30th Aug 2006 07:02
Johnston Press PLC30 August 2006 For Immediate Release 30 August 2006 Johnston Press plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Johnston Press plc, one of the leading regional media groups in the UK andIreland, announces interim results for the six months ended 30 June 2006. KEY POINTS 2006 2005 Change £m £mRevenue 312.2 264.6 +18.0%Operating profit 99.4 93.0 +6.9%Profit before Tax 79.8 82.2 -2.9%Underlying earnings per share (note 7) 20.39p 20.57p -0.9%Interim Dividend 3.1p 2.8p +10.7% •Operating profit before non-recurring items and associates rose 7.8% to a record £101.6m - operating margins on acquired businesses of 23.9% and on existing business of 35.0%. •Period characterised by sustained downturn in advertising revenues. Like-for-like advertising down 8.8% - print down 9.2%, digital up 13.4% •Like-for-like newspaper sales revenue grew by 1.9% •Strong progress in Digital Publishing - double digit revenue growth, page impressions up 52%, unique users up 65% •Excellent cost management protecting margins •Major capital investment programmes at Dinnington and Portsmouth on track and within budget at just over £100m. Sheffield Star already being printed at Dinnington. •Good progress on integration of acquisitions with each achieving earnings enhancing performance in the period OUTLOOK Chief Executive, Tim Bowdler, said:"The second half has started as the first half finished with no discernibleimprovement in advertising revenues. Our assessment of the underlying marketconditions does not suggest any early recovery in revenue performance. The Groupcontinues to maintain a tight control of costs and will benefit from the firstfull year contributions from the acquisitions made over the past 12 months."With the steps we have taken in managing our cost structure and the clearstrategy in serving local communities, we consider the Group to be wellpositioned for any recovery in the advertising cycle." For further information please contact: Tim Bowdler, Chief Executive Officer orStuart Paterson, Finance Director 020 7466 5000 (today) or 0131 225 3361 (thereafter)Richard Oldworth/ Suzanne Brocks 020 7466 5000Buchanan Communications Chief Executive's Half Year Statement In the six months to 30 June 2006 Johnston Press increased operating profitbefore non-recurring items and associates by 7.8% to a record £101.6 million. Ofthis result, £16.1 million came from businesses acquired since July 2005 whichtogether achieved an operating margin of 23.9% on the same basis. The period wascharacterised by a sustained downturn in advertising revenues and an increase inthe cost of newsprint. Despite this, those businesses which operated throughout2005 produced an operating margin of 35.0% as shown in the table on page 3, onlymarginally down on the record level achieved in the previous year. The outcomereflects continued progress on containing costs and improving operatingefficiencies coupled with ongoing organic revenue growth initiatives both inprint and in our digital publishing activities. With recent acquisitions being funded entirely from new debt facilities and thecontinuing investment programme in the major printing press projects atDinnington near Sheffield and in Portsmouth, net debt at 30 June 2006 stood at£770 million. This represents a reduction of £30 million from peak borrowingsearlier in the year. Reflecting the increase in average net debt levels, financecosts rose to £20.0 million for the six months, up 83% on the same period lastyear. This amount included a pension credit of £1.5 million relating to IAS19.Interest cover was 4.6 times in 2006 excluding the pension credit. Non-recurring items in the period were £2.2 million. These were costs related tothe integration of our recent acquisitions of £2.0 million and restructuringcosts in the existing businesses of £1.7 million, offset by a gain on thedisposal of freehold premises in Aylesbury amounting to £1.5 million. It isexpected that there will be further costs associated with the integration of ourrecent acquisitions in the second half. Profit before tax was £79.8 million, a reduction of £2.4 million from the recordlevel attained in the first half of 2005. Underlying earnings per share, excluding non-recurring items, as shown in note7, fell marginally from 20.57p to 20.39p, a reduction of 0.9%. The interimordinary dividend payable on 3 November 2006 will be 3.1p, an increase of 10.7%. Acquisitions The only acquisition in the period was of The Scotsman Publications Limited(TSPL) for £160 million which completed on 4 January 2006. Details of theacquisition, with its flagship Scotsman title and Scotsman.com website, werecovered in my review of the year ended 31 December 2005. The primary management focus to date this year has been on the integration ofTSPL and of those acquisitions made during the second half of 2005. Goodprogress has