29th Aug 2007 07:01
Johnston Press PLC29 August 2007 For Immediate Release 29 August 2007 INTERIM RESULTS FOR THE TWENTY SIX WEEKS ENDED 30 JUNE 2007 Johnston Press plc, one of the leading community media groups in the UK andIreland, announces interim results for the twenty six weeks ended 30 June 2007. KEY POINTS Before non-recurring items After non-recurring items ---------------------------- --------------------------- 2007 2006 2007 2006 26 Weeks 26 Weeks % 26 Weeks 26 Weeks % £m £m change £m £m change Revenue 312.8 312.2 0.1 312.8 312.2 0.1Operating Profit 96.7 101.6 -4.8 88.0 99.4 -11.5Profit after tax 55.1 58.7 -6.1 73.2 57.1 28.2Earnings per share 19.12p 20.44p -6.5 25.40p 19.88p 27.8Interim Dividend pershare 3.3p 3.1p 6.5 3.3p 3.1p 6.5 Because of the extent of the adjustments relating to the change in the rate ofCorporation Tax from 30% to 28% and the way in which we are required to reflectthese in the Income Statement under International Accounting Standards, thehighlights below relate to the before non-recurring figures above. • Operating profit was 4.8% lower at £96.7m on turnover very slightly ahead at £312.8m. • Operating margin of 30.9% (2006:32.6%) achieved against background of continued, though slowing, decline in advertising revenues, a further modest increase in newsprint prices and increased investment in digital publishing. • Overall advertising revenues down 1.5%. • Rate of decline in UK print-based advertising reduced from 9.2% to 2.9%. • Digital revenues continued strong growth with rise of 33.5%. Unique users grew 31% to 7.9 million per month and page impressions were 40% ahead at 76.2 million per month. • Advertising revenue in the Republic of Ireland grew 10.0%. • UK newspaper sales revenues marginally up by 0.5%. • Focus on building new revenue streams in both print and especially digital channels, whilst containing costs through continued improvements in operating efficiencies. • "Newsroom of the future" roll-out completed ahead of plan. • Greatly enhanced "Jobs Today" site relaunched with heavy advertising and promotional support. • Increased printing revenues from new Dinnington press. OUTLOOK Chief Executive, Tim Bowdler, said: "The month of July has seen a continuation of the improving month-on-monthadvertising trends in the UK. Costs remain under good control and new publishinginitiatives, especially in the digital area, continue to produce strong growth,albeit from a small base. These factors, coupled with a reported first halfprofit before non-recurring items being marginally ahead of City expectations,lead us to anticipate a satisfactory outcome for the year as a whole". For further information please contact:Tim Bowdler, Chief Executive Officer or 020 7466 5000 (today) orStuart Paterson, Chief Financial Officer 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 2007, the Group recorded an operating profit beforenon-recurring items of £96.7 million (2006 £101.6 million). This represented anoperating margin of 30.9% (2006 32.6%) and was achieved against a background ofa continued, though slowing, decline in advertising revenues, a further modestincrease in newsprint prices and increased investment in our digital publishingactivities. During the period, the Group's focus has been on building new revenue streams inboth print and especially digital channels, whilst containing costs throughcontinued improvements in operating efficiencies. The latter was assisted by ourinvestment programmes in common IT systems and the benefits arising from ourmajor new printing plant at Dinnington in South Yorkshire. The trading results for 2007 were impacted by the additional digital investmentof £2.5 million referred to above and in the 2006 Annual Report. A furtherequivalent amount will be invested in the second half of 2007. Net debt at 30 June 2007 was £733.1 million (June 2006 £770.4 million), areduction of £13.3 million since the start of the year despite the £11.2 millioncost of acquiring the Archant Ltd titles in Scotland. Finance costs for theperiod were £23.0 million (2006 £21.5 million), reflecting the fact that reducedaverage net debt levels were more than offset by the effect of increasedinterest rates. Interest cover was 4.4 times. Non-recurring items within operating expenses in the period were £3.1 million(2006 £2.2 million). These costs were related to actions we