27th Apr 2015 15:05
Johnston Press plc
27 April 2015
ANNUAL REPORT 2014 AND NOTICE OF ANNUAL GENERAL MEETING
Johnston Press plc (the "Company") announces today that it has published its 2014 Annual Report and Accounts (the "Annual Report") together with its Notice of Annual General Meeting (which explains the business to be conducted at the meeting), to be held at 12.00 noon at 8th Floor, Orchard Brae House, 30 Queensferry Road, Edinburgh, EH4 2HS on 3 June 2015.
Copies of the above documents, along with the related proxy forms for the 2015 Annual General Meeting, have been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM. Copies are also available to view on the Company's website - http://www.johnstonpress.co.uk. Hard copies have been mailed today to those shareholders who have elected to continue to receive paper communications.
Enquiries:
Peter McCall, Company Secretary | Tel: +44 (0)131 311 7500 |
Dan de Belder, Bell Pottinger | Tel:+44 (0)20 3772 2561 |
Zoë Pocock, Bell Pottinger | Tel:+44 (0)20 3772 2574 |
APPENDIX
In compliance with DTR 6.3.5(2), the information contained in this appendix is extracted from the Annual Report. Page numbers and note references in the text refer to page numbers and notes in the Annual Report. This material should be read in conjunction with, and is not a substitute for reading, the Annual Report in full.
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 principal risks and uncertainties described are not a complete list of all those risks identified but those that the Directors feel could have a significant impact on the Group and the general economic conditions in the markets in which we operate. By including risks within this section, the Directors make no prediction as to the particular likelihood of any event or set of events occurring. The business could also be affected by other risks not currently identified or considered to be significant.
Other risks that remain the most important in terms of the overall performance of the Group, but also relate to issues over which the Group has no control, namely:
· Change in Gross Domestic Product;
· Change in the unemployment rate;
· Levels of property transactions;
· Levels of new car sales;
· Levels of consumer confidence; and
· Public sector spending.
In 2013, covenant compliance and interest rate risks were included as principal risks and uncertainties. Following the successful refinancing of the Group in 2014, these risks are no longer principal risks and uncertainties.
Description of risk | Impact | Mitigation | |
Further Reductions in Print Advertising | |||
Print advertising revenues could decline at a faster rate due to further migration of customer spending to online media and weak consumer confidence in some of the markets in which we operate.
| Online migration of classified advertising means that even with the economic recovery in the UK, it is unlikely that these revenues will be fully recovered. Consumer confidence remains low in some of the markets in which we operate, and both national and local businesses spend on advertising may remain constrained.
| The Group continues to develop its online advertising offering through partnerships, mobile apps and new verticals such as Digital Kitbag, The Smartlist and WOW247. It also continues to invest in its sales expertise to ensure both a more proactive and effective approach and that the sales offering is fully understood by sales staff and appropriate for customers' needs. | |
Newsprint Price and Supply Risk | |||
Although paper prices have fallen over the course of the past 12 months future price rises represent a risk to the Group in terms of both supply and pricing of newsprint which, after staff costs, is the largest single expense incurred by the business.
| In 2014 newsprint represented approximately 10% of the Group's cost base. A significant increase in price would impact the Group's profitability and a reduction in supply could impact the quantity of newspapers we distribute in the market, which could in turn have an impact on advertising revenues. | The Group carefully manages its consumption of newsprint through waste management, recycling, pagination and distribution of free titles. The Group also has some of the most efficient printing presses in the industry. Contracts are put in place with key suppliers to ensure security of supply and optimum pricing. | |
Failure to Monetise Increased Readership of our News Websites | |||
This is an industry issue. Online and mobile advertising rates are lower than print and it is difficult to charge for accessing news online because free alternatives exist.
| Readership continues to migrate to a digital environment where the advertising rates per reader are significantly lower. This is in part driven by demographic and societal change.
| Our digital strategy focuses on building digital audiences and revenues through new platforms and enhancing the content available to readers and advertisers. There is considerable effort to maximise the advertising rates attained for digital inventory, and to sell more inventory at premium rates eg through the launch of 1XL. | |
Pension Deficit Funding |
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The Group's defined benefit pension scheme is currently in deficit leaving the Group responsible for potential shortfalls, in particular driven by sustained low interest rates.
| While working to reduce the pension deficit, the Group must balance this with the need to invest in the business and reduce the level of debt and resulting interest charges. See Financial Review for further information.