been made and each of the acquired businesses achieved earningsenhancing performance by the end of the period with additional operating profitbefore non-recurring items exceeding the additional interest cost. In all cases,a new management structure is in place and performing well. Real progress hasbeen made with the introduction of new IT systems which conform to JohnstonPress standard practices. Benefits of increased scale have been captured andgood progress is being made in respect of opportunities for the rationalisationof back-room activities. New revenue opportunities have been identified andnecessary organisational changes are being addressed. References in this Report to like-for-like comparisons exclude the acquisitionsin the second half of 2005 and in the first half of 2006 from the 2006 figures.This allows a true comparison of the titles held in the 26 weeks to June 2006that were also owned by the Group in the corresponding period in 2005. Trading Review On a like-for-like basis, total print-based advertising revenues for the sixmonths fell by 9.2%. Digital advertising revenues increased by 13.4% reducingthe overall deficit to 8.8%. In print, property advertising was the onlycategory to exhibit growth, continuing its strong performance from the previousyear. Of the remaining categories, employment advertising experienced thegreatest reduction, reflecting a tighter employment market and efforts by publicand private sector employers to rein back costs. Motors advertising was alsovery weak as a result of continuing dealer consolidation and reduced new carsales. The reduction in display advertising reflected falling consumerconfidence and difficult trading in parts of the retail sector. General trading conditions did not show any sign of improvement through theperiod and we do not anticipate any early recovery in advertising revenues. Newspaper sales grew by 1.9% for the six months on a like-for-like basis withcover price increases more than offsetting circulation declines. Weeklynewspaper sales fared better than our daily titles but both experienced declinesat a very similar rate to their 2005 performance. Whilst management remainsfocused on actions to address circulation declines, equal effort is being placedon new product launches to layer our markets more effectively such that, whencombined with our rapidly growing digital platforms, we deliver an increasedtotal audience resulting in improved advertiser reach and response. Examples of new products launched in the first half include more than 30community newsletters. These are targeted at new advertisers and are publishedfor small rural communities or selected suburbs of larger cities. We alsolaunched a number of niche publications with lifestyle themes within the variedcommunities we serve. In order to provide a like-for-like summary of the results in the first half of2006 compared with 2005, the table below analyses the turnover and operatingprofit in 2006 between the acquisition in 2006, the acquisitions in 2005 and thebusinesses that were in place throughout the first half of 2005. On a like-for-like basis the table shows very clearly how we have been able tomitigate the £20 million loss in revenue by £11 million in cost savings despitefacing a 7% increase in newsprint costs and other inflationary increases. ------- ------------------------ 26 weeks to 30 June 2006 ------- ----------- ------------ ---------- --------- TOTAL Acquisition Acquisitions Like-for -like TOTAL 2006 in 2006 in 2005 2006 2005 £'m £'m £'m £'m £'m Advertisingrevenues 227.0 22.0 22.7 182.3 200.8Digital 5.4 0.5 0.1 4.8 4.2-------------- -------- --------- --------- --------- -------- 232.4 22.5 22.8 187.1 205.0Newspaper sales 51.6 7.4 8.6 35.6 35.0Contractprinting 12.9 0.0 4.0 8.9 9.4Other revenues 15.3 1.5 0.7 13.1 15.2-------------- -------- --------- --------- --------- --------Total revenues 312.2 31.4 36.1 244.7 264.6Costs 210.6 26.1 25.3 159.2 170.3-------------- -------- --------- --------- --------- --------Operatingprofit* 101.6 5.3 10.8 85.5 94.3-------------- -------- --------- --------- --------- --------Operatingmargin* 32.6% 16.9% 29.9% 35.0% 35.6%-------------- -------- --------- --------- --------- -------- *pre non-recurring items and associates Digital Publishing We continue to make good progress with the development of our digital publishingactivities, with double digit revenue growth and rapidly increasing pageimpressions and unique users up on a like-for-like basis by 52% and 65%respectively. Our three main Today branded classified sites covering Jobs,Property and Motors have been substantially upgraded and re-launched. Customerand user reaction has been very positive. Our added value on-line services andin particular CV matching and Local Pages, a web-based directory, continue toexhibit strong revenue growth as a result of increasing usage. In June, we gave