have taken tofundamentally restructure the business for the future and include the closure ofold presses in Falkirk, Peterhead and Portsmouth and of pre-press departments inFalkirk, Chesterfield and Scarborough. There was also a reduction in goodwill of£5.7 million related to a tax adjustment of an equal and opposite amount andthis is explained later in this statement. After taking account of thistechnical IFRS adjustment, the resultant profit before tax was £67.5 million(2006 £79.8 million). Profit before tax and non-recurring items was £76.3million (2006 £82.0 million). Underlying earnings per share, excluding non-recurring items, were 19.12p (200620.44p), a reduction of 6.5%. The interim ordinary dividend payable on 2November 2007 will be 3.3p (2006 3.1p), an increase of 6.5%. In his recent Budget, the Chancellor reduced the rate of UK Corporation Tax to28% effective from April 2008. The impact of this reduction has been reflectedin the deferred taxation provision where the timing differences are unlikely toreverse before April next year. Trading Review In this trading review the advertising statistics are like-for-like, excludingthe eight titles acquired from Archant Ltd and Farm Week, which was sold inDecember 2006. Overall advertising revenues declined by 1.5% in the period with digitalrevenues continuing to grow strongly, up 33.5%. UK total print-based advertisingfor the six months fell by 2.9%. The rate of decline has diminished considerablywhen compared with the comparative period in 2006 for which the figure was afall of 9.2%. Encouragingly, though largely due to weaker comparatives, relativemonth-to-month performance improved progressively through the half-year withJune suffering a reduction of just 1.3%. Advertising revenue in the Republic ofIreland increased by 10.0%. Property advertising, which increased by 6.8%, was the only category to exhibitgrowth, continuing its strong run since 2002. Whilst employment advertising fellby 4.3%, this represented a considerable improvement over the comparable periodwhen a 21.5% decline was reported. Although also showing a diminishing rate ofdecline, motors advertising remained the weakest performing category with areduction of 8.4%. The "others" category fell marginally by 2.0% but within thissegment of our advertising, entertainments, private announcements and publicnotices all produced growth. The decline of 6.5% in display advertising was primarily the result of continuedweakness in local markets, although national display advertising also reduced,albeit at a lesser rate. Our focus on increasing the number and quality ofGroup-wide advertising platforms did result in new display revenues, an examplebeing a dedicated supplement covering the smoking ban in England which attractedsupport from the Central Office of Information and the NHS. UK newspaper sales revenues increased marginally by 0.5% with selective coverprice increases more than compensating for reduced circulations. The greatestdeclines were again experienced by our daily titles with both daily and weeklysectors experiencing similar reductions to recent prior periods. Someencouragement can be gleaned from the improving trends experienced in the latterstages of the half-year though in part this reflects poor comparative sales inthe equivalent period in 2006 due to the Football World Cup. With a decline of1.8%, the (Belfast) Newsletter, where we appointed a new editor during 2006, wasour best performing daily title, closely followed by the Sunderland Echo with areduction of 2.3%, benefiting from the success of the local football club. Our strategy of launching new print publications to layer our markets, therebyextending audience reach, continued throughout the first half and included thelaunch of 68 community newsletters in both urban and rural areas. Digital Publishing We have continued to make excellent progress in our digital publishingoperations which also play an essential part in achieving our objective ofreaching a growing audience in all our local communities. Unique users in thefirst half grew by 31% to 7.9 million per month and page impressions were 40%ahead at 76.2 million per month, a performance which has enabled us to maintainthe strong revenue growth mentioned earlier. The significant expansion of ourdigital operations has progressed according to plan with increased resourceshaving