - 21
--------------------------- ---------- ---------- ---------- ---------- --------
(1 Includes accelerated depreciation of GBP0.1 million on property to be disposed of by the year end to reflect the asset at the lower of its carrying amount and fair value less costs to sell.)
Assets classified as held for sale consists of land and buildings in the UK and Republic of Ireland that are no longer in use by the Group and print presses that have ceased production. Non-current assets are transferred to assets held for sale when it is expected that their carrying amount will be recovered principally through disposal and a sale is considered likely. They are held at the lower of carrying amount and fair value less cost of sales.
All the assets are being marketed for sale and are expected to be sold within the next year.
On 17 January 2017, the Group disposed of publishing titles with a net book value of GBP16 million to Iliffe Media Ltd. Refer to Note 9 for more details on disposal.
In addition to the above, the Group disposed of its freehold property, Telegraph House in Sheffield. The property had a net book value of GBP1.9 million and was disposed for a total consideration of GBP3.6 million in cash. The disposal has resulted in a gain on disposal of GBP1.37 million after disposal costs. Proceeds on the disposal are to be used for working capital purposes, and to finance the move to a new, fit for purpose, leasehold site.
The Group also disposed of an item of land and buildings held in the Republic of Ireland with a net book value of GBP0.26 million for GBP0.26m with no gain/(loss) recognised on this disposal.
12. Borrowings
The borrowings at 1 July 2017 are recorded at quoted market fair value and classified as Level 1 according to IFRS 13.
The breakdown of the 8.625% Senior Secured Notes due 1 June 2019 is as follows:
2 July 31 December
1 July 2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ --------- ------------
Principal amount(1) 220,000 220,000 220,000
Bond discount (4,400) (4,400) (4,400)
Fair value gain from inception(2) (68,200) (67,346) (72,600)
Total borrowings (including
mark-to-market) 147,400 148,254 143,000
----------------------------------- ------------ --------- ------------
The borrowings are disclosed in the financial statements as:
1 July 2017 2 July 2016 31 December 2016
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------ ------------ -----------------
Current borrowings - - -
Non-current borrowings 147,400 148,254 143,000
Total borrowings (including mark-to-market) 147,400 148,254 143,000
--------------------------------------------- ------------ ------------ -----------------
(1) The Principal amount is stated after GBP5 million Bond buy back in August 2015.
(2) The fair value loss for the period from 31 December 2016 to 1 July 2017 amounted to GBP4.4 million (26 weeks 2016: GBP38.4 million gain, 52 weeks 2016: GBP43.6 million gain).
The Group's net debt(1) is:
1 July 2017 2 July 2016 31 December 2016
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------------ ------------ -----------------
Gross borrowings as above (including mark-to-market) 147,400 148,254 143,000
Cash and cash equivalents (28,823) (10,593) (16,058)
Net debt 118,577 137,661 126,942
------------------------------------------------------ ------------ ------------ -----------------
(1) Net debt is a non-statutory term presented to show the Group's borrowings net of cash equivalents and Bond fair value movements. Refer to "Reconciliation of statutory net debt to net debt excluding mark-to-market" on page 9.
The Group's revolving credit facility was cancelled on completion of the disposal of Johnston Publishing East Anglia Limited, refer to Note 9.
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 formerly a defined contribution section of the Johnston Press Pension Plan which was closed in August 2013 and members' defined contribution benefits were transferred to the Johnston Press Retirement Savings Plan. The assets of the Plan are held separately from those of the Group. The contributions are determined by a qualified actuary on the basis of a triennial valuation using the projected unit method and are set out in a Schedule of Contributions and Recovery Plan dated 29 July 2014.
A valuation of the Johnston Press Pension Plan as at 31 December 2012 was commissioned by the Trustees and takes account of the Capital Refinancing Plan. The triennial valuation as at 31 December 2015 is currently in progress and is expected to be completed in parallel with the Group's strategic review.
In conjunction with the 2014 Capital Refinancing Plan, the Plan Trustees and the Group entered into a Pension Framework Agreement, agreeing, inter alia to the following:
-- On implementation of the Capital Refinancing Plan in June 2014, the secured guarantee provided in favour of the Plan Trustees by the Group and certain of its subsidiaries in relation to any default on a payment obligation under the Johnston Press Pension Plan has been removed. In return for the removal of this security and the aforementioned guarantee, an unsecured cross-guarantee has been provided on implementation of the Capital Refinancing Plan by the Group and certain of its subsidiaries in favour of the Plan Trustees in relation to any default on a payment obligation under the Plan. Each claim made under the unsecured cross-guarantee is capped at an amount equal to the aggregate Section 75 (s75) debt of the Johnston Press Pension Plan at the date any claim made by the Plan Trustees falls due.