a detailed presentation to major investors and analysts toprovide a better understanding of our digital publishing activities. Thepresentation can be viewed on our corporate website at www.johnstonpress.co.uk.A centrepiece of the presentation was an illustration of the "Newsroom of theFuture" project which we are developing in Preston. This project has resulted ina re-structuring of the newsroom with the appointment of digitally experiencedjournalists and related staff and a major re-training programme. News is nowbeing gathered for simultaneous dissemination across a variety of print anddigital platforms and includes the use of self generated audio visual content.Unique users and page impressions have grown strongly during the project. Capital Investment The major capital investment programmes at Dinnington near Sheffield and inPortsmouth for the provision of state-of-the-art high volume printing facilitiescontinue to plan and with total projected expenditure remaining under budget atmarginally in excess of £100 million. The new press at Dinnington has been commissioned and is now printing the dailySheffield Star on a continuous basis. Performance and print quality are bothexcellent. This investment has allowed us to announce plans to close old pressesin Hartlepool, Sheffield and Wakefield, in addition to the closures alreadycompleted at Halifax and Scarborough. We have also announced the proposedre-organisation of our printing activities in Northern Ireland with the closureof the presses in Belfast and at the Derry Journal. The Portsmouth project isexpected to be completed in the third quarter of 2007 and the building work isnow substantially completed. Organisation In April 2006 Alex Green was appointed Director of Digital Publishing. Alex hasspent 12 years growing businesses in converging areas of media and technology,including senior roles at News International and the Virgin Group. The only other senior management changes included the internal appointment ofRoger Davies as Group Head of IT, replacing Graham Gould on his retirement.Graham held a number of senior roles since he joined the Group in 1987 and hasbeen a key contributor to the success of Johnston Press. His retirementcoincided with that of Stuart McPherson who also played a leading role in theGroup over many years, latterly as Managing Director of our Scottish Division. Outlook The second half has started as the first half finished with no discernibleimprovement in advertising revenues. Our assessment of the underlying marketconditions does not suggest any early recovery in revenue performance. The Groupcontinues to maintain a tight control of costs and will benefit from the firstfull year contributions from the acquisitions made over the past 12 months. With the steps we have taken in managing our cost structure and the clearstrategy in serving local communities, we consider the Group to be wellpositioned for any recovery in the advertising cycle. Tim BowdlerChief Executive Officer30 August 2006 Independent Review Report to Johnston Press plc26 Weeks to 30 June 2006 We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006 which comprises the group income statement,group balance sheet, group cash flow statement, group statement of recognisedincome and expense, group reconciliation of shareholders' equity and relatednotes 1 to 15. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Deloitte & Touche LLPChartered AccountantsEdinburghUnited Kingdom30 August 2006 Group Income Statement (unaudited)26 Weeks to 30 June 2006 Notes 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Revenue 3a 312,245 264,579 520,154 Operating profit 99,428 93,031 177,677------------------ ------ ---------- ---------- ----------Comprising:Operating profit beforenon-recurring items andassociates 3b 101,639 94,260 180,210Non-recurring items 4 (2,237) (1,273) (2,614)Share of results ofassociates 26 44 81------------------ ------ ---------- ---------- ----------Operating profit 3c 99,428 93,031 177,677------------------ ------ ---------- ---------- ----------Investment income 8 405 155 371Finance costs 9 (20,049) (10,968) (26,685)------------------ ------ ---------- ---------- ----------Profit before tax 79,784 82,218 151,363Tax 5 (22,640) (24,167) (43,572)------------------ ------ ---------- ---------- ----------Profit for the period 57,144 58,051 107,791------------------ ------ ---------- ---------- ---------- Pence Pence PenceEarnings per share 7Underlying earnings pershare 20.39 20.57 38.62Non-recurring items (0.56) (0.31) (1.04)------------------ ------ ---------- ---------- ----------Earnings per share - basic 19.83 20.26 37.58------------------ ------ ----------- ---------- ---------- Earnings per share - diluted 19.75 20.10 37.34------------------ ------ ----------- ---------- ---------- All of the revenue and profit above is derived from continuing operations