been committed to both the commercial and development areas. Thisincluded the recruitment of a senior manager with strong commercial internetexperience to head our digital sales initiatives and the deployment of ournational on-line sales force from a new London office. Having been greatlyenhanced, our Jobs Today site has been relaunched with the support of a heavyadvertising and promotional campaign. The roll-out of our "newsroom of thefuture" project to all of our daily and larger weekly centres has been completedahead of plan and has been critical to delivering the substantial growth whichwe have achieved in our on-line audience. The roll-out has been supported by anextensive training programme for our editors and journalists run in conjunctionwith the University of Central Lancashire. Non-Recurring Tax Items The non-recurring tax credit shown in the Income Statement has 3 components. Thefirst is the tax credit of £0.9 million in relation to the non-recurring itemsin operating expenses detailed above. The second element is in relation to the deferred tax balance created under thetransitional arrangements in place during the implementation of IFRS and IAS 12in particular. This required that deferred tax be provided against the carrying value of our publishing titles at 1 January 2005 with theoffset being against retained earnings. As the tax rate has been reduced by 2%to 28% this notional deferred tax liability, which the Board can still notforesee any circumstance under which it might become payable, requires to berestated. The impact of this represents the vast majority of the credit to thetax charge of £20.3 million, the remainder relating to other timing differences.The original adjustment in relation to publishing titles was taken againstreserves. However, IAS 12 requires this reversal to flow through the IncomeStatement. The third element relates to the deferred tax booked on acquisitions made after1 January 2005. Under the effect of IAS rules, the equal and opposite offset tothe notional deferred tax was to create an intangible goodwill asset. All logicand base accounting principles would dictate that any reduction in the deferredtax balance because of the tax rate change should be mirrored in a reduction inthe associated goodwill. However, the rules of IAS 12 require that this releaseis also flowed through the Income Statement, the impact being a credit of £5.7million. This leaves the Group with an unmatched goodwill balance, which wasonly created by the booking of the deferred tax, and we have no option but towrite this off as a £5.7 million charge against operating profit. Although thismight appear to be inconsistent with accepted accounting principles andpractice, we had no alternative but to book the entries noted above in strictcompliance with the rules based standard. Capital Investment Good progress has also been made in our ongoing programme to introduce common ITsystems throughout the business. By the end of the second half, this should havebeen substantially completed. In the Printing Division, the new Dinnington presshas performed ahead of expectations, providing us with a full half-year ofcontributions from third party customers more than offsetting the lost thirdparty revenues at the older presses closed in the second half of last year.Progress at Portsmouth, where we are installing a similar press, remains onschedule and within budget with an expectation of it contributing to the Group'sresults in the second half. Acquisitions The integration of recently acquired businesses also remains on track. TheScottish weekly newspapers, acquired from Archant Limited earlier this year,have already been absorbed within our larger Scottish publishing division withconsolidation of printing and back-room functions well advanced. The ScotsmanPublications Limited in Edinburgh is now firmly established as the operationalhub of our Scottish division with common advertising and production systems nowin place. In Northern Ireland, similar systems changes have been fullyintroduced and the Newsletter has benefited from a new superbly located BelfastCity Centre office, which was officially opened by Tony Blair shortly before hestood down as Prime Minister. The management team in the Republic of Ireland hasbeen further strengthened and preparations for the introduction of new ITsystems are at an