| The Group entered into a revised arrangement with the scheme trustees during 2014 with increased contribution levels which are designed to address the deficit over time. These were agreed with the trustees concurrently with the refinancing and take account of Group cashflow forecasts. The scheme is closed to future accrual and pension exchange exercises have taken place to limit the level of pension increases, reducing the liability further. The Group is also working with the trustees and actual advisors to manage all controllable items. | |
Business Opportunities Constrained by Debt | |||
The Group continues to operate with greater than optimal levels of gearing, hence reduction of debt over time remains a priority. However, this focus could lead to missed revenue opportunities if insufficient funds are left available for investment. | The Group may be unable to take advantage of opportunities to invest in its core business or complementary revenue streams thus impacting its long-term growth prospects.
| The refinancing completed in 2014 provided greater financial stability for the Group together with access to funding to permit a degree of investment in its core business or complementary revenue streams. | |
Business Change | |||
The Group is implementing two major projects to revise the organisation of its news rooms and its sales model which may cause disruption during the transition.
| The implementation of key change initiatives could lead to disruption in our business which could affect quality of output and staff morale and industrial relations and impact advertising and circulation revenue. | The Group has developed a planned phased approach to implementing the changes including full communications with staff and Unions. The business has also updated its business continuity plan to cater for the changes. | |
Adequacy of Human Resources | |||
Like most organisations there is an element of dependency on certain key individuals in the Group.
| Should some of these key people leave the organisation there could be the loss of industry knowledge, supplier relationships, technical expertise and leadership.
| The Group has put in place succession planning across the organisation and this is reviewed at least annually by the Executive Directors and by the Board. During 2014 continued effort was put into staff engagement, including staff surveys, improved staff communication and the on-going awards scheme. These initiatives will continue in 2014. | |
Lifestyle and Technology Changes Affect Newspaper Circulations | |||
Newspaper circulations continue to decline due to increased availability of news through alternative media channels and reductions in the regularity of purchase. This change is in part driven by demographic and societal change.
| The reduction in circulations can lead to reduced newspaper sales revenues as well as reduced audience for our advertisers.
| The Group continues to promote loyalty schemes to encourage increased frequency of newspaper purchase and is seeking to increase subscription rates. In response to changing reader habits we are in the process of redesigning and relaunching our news websites tailored to mobile devices, increasing the frequency of updates and promoted news and mobile services. | |
Slowdown in Rate of Digital Growth and Reduction in Advertising Rates for Mobile | |||
The Group has experienced strong growth in its digital income streams in recent years. The rate of growth could slow if customers seek alternative routes to audiences served. The industry as a whole has seen a shift towards accessing digital content through mobile devices which generally attract lower advertising rates than the rates achieved for desktop devices. | A slowdown in digital revenue growth and/or reduction in advertising rates achieved could impact profitability and the carry value of assets. In addition, the Group adopts a long-term growth rate of 1% in assessing the valuation of publishing titles. In order to achieve this growth rate continued levels of growth in digital is required for the foreseeable future. | The Group continues to invest in improving its understanding of its audience and in growing its overall audience, as well as developing new products (e.g. Digital Kitbag) to enable customers to reach their targeted audience and enable the Group to continue to participate in growth in digital advertising spend. | |
Directors' Responsibility Statement
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period. In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and accounting estimates that are reasonable and prudent;
· state whether applicable IFRSs as adopted by the European Union and applicable United Kingdom Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent company financial statements respectively; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's and the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the financial and corporate governance information included on the Company's website (www.johnstonpress.co.uk). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
In accordance with Section 418 of the Companies Act 2006, each Director in office at the date the Directors' report is approved, confirms that:
· so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
· he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
· the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
By order of the Board
Ashley Highfield David King
Chief Executive Officer Chief Financial Officer25 March 2015 25 March 2015
32. Related Party Transactions
Associated parties
The Group undertook transactions, all of which were on an arms' length basis, and had balances outstanding at the period end with related parties as shown below.
Purchases | Creditors | Sales | Debtors | |||||
Related party | 3 January 2015 £'000 | 28 December 2013 £'000 | 3 January 2015 £'000 | 28 December 2013 £'000 | 3 January 2015 £'000 | 28 December 2013 £'000 | 3 January 2015 £'000 | 28 December 2013 £'000 |
Classified Periodicals Ltd | - | 20 | - | 5 | - | - | - | - |
Classified Periodicals Ltd is an associated undertaking of Johnston Press plc, which re-publishes in a separate publication classified advertisements that appear in the Group's titles and those of certain other publishers.
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.
Transactions with Directors
There were no material transactions with Directors of the Company during the year, except for those relating to remuneration and shareholdings, disclosed in the Directors' Remuneration Report.
For the purposes of IAS 24, Related Party Disclosures, management below the level of the Company's Board are not regarded as related parties.
The remuneration of the Directors at the year end, who are the key management personnel of the Group, is set out in aggregate in the audited part of the Directors' Remuneration Report on page 62.
Related Shares:
Johnston Press PLC