-- The deficit as at the 31 December 2012 valuation date will be sought to be addressed by 31 December 2024 by entry into a recovery plan providing for contributions starting at GBP6.3 million in 2014, GBP6.5 million in 2015 and GBP10.0 million in 2016 increasing by 3% per annum with a final payment of GBP12.7 million in 2024.
-- Settlement of previously incurred PPF levies and s75 debts.
-- The Plan was entitled to receive 25% of net proceeds from business or asset disposals up to and including 31 August 2015 exceeding GBP1 million in a single transaction or GBP2.5 million over the course of a financial year, subject to certain permitted disposals, conditions in relation to financial leverage and other exceptions set out in the Framework Agreement.
-- The Group would also pay additional contributions to the Plan in the event that the 2015/2016 PPF levy and/or
the 2016/2017 PPF levy was less than GBP3.2 million, equal to the amount the levy falls below GBP3.2 million, up to a maximum of GBP2.5 million.
-- Additional contributions 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 Agreement and the required level of contributions are now subject to review as part of the ongoing valuation as at 31 December 2015 which is expected to be completed in parallel with the Strategic review.
Amounts arising from pensions related liabilities in the Group's financial statements
The following tables identify the amounts in the Group's financial statements arising from its pension related liabilities.
Income statement - pensions and other pension related liabilities costs
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
---------------------------------- ---- --------------------- ------------------- ------------
Employment costs:
Defined contribution
scheme (1,842) (2,039) (4,047)
Defined benefit scheme:
Plan expenses (IAS19)(1) (374) (409) (563)
Pension Protection Fund
Levy (144) (261) (422)
Past service cost - - (3,539)
Net finance cost on Johnston
Press Pension Plan (IAS19) (873) (457) (831)
----------------------------------- --- --------------------- ------------------- ------------
Total defined benefit
scheme (1,391) (1,127) (5,355)
---------------------------------------- --------------------- ------------------- ------------
Total pension costs (3,233) (3,166) (9,402)
---------------------------------------- --------------------- ------------------- ------------
(1) Relates to administrative expenses incurred in managing the pension fund.
Other comprehensive income - (loss)/gain on pension
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
------------------------------------ --------- ----------------------------- ------------
(Losses)/gains on plan assets
in excess of interest (894) 59,444 69,806
Losses from changes to financial
assumptions - (59,907) (104,200)
Gains/(losses) from changes
to demographic assumptions 11,267 - (6,710)
Experience losses arising
on the benefit obligation - - (5,013)
Actuarial gain/(loss) recognised
in the statement of comprehensive
income 10,373 (463) (46,117)
Deferred tax(2) (1,763) 88 7,410
------------------------------------ --------- ----------------------------- ------------
Actuarial gain/(loss) recognised
in the statement of comprehensive
income net of tax 8,610 (375) (38,707)
------------------------------------ --------- ----------------------------- ------------
(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 - net defined benefit pension deficit and other pension related liabilities
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
---------------------------------- ---------- ---------- ------------
Amounts included in the Group
Statement of Financial Position
:
Fair value of scheme assets 547,763 534,918 547,885
Present value of defined benefit
obligations (600,855) (558,085) (615,610)
Total liability recognised (53,092) (23,167) (67,725)
Amount included in current
liabilities 10,316 10,166 10,316
Amount included in non-current
liabilities (42,776) (13,001) (57,409)
---------------------------------- ---------- ---------- ------------
Analysis of amounts recognised of the net defined benefit pension deficit
1 July 2 July 31 December
2017 2016 2016
Notes GBP'000 GBP'000 GBP'000
----------------------------- ------ ---------- ---------- -------------
Net defined benefit pension
deficit at beginning of
period (67,725) (26,962) (26,962)
----------------------------- ------ ---------- ---------- -------------
Defined benefit obligation
at beginning of period (615,610) (500,375) (500,375)
Income statement:
Interest cost (8,177) (9,190) (18,345)
Past service cost - - (3,539)
Other comprehensive income:
Experience losses - - (5,013)
Re-measurement of defined
benefit obligation:
Arising from changes in
demographic assumptions 11,267 - (6,710)
Arising from changes in
financial assumptions - (59,907) (104,200)
Cash flows:
Benefits paid (by fund and
Group) 11,665 11,387 22,572
----------------------------- ------ ---------- ---------- -------------
Defined benefit obligation
at end of the period (600,855) (558,085) (615,610)
Fair value of plan assets
at beginning of period 547,885 473,413 473,413
Income statement:
Interest income on plan
assets 7,304 8,733 17,514
Other comprehensive income:
Return on plan assets less
interest (894) 59,444 69,806
Cash flows:
Company contributions(1) 16 5,133 4,715 9,724
Benefits paid (by fund and
Group) (11,665) (11,387) (22,572)
----------------------------- ------ ---------- ---------- -------------
Fair value of plan assets
at end of period 547,763 534,918 547,885
Net defined benefit pension
deficit at end of period (53,092) (23,167) (67,725)
----------------------------- ------ ---------- ---------- -------------
(1) Comprises employer contributions of GBP5.1 million (H1 2016: GBP4.7 million and plan expenses of GBPnil).