advanced stage. Outlook The month of July has seen a continuation of the improving month-on-monthadvertising trends in the UK. Costs remain under good control and new publishinginitiatives, especially in the digital area, continue to produce strong growth,albeit from a small base. These factors, coupled with a reported first halfprofit before non-recurring items being marginally ahead of City expectations,lead us to anticipate a satisfactory outcome for the year as a whole. Tim Bowdler Chief Executive Officer 29 August 2007 Independent Review Report to Johnston Press plc 26 Weeks to 30 June 2007 We have been instructed by the company to review the condensed financialinformation for the twenty six weeks to 30 June 2007 which comprise the GroupIncome Statement, Group Balance Sheet, Group Cash Flow Statement, GroupStatement of Recognised Income and Expense, Group Reconciliation ofShareholders' Equity and related notes 1 to 17. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the condensedfinancial 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 and the requirements of InternationalAccounting Standard 34, "Interim Financial Reporting" which require that theaccounting policies and presentation applied to the interim figures areconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. Accordingly, theinterim report has been prepared in accordance with International AccountingStandard 34, "Interim Financial Reporting". 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 andIreland) 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 condensed financial information as presented for thetwenty six weeks to 30 June 2007. Deloitte & Touche LLP Chartered Accountants Edinburgh, United Kingdom 29 August 2007 Group Income Statement (unaudited)26 Weeks to 30 June 2007 26 weeks to 30.06.07 26 weeks to 30.06.06 52 Weeks Before Before to Non- Non- Non- Non- 31.12.06 recurring recurring recurring recurring Notes items items Total items items Total Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue 3a 312,782 - 312,782 312,245 - 312,245 602,221Cost of sales (156,717) - (156,717) (151,618) - (151,618) (304,806)-------------- ------ -------- ------- ------ ------- ------- ------- ------- Gross profit 156,065 - 156,065 160,627 - 160,627 297,415Operatingexpenses 3d/4 (59,319) (3,096) (62,415) (58,988) (2,237) (61,225) (125,785)Goodwilladjustment 5b - (5,669) (5,669) - - - --------------- ------ -------- ------- ------ ------- ------- ------- ------- Operatingprofit 3 96,746 (8,765) 87,981 101,639 (2,237) 99,402 171,630Investmentincome 8 249 - 249 405 - 405 583Net financeincome on 9a 2,234 - 2,234 1,472 - 1,472 3,382pension assets/liabilities Finance costs 9b (22,955) - (22,955) (21,521) - (21,521) (44,101)Share ofresults ofassociates 38 - 38 26 - 26 60-------------- ------ -------- ------- ------ ------- ------- ------- -------Profit beforetax 76,312 (8,765) 67,547 82,021 (2,237) 79,784 131,554Tax 5 (21,177) 26,858 5,681 (23,277) 637 (22,640) (35,899)-------------- ------ -------- ------- ------ ------- ------- ------- ------- Profit for theperiod 55,135 18,093 73,228 58,744 (1,600) 57,144 95,655-------------- ------ -------- ------- ------ ------- ------- ------- ------- Earnings pershare (p) 7- Basic 19.12 6.28 25.40 20.44 (0.56) 19.88 33.24- Diluted 19.09 6.27 25.36 20.36 (0.56) 19.80 33.13 -------------- ------ -------- ------- ------ ------- ------- ------- ------- All of the revenue and profit above is derived from continuing operations.Group Balance Sheet (unaudited)At 30 June 2007 Restated (note 10) Notes 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Non-current assetsGoodwill 14 127,464 130,351 130,271Other intangible assets 14 1,363,682 1,356,833 1,353,462Property, plant and equipment 281,612 258,902 268,342Available-for-sale investments 2,712 2,712 2,712Interests in associates 1 44 33Trade and other receivables 466 436 467------------------------- ------ -------- -------- -------- 1,775,937 1,749,278 1,755,287------------------------- ------ -------- -------- -------- Current assetsInventories 4,260 3,973 5,776Trade and other receivables 100,124 93,217 81,877Cash and cash equivalents 25,693 24,991 24,636------------------------- ------ -------- -------- -------- 130,077 122,181 112,289------------------------- ------ -------- -------- --------Total assets 1,906,014 1,871,459 