8th Mar 2006 07:04
Johnston Press PLC08 March 2006 For Immediate Release 8 March 2006 RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Johnston Press plc, one of the leading regional media groups in the UK andIreland, is pleased to announce record results for the year ended 31 December2005. KEY FINANCIALS 52 weeks 53 weeks 52 weeks 2005 2004 2004 £m £m £m Revenue 520.2 519.3 514.9Profit before tax 151.4 149.8Operating profit - before non-recurring items* 180.3 178.4 175.4 Pence Pence % Change Earnings per share - underlying (note 7) 38.62 37.77 +2.3 - basic 37.58 37.41 +0.5 Dividend per share - final 5.60 4.80 +16.7 - total 8.40 7.20 +16.7 • Robust profit performance despite significant downturn in recruitmentadvertising experienced by the industry as a whole. • Operating margins before non-recurring items achieved new record of34.7% compared with 34.1% for the comparable 52 weeks of 2004 and 34.4% for the53 weeks of 2004 - despite newsprint price increase. • Against a challenging background advertising revenues for thecomparable 52 weeks excluding acquisitions reduced by 3.7%. • Notable year for acquisitions with major advances in both Scotland andIreland - over 50 new titles. • Digital publishing activities continued to exhibit strong growth - 288local or regional websites. Page impressions up by 49%, exceeding 30 millionper month with over 2.5 million unique users per month. • Other organic initiatives continue to extend advertisers' reach withover 50 new publications launched during the year. * See page 16 for definition PROSPECTS Chairman, Roger Parry said: "In the early weeks of 2006 the advertising market remains challenging with noearly signs of recovery. The Group remains committed to improving operatingefficiencies and maintaining a tight control of costs. The Board is delighted with progress made integrating our recent acquisitionsand, providing market conditions do not significantly worsen, we are confidentthat 2006 will again be a year of progress in building our local mediafranchises." For further information please contact: Tim Bowdler, Chief Executive Officer Tel: 020 7466 5000 (today) orStuart Paterson, Chief Financial Officer 0131 225 3361 (thereafter) Buchanan Communications Tel: 020 7466 5000Richard Oldworth/Richard Darby/Suzanne Brocks CHAIRMAN'S STATEMENT In 2005 Johnston Press was able to achieve a robust profit performance despitethe significant downturn in recruitment advertising experienced by the industryas a whole. The growth in profit before tax reflects tight cost controls andincreased business efficiencies as well as the development of new revenuestreams including those from web-based products aimed at local markets. In theface of difficult trading conditions the staff of Johnston Press have shownthemselves to be flexible and highly effective. On behalf of shareholders, Iwould like to congratulate them all on the results they have achieved. Results Overall revenues for the year were £520.2 million. This was up only 0.2% on 2004reflecting the significant downturn in recruitment advertising. Operating profitfor 2005 was £177.7 million, flat on a 53 week 2004. Underlying earnings pershare were 38.62p, up 2%. Dividend The Board proposes a final dividend of 5.6p per share, making a total of 8.4pper share for the year. This compares to 7.2p per share in 2004, an increase of17%. Growth in local media During the year we were successful in making a number of acquisitions ofcompanies which specialise in local publishing. The principal acquisitions wereScore Press Ltd, Leinster Leader Ltd, Local Press Ltd and finally The ScotsmanPublications Ltd, which did not complete until 4 January 2006 and therefore hasnot been consolidated into the 2005 results. The process of integrating thesebusinesses into the existing Johnston Press management structure is going well.This means we have acquired more than 50 new print titles in Scotland, NorthernIreland and the Republic of Ireland. The majority of these are weeklypublications but they include three notable daily titles, The News Letter inNorthern Ireland, The Scotsman and The Edinburgh Evening News, in addition toour first paid-for Sunday title, Scotland on Sunday. These acquisitions bringthe total of local weekly and daily newspapers published by Johnston Press tomore than 300. In addition we publish many hundreds of other specialist localpublications and operate more than 250 websites. Classified advertising About half of the Group's income comes from the sale of classified advertising.During 2005, property advertising grew strongly, motors fell marginally butthere was a significant reduction in spending by companies and the public sectorseeking to recruit staff. On the evidence available to us, we believe that thissignificant drop in recruitment advertising is cyclical rather than structural.It would appear to reflect government policy in terms of cutting back on localgovernment recruitment and a general slow down in the economy rather thanmigration of spending to websites. Having said this, however, the Board ofJohnston Press does recognise that web-based recruitment advertising isattractive to employers. Accordingly, we are devoting significant managementtime and resource to the continuing development of our own web-based products.In this context it is very pleasing to note the significant success of ourweb-based CV matching service. This enables candidates for jobs and providers ofemployment to match up their respective objectives. Our new revenues from CVmatching in 2005 were £1.1 million. Investment in the business In addition to developing our web-based publishing, we have continued todemonstrate our commitment to equipping our business with the best availabletechnology. Our new £60 million investment in a triple-width press in Sheffieldwill be coming on-stream in the third quarter of 2006. The similar installationin Portsmouth at a cost of £50 million will be coming on-stream a year later. At the time of writing, both projects are to schedule and coming in below budget.These new presses will significantly increase our ability to print in colour. Strategy Serving local communities through the provision of news, information andentertainment has been at the heart of the Johnston Press culture for more than150 years. This mission remains the driving principle of the company. JohnstonPress is often called a local newspaper publisher but this is increasingly aninaccurate description of what the company really does. It is true that we areprimarily focused on local communities rather than national markets but we servethose communities through a wide range of publications, both printed anddigital. In many of our markets our portfolio includes a wide range of printpublications such as lifestyle guides, property magazines and motoringsupplements in addition to our newspapers. All the communities we serve now haveour local websites available to them. Board Other than the appointments of Mr Danny Cammiade and Mr Les Hinton on 17 March2005 which I reported last year, there have been no changes to the membership ofthe Board. It consists of five independent non-executives, two non-executivesrepresenting the Johnston family interest, three executives and myself. Eachyear the Board is subject to an analysis of its own performance. The 2005performance review suggests the Board continues to function well and it remainscompliant with all aspects of the Combined Code. Prospects In the early weeks of 2006 the advertising market remains challenging with noearly signs of recovery. The Group remains committed to improving operatingefficiencies and maintaining a tight control of costs. The Board is delighted with progress made integrating our recent acquisitionsand, providing market conditions do not significantly worsen, we are confidentthat 2006 will again be a year of progress in building our local mediafranchises. ROGER PARRYChairman8 March 2006 CHIEF EXECUTIVE OFFICER'S REVIEW The trading environment in 2005 proved to be more difficult for the regionalpress than at any time since the early 1990s. For Johnston Press, this resultedin a reduction in like-for-like advertising revenues of 3.7%. When using theterm like-for-like, this excludes all businesses acquired in 2005 and comparesthe 52 weeks trading in 2005 with the same 52 weeks in 2004. Against thischallenging background, compounded by an increase in newsprint prices, it ispleasing to be able to report another set of record results. 