Analysis of fair value of plan assets
2 July 31 December
1 July 2017 2016 2016
GBP'000 GBP'000 GBP'000
------------------------------ ------------ --------- ------------
Equities 92,962 78,158 86,342
Multi-asset credit 113,783 109,762 112,775
Diversified Growth Funds 113,342 165,168 202,247
Liability Driven Investments 203,742 180,276 141,913
Other(2) 23,934 1,554 4,608
------------------------------ ------------ --------- ------------
Total fair value of plan
assets 547,763 534,918 547,885
------------------------------ ------------ --------- ------------
(2) Other mainly includes cash and insured benefits (annuities held in the name of the Trustees with various providers).
The Johnston Press Pension Plan invests in leveraged Liability Driven Investment (LDI) funds in order to match a proportion of the interest rate and inflation sensitivity of the Plan's liabilities.
-- 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 to the Standard Life 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.
-- Between February 2017 and June 2017, the SSGA LDI portfolio and the Standard Life ILPS allocation have broadly hedged the Plan's funded liabilities (as measured on a gilts + 0.5%p.a. basis).
13. Retirement benefit obligation (continued)
Analysis of financial assumptions
Valuation Valuation Valuation
at at at
2 July 31 December
1 July 2017 2016 2016
------------------------------- ------------ ---------- ------------
Discount rate 2.70% 2.85% 2.70%
Future pension increases
Deferred revaluations (where
linked to inflation (CPI)) 2.40% 1.75% 2.40%
Pensions in payment (where
linked to inflation (RPI)) 3.40% 2.75% 3.40%
Life expectancy (years)
Male currently aged 65 19.7 19.7 20.1
Female currently aged 65 21.4 21.3 21.7
------------------------------- ------------ ---------- ------------
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 9,194
Inflation rate
+0.10% inflation rate (5,063)
Mortality
+10.0% to base table mortality rates 20,018
Pension increase exchange
Allowance for 25% take up for sections
where automatically offered (567)
--------------------------------------- ------------------------------------------------------------
The sensitivity analysis is based on a change in one assumption while holding all other assumptions constant, therefore interdependencies between assumptions are excluded. The methodology applied is consistent to that used to determine the recognised pension liability.
Other pension-related obligations
The Group has agreed to pay the expenses of the Plan and the Pension Protection Fund (PPF) levy as they fall due.
The Plan had seen an increase in its obligations at the end of the year ended 31 December 2016, with respect to historic benefit equalisation for a specific group of members (the 'Affected Members') for the Portsmouth & Sunderland section of the Plan. The Company made an application to the High Court (the 'Court') for a declaration that Normal Retirement Dates (NRDs) for the Affected Members were validly equalised between male and female members. A court order dated 19 May 2016 was executed which revised the NRDs and this has been reflected as a past service cost in the Income Statement for that year of GBP3.5 million.
News Media Association Pension Scheme
The Group is a member of the News Media Association (NMA) (formerly 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 or until such time as the deficit has been addressed. Applying a pre-tax discount rate of 13.7%, the Group's best estimate of this at present value is GBP0.7 million.
News Media Association Pension Scheme liabilities have been included within provisions.