1,867,576------------------------- ------ -------- -------- -------- Current liabilitiesTrade and other payables 81,288 71,020 73,670Tax liabilities 14,479 21,472 7,993Obligations under finance leases 4 29 5Retirement benefit obligation 15 4,548 4,350 4,272Bank overdrafts and loans 10,696 8,799 1,894------------------------- ------ -------- -------- -------- 111,015 105,670 87,834------------------------- ------ -------- -------- -------- Non-current liabilitiesBorrowings 727,022 779,373 751,149Obligations under finance leases - 5 -Retirement benefit obligation 15 2,458 54,455 41,167Derivative instruments 10 11,416 9,110 11,539Deferred tax liabilities 393,155 388,919 399,174Trade and other payables 1,963 2,370 431Long term provisions 2,419 2,455 2,469------------------------- ------ -------- -------- -------- 1,138,433 1,236,687 1,205,929------------------------- ------ -------- -------- --------Total liabilities 1,249,448 1,342,357 1,293,763------------------------- ------ -------- -------- --------Net assets 656,566 529,102 573,813------------------------- ------ -------- -------- -------- EquityShare capital 29,917 29,852 29,893Share premium account 332,040 330,018 331,289Share-based payments reserve 4,072 3,464 4,265Revaluation reserve 2,110 2,555 2,522Own shares (1,239) (509) (1,628)Hedging and translation reserve 6,781 (1,281) 4,112Retained earnings 282,885 165,003 203,360------------------------- ------ -------- -------- --------Total equity 656,566 529,102 573,813------------------------- ------ -------- -------- -------- Group Cash Flow Statement (unaudited)26 Weeks to 30 June 2007 26 Weeks to 26 Weeks to 52 Weeks to Notes 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Cash flows from operating activitiesCash generated from operations 11 94,640 88,196 187,140Income tax paid (10,855) (16,415) (37,489)------------------------- ------ --------- -------- ---------Net cash from operating activities 83,785 71,781 149,651------------------------- ------ --------- -------- --------- Investing activitiesInterest received 249 405 583Dividends received fromassociated undertakings 70 30 75Proceeds on disposal of property,plant and equipment 829 3,077 8,738Proceeds on disposal of business - - 3,277Purchases of property, plant and equipment (19,013) (32,391) (65,040)Acquisition of businesses (11,413) (165,818) (165,535)Net cash in businesses acquired 1 5,225 5,225------------------------- ------ --------- -------- ---------Net cash used in investingactivities (29,277) (189,472) (212,677)------------------------- ------ --------- -------- --------- Financing activitiesDividends paid (17,894) (16,148) (25,113)Interest paid (23,892) (21,699) (42,918)Interest paid on finance leases (1) (14) (15)Repayments of borrowings (21,240) (38,352) (29,685)New borrowings - 194,761 163,043Arrangement fees on new borrowings - (548) (548)Principal payments under financeleases (1) (38) (52)Issue of shares 775 2,661 3,973Purchase of own shares - - (1,665)Increase/(decrease) in bank overdrafts 8,802 (3,055) (4,472)------------------------- ------ --------- -------- ---------Net cash (received from)/used infinancing activities (53,451) 117,568 62,548------------------------- ------ --------- -------- --------- Net increase/(decrease) in cashand cash equivalents 1,057 (123) (478)Cash and cash equivalents at thebeginning of period 24,636 25,114 25,114------------------------- ------ --------- -------- ---------Cash and cash equivalents at theend of period 25,693 24,991 24,636------------------------- ------ --------- -------- --------- Group Statement of Recognised Income and Expense (unaudited)26 Weeks to 30 June 2007 Hedging and Revaluation Translation Retained Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 Profit for the period - - 73,228 73,228Actuarial gain on defined benefitpension - - 23,099 23,099schemes (net of tax)Revaluation adjustment (412) - 412 -Exchange differences ontranslation of foreign operations - 231 - 231Change in fair value of financial instruments (note 10) - 3,205 - 3,205Deferred taxation - (961) - (961)Change in deferred tax rate to 28% - 194 (297) (103)--------------------- -------- ---------- -------- --------Total recognised income and expense (412) 2,669 96,442 98,699--------------------- -------- ---------- -------- -------- Group Statement of Recognised Income and Expense (unaudited)26 Weeks to 30 June 2006 