2005 was also anotable year for acquisitions with major advances in both Scotland and Ireland.Our digital publishing activities continued to exhibit strong growth, our majorcapital expenditure programmes remain on track and our ongoing organic growthplans delivered over 50 new publications in the year. Industry Development After a period of relative calm since 2002 when we acquired Regional IndependentMedia Holdings Ltd (RIM), 2005 witnessed a resurgence of industry restructuringwith Johnston Press at the forefront of events. These changes have enabled us tobuild on our consistent strategy of being a leading industry consolidator. This process has been given renewed focus by the decision in late 2005 of DailyMail & General Trust plc (DMGT) to explore the possible sale of NorthcliffeNewspapers, its regional newspaper subsidiary and one of the big 4 publishers inthe sector. Although DMGT ultimately decided to retain Northcliffe, theirwillingness to consider its disposal suggests that further change may well occurin our sector, providing yet more opportunities for continued targeted growth byJohnston Press in the coming years. We are equally confident that consolidationis the greatest possible safeguard for a healthy regional press and that it willprove to be in the best long-term interests of readers, advertisers,shareholders and the industry itself, including those who work in it. The changes introduced in the Communications Act 2003 have also helped tosimplify the process of consolidation and during 2005 this has enabled JohnstonPress to complete transactions which might not have been pursued under theprevious regime. Whilst it is too early to form any definitive views, wecontinue to believe that over time, the regulators will take a broader view ofmarket definition in their assessment of proposed newspaper mergers, therebyeasing the process of continued industry consolidation. Acquisitions During 2005, the Group announced a total of seven acquisitions, with a totalconsideration, excluding related costs, of £469m. Of these, the largest and mostrecent was The Scotsman Publications Limited (TSPL), for £160m, announced on 19December and completed on 4 January 2006. In addition to its flagship Scotsmantitle, the company also publishes a paid-for Sunday newspaper, Scotland onSunday, and covering the Edinburgh and Lothian markets, the Evening News as wellas the weekly free Herald & Post series. Its Scotsman.com website is one ofScotland's leading sites registering over 20 million page impressions and 3million monthly unique users in the most recent ABC audit. In addition to itsstable of market leading brands, TSPL represents an excellent geographic fitwith our existing weekly newspaper portfolio in Scotland and will provide goodopportunities for performance improvement and growth. As with all of theacquisitions made during the year, we expect the acquisition of TSPL, before anynon-recurring restructuring costs, to be earnings enhancing in 2006. On almost as large a scale, on 9 August, we acquired Score Press Limited (Score)from Emap plc for £155m. Score represented the newspaper interests of ScottishRadio Holdings plc (SRH) and the deal was made possible as a result of theacquisition of SRH by Emap. The acquisition involved 35 weekly newspaper titleswith 13 in Scotland, 17 in Northern Ireland and 5 in the Republic of Ireland. 28of the titles are paid-for and 7 are free. The integration of Score's Scottishtitles into our existing Scottish business is well advanced and the deal alsoprovided the Group with its first presence on the island of Ireland. The overallperformance of Score since acquisition has exceeded our expectations at the timeof the deal. Following the acquisition of Score we were keen to expand our presence in bothNorthern Ireland and the Republic. This objective was entirely consistent withour acquisitive growth strategy and had the added incentive of becoming a biggerplayer in the fast growing Republic of Ireland marketplace which has recentlyexperienced double digit advertising revenue growth rates. Two opportunities tomeet this objective occurred in rapid succession and the Group was successful insecuring these to become a leading publisher of regional and local newspapersboth north and south of the border. The first deal, completed on 4 November, was the acquisition of Local PressLimited (LPL), in which 3i plc was the principal shareholder. In addition to thedaily News Letter, LPL also publishes 6 weekly newspapers in Northern Irelandand 3 in the County of Donegal in the Republic. 7 of the titles are paid-for and3 are free. Combined with Score's Northern Irish titles, the acquisition of LPLgives the Group excellent coverage across much of the Province and integrationopportunities which will improve performance as well as benefiting readers andadvertisers. The acquisition of Leinster Leader (LL), a private company owned by 27 separateshareholders, was completed on 14 December. LL publishes 6 titles, and with theexception of the Limerick Leader which is published 4 times per week, all arepaid-for weekly newspapers. Combined with the 5 Score titles, the acquisition ofLL gives the Group critical mass in the Republic of Ireland and the opportunityto consolidate the separate operations into an integrated business. There areconsiderable opportunities for the combined business in this high growtheconomy, not least from much needed investment in IT systems to improveefficiency and customer service. Although on a much smaller scale, 3 other acquisitions were also completedduring the year. The first was Thorne Gazette on 16 May, a publisherdistributing 20,000 free newspapers in an area of South Yorkshire as well as atitle for the region's farming community and a visitors' guide for Lincolnshire.The business has already been integrated with our existing activities in theregion and its performance has exceeded expectations. On 3 August, the Group acquired the entire share capital of Best Asian MediaLtd, a company which distributes a fortnightly free newspaper, Asian LifeMagazine and EID magazine for the Asian community in the Northwest of England.The previous owners and management have remained with the business and areworking on plans to expand its activities through a series of related newlaunches. The third small acquisition, announced on 9 December, was Ashwell AssociatesLtd, publishers of the paid-for weekly newspapers, The Rutland Times and BourneLocal, as well as Embrace, Your Perfect Day and Your Country, specialistpublications focused on the county of Rutland. The business has already beenintegrated with our Welland Valley Newspapers subsidiary based in Stamford. We are pleased with the progress made so far in integrating all these acquiredbusinesses. As a result of these acquisitions, Johnston Press now publishes 301 titles ofwhich 3 are paid-for morning newspapers, 15 are paid-for evenings, 158 arepaid-for weeklies, 118 are free weeklies, 2 paid-for Sunday titles and 5 weeklymagazines. The total number of copies published per edition stands at 7.1million with 0.2 million of these being in the Republic of Ireland. JohnstonPress is now the second largest regional newspaper publisher in the UK. Connecting Communities The Group also continues to pursue its organic growth strategy which recognisesthe opportunity and need to reach local communities through an increasing arrayof media channels, especially digital. This strategy is built on the underlyingfact that "Life is Local". The publishing rationale of Johnston Press is to bethe leading purveyor of news, information and related services to thecommunities it serves, thereby providing the primary and most effective meansfor advertisers to reach those communities. Industry research continues toprovide strong evidence of consumer behaviour which underpins this approach. In print, the Group has an active policy of encouraging its local publishingcompanies to seek opportunities capable of generating new revenue streams.During 2005, this resulted in the launch of well over 50 new publicationsincluding 47 community newspapers, 5 monthly lifestyle magazines and,additionally, numerous niche publications. In total, we now publish 58 communitynewspapers. These are typically monthly free pickup