Other pension-related liabilities
The closing provision relating to unfunded pensions for senior employees was GBP0.5 million (2 July 2016: GBP0.5 million). The unfunded pension provision is assessed by a qualified actuary at each period end.
Post-retirement medical benefit pension related liabilities for former Portsmouth and Sunderland members of GBP0.1 million (2 July 2016: GBP0.1 million). The post-retirement medical benefits represent management's best estimate of the liability concerned.
Other pension related liabilities have been included within provisions.
14. Share capital
1 July 2 July 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- ------------
Issued
Ordinary shares
105,877,777 ordinary shares
of 1p each (1 July 2017, 2
July 2016 and 31 December 2016) 1,059 1,059 1,059
-------------------------------------- --------- --------- ------------
Total ordinary shares 1,059 1,059 1,059
-------------------------------------- --------- --------- ------------
Deferred shares
690,294,608 deferred shares
of 9p each 62,126 62,126 62,126
Second class deferred shares
5,293,888,850 deferred shares
of 0.98p each 51,880 51,880 51,880
-------------------------------------- --------- --------- ------------
Total deferred shares and second
class deferred shares 114,006 114,006 114,006
-------------------------------------- --------- --------- ------------
Preference shares
756,000 13.75% cumulative preference
shares of GBP1 each 756 756 756
349,600 13.75% 'A' preference
shares of GBP1 each 350 350 350
-------------------------------------- --------- --------- ------------
Total preference shares 1,106 1,106 1,106
-------------------------------------- --------- --------- ------------
Total issued share capital 116,171 116,171 116,171
-------------------------------------- --------- --------- ------------
The Group has only one class of Ordinary Shares which has no right to fixed income. All the preference shares carry the right, subject to the discretion and ability of the Group to distribute profits, to a fixed dividend of 13.75% and rank in priority to the Ordinary Shares. Given the discretionary nature of the dividend right, the preference shares are considered to be equity under IAS 32. The Group is currently limited in its ability to pay dividends due to insufficient distributable reserves, however, the dividend in respect of the preference shares has been accrued but not paid.
Share warrants
The Company has issued share warrants over a total of 12.5% of its issued share capital to former lenders (with 5.0% issued 28 August 2009, 2.5% issued 24 April 2012 and 5.0% issued 21 September 2012). Each of the share warrants have the right to subscribe for 0.1533799 ordinary shares at an exercise price of GBP1.9745 per share and expire on 30 September 2017. The warrant instruments will be settled by the Company delivering a fixed number of Ordinary Shares and receiving a fixed amount of cash in return and so qualify as equity under IAS 39. The Binomial Option pricing model was used to assess the fair value of the share warrants issued in the financial year that they were issued. At the balance sheet date 30,359,979 warrants were outstanding.
15. Share-Based payments
The Group issues share-based benefits to employees. These share-based payments have been measured at their fair value at the date of grant and the fair value of expected shares is being expensed to the Income Statement on a straight-line basis over the vesting period. Fair value has been measured using the Black Scholes model and adjusted to reflect the most likely share vesting and exercise pattern. The impact on the accounting periods has been:
26 weeks 52 weeks
to to
26 weeks to 2 July 31 December
1 July 2017 2016 2016
GBP'000 GBP'000 GBP'000
PSP, SAYE, CSOP, Deferred
Bonus, RSP(1) 112 509 829
Value Creation Plan(2) 821 520 1,003
---------------------------- ------------- --------- -------------
Included in operating
expenses 933 1,029 1,832
---------------------------- ------------- --------- -------------
(1) PSP - Performance Share Plan, SAYE - Save As You Earn, CSOP - Company Share Option Plan, RSP - Restricted Share Plan.
(2) All VCPs of 6.7 million options have lapsed 28 June 2017 as a result of the performance conditions not being met. As a result an accelerated charge of GBP0.4 million has been recognised in the period and the existing balance held in reserves has been released to Retained Earnings.
The cumulative provision for share-based payments of GBP6.1 million (2 July 2016: GBP7.4 million) is shown as a reserve in the Group Statement of Financial Position.