Hedging and Revaluation Translation Retained Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 Profit for the period - - 57,144 57,144Revaluation adjustment (32) - 32 -Exchange differences ontranslation of foreign operations - 117 - 117 Change in fair value of financial - 2,749 - 2,749instruments (note 10)Deferred taxation - (825) - (825)--------------------- -------- ---------- -------- --------Total recognised income and expense (32) 2,041 57,176 59,185--------------------- -------- ---------- -------- -------- Group Reconciliation of Shareholders' Equity (unaudited) 26 Weeks to 30 June 2007 Share- Hedging Based and Share Share Payments Revaluation Own Translation Retained Capital Premium Reserve Reserve Shares Reserve Earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 29,893 331,289 4,265 2,522 (1,628) 4,112 203,360 573,813----------------- ------ ------ ------ ------- ------ ------- ------ ------Total recognisedincome and expense - - - (412) - 2,669 96,442 98,699 ----------------- ------ ------ ------ ------- ------ ------- ------ ------Recogniseddirectly in equityDividends - note 6 - - - - - - (17,894) (17,894)New share capital subscribed 24 751 - - - - - 775Own shareswritten off - - - - 389 - - 389Exercise ofshare-based payments - - (977) - - 977 -Provision forshare-based payments - - 784 - - - - 784----------------- ------ ------ ------ ------- ------ ------- ------ ------Net change directly in equity 24 751 (193) - 389 - (16,917) (15,946)----------------- ------ ------ ------ ------- ------ ------- ------ ------Total movements 24 751 (193) (412) 389 2,669 79,525 82,753----------------- ------ ------ ------ ------- ------ ------- ------ ------Equity at the end of the period 29,917 332,040 4,072 2,110 (1,239) 6,781 282,885 656,566----------------- ------ ------ ------ ------- ------ ------- ------ ------ Group Reconciliation of Shareholders' Equity (unaudited) 26 Weeks to 30 June 2006 Share- Hedging Based and Share Share Payments Revaluation Own Translation Retained Capital Premium Reserve Reserve Shares Reserve Earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balances 29,772 327,437 2,770 2,587 (749) (3,322) 123,975 482,470----------------- ------ ------ ------ ------ ------ ------- ------ ------Total recognisedincome and expense - - - (32) - 2,041 57,176 59,185----------------- ------ ------ ------ ------ ------ ------- ------ ------Recognised directly in equity Dividends - note 6 - - - - - - (16,148) (16,148)New share capitalsubscribed 80 2,581 - - - - - 2,661Own shareswritten off - - - - 240 - - 240----------------- ------ ------ ------ ------ ------ ------- ------ ------Provision for share-based payments - - 694 - - - - 694 ----------------- ------ ------ ------ ------ ------ ------- ------ ------Net changedirectly in equity 80 2,581 694 - 240 - (16,148) (12,553)----------------- ------ ------ ------ ------ ------ ------- ------ ------Total movements 80 2,581 694 (32) 240 2,041 41,028 46,632----------------- ------ ------ ------ ------ ------ ------- ------ ------Equity at theend of the period 29,852 330,018 3,464 2,555 (509) (1,281) 165,003 529,102----------------- ------ ------ ------ ------ ------ ------- ------ ------ Notes to the Interim Financial Information(unaudited) 1. Basis of Preparation The condensed financial information for the 26 weeks to 30 June 2007 does notconstitute statutory accounts for the purposes of Section 240 of the CompaniesAct 1985 and has not been audited. No statutory accounts for the period havebeen delivered to the Registrar of Companies. The condensed financial information in respect of the 52 weeks ended 31 December2006 has been produced using extracts from the statutory accounts for thisperiod. Consequently, this does not constitute the statutory information for the52 weeks ended 31 December 2006 which was audited. The statutory accounts forthis period have been filed with the Registrar of Companies. The auditors'report on these accounts was unqualified and did not contain a statement underSections 237 (2) or (3) of the Companies Act 1985. The next annual financial statements of the Group to 31 December 2007 will beprepared in accordance with International Financial Reporting Standards asadopted for use in the EU ("IFRS"). The Company has elected to comply early withIAS 34 on Interim Financial Reporting. 