newspapers servicing smallcommunities in rural areas and selected suburbs of larger cities. They containlocal 'parish pump' news and allow small local businesses to advertise in a verytargeted and cost effective manner. The continuing growth and development of our digital publishing activities is avital and central part of our organic growth strategy. We have a total of 288community websites including those operated by the newly acquired companies.These are an integral component in each of our publishing centres' portfolios,offering users the opportunity to access a vast range of information and tointeract with us via the internet and from mobile devices. Without dismissing the possibility of acquiring an internet business which wouldcomplement our local offerings, our approach is primarily dependent on theorganic development of digital platforms which build on the strength of ourlocal brands and market position, providing a natural extension to our existingpublishing activities. More details of our digital publishing activities areprovided in a later section of this report on pages 8 and 9. In addition to the initiatives outlined above, the Group is also pursuingorganic growth opportunities in services which are closely related to our localpublishing and newspaper delivery activities. Examples of such areas includeleaflet distribution through the Group's dedicated Letterbox Direct subsidiary,promotional coupon offers through Offer Pack which was acquired in 2004, readerholidays, where we promote and provide tailored holidays and events packages,premium line offerings which primarily relate to dating services, localexhibitions and events such as fashion shows and the syndication of oureditorial content. Trading Performance As indicated above, 2005 was a challenging period with trading becoming moredifficult as the year progressed. All advertising revenue percentages in thiscommentary are shown on a like-for-like basis. After a marginal advertisingrevenue decline of 1.5% in the first six months, the second half witnessed afall of 6.0%. We are confident that this advertising downturn, which affectedthe regional press generally as well as many other sectors of the media, wasprimarily cyclical in nature reflecting weaker consumer confidence, partlyfuelled by a flatter property market and a cutback in recruitment by a number ofemployers. Only the Northeast of England and Scotland achieved growth with allother markets suffering year-on-year declines. The greatest shortfall year-on-year was in recruitment advertising which fell by17.3%, comprising 12.1% in the first half and 23.7% in the second, entirely as aresult of reduced volumes. This represents our most volatile advertisingcategory and it followed a similar pattern in the last significant downturn inthe early 1990s. The impact was felt across the entire spread of the Group'spublishing areas. Property advertising performed strongly, up 13.7% overall and increasing by15.9% and 11.3% respectively in the first and second halves. The healthy growthreflected the need for vendors, house-builders in particular, to advertise moreheavily in a flatter market. All areas of the country grew, with Scotland thestrongest and the South of England weakest. Motors advertising continued its lacklustre performance with an overall declineof 5.2%, falling in each half by 3.9% and 6.7% respectively. Continued dealerownership changes and consolidation, coupled with poor car sales, combined tokeep performance depressed. Only the Northeast division achieved growth in thiscategory. The other classified category performed well, growing by 5.5%, 4.1% inthe first half and the strong increase of 7.0% in the second fuelled by the needfor licensed premises to re-apply for liquor licences following the introductionof new licensing laws. In the display category, there was an overall decline of 2.4%, made up of 0.6%in the first half and 4.1% in the second. This was despite strong growth inspecial features as a result of the proactive efforts of our sales teams tostimulate additional revenues. The overall performance reflected tougherconditions on the High Street in all markets, although marginal growth wasachieved in the South Midlands. Given the difficult trading environment and taking into account the increasedcost of newsprint, the Group did well to raise operating margins from 34.0% to34.8% as shown on page 12. This performance reflects the benefits of ourcontinuing programme of investment in modern IT systems to drive efficiency,good control of costs and actions taken to mitigate the increase in the cost ofnewsprint. Operating Review The Group maintains a strong focus on revenue growth initiatives and, asoutlined above, this resulted in a record number of new publications during theyear. Each is regularly monitored to ensure that it makes a positivecontribution to the Group's profitability. Our intranet-based ADS4U database ofadvertising ideas and creative copy is now firmly embedded as an invaluable toolfor all advertising sales staff, assisting the dissemination of best practicearound the Group, providing a more professional service to advertisers andhelping to generate additional revenues. Our close working relationship with Mediaforce, the independent nationalsales-house which represents all Johnston Press titles with national and anumber of regional advertising agencies, continues to form an integral part ofour sales operations. The recently established creative sales unit withinMediaforce assisted in the capture of new business for Johnston Press fromclients such as Baxters and RIAS, as well as winning back clients such asPowerhouse and ATS from other media. National advertising also benefited fromGeneral Election advertising from various political parties. The importance of the Group's continuing programme of investment in new ITsystems cannot be overstated in terms of its positive impact on businessefficiency and customer service levels. During the year, progress was made in anumber of key areas. Our drive towards common systems made strong advances with the implementation ofnew advertising front-end systems in the Northwest and new editorial systems inthe South and South Midlands. This programme will continue in 2006 withinvestment planned in Yorkshire, Ireland and Scotland. We are well into theroll-out of a Group-wide newspaper sales system which will be completed duringthe current year. We have transferred to Thus plc as our infrastructure providerfor our wide area network and continued progress has been made in theinstallation of voice-over IP telephony across the Group which will deliversignificant cost savings. Considerable progress has also been made in automating our customer interfaces,with many estate agents now producing and uploading their content electronicallyand more advertisers using our internet-based solution to place advertisementswith us. The growing extent of IT standardisation across the Group has alsoenabled us to improve the technical support function with the strengthening ofour central help desk in Leeds. All of this investment has allowed the Group toconsolidate further a number of pre-press centres including those in the South,East Midlands, the North and Northeast. Health and safety remains a key area of focus for the Group. Improvements to ourmonitoring, reporting systems and training have been made during the year. Therolling audit of our systems and procedures by a third party has indicated afurther general improvement in adherence to our health and safety procedures.There were 30 reportable accidents in 2005, a small number for a company of oursize, and the vast majority were very minor in nature. During the year, more of our titles celebrated important milestones, notably150th anniversaries for the Bury Free Press, the Sudbury based Suffolk FreePress and The Southern Reporter in the Borders. A number of our newspapers and staff were also recognised for their achievementswith awards including The Southern Reporter being voted as the NewspaperSociety's Scottish weekly "newspaper of the year" for the fourth successiveoccasion. Digital Publishing The growth and development of our digital publishing activities during 2005 hasbeen considerable, reflecting the strong focus which Johnston Press continues toplace on this aspect of our business. The Group now has 288 local or regionalwebsites, including