16. Notes to the Cash flow statement
1 July 2 July 31 December
2017 2016 2016
Notes GBP'000 GBP'000 GBP'000
------------------------------------- ------ --------- ---------- ------------
Operating profit/(loss) 4,939 (211,672) (323,066)
Adjustments for non-cash
items:
Impairment of publishing
titles 8 4,513 216,942 336,850
Impairment of print
presses 10 - 5,391 5,539
Impairment of property 10 - 1,537 1,937
Amortisation of intangible
assets 1,595 386 866
Depreciation charges 2,151 3,332 6,550
Charge for share-based
payments 15 933 1,029 1,832
Profit on disposal
of assets held for
sale (1,790) - (401)
Loss on disposal of
Midlands titles 9 538 - -
Profit on disposal
of property, plant
and equipment (6) (182) (16)
Profit on disposal
of property - - 159
Gain on disposal of
intangibles - (65) (65)
Past service cost - - 3,539
Currency differences (66) (110) (92)
------------------------------------- ------ --------- ---------- ------------
12,807 16,588 33,632
Operating items before
working capital changes:
Net pension funding
contributions-cash 13 (5,133) (4,715) (9,724)
Movement in provisions (766) (419) (598)
------------------------------------- ------ --------- ---------- ------------
Cash generated from operations
before working capital changes 6,908 11,454 23,310
Working capital changes
:
Decrease in inventories 245 273 121
Increase in receivables (1,469) (3,619) (181)
Decrease in payables/including
restructuring payables, redundancy
accruals (and LTIP settlement
in 2016). (1,037) (4,995) (6,982)
------------------------------------- ------ --------- ---------- ------------
Cash generated from
operations 4,647 3,113 16,268
------------------------------------- ------ --------- ---------- ------------
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.
17. Contingent liability
On 17 January 2017, the Group entered into a sale agreement to dispose of certain publishing titles to Iliffe Media (Note 9).
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 GBP0.2 million and no provision has been included in the Consolidated Balance Sheet.
18. Related party transactions
There have been no 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 changes in the related party transactions described in the 2016 Annual Report and Accounts that could do so.
19. Post balance sheet events
In July 2017, the Group announced plans to restructure its field sales operation and its editorial function as part of its transformation program. Redundancies of 128 sales staff and 25 editorial staff are expected and as these were not announced until the second half, no provision has been made in the accounts for the 26 week period ended 1 July 2017.
We have been engaged by the Company to review the Condensed set of Financial Statements in the interim financial report for the 26 weeks ended 1 July 2017 which comprises the Group Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Financial Position, Cash Flow Statement and related notes 1 to 19. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the Condensed set of Financial Statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 26 weeks ended 1 July 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
Non-GAAP measures
Consolidated Income Statement - Reconciliation of Statutory
and Adjusted Results
26 weeks ended 26 weeks ended 52 weeks ended
1 July 2017 2 July 2016 31 December 2016
Adjusting Adjusting Adjusting
Statutory items Adjusted Statutory(1) items Adjusted Statutory items Adjusted
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- --------- ------------- ---------- --------- ----------- --------- ---------
Advertising revenue
Print advertising A 39,435 (246) 39,189 50,432 (3,905) 46,527 95,674 (7,035) 88,639
Digital advertising A 13,280 (35) 13,245 14,043 (1,117) 12,926 26,950 (1,727) 25,223
Total advertising
revenue 52,715 (281) 52,434 64,475 (5,022) 59,453 122,624 (8,762) 113,862
Newspaper sales A 39,643 (92) 39,551 38,121 (1,475) 36,646 79,849 (2,921) 76,928
Contract printing A 6,857 - 6,857 6,643 - 6,643 12,788 - 12,788
Leaflet, sundry and
other A 4,087 (6) 4,081 3,524 (84) 3,440 7,438 (244) 7,194
Total other revenue 50,587 (98) 50,489 48,288 (1,559) 46,729 100,075 (3,165) 96,910
Total continuing
revenues 103,302 (379) 102,923 112,763 (6,581) 106,182 222, 699 (11,927) 210,772
Cost of sales B (66,594) 149 (66,445) (67,446) 729 (66,717) (135,639) 2,741 (132,898)
Operating costs (28,023) 142 (27,881) (253,430) 3,469 (249,961) (402,711) 4,469 (398,242)
Restructuring and
redundancy C - 3,413 3,413 - 5,291 5,291 - 9,299 9,299
Pension equalisation D - - - - 187 187 - 4,151 4,151