Group Balance Sheet (unaudited)At 30 June 2006 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Restated (note 13)Non-current assetsGoodwill 130,351 107 101,635Other intangible assets 1,356,833 927,914 1,213,186Property, plant and equipment 258,902 162,299 222,178Available-for-sale investments 2,712 2,712 2,712Interests in associates 44 48 48Trade and other receivables 436 50 893------------------------ ---------- ---------- ---------- 1,749,278 1,093,130 1,540,652------------------------ ---------- ---------- ---------- Current assetsInventories 3,973 2,699 4,861Trade and other receivables 93,217 73,308 70,204Cash and cash equivalents 24,991 21,871 25,114------------------------ ---------- ---------- ---------- 122,181 97,878 100,179------------------------ ---------- ---------- ----------Total assets 1,871,459 1,191,008 1,640,831------------------------ ---------- ---------- ----------Current liabilitiesTrade and other payables 71,020 58,184 73,351Tax liabilities 21,472 28,158 16,854Obligations under finance leases 29 16 60Retirement benefit obligation 4,350 - 4,350Bank overdrafts and loans 8,799 86,533 47,604Derivative instruments 598 - ------------------------- ---------- ---------- ---------- 106,268 172,891 142,219------------------------ ---------- ---------- ----------Non-current liabilitiesBorrowings 786,547 246,153 594,776Obligations under finance leases 5 8 12Retirement benefit obligation 54,455 55,586 50,839Derivative instruments 8,512 11,151 9,234Deferred tax liabilities 386,767 270,526 361,908Trade and other payables 2,370 2,693 2,821Long term provisions 2,455 1,668 2,507------------------------ ---------- ---------- ---------- 1,241,111 587,785 1,022,097------------------------ ---------- ---------- ----------Total liabilities 1,347,379 760,676 1,164,316------------------------ ---------- ---------- ----------Net assets 524,080 430,332 476,515------------------------ ---------- ---------- ---------- 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Restated (note 13)EquityShare capital 29,852 29,688 29,772Share premium account 330,018 325,176 327,437Share-based payments reserve 3,464 1,980 2,770Revaluation reserves 2,555 2,801 2,587Own shares (509) (1,057) (749)Hedging and translation reserve (6,303) (11,151) (9,277)Retained earnings 165,003 82,895 123,975------------------------ ---------- ----------- ----------Total equity 524,080 430,332 476,515------------------------ ---------- ----------- ---------- Group Cash Flow Statement (unaudited)26 Weeks to 30 June 2006 Notes 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000Cash flows from operating activitiesCash generated fromoperations 11 88,196 76,544 182,055Income tax paid (16,415) (20,975) (44,564)----------------------- ------ --------- --------- ---------Net cash fromoperatingactivities 71,781 55,569 137,491----------------------- ------ --------- --------- ---------Investing activitiesInterest received 405 155 371Dividends received from associatedundertakings 30 54 91Proceeds on disposal of property,plant and equipment 3,077 517 2,221 Proceeds on disposal of available-for-saleinvestments - 28 28Purchases of property, plant and equipment (32,391) (15,563) (63,642) Acquisition of businesses (165,818) (357) (308,356)Net cash in businesses acquired 5,225 - 9,931----------------------- ------ --------- --------- ---------Net cash used in investing activities (189,472) (15,166) (359,356)----------------------- ------ --------- --------- ---------Financing activitiesDividends paid (16,148) (13,755) (21,826)Interest paid (21,699) (9,667) (23,955)Interest paid on finance leases (14) (9) (15)Repayments of borrowings (38,352) (11,124) (157,679)New borrowings 194,761 - 443,604Arrangement fees on new borrowings (548) - (1,505)Principal payments under finance leases (38) (15) (16)Issue of shares 2,661 1,556 3,901Purchase of own shares - (567) (567)(Decrease)/increase in bank overdrafts (3,055) 4,930 (5,082)----------------------- ------ --------- --------- ---------Net cash used in /(received from)financing activities 117,568 (28,651) 236,860----------------------- ------ --------- --------- ---------Net (decrease)/increase in cashand cash equivalents (123) 11,752 14,995Cash and cash equivalents atthe beginning of period 25,114 10,119 10,119----------------------- ------ --------- --------- ---------Cash and cash equivalents atthe end of period 24,991 21,871 25,114----------------------- ------ --------- --------- --------- Group Statement of Recognised Income and Expense (unaudited)26 Weeks to 30 June 2006 Share Capital Share Premium Share based Revaluation Own Shares Hedging and Retained Total Payments Reserve Translation Earnings Reserve Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Profit for theperiod - - - - - - 57,144 57,144Revaluation adjustment - - - (32) - - 32 -Exchange differences ontranslation of foreignoperations - - - - - 117 - 117Change in fair value offinancial instruments - - - - - 124 - 124(note 10)Deferred taxation - - - - - 2,733 - 2,733------------- ------- -------- -------- -------- -------- --------- ------- -------Total recognisedincome and expense - - - (32) - 2,974 57,176 60,118------------- ------- -------- -------- -------- -------- --------- ------- ------- Group Reconciliation of Shareholders' Equity (unaudited)26 Weeks to 30 June 2006 Share Capital Share Premium Share based Revaluation Own Shares Hedging and Retained Total Payments Reserve Translation Earnings Reserve Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 29,772 327,437 2,770 2,587 (749) (9,277) 123,975 476,515------------- ------- -------- -------- -------- ------- -------- -------- --------Total recognisedincome and expense - - - (32) - 2,974 57,176 60,118------------- ------- -------- -------- -------- ------- -------- -------- --------Recognised directly inequity - - - - - - (16,148) (16,148)Dividends - note 6New share capitalsubscribed 80 2,581 - - - - - 2,661 Own shares written off - - - - 240 - - 240------------- ------- -------- -------- -------- ------- -------- -------- --------Provision for share -based payments - - 694 - - - - 694 ------------- ------- -------- -------- -------- ------- -------- -------- --------Net change directly inequity 80 2,581 694 - 240 - (16,148) (12,553)------------- ------- -------- -------- -------- ------- -------- -------- -------- Total movements 80 2,581 694 (32) 240 2,974 41,028 47,565 ------------- ------- -------- -------- -------- ------- -------- -------- --------Equity at theend of the period 29,852 330,018 3,464 2,555 (509) (6,303) 165,003 524,080------------- ------- -------- -------- -------- ------- -------- -------- -------- Notes to the Interim Financial Information(unaudited) 1. Basis of Preparation The financial information for the 26 weeks to 30 June 2006 does not constitutestatutory accounts for the purposes of Section 240 of the Companies Act 1985 andhas not been audited. No statutory accounts for the period have been deliveredto the Registrar of Companies. The financial information in respect of the 52 weeks ended 31 December 2005 hasbeen produced using extracts from the statutory accounts for this period.Consequently, this does not constitute the statutory information for the 52weeks ended 31 December 2005 which was audited. The statutory accounts for thisperiod have been filed with the Registrar of Companies. The auditors' report onthese accounts was unqualified and did not contain a statement under Sections237 (2) or (3) of the Companies Act 1985. The next annual financial statements of the Group to 31 December 2006 will beprepared in accordance with International Financial Reporting Standards asadopted for use in the EU ("IFRS"). This Interim Report has been prepared inaccordance with the recognition and measurement criteria of IFRS and thedisclosure requirements of the Listing Rules. The auditors have reviewed this Interim Report and their report is set out onpage 5. The Interim Report was approved by the directors on 30 August and is being sentto shareholders on the same date. It is also available on the Company's websiteat www.johnstonpress.co.uk. The interim financial information has been prepared on the historical costbasis, except for the revaluation of certain properties and financial instruments. 2. Accounting Policies The accounting policies used in the preparation of the financial information forthe 26 weeks to 30 June 2006 have been consistently applied to all the periodspresented and are set out in full in the Group's financial statements for the 52weeks to 31 December 2005. A copy of these financial statements is availablefrom the Company's registered office at 53 Manor Place, Edinburgh EH3 7EG. 3. Business Segments For management purposes the Group has two business segments, newspaperpublishing (in print and online) and contract printing. The business operates intwo geographical segments which are the United Kingdom and the Republic ofIreland. Revenue and the carrying value of assets in the Republic of Ireland areless than 10 per cent of the Group total in the current period and so have notbeen disclosed separately. a) Revenue An analysis of the Group's revenue is as follows: ----------------------- 26 Weeks to 30.06.06 26 Weeks 52 Weeks to 30.06.05 to 31.12.05 Existing Acquisitions Total Existing Existing £'000 £'000 £'000 £'000 £'000Newspaper 267,984 31,365 299,349 255,656 499,041publishingContract printing 12,896 - 12,896 8,923 21,113------------- -------- ---------- -------- --------- ---------Revenue sub total 280,880 31,365 312,245 264,579 520,154Investment Income 405 - 405 155 371------------- -------- ---------- -------- --------- ---------Total revenue 281,285 31,365 312,650 264,734 520,525------------- -------- ---------- -------- --------- --------- The