those operated by the newly acquired companies, with pageimpressions having grown by 49%, exceeding 30 million per month and unique usersnow around 2.5 million per month. Total online revenues increased by 32% toreach £8.3 million, producing a contribution to profit of £5.8 million. The Group announced in September that it had agreed a £60,000 annual sponsorshipof a Chair in Digital Journalism at the University of Central Lancashire (UCLan)for a three year period. Johnston Press's partnership with UCLan, which combinesthe expertise of one of the top journalism departments in the country with oneof the UK's major regional newspaper groups, represents a unique opportunity inthe development of new digital applications. During the year, we increased the size of our development team based inPeterborough by 20% and resource around the Group was also strengthened. We haveappointed category managers for each of our jobs, motors and property sites and,in addition, an online editorial content champion. Assisted by thoseappointments, we are in the process of a further programme of enhancements andupgrades to each of our classified sites with re-launches planned during thecourse of 2006. In addition, we have launched a project in Preston to act as atest-bed in the development of the "newsroom of the future", in which contentwill be gathered and disseminated through a variety of print and digitalchannels in a media-neutral manner. A number of new services have been developed and launched during 2005. The mostsuccessful in revenue terms has been the roll-out of our online CV matchingservice which is now generating around £30k per week from a database of 6,000active CVs and over 60,000 registered users. The redesign and re-launch of ourlocal directory service under the Local Pages brand has proved very popular withusers and advertisers. The sales of links to electronically formatted versionsof newspaper advertisements have generated strong revenue growth. Our auction site Lot24-7.co.uk was launched at the end of 2005 and will utilisethe combination of our newspapers and local websites to create a truly local anddifferentiated auction service. Our digital offering is also providing userswith an increasing range of services with developments in 2005 including a realtime news service to mobile phones, greater depth of content within ourclassified search engines and electronic versions of a number of our printeddaily newspapers available by subscription online. Our continuing investment in advertising front-end systems has also improved thestructure and quality of data obtained from our advertisers and, together with agrowing database of information on our readers, good progress is being made inthe introduction and use of our customer relations management (CRM) programme.This, as with our entire digital publishing development programme, remainscentral to the Group's overall progress. Printing The key developments for our Printing Division during 2005 have been dominatedby the major new press projects at Dinnington, near Sheffield, and atPortsmouth. With a total expenditure in excess of £100m and backed by 15-yearsupply contracts with News International (NI), these represent by far thelargest and most exciting press projects in the Group's history. It is pleasingto report that both projects are proceeding to plan in terms of cost andtimescale. The Dinnington building is largely complete and equipment is in thecourse of installation for start-up in the third quarter of 2006. At Portsmouth,demolition work is complete, building work has commenced, the publishing officesrefurbished and start-up is planned for 12 months after Dinnington. At Leeds, a digital inking system has been installed and the refurbishment ofthe mailroom has begun. At Peterborough, the press is being extended to ensurethat we meet the increasing demand for colour. Once completed, this project willallow the press to print 160 pages with every one in colour. Reflecting the need of all of our titles for high quality colour printing andfor the Group to maximise the return on its press investment programme, theHalifax press was closed during 2005 with printing being transferred to Leeds.Plans have also been announced for the closure of our pressrooms in Scarborough,Wakefield and Sheffield, the latter two to take place once the new Dinningtonpress comes on stream. The acquisitions made during 2005 have also broughtadditional pressrooms to the Group, in Edinburgh and Forfar in Scotland with twoin the Republic of Ireland and three in Northern Ireland. In view of the increased price of newsprint in 2005, the Group took steps tomitigate the impact on costs including the standardisation of web width to theNI standard. This will also be helpful when the new presses in Dinnington andPortsmouth come on stream in view of the NI contracts. Prices of newsprint forthe current year have increased by a similar amount to 2005 and further measuresto partially mitigate the effect are already in place. Circulations For the year as a whole, circulation revenues increased on a like-for-like basisby 1.8%, the majority of the increase coming in the second half of the year.During 2005, we increased the cover price of over 70% of our paid-fornewspapers. This takes no account of The Scotsman and the Leinster Leader Group,which only became part of the Group at the turn of the year. After seven consecutive years of growth, the total sale of our weekly titlesfell in the second half of 2004, a trend which continued in 2005 with reductionsof 2.1% and 2.4% in the first and second halves respectively contributing to anoverall fall of 2.3%. The more difficult trading environment, with its adverseimpact on advertising volumes, is undoubtedly a factor in this decline but, thatsaid, penetration levels remain extremely high and, with relatively staticpopulation numbers, it is unrealistic to expect a perpetual increase in theoverall sale. The key factor is the high market penetrations being achieved andthereby the unrivalled extent to which advertisers are able to reach localcommunities with their messages. The circulation performance of our daily titles remains broadly unchanged withan overall decline over the year of 5.5% comprising 6.5% in the first half and4.5% in the second. The first half figure was depressed by the final stage inthe process of removing bulk sales from our reported ABC figures. All of thedaily newspapers we published throughout 2005 achieved 100% actively purchasedstatus. The figures were also adversely affected by steps taken to address theissue of bad debt on our direct delivery sales. The Group's Daily Newspaper Sales Forum has made good progress in ensuring theadoption of best practice at all centres and in evolving new approaches toaddress the underlying circulation issues. This includes using the Group'sstrength to improve our reader offers and promotional activity, publishing ourtitles earlier in the day to match the shopping habits of our readers andcollecting detailed customer data to enable us to tailor our serviceaccordingly. In addition, we have undertaken a number of research projects thathave given us a clearer understanding of our readers' opinions, purchasinghabits and expectations for the future. However, behind the disappointingfigures, the market penetration of our daily titles remains strong and theycontinue to deliver good advertiser response levels. When combined with our local websites, we can offer a significantly increasedaudience reach to advertisers. We have installed an online market measurementtool which enables us to provide advertisers with an estimate of total marketreach after removing those users who are also newspaper readers. Content Community involvement remains the cornerstone of the editorial approach for allof our newspaper titles, within a framework which guarantees editors the freedomto edit without management interference. The Corporate Social ResponsibilityStatement in our Annual Report will provide details of the numerous ways inwhich our newspapers serve their local communities through campaigns,championing good causes, supporting charitable organisations, leadingfundraising efforts, exposing wrong-doing and celebrating success. Quite simply,our newspapers are the voice and conscience of the communities they serve,having a pivotal role in community life. As a