Impairment E - 4,513 4,513 - 223,870 223,870 - 344,326 344,326
Strategic review F - 1,307 1,307 - - - - - -
Other G - 1,872 1,872 - 3,983 3,983 - 6,852 6,852
Total adjustments - 11,105 11,105 - 233,331 233,331 - 364,628 364,628
Total operating costs (28,023) 11,247 (16,776) (253,430) 236,800 (16,630) (402,711) 369,097 (33,614)
Total costs (94,617) 11,396 (83,221) (320,876) 237,529 (83,347) (538,350) 371,838 (166,512)
EBITDA 8,685 11,017 19,702 (208,113) 230,948 22,835 (315,651) 359,911 44,260
Depreciation and
amortisation H (3,746) 207 (3,539) (3,559) 159 (3,400) (7,415) 498 (6,917)
Operating
profit/(loss) 4,939 11,224 16,163 (211,672) 231,107 19,435 (323,066) 360,409 37,343
Investment income 19 - 19 60 - 60 73 - 73
Net finance expense
on pension
assets/liabilities I (873) 873 - (457) 457 - (831) 831 -
Fair value (loss)gain
on borrowings J (4,400) 4,400 - 38,368 (38,368) - 43,619 (43,619) -
Finance costs K (9,902) 381 (9,521) (10,271) 487 (9,784) (20,056) 487 (19,569)
Finance (costs) /
income (15,156) 5,654 (9,502) 27,700 (37,424) (9,724) 22,805 (42,301) (19,496)
Profit/(loss) before
tax (10,217) 16,878 6,661 (183,972) 193,683 9,711 (300,261) 318,108 17,847
Tax
credit/(expense)(2) 4,600 (5,794) (1,194) 35,743 (37,636) (1,893) 53,371 (57,318) (3,947)
(Loss)/profit from
continuing
operations (5,617) 11,084 5,467 (148,229) 156,047 7,818 (246,890) 260,790 13,900
Net profit from
discontinued
operations - - - 257 - 257 28 - 28
Consolidated
profit/(loss) for
the period (5,617) 11,084 5,467 (147,972) 156,047 8,075 (246,862) 260.790 13,928
(1) The prior period comparative has been restated to reclassify GBP0.3m from continuing operations to discontinued operations, following the Isle of Man business disposal in August 2016.
(2) The change to the prior period adjusting items and adjusted comparatives has resulted in a restated adjusting items and adjusted tax expense, largely due to the disposal of the Midlands publishing titles in January 2017 which is now treated as an adjusting item. The impact on H1 2016 is a reduced adjusted tax expense of GBP0.5m, FY2016: GBP1.0m.
A. Revenue Adjustment split for 26 weeks ending 1 July 2017
Closed titles Digital brands Motors Disposed titles
Statutory GBP'000 GBP'000 GBP'000 GBP'000 Total adjusting Adjusted
GBP'000s A1 A2 A3 A4 GBP'000 GBP'000
Advertising revenue
Print advertising 39,435 (50) - - (196) (246) 39,189
Digital advertising 13,280 (3) - - (32) (35) 13,245
Total advertising
revenue 52,715 (53) - - (228) (281) 52,434
Newspaper sales 39,643 - - - (92) (92) 39,551
Contract printing 6,857 - - - - - 6,857
Other 4,087 (3) - - (3) (6) 4,081
Non advertising
revenue 50,587 (3) - - (95) (98) 50,489
Total continuing
revenues 103,302 (56) - - (323) (379) 102,923
A. Revenue Adjustment split for 26 weeks ending 2 July 2016
Closed titles Digital brands Motors Disposed titles
Statutory GBP'000 GBP'000 GBP'000 GBP'000 Total adjusting Adjusted
GBP'000s A1 A2 A3 A4 GBP'000 GBP'000
Advertising revenue
Print advertising 50,432 (553) - - (3,352) (3,905) 46,527
Digital advertising 14,043 (49) (206) (319) (543) (1,117) 12,926
Total advertising
revenue 64,475 (602) (206) (319) (3,895) (5,022) 59,453
Non advertising
revenue
Newspaper sales 38,121 (46) - - (1,429) (1,475) 36,646
Contract printing 6,643 - - - - - 6,643
Other 3,524 (6) - - (78) (84) 3,440
Total other revenue 48,288 (52) - - (1,507) (1,559) 46,729
Total continuing
revenues 112,763 (654) (206) (319) (5,402) (6,581) 106,182
A. Revenue Adjustment split for 52 weeks ending 31 December 2016
Closed titles Digital brands Motors Disposed titles
Statutory GBP'000 GBP'000 GBP'000 GBP'000 Total adjusting Adjusted
GBP'000 A1 A2 A3 A4 GBP'000 GBP'000
---------
Advertising revenue
Print advertising 95,674 (868) - - (6,167) (7,035) 88,639
Digital advertising 26,950 (67) (335) (319) (1,006) (1,727) 25,223
Total advertising
revenue 122,624 (935) (335) (319) (7,173) (8,762) 113,862
Non advertising
revenue
Newspaper sales 79,849 (69) - - (2,852) (2,921) 76,928
Contract printing 12,788 - - - - - 12,788
Other 7,438 (23) - - (221) (244) 7,194
Total other revenue 100,075 (92) - - (3,073) (3,165) 96,910
Total continuing
revenues 222,699 (1,027) (335) (319) (10,246) (11,927) 210,772
A1 Closed titles
As part of the ongoing review of the Group's portfolio, 4 underperforming titles (H1 2016: 7 titles) were closed during the first half of the year. Total revenue of GBP0.1 million (H1 2016: GBP0.7 million) has been adjusted on a like-for-like basis. The revenue on these related titles 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 adjustment has also been restated to exclude title revenue for those titles closed in 2017.