printing revenues excludes inter group revenue of £35.4 million in the 26weeks to 30 June 2006, £31.6 million in the 26 weeks to 30 June 2005 and £60.0 million in the 52 weeks to 31 December 2005. Notes to the Interim Financial Information(unaudited) - continued 3. Business Segments (continued) b) Operating profit before non-recurring items and associatesAn analysis is as follows: ----------------------- 26 Weeks to 30.06.06 26 Weeks to 52 Weeks to 30.06.05 31.12.05 Existing Acquisitions Total Existing Existing £'000 £'000 £'000 £'000 £'000Newspaperpublishing 93,051 5,304 98,355 92,008 175,809Contractprinting 3,284 - 3,284 2,252 4,401------------- -------- --------- --------- --------- --------- 96,335 5,304 101,639 94,260 180,210 ------------- -------- --------- --------- --------- --------- c) Operating profit An analysis of the Group's operating profit is as follows: ----------------------- 26 Weeks to 30.06.06 26 Weeks to 52 Weeks to 30.06.05 31.12.05 Existing Acquisitions Total Existing Existing £'000 £'000 £'000 £'000 £'000 Newspaperpublishing 92,646 3,761 96,407 90,735 173,195Contractprinting 2,995 - 2,995 2,252 4,401------------- -------- --------- --------- --------- --------- 95,641 3,761 99,402 92,987 177,596Share of resultsof associates 26 - 26 44 81------------- -------- --------- --------- --------- ---------Operatingprofit 95,667 3,761 99,428 93,031 177,677------------- -------- --------- --------- --------- --------- 4. Non-Recurring Items 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Restructuring costs ofExisting businesses 1,682 1,273 2,925Newly acquired businesses 2,029 - 591Profit on sale of freehold land andbuildings (1,474) - (902)------------------- ------------ ------------ ------------Non-recurring items 2,237 1,273 2,614------------------- ------------ ------------ ------------ Notes to the Interim Financial Information(unaudited) - continued 5. Tax 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Corporation tax 21,124 24,319 36,806Deferred tax 1,516 (152) 6,766--------------------- ----------- ----------- ------------Total tax charge 22,640 24,167 43,572--------------------- ----------- ----------- ------------ Reconciliation of tax chargeStandard rate of corporation tax 30% 30% 30%Profit before tax at standardcorporation tax rate 23,935 24,665 45,409Tax effect of items that are notdeductible or not taxable indetermining taxable profit 100 120 102Tax effect of share of results ofassociate (11) (13) (24)Effect of different tax rates onsubsidiaries (1,086) - (1,004)Other items (314) (605) (32)Prior year adjustment 16 - (879)--------------------- ----------- ----------- ------------Total tax charge 22,640 24,167 43,572--------------------- ----------- ----------- ------------ Corporation tax for the interim period is charged at 28.4% (2005: 29.4%),representing the best estimate of the weighted average annual corporation taxrate expected for the full financial year. 6. Dividends 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000Amounts recognised as distributions inthe period:Dividends paidOrdinary 16,072 13,679 21,674Preference 76 76 152--------------------- ----------- ----------- ----------- 16,148 13,755 21,826--------------------- ----------- ----------- ----------- Pence Pence PenceDividend paid per shareOrdinary 5.600 4.800 7.600Preference 6.875 6.875 13.750--------------------- ----------- ----------- ----------- £'000 £'000 £'000Dividend proposed but not paid orincluded in the accounting records 8,911 8,003 16,053--------------------- ----------- ----------- ----------- Pence Pence PenceDividend proposed per share 3.1 2.8 5.6--------------------- ----------- ----------- ----------- The interim ordinary dividend of 3.1p per share (2005: 2.8p) is payable on 3 November 2006 to shareholders on the register at close of business on 13 October 2006. Notes to the Interim Financial Information(unaudited) - continued 7. Earnings Per Share 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Profit after tax for basic EPS earnings 57,144 58,051 107,791Non-recurring items (after tax) -see notes 4 and 9 1,600 891 2,997--------------------- ----------- ----------- -----------Underlying EPS earnings 58,744 58,942 110,788--------------------- ----------- ----------- ----------- Number of Shares 000's 000's 000'sWeighted number of ordinary sharesfor the purpose of basic EPS 287,057 285,405 285,763Weighted number of preference sharesfor basic EPS calculation 1,106 1,106 1,106--------------------- ----------- ----------- -----------Number of shares - basic earningsper share 288,163 286,511 286,869Effect of dilutive potential ordinaryshares- share options 1,166 2,282 1,826--------------------- ----------- ----------- -----------Number of shares - diluted earningsper share 289,329 288,793 288,695--------------------- ----------- ----------- ----------- Pence Pence PenceEarnings