Company, we are acutely consciousof the heavy responsibility which our editors bear. In recognition of the important role of our editors, we have strengthened theEditorial Review Group which has continued to perform a valuable role insupporting editors and encouraging the improvement of standards generally. Inaddition to their involvement in the appointment of editors, we have extendedthe use of a "buddying" system for all those newly appointed to the editor'schair. Our acquisitions during 2005 have brought various new titles to the Group andfrom an editorial standpoint, high profile newspapers such as The Scotsman,Scotland on Sunday and the News Letter in Northern Ireland. These titles, likethe Yorkshire Post, have a more discernable editorial stance than is typical ofmany of our newspapers and, whilst we are totally committed to the maintenanceof the highest editorial standards and investment in good content, we do notintend to alter our editorial policy which leaves content decisions firmly andclearly with each individual editor. In accordance with this, Johnston Presseditors are encouraged to vigorously pursue investigative journalism andworthwhile campaigns. In that regard, it is particularly pleasing to note thesuccessful outcome of the long running campaign by The News in Portsmouth toseek a specific Arctic Medal for those men who took part in the Arctic Campaignof World War II. Organisation and People 2005 has been a particularly challenging year, not only as we have had to managethrough a more difficult trading environment but also due to the heavy programmeof acquisitions which inevitably places additional burdens on those involvedduring the negotiations and the subsequent integration process. Our ability todeal with these added pressures is a testament to the strengths and quality ofour management and has undoubtedly been assisted by the continuing stabilitywithin our Head Office and Senior Management teams. Following the various acquisitions made during the year and the resultantincrease in the size of the Group, we have made several key managementappointments and organisational changes. Running our businesses in NorthernIreland and the Republic of Ireland respectively, we welcome Jean Long and BarryBrennan to the Divisional Management team. Jean was the previous Chief Executiveof LPL and Barry was Group Marketing Director at Independent News & Media plc.Michael Johnston has relocated from Portsmouth, where he was Managing Directorof our South of England division, to Edinburgh to run The Scotsman Publications Limited and the enlarged Scottish division. Michael has been replaced inPortsmouth by Gary Fearon who was previously Managing Director of our Northeastdivision. We have combined the North division, headquartered in Leeds, with theSheffield based North Midlands and South Yorkshire division and the Northeastdivision based in Sunderland, under the leadership of Chris Green. A similarcombination of the East and South Midlands divisions, led by Nick Mills, hasbeen made possible by the appointment of Chris Pennock to the role of GroupNewspaper Sales and Marketing Director. We continue to place strong emphasis on skills-based training and managementdevelopment which has included the introduction of a new Senior ManagementDevelopment Programme run by Kaizen Training. We have also strengthened oursuccession planning processes and continue to embrace our commitment to being acaring and responsible employer. The fact that Johnston Press produced such good results in 2005 against such adifficult trading background speaks volumes for the professionalism, hard workand commitment of all of our staff. I would like to express my personal thanksto all our staff and I am pleased that the Board has agreed to recognise andreward those efforts by once again permitting all qualifying employees,representing the substantial majority of those we employ, to receive freeJohnston Press shares to be granted under the Group's Share Incentive Plan. TIM BOWDLERChief Executive Officer 8 March 2006 FINANCIAL REVIEW Overview As described in the Chief Executive Officer's Review, 2005 was a difficult yearfrom a trading point of view, but despite this the Group has produced anotherset of excellent financial results. There were year-on-year increases inoperating margins before non-recurring items and operating profits,notwithstanding the fact that 2004 was a 53 week year. The business continues togenerate excellent operating cash flows which more than covered the increasedcapital expenditure on our new press projects and contributed towards thefunding of the acquisitions made in the year. The proposed dividend has beenincreased by 17% recognising the growth in dividend cover over recent years. Financial Review In comparing performance between 2005 and 2004, it should be remembered that2004 was a 53 week year and, where relevant, in order to help the reader makelike-for-like comparisons, we have included performance figures for 52 weeks. 2005 2004 Total Acquisitions Existing 52 Weeks 53rd Week 53 Weeks £'m £'m £'m £'m £'m £'m Advertising revenues 387.7 10.6 377.1 391.5 3.0 394.5Newspaper sales 73.6 3.9 69.7 68.5 1.1 69.6Contract printing 21.1 2.3 18.8 19.1 0.2 19.3Other revenues 37.8 0.5 37.3 35.8 0.1 35.9 Total revenues 520.2 17.3 502.9 514.9 4.4 519.3Costs 340.0 12.0 328.0 339.7 1.4 341.1 Operating profit* 180.2 5.3 174.9 175.2 3.0 178.2 Operating margin* 34.6% 30.6% 34.8% 34.0% 34.3% * pre non-recurring items and associates Acquisitions The Group completed a total of 6 acquisitions in the year. In addition, theacquisition of The Scotsman Publications Limited was completed just after theyear end on 4 January 2006 and is therefore excluded from these financialresults. These acquisitions included three small transactions which will add to the localoperations where they are published but, being relatively small from a Groupperspective, they are not analysed separately within this report. These were theacquisitions of the Thorne Gazette, Ashwell Associates (publishers of theRutland Times and the Bourne Local) and Best Asian Media (publishers of theAsian Leader in Lancashire and the EID Magazine). The significant acquisitions completed in the year were: a) Score Press Limited, acquired from Emap for £155 million debt free on 9August 2005; b) Local Press Limited, acquired from individual shareholders including 3i,Mecon and management for £65 million debt free on 4 November 2005; and c) The Leinster Leader Group, acquired again from individual shareholders on 15December 2005 for €138.6 million debt free. All of the above acquisitions have been funded out of new debt facilitiesestablished during the year. The acquisitions contributed revenues of £17.3 million in the period andoperating profit before non-recurring items of £5.3 million. As the integrationof these businesses into the Johnston Press divisional structure only commencedlate in the year there were limited non-recurring items incurred in the period.The integration process is expected to be largely completed in the first half of2006. Excluding the value of the publishing titles and goodwill, fair valueadjustments of £3.0 million have been made to the assets of the acquiredbusinesses. The major adjustments were to write down the value of the property,plant and equipment to reflect consistent accounting treatment with JohnstonPress or, where relevant, current valuations. As well as these write downs, theGroup has provided for the acquired businesses' share of the deficits existingon the industry pension schemes in the Republic of Ireland. Revenues Advertising revenues for the Group on a like-for-like basis were as follows: 2005 2004 Increase £'m £'m % Employment 96.9 117.2 (17.3)Property 63.4 55.7 13.7Motor 44.8 47.3 (5.2)Other classified 63.9 60.6 5.5 Total Classified 269.0 280.8 (4.2)Display 108.1 110.7 (2.4) 377.1 391.5 (3.7) The Chief Executive Officer's Review on pages 5 to 11 provides a summary ofadvertising performance by division. The table below shows the advertising revenues consolidated into the Groupfinancial statements for the acquired businesses along with the comparatives ona like-for-like basis. Some of the acquired businesses did not recordadvertising revenues by category but this will change for 2006. Acquired Businesses 2005 2004 Increase £'m £'m % Advertising revenues since acquisition 10.6 10.8 (1.9) The existing businesses experienced advertising revenue declines in the year.This decline was primarily due to weakness in the recruitment category. Theacquired businesses performed better and saw advertising revenues decline by alower percentage mainly as a result of the strong growth currently beingexperienced in the Republic of Ireland economy being reflected in theadvertising environment. In the existing businesses, the advertising performance deteriorated over thecourse of the year due to the weakening in consumer confidence, increasedunemployment and the strong performance reflected in the comparative figures ofthe second half of 2004. Other than the Thorne Gazette, all the acquisitionswere completed in the second half of 2005 and therefore the acquisitions had nomaterial impact on the first half trading. The advertising revenues on a like-for-like basis analysed into the 2 half yearswere: Half year to 31 December Half year to 30 June 26 Weeks 26 Weeks 2005 2004 Increase 2005 2004 Increase £m £m % £m £m % Employment 40.7 53.3 (23.7) 56.2 63.9 (12.1)Property 29.9 26.8 11.3 33.5 28.9 15.9Motors 20.7 22.2 (6.7) 24.1 25.1 (3.9)Other classified 31.8 29.8 7.0 32.1 30.8 4.1 Total classified 123.1 132.1 (6.8) 145.9 148.7 (1.9) Display 52.9 55.2 (4.1) 55.2 55.5 (0.6) Total advertising revenue 176.0 187.3 (6.0) 201.1 204.2 (1.5) Circulation revenues have increased by 5.7% with both increased cover prices andthe acquisitions contributing to the growth. On a like-for-like basis newspapersales revenues were up by 1.8%, with cover price increases more than offsettingmodest declines in copy sales. Contract print revenues grew by 9.3% with the contribution from the acquiredcompanies offsetting the revenues that were lost from the closure of the HalifaxPress and the heatset press at Portsmouth. If the contract printing revenuesfrom the acquired businesses were excluded the decline for 52 weeks was 1.6%. Other revenues grew primarily on the back of rapidly growing internet basedrevenues where the new services of CV Matching and Local Pages, along with goodupselling of recruitment adverts, were the key drivers. Margins With the lack of growth in revenues due to the challenging advertisingenvironment and increased newsprint prices, the control of costs and increasedbusiness efficiencies were key operational targets in the year. For the existingbusinesses the operating margin on a like-for-like basis, as indicated on page12, improved from 34.0% to 34.8%. The acquired businesses had a collective margin of 30.6% for the relevantperiods of consolidation. Non-Recurring Items As has been the practice of the Group over many years, costs or revenues thatare material and out of the normal course of operations are highlightedseparately in the columnar style Income Statement. These include costs ofredundancies following the restructuring of the Group's business or associatedwith the integration of an acquisition and gains or losses on the disposal offixed assets. In total this year they amount to £4.3 million, which included thewrite off of unamortized arrangement fees on the previous bank facilities of£1.7 million, as these were replaced by new facilities to finance the recentacquisitions, and are net of the gain of £0.9 million on the disposal of surplusland in Northampton. Cash Flow/Net Borrowings There were several significant cash outflows during the year; these were aone-off payment of £15.0 million to the defined benefit pension schemes as partof a new funding package following the triennial valuation, an increase incapital expenditure as a result of the press projects at Sheffield andPortsmouth and £309 million being the cumulative cost of the acquisitions madein the period. Excluding the one-off payment to the pension scheme, cashgenerated from operations increased by 1.5%. The Group's net borrowings at 31December 2005 were £617 million compared to £328 million at the end of 2004. This increase in net borrowings was made possible by new 5 year facilities putin place in August 2005 and then subsequently extended to encompass the lateracquisitions. The new facilities are on a bilateral basis with a smaller numberof banks and replace the syndicated facility negotiated in 2002 at the time ofthe acquisition of Regional Independent Media Holdings Limited. Financial Investments With the acquisition of Score Press Limited, the Leinster Leader Group and LocalPress Limited, Johnston Press has for the first time an exposure to a currencyother than Sterling. To provide a natural hedge and offset to the majority ofthis exposure, the debt to finance the Leinster Leader Group was drawn down inEuros. Other than this the main financial risk that the Group faces isassociated with interest rates. The Group's policy, as it has been for a number of years, is that borrowingsshould be arranged at the lowest possible cost and with covenants within whichit can comfortably operate. The policy requires that a minimum of 50% of thedebt should be hedged against potential movements in interest rates whilst thebalance is kept under constant review. At 31 December 2005, £250 million of thedebt was hedged or fixed for an average period of 3 years. Additional hedge agreements were executed early in 2006 to ensure adherence withGroup policy. These were a combination of Sterling and Euro hedges. At the end of each year the Directors review the carrying value of the Group'sinvestments. The shares in Sunderland AFC were disposed of during the year andthe Group no longer holds any significant listed investments. The valuation ofthe unlisted investment in Mirago has, following the Directors' valuation, notchanged. Pension Funds/IAS 19 At 31 December 2005, following a change in the legislation with regard toprotected rights, the Group completed the merger of the outstanding deferred andpensioner members in the RIM pension scheme into the Johnston Press PensionPlan. The pension schemes' triennial valuations were completed during the year and thedetails will be contained in the Annual Report. To address the deficit theCompany, together with the Pension Fund Trustees, have agreed a new fundingstrategy which included a one-off contribution from the Company of £15 millionand increased employee and employer contributions. Over the year the IAS19 valuation has seen a decrease in the deficit of around£16 million. This decrease has been as a result of the one-off contributionnoted above, strong investment returns and increased monthly contributionspartially offset by the impact of a reduced discount rate being applied to thescheme's future liabilities. The Group also carries provisions for unfunded ex-gratia pension arrangementsfor certain former employees. This liability is subject to annual actuarialvaluation and this resulted in no change to the pension provision. International Financial Reporting Standards (IFRS or IAS) The results for 2005 are the first we have prepared under IFRS. Under the firsttime adoption procedures set out in IFRS 1, the Group is required to establishits accounting policies as at 1 January 2005 and apply these retrospectively inthe determination of prior period comparatives from 1 January 2005. There are anumber of optional exemptions to that principle which will be detailed in ourAnnual Report. The significant impacts of IFRS on the 2005 results are as follows: a) Under IAS 12 the recognition of a deferred tax liability against the value ofpublishing titles acquired at 1 January 2005 and certain other assets. Thisliability reflects the difference between the book value of these assets andtheir tax written down value which is zero. The Board cannot foresee anycircumstance in which this tax would become payable. Acquisitions made since 1January 2005 will also carry a goodwill valuation equal and opposite to thisnotional deferred tax liability. The deferred tax liability recognised on 1January 2005 was £284 million and this has increased by a further £86 million asa consequence of the acquisitions in 2005. b) Under IAS 19 the Group has recognised all actuarial gains and losses inrelation to employee benefit schemes at the date of transition. c) Under IFRS 2 the cost of the Group's share based payment schemes in the yearpre-tax was £1.3 million (2004 - £1.1 million). Share Incentive Plan The share incentive plan introduced in January 2003 continued to operate in 2005for all