A2 Digital brands
Revenue in H1 of the prior period has been adjusted in respect of both DealMonster and Business Directory of GBP0.2 million. The amount adjusted for the full year ended 31 December 2016 was GBP0.3 million. These two revenue streams were closed in the second half of 2015 and the aforementioned adjustments have been made as a result of the wind down of this revenue stream. There are no related adjustments in respect of the aforementioned items for H1 2017.
A3 Motors
Revenue of GBP0.3 million for H1 2016 reflecting the wind down of motors.co.uk has been adjusted for. The contract with motors.co.uk for online motor sales expired at the end of March 2016.
A4 Disposed titles
This relates to adjustments in respect of the Midlands titles sold to Iliffe Media Ltd on 17 January 2017. Adjustments made in H1 2017 in respect of these titles relate to revenue earned in the two week period up to the date of disposal of GBP0.3 million (H1 2016: GBP5.4 million) and GBP10.2 million in respect of the year ended 31 December 2016.
B Cost of sales
Total cost of sales adjusted for GBP0.14 million related to Closed Titles of GBP0.014 million, Midlands titles of GBP0.13 million, Digital Brands GBPnil and Motors GBPnil respectively (H1 2016: Closed titles GBP0.1 million, Digital Brands GBPnil and Motors GBP0.3 million respectively) have been adjusted for.
C Restructuring costs
Business transformation and restructuring costs of GBP3.4 million (H1 2016: GBP5.3 million) have been adjusted for as they are considered to be non-core costs. Included in these non-core costs are costs in respect of redundancies of GBP2.0 million, portfolio review GBP0.5 million and business transformation GBP0.9 million respectively (H1 2016: GBP3.5 million for redundancies, GBP0.8 million for portfolio review and GBP0.9 million for business transformation costs respectively).
D Pension equalisation
This is the impact of the Portsmouth and Sunderland (P&S) pension equalisation court order and related advisory costs of GBP3.5 million that was finalised by the end of the year ended 31 December 2016. The matter has been accounted for as a past service cost in the Income Statement with no short term cash impact. Related legal costs of GBP0.6 million (H1 2016: GBP0.2 million) were incurred in FY 2016.
E Impairment of assets
The Group has performed a review of the indicators of impairment at the half year and as a result an impairment of GBP4.5 million (H1 2016: GBP216.9 million) has been recorded in relation to publishing titles, print presses GBPnil (H1 2016: GBP5.4 million) and property of GBPnil (H1 2016: GBP1.5 million).
F Strategic review
The Group has recently commenced a strategic review of its financing options in relation to the GBP220 million 8.625% senior secured notes which become due on 1 June 2019. Legal and advisory costs in relation to this strategic review of GBP1.4 million (H1 2016: GBPnil) have been incurred in the first half of the year.
G Other costs
Other costs of GBP1.9 million (H1 2016: GBP3.9 million) include pension-related costs of GBP0.7 million, LTIPs of GBP1.2 million, the i acquisition-related costs of GBP0.5 million offset by a net gain on disposal of assets of GBP0.5 million respectively (H1 2016: pension-related costs of GBP1.0 million, LTIPs of GBP1.0 million (Note 15), the i acquisition-related costs of GBP1.8 million and property restructuring costs of GBP0.1 million respectively).