per shareUnderlying earnings per share 20.39 20.57 38.62Non-recurring items (0.56) (0.31) (1.04)--------------------- ----------- ----------- -----------Earnings per share - basic 19.83 20.26 37.58--------------------- ----------- ----------- -----------Earnings per share - diluted 19.75 20.10 37.34--------------------- ----------- ----------- ----------- 8. Investment Income 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Interest on bank deposits 78 49 106Income from available-for-saleinvestments 327 106 265-------------------- ------------ ----------- ----------- 405 155 371-------------------- ------------ ----------- ----------- 9. Finance Costs 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Interest on pension liabilities 7,350 8,267 16,505Expected return on pension assets (8,822) (8,375) (17,026)-------------------- ------------ ----------- ----------- (1,472) (108) (521)Interest on bank overdrafts and loans 21,347 10,389 24,553Interest on obligations underfinance leases 14 9 17Amortisation of term debt issue costs 160 678 968-------------------- ------------ ----------- ----------- 20,049 10,968 25,017Non-recurring write-off term debtissue costs on bank facility repaid - - 1,668-------------------- ------------ ----------- -----------Total finance costs 20,049 10,968 26,685-------------------- ------------ ----------- ----------- Notes to the Interim Financial Information(unaudited) - continued 10. Derivative Financial Instruments The Group has applied hedge accounting in accordance with the provisions of IAS 39. The fair value of the Group's financial instruments is as follows: 26 Weeks to 30.6.06 £'000 LiabilitiesCross-currency and other interest rate swaps Closing balance at 31 December 2005 9,234Movement in fair value during the period including exchangemovements (124)------------------------------------- -------------- Closing balance at 30 June 2006 9,110------------------------------------- -------------- Current 598Non-current 8,512------------------------------------- -------------- 11. Notes to the Cash Flow Statement 26 Weeks to 26 Weeks to 52 Weeks to 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Operating profit 99,428 93,031 177,677 Adjustment for:Non-recurring items - (160) -Depreciation of property, plant andequipment 10,011 10,792 19,923Share of result of associate (26) (44) (81)Cost of LTIP benefits 240 305 613(Profit)/loss on disposal ofproperty, plant and equipment (1,583) 103 (891)Currency differences 94 - 41IAS 19 pension funding (944) (15,000) (16,566)Decrease in inventories 1,652 1,718 371(Increase)/decrease in receivables (16,735) (13,197) 3,890Decrease in payables (3,941) (1,004) (2,922)------------------------- ---------- ---------- ----------Cash generated from operations 88,196 76,544 182,055------------------------- ---------- ---------- ---------- Notes to the Interim Financial Information(unaudited) - continued 12. Net Debt Cash Non-cash 1.1.06 Flow Changes 30.6.06Net debt £'000 £'000 £'000 £'000 Debts due after one yearBank loans (443,604) (111,718) - (555,322)Loan notes (19,459) 2,709 - (16,750)Senior notes (132,785) (83,043) - (215,828)Finance leases (12) 7 - (5)Term debt issue costs 1,072 441 (160) 1,353--------------------- --------- --------- --------- -------- (594,788) (191,604) (160) (786,552)--------------------- --------- --------- --------- --------Debts due within one yearBank overdraft (6,591) 3,055 - (3,536)Loan notes (41,302) 35,643 - (5,659)Finance leases (60) 31 - (29)Term debt issue costs 289 107 - 396--------------------- --------- --------- --------- -------- (47,664) 38,836 - (8,828)--------------------- --------- --------- --------- --------Cash and cash equivalents 25,114 (123) - 24,991--------------------- --------- --------- --------- --------Net debt (617,338) (152,891) (160) (770,389)--------------------- --------- --------- --------- -------- The analysis of net debt is as follows: 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Cash and cash equivalents 24,991 21,871 25,114Bank overdrafts (3,536) (16,603) (6,591)-------------------- --------- --------- --------- ---------Net cash balances 21,455 5,268 18,523-------------------- --------- --------- --------- ---------Debt due within one year (5,263) (69,930) (41,013)Debt due after one year (786,547) (246,153) (594,776)Finance leases (34) (24) (72)-------------------- --------- --------- --------- --------- Bank loans, bank notes andfinance leases (791,844) (316,107) (635,861)-------------------- --------- --------- --------- ---------Net debt (770,389) (310,839) (617,338)-------------------- --------- --------- --------- --------- 13. Share-Based Payments The Group issues share-based benefits to employees. These share-based paymentshave been measured at their fair value at the date of grant and the fair valueof expected shares is being expensed to the Income Statement