qualifying employees. The plan provides for free shares for thoseemployees based on financial performance targets determined by the Board. Basedon the performance in 2005, shares to the value of £0.8 million (2004 - £1.5million) will be distributed to participating employees based on theircontracted hours of employment. Dividends and Earnings per Share Earnings per share were 37.58p, marginally ahead of 2004, despite the higherlevel of non-recurring items in 2005 and the fact that 2004 included anadditional week of trading. Underlying earnings per share increased from 37.77p to 38.62p, an increase of2.3%. Subject to approval at the Annual General Meeting on 28 April 2006, the totaldividend for the year will be 8.4p, an increase of 16.7%. This level of increasewill result in a reduction in the level of dividend cover, which has grown overrecent years. STUART PATERSONChief Financial Officer 8 March 2006 Group Income Statement For the year ended 31 December 2005 2005 2004 Before Before non-recurring non- Non- recurring Non- recurring recurring items items Total items items Total Notes £'000 £'000 £'000 £'000 £'000 £'000 Revenue 520,154 - 520,154 519,299 - 519,299Cost of sales (244,781) - (244,781) (239,722) - (239,722) Gross profit 275,373 - 275,373 279,577 - 279,577Operating expenses 2 (95,163) (2,614) (97,777) (101,366) (769) (102,135)Share of results of associates 81 - 81 174 - 174 Operating profit 180,291 (2,614) 177,677 178,385 (769) 177,616Investment income 3 371 - 371 830 (708) 122Finance costs 4 (25,017) (1,668) (26,685) (27,939) - (27,939) Profit before tax 155,645 (4,282) 151,363 151,276 (1,477) 149,799Tax 5 (44,857) 1,285 (43,572) (43,630) 443 (43,187) Profit for the year 110,788 (2,997) 107,791 107,646 (1,034) 106,612 Earnings per share (p)Earnings per share - Basic 7 38.62 1.04 37.58 37.77 0.36 37.41Earnings per share - Diluted 7 38.38 1.04 37.34 37.43 0.36 37.07 Group Statement of Recognised Income and ExpenseFor the year ended 31 December 2005 Hedging and Revaluation Translation Retained Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 Profit for the year - - 107,791 107,791Actuarial loss on defined benefit pension schemes (net of tax) - - (803) (803)Revaluation adjustment (249) - 249 -Exchange differences on translation of foreign operations - (43) - (43)Change in fair value of financial instruments - 7,035 - 7,035 Total recognised income and expense (249) 6,992 107,237 113,980 For the year ended 31 December 2004 Profit for the year - - 106,612 106,612Actuarial loss on defined benefit pension schemes (net of tax) - - (13,091) (13,091)Revaluation adjustment (69) - 69 - Total recognised income and expense (69) - 93,590 93,521 Group Reconciliation of Shareholders' EquityFor the year ended 31 December 2005 Share-based Hedging and Share Share Payments Revaluation Translation Retained Own Capital Premium Reserve Reserve Reserve Earnings Shares Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances pre IAS 39 adjustment 29,638 323,670 1,474 2,836 - 38,564 (795) 395,387IAS 39 adjustment - - - - (16,269) - - (16,269) Revised opening balances 29,638 323,670 1,474 2,836 (16,269) 38,564 (795) 379,118 Total recognised Income and expense - - - (249) 6,992 107,237 - 113,980 Recognised directly inequityDividends (note 6) - - - - - (21,826) - (21,826)New share capital 134 3,767 - - - - - 3,901subscribedOwn shares purchased - - - - - - (567) (567)Amount written off - - - - - - 613 613Provision for share-based payments - - 1,296 - - - - 1,296 Net changes directly in 134 3,767 1,296 - - (21,826) 46 (16,583)equity Total movements 134 3,767 1,296 (249) 6,992 85,411 46 97,397 Equity at the end of the 29,772 327,437 2,770 2,587 (9,277) 123,975 (749) 476,515year For the year ended 31 December 2004 Opening balances 29,505 320,558 419 2,905 - (36,678) (470) 316,239 Total recognised Income and expense - - - (69) - 93,590 - 93,521 Recognised directly inequityDividends (note 6) - - - - - (18,348) - (18,348)New share capital 133 3,112 - - - - - 3,245subscribedOwn shares purchased - - - - - - (791) (791)Amounts written off - - - - - - 466 466Provision for share-based payments - - 1,055 - - - - 1,055 Net changes directly in 133 3,112 1,055 - - (18,348) (325) (14,373)equity Total movements 133 3,112 1,055 (69) - 75,242 (325) 79,148 Equity at the end of the year 29,638 323,670 1,474 2,836 - 38,564 (795) 395,387 Group Balance SheetAt 31 December 2005 2005 2004 Notes £'000 £'000 Non-current assetsGoodwill 101,635 -Other intangible assets 1,213,186 927,557Property, plant and equipment 222,178 156,742Available for sale investments 2,712 2,738Interests in associates 48 60Trade and other receivables 893 46 1,540,652 1,087,143 Current assetsInventories 4,861 4,417Trade and other receivables 70,204 60,114Cash and cash equivalents 25,114 10,119 100,179 74,650 Total assets 1,640,831 1,161,793 Current liabilitiesTrade and other payables 73,351 57,492Tax liabilities 16,854 24,814Obligations under finance leases 60 16Retirement benefit obligation 4,350 -Borrowings 8 47,604 77,210 142,219 159,532 Non-current liabilitiesBorrowings 8 594,776 260,992Obligations under finance leases 12 23Derivative instruments 9,234 -Retirement benefit obligation 50,839 70,586Deferred tax liabilities 361,908 270,572Trade and other payables 2,821 2,987Long term provisions 2,507 1,714 1,022,097 606,874 Total liabilities 1,164,316 766,406 Net assets 476,515 395,387 EquityShare capital 29,772 29,638Share premium account 327,437 323,670Share-based payments reserve 2,770 1,474Revaluation reserve 2,587 2,836Own shares (749) (795)Hedging and translation reserve (9,277) -Retained earnings 123,975 38,564 Total equity 476,515 395,387 Group Cash Flow StatementFor the year ended 31 December 2005 Year Year ended ended 2005 2004 Notes £'000 £'000 Cash generated from operations 9 182,055 193,712Income tax paid (44,564) (34,321) Net cash from operating activities 137,491 159,391 Investing activitiesInterest received 371 848Dividends received from associated undertakings 91 498Proceeds on disposal of property, plant and equipment 2,221 1,975Proceeds on disposal of available for sale investments 28 1,198Purchases of property, plant and equipment (63,642) (24,498)Acquisition of businesses (308,356) -Net cash in businesses acquired 9,931 - Net cash used in investing activities (359,356) (19,979) Financing activitiesDividends paid (21,826) (18,348)Interest paid (23,955) (26,455)Interest paid on finance leases (15) (27)Repayments of borrowings (157,679) (93,475)New borrowings 443,604 -Arrangement fees on new borrowings (1,505) -Principal payments under finance leases (16) (27)Issue of shares 3,901 3,245Purchase of own shares (567) (791)Decrease in bank overdrafts (5,082) (3,359) Net cash from/(used in) financing activities 236,860 (139,237) Net increase in cash and cash equivalents 14,995 175Cash and cash equivalents at the beginning of the year 10,119 9,944 Cash and cash equivalents at the end of the year 25,114 10,119 Notes to the Financial Information 1 Basis of Preparation The financial information set out in the announcement does not constitute theCompany's statutory financial statements for the years ended 31 December 2005 or2004. The financial information for the year ended 31 December 2004 is derivedfrom the statutory financial statements for that year which have been deliveredto the Registrar of Companies and which have been restated under IFRS. Theauditors reported on those financial statements; their report was unqualifiedand did not contain a statement under s. 237 (2) or (3) Companies Act 1985. Thestatutory financial statements for the year ended 31 December 2005 will befinalised on the basis of the financial information presented by the Directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies following the Company's Annual General Meeting. While the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The Company expects to publish full financial statementsthat comply with IFRSs in March 2006. 