The net gain on disposal of assets of GBP0.5 million is comprised of a gain on disposal of Telegraph House in York Street, Sheffield of GBP1.3 million offset by a loss on disposal of the Midlands titles to Iliffe Media Ltd of GBP0.5 million and property restructuring costs of GBP0.3 million. These items have been adjusted as they are not considered to be related to normal trading activity.
H Depreciation and amortisation
Includes accelerated depreciation and amortisation of GBP0.1 million (H1 2016: GBPnil million) arising as a result of a review of websites held within the Group as well as on assets disposed of in the period GBP0.1 million (H1 2016: GBP0.2 million).
I Net finance expense on pension assets/liabilities
Net pension interest expense of GBP0.9 million (H1 2016: GBP0.5 million) required under IAS 19 relating to the net interest on the pension scheme assets and liabilities has been adjusted on the basis that it does not relate to current trading activities (see Note 12).
J Fair value gain on borrowings
Fair value market movement adjustments on external Bonds held of GBP4.4 million (H1 2016: GBP38.4 million) required under IAS 39 were adjusted for.
K Other finance (costs) / income
An adjustment of GBP0.4 million has been made in the first half of the year in relation to the write off of RCF issuance costs that arose as a result of the termination of the facility in January 2017. At 2 July 2016 an adjustment of GBP0.5 million was made in relation to unrecoverable VAT on the 2014 refinancing fees.
Revenues
Adjusted JP i JP Group Revenues(1) (GBP'm) H1 2017 H1 2016 Change (%) H1 2017 H1 2016(2) Change (%) H1 2017 H1 2016 Change (%) Newspaper sales 28.5 32.2 (11.5) 11.0 4.4 148.6 39.5 36.6 7.9 Contract printing 6.8 6.6 3.2 - - - 6.8 6.6 3.2 Print and digital advertising excluding classified 32.5 34.6 (6.1) 2.7 0.6 359.1 35.2 35.2 0.0 Classified and other advertising 17.0 24.1 (29.6) 0.3 0.2 86.1 17.3 24.3 (28.9) Advertising 49.5 58.7 (15.7) 3.0 0.8 301.8 52.5 59.5 (11.8) Leaflets, syndication & other revenue 3.6 3.4 8.0 0.5 0.1 251.4 4.1 3.5 18.2 Total revenues 88.4 100.9 (12.4) 14.5 5.3 172.7 102.9 106.2 (3.1) Total revenues excluding classified 71.4 76.8 (6.9) 14.2 5.1 175.3 85.6 81.9 4.6
1. Based on unrounded figures
2. Includes i from 10 April 2016 (12 weeks)
Advertising Revenues
Adjusted Revenues JP i JP Group (GBP'm) H1 2017 H1 2016 Change (%) H1 2017 H1 2016(2) Change (%) H1 2017 H1 2016 Change (%) Display - local & national 19.7 22.5 (12.5) 2.6 0.6 353.8 22.3 23.1 (3.3) Transaction revenues(1) 10.3 10.2 1.0 - - - 10.3 10.2 1.0 Digital Marketing Services & Partnerships 2.5 1.9 32.2 0.1 - 100.0 2.6 1.9 34.4 Print and digital advertising excluding classified 32.5 34.6 (6.1) 2.7 0.6 359.1 35.2 35.2 0.0 Classified and other advertising 17.0 24.1 (29.6) 0.3 0.2 86.1 17.3 24.3 (28.9) Total advertising revenues 49.5 58.7 (15.7) 3.0 0.8 301.8 52.5 59.5 (11.8) Print advertising ex classified 22.6 25.9 (12.8) 2.6 0.5 375.6 25.2 26.5 (4.9) Digital advertising ex classified 9.9 8.7 14.0 0.1 0.1 166.8 10.0 8.7 14.8 Print & digital advertising ex classified 32.5 34.6 (6.1) 2.7 0.6 359.1 35.2 35.2 0.0
1. Includes Public Notices, Births, Marriages & Deaths & i Announce
2. Includes i from 10 April 2016 (12 weeks)
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFSLTTILIID
(END) Dow Jones Newswires
August 02, 2017 02:01 ET (06:01 GMT)
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