on a straight-linebasis over the vesting period. Fair value has been measured using the BlackScholes model and adjusted to reflect the most likely share vesting and exercisepattern. The impact on the accounting periods has been: 30.6.06 30.6.05 31.12.05 £'000 £'000 £'000 Included in operating expenses 694 506 1,296Deferred taxation (208) (152) (389)--------------------- ----------- ----------- ------------ The cumulative provision for share-based payments of £3,464,000 (2005:£1,980,000) is shown as a reserve on the balance sheet. The original financialstatements to 30 June 2005 included the provision for share-based payments of£1,980,000 in long-term provisions but this has been adjusted in thecomparatives within this Report to reflect the correct treatment. Notes to the Interim Financial Information(unaudited) - continued 14. Acquisition On 4 January 2006, the Group acquired 100 per cent of the issued share capitalof The Scotsman Publications Ltd for a cash consideration of £95,704,000, acompany involved in newspaper publishing. This transaction has been accountedfor by the purchase method of accounting. The net assets acquired, and the goodwill arising, are as follows: Book Fair value Fair Value Adjustments Value £'000 £'000 £'000 Goodwill - 43,094 43,094Other intangible assets 97,219 46,428 143,647Other non-current assets 23,166 (2,763) 20,403Current assets 11,918 (19) 11,899Current liabilities (6,349) (189) (6,538)Pension liability (6,032) - (6,032)Deferred taxation 1,810 (42,265) (40,455)Loan to parent company (26,340) - (26,340)Bank loan (43,000) - (43,000)------------------------ ---------- ---------- ---------- 52,392 44,286------------------------ ---------- ---------- ----------Total consideration 96,678------------------------ ---------- ---------- ---------- Satisfied by:Cash 95,704Directly attributable costs 974------------------------ ---------- ---------- ---------- 96,678------------------------ ---------- ---------- ---------- Net cash flows arising on consolidationCash consideration 96,478Net debt settled at acquisition 69,340------------------------ ---------- ---------- ---------- 165,818Cash and cash equivalents acquired (5,225)------------------------ ---------- ---------- ----------Net cash flow arising on completion 160,593------------------------ ---------- ---------- ---------- The resultant impact of this acquisition on goodwill and other intangible assetsis as follows: Goodwill Publishing Titles £'000 £'000CostAt 1 January 2006 101,635 1,213,186Acquisition 43,094 143,647Adjustment - see note below (14,378) ------------------------------- ----------- -----------At 30 June 2006 130,351 1,356,833------------------------------ ----------- -----------Accumulated impairment lossesAt 1 January 2006 and 30 June 2006 - ------------------------------- ----------- -----------Carrying amountAt 30 June 2006 130,351 1,356,833------------------------------ ----------- -----------At 31 December 2005 101,635 1,213,186------------------------------ ----------- ----------- The adjustment relates to an amendment to the provisional fair value accountingof the overseas publishing titles acquired in 2005. Deferred taxation wasprovided at the UK rate of 30% until the split of the value of the publishingtitles acquired was finalised. This has been completed in 2006 and theadjustment reflects the impact of the reduced rate of taxation on the value ofthe titles acquired in the Republic of Ireland in line with IAS 12. 15. Pension obligation The valuation of the Group's pension scheme is updated at the end of eachaccounting year and at the half year if circumstances warrant or there has beena material change in the basic assumptions. The assumptions used and fulldetails of the valuation at 31 December 2005 are outlined in the financialstatements to that date. Following the acquisition of The Scotsman Publications Ltd on 4 January 2006 theGroup now has a second pension scheme, The Scotsman Publications Pension Plan(SPPP). The Group is looking to merge this into the Johnston Press Pension Plan(JPPP) before the end of 2006. Although there is no movement in the current retirement pension obligation of£4.35 million, the movement in the non-current liability retirement pensionobligation is as follows: JPPP SPPP Total £'000 £'000 £'000 Obligation at 31 December 2005 50,839 - 50,839 Acquisition - 6,032 6,032 Funding to the pension scheme in additionto the current service cost (note 11) (737) (207) (944)Net finance credit (note 9) (1,472) - (1,472)---------------------- ----------- ----------- ----------- 48,630 5,825 54,455---------------------- ----------- ----------- ----------- 16. The Interim Statement is being sent to shareholders. Further copies will beavailable from the Company's registered office at 53 Manor Place, Edinburgh EH3 7EG This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Johnston Press PLC