2 Non-Recurring Items Year ended Year ended 2005 2004 £'000 £'000 Restructuring costs of acquired businesses 591 -Restructuring costs of existing business 2,925 1,835Profit on sale of investments - (1,066)Profit on sale of property in existing business (902) - 2,614 769 3 Investment Income Year ended Year ended 2005 2004 £'000 £'000 Income from fixed asset investments 265 495Interest receivable 106 335 371 830 Non-recurringImpairment of available-for-sale investments - (708) 371 122 4 Finance Costs Year ended Year ended 2005 2004 £'000 £'000 Interest on pension liabilities 16,505 14,969Expected return on pension assets (17,026) (13,997) (521) 972Interest on bank overdrafts and loans 24,553 24,954Interest on obligations under finance leases 17 27Amortisation of term debt issue costs 968 1,986 25,017 27,939Non-recurringWrite off of term debt issue costs on old bank facility repaid 1,668 - 26,685 27,939 5 Tax Year ended Year ended 2005 2004 £'000 £'000 Current tax 36,806 45,061Deferred tax 6,766 (1,874) 43,572 43,187 UK corporation tax is calculated at 30% (2004 - 30%) of the estimated assessableprofit for the year. Taxation for other jurisdictions is calculated at therates prevailing in the relevant jurisdiction. The tax charge for the year can be reconciled to the profit per the incomestatement as follows: Year ended Year ended 2005 2004 £'000 % £'000 % Profit before tax 151,363 100 149,799 100 Tax at 30% 45,409 30 44,940 30Tax effect of share of results of associate (24) - (52) -Tax effect of expenses that are non deductible in determining taxable profit 102 0.1 114 0.1Tax effect of investment income (32) - (149) (0.1)Effect of different tax rates of subsidiaries (1,004) (0.7) - -Over provision in prior years (879) (0.6) (1,666) (1.2) Tax expense for the year and effective rate 43,572 28.8 43,187 28.8 6 Dividends Year ended Year ended 2005 2004 £'000 £'000Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 December 2004 of 4.8p (2003 - 4p) 13,695 11,360 Interim dividend for the year ended 31 December 2005 of 2.8p (2004 - 2.4p) 7,979 6,836 Preference Dividends13.75% Cumulative Preference Shares 104 10413.75% "A" Preference Shares 48 48 21,826 18,348 The proposed dividend to be considered by shareholders at the Annual GeneralMeeting is 5.6p per share making a total for the year of 8.4p. If approved atthe Annual General Meeting, the proposed dividend will be paid on 12 May 2006 toordinary shareholders on the register at 28 April 2006. 7 Earnings per Share The calculation of earnings per share are based on the following profits andweighted average number of shares: Year ended Year ended 2005 2004 £'000 £'000Earnings Profit for the year 107,791 106,612Preference dividend - (152) Earnings for the purposes of basic and diluted earnings per share 107,791 106,460Non-recurring items (after tax) 2,997 1,034 Earnings for the purposes of underlying earning per share 110,788 107,494 2005 2004 No. of shares No. of shares Number of sharesWeighted average number of ordinary shares for the purpose of basic earnings per share 285,762,958 284,567,734Weighted average number of preference shares for the purpose of basic earnings per share 1,105,600 - Number of shares for the purposes of basic earnings per share 286,868,558 284,567,734Effect of dilutive potential ordinary shares: - share options 1,826,349 2,593,694 Number of shares for the purposes of diluted earnings per share 288,694,907 287,161,428 Earnings per share (p)Basic 37.58 37.41Underlying 38.62 37.77Diluted 37.34 37.07 Underlying figures are presented to show the effect of excluding non-recurringitems from earnings per share. 8 Borrowings 2005 2004 £'000 £'000 Bank overdrafts 6,591 11,673Bank loans 443,604 156,796Guaranteed loan stock 60,761 39,440Private placement of 10 year senior notes 132,785 132,785 643,741 340,694 The borrowings are repayable as follows: On demand or within one year 47,892 78,566In the second year - 113,119In the third to fifth years inclusive 463,064 16,224After five years 132,785 132,785 643,741 340,694Less amount due for settlement within one year (47,892) (78,566) Amount due for settlement after one year 595,849 262,128 The borrowings are shown in the balance sheet net of term debt issue costs of£1,361,000 of which £288,000 is deducted from current liabilities (2004 -£2,492,000 of which £1,356,000 is deducted from current liabilities). The Group's net borrowings are: Gross borrowings as above 643,741 340,694Finance leases 72 39Term debt issue costs (1,361) (2,492)Cash and cash equivalents (25,114) (10,119) Net borrowings 617,338 328,122 9 Notes to Cash Flow Statement 2005 2004 £'000 £'000 Operating profit 177,677 177,616Adjustments for: Non-recurring items - (337) Depreciation of property, plant and equipment 19,923 19,506 Share of result of associate (81) (174) Currency differences 41 - Cost of long term incentive plan benefits 613 466 (Profit)/loss on disposal of property, plant and equipment (891) 285 Profit on sale of investments - (1,066) Movement on pension provision (16,566) (300) Operating cash flows before movements in working capital 180,716 195,996 Decrease/(increase) in inventories 371 (1,456) Decrease/(increase) in receivables 3,890 (4,805) (Decrease)/increase in payables (2,922) 3,977 Cash generated by operations 182,055 193,712 10 Explanation of Transition to IFRS This is the first year that the Group has presented its financial statementsunder IFRS. The last financial statements under UK GAAP were for the year ended31 December 2004 and the date of transition to IFRS was 1 January 2004. Differences between IFRS and UK GAAP Dividends - IAS 10, Events After the Balance Sheet Date Dividends proposed are disclosed but are not recognised as liabilities untilthey are appropriately approved by the shareholders. Employee Option and Performance Share Schemes - IFRS 2, Share-based Payments All transactions within the scope of IFRS 2 are measured based on the fair valueof the option or award at grant date and expensed to the Income Statement overthe vesting period of the scheme. Pension Costs - IAS 19, Employee Benefits Under IAS 19, the pension scheme liability is shown gross of the relateddeferred tax asset. Holiday Pay - IAS 19, Employee Benefits IAS 19 requires the recording of a holiday pay accrual. The holiday year of theGroup is the calendar year and no holidays can be carried forward. Consequently,no accrual is required at the year end but an accrual was made at 30 June 2004and 30 June 2005. Goodwill - IAS 38, Intangible Assets Under IAS 38 goodwill is not amortised. Instead it is subject to an annualimpairment review. Associates - IAS 28, Investment in Associates IFRS requires the share of profit of Associates to be shown post tax (IAS 1).Under UK GAAP this amount is shown before tax with the tax charge included aspart of the Group tax charge. Deferred Tax - IAS 12, Income Taxes IAS 12 requires a deferred tax liability to be recognised on all temporarytiming differences. Under this methodology, a potential liability arises fromthe value attributed to publishing rights and titles from previous acquisitions,together with any properties that do not qualify for tax allowances. As theGroup has elected, under IFRS 1, not to restate prior acquisitions at transitiondate to an IFRS 3 basis then recognition is against equity reserves rather thanagainst goodwill. Cash Flow The cash flow differences between UK GAAP and IFRS are all either movementswithin a classification (adjustments netting to zero) or presentational. Thereis no impact on the final cash position nor the movement in the period. The reconciliation of profit below, together with the explanations of thechanges, is provided to facilitate the understanding of changes arising from theadoption of IFRS. Reconciliation of profit for the year ended 31 December 2004 UK GAAP Effect of in IFRS transition format to IFRS IFRS £'000 £'000 £'000 Revenue 518,830 469 519,299Cost of sales (239,722) - (239,722) Gross Profit 279,108 469 279,577 Operating expenses: Non-recurring (769) - (769) Other (101,115) (251) (101,366)Share of results of associates 221 (47) 174 Operating profit 177,445 171 177,616Investment income - 122 122Finance costs (26,845) (1,094) (27,939) Profit before tax 150,600 (801) 149,799 Tax (43,460) 273 (43,187) Profit for the period 107,140 (528) 106,612 All the IFRS transitional statements were included in the Group's half yearstatement to 30 June 2005. 11 Posting to Shareholders and Annual General Meeting It is planned to post the Annual Report and Accounts to shareholders on Friday17 March 2006. The Annual General Meeting will take place on Friday 28 April2006 at noon in the Boardroom, The Caledonian Hilton Hotel, Princes Street,Edinburgh. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Johnston Press PLC