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 29 August 2007 and is beingsent to shareholders on the same date. It is also available on the Company'swebsite at www.johnstonpress.co.uk. The interim financial information has been prepared on the historical costbasis, except for the revaluation of certain properties and financialinstruments. 2. Accounting Policies The accounting policies used in the preparation of the financial information forthe 26 weeks to 30 June 2007 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 2006. A copy of these financial statements is availablefrom the Company's registered office at 53 Manor Place, Edinburgh EH3 7EG. Notes to the Interim Financial Information(unaudited) - continued 3. Business Segments For management purposes the Group has two business segments, newspaperpublishing (in print and online) and contract printing. The business operates in two geographical segments which are the United Kingdomand the Republic of Ireland. Revenue and the carrying value of assets in theRepublic of Ireland are less than 10 per cent of the Group total in the currentperiod and so have not been disclosed separately. On 23 April 2007 the Group acquired the Scottish newspaper operations of ArchantLimited. The trading results for the 10 weeks to 30 June 2007 are not materialto the Group's results and therefore they have not been disclosed separately. a) RevenueAn analysis of the Group's revenue is as follows: 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Newspaper publishing 296,534 299,349 576,141Contract printing 16,248 12,896 26,080------------------------- --------- --------- ---------Revenue sub total 312,782 312,245 602,221Investment income 249 405 583------------------------- --------- --------- ---------Total revenue 313,031 312,650 602,804------------------------- --------- --------- --------- The contract printing revenue excludes inter group revenue of £43.3 million inthe 26 weeks to 30 June 2007, £35.4 million in the 26 weeks to 30 June 2006 and£60.0 million in the 52 weeks to 31 December 2006. b) Operating profit before non-recurring items and interests in associatesAn analysis is as follows: 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Newspaper publishing 91,989 98,355 180,841Contract printing 4,757 3,284 5,932------------------------- ------ --------- --------- --------- 96,746 101,639 186,773------------------------- ------ --------- --------- --------- c) Operating profitAn analysis of the Group's operating profit is as follows: 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Newspaper publishing 84,621 96,407 177,494Contract printing 3,360 2,995 (5,864)------------------------- ------ --------- --------- ---------Operating profit 87,981 99,402 171,630------------------------- ------ --------- --------- --------- Notes to the Interim Financial Information (unaudited) - continued 3. Business Segments (continued) d) Operating expenses 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Distribution costs 22,537 22,614 45,580Administrative expenses before non-recurring 36,782 36,374 65,062------------------------- --------- --------- --------- 59,319 58,988 110,642Non-recurring administrative expenses 3,096 2,237 15,143------------------------- --------- --------- --------- 62,415 61,225 125,785------------------------- --------- --------- --------- 4. Non-Recurring Items Non-recurring items within operating expenses are: 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Restructuring costs ofExisting businesses 3,096 1,682 6,717Newly acquired businesses - 2,029 2,109Write down of value of presses inexisting businesses - - 9,000Profit on sale of freehold land andbuildings - (1,474) (2,683)------------------------- --------- --------- ---------Non-recurring items 3,096 2,237 15,143------------------------- --------- =--------- --------- Notes to the Interim Financial Information (unaudited) - continued 5. Tax a) The tax (credit)/charge comprises 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Corporation tax 17,357 21,124 28,528 Deferred taxCharge for year 2,891 1,516 7,371Credit relating to change in taxrate on titles held on adoption of IFRS and other timing differences (20,260) - - ------------------------- --------- --------- ---------Credit relating to change in taxrate on titles acquired since 1 January 2005 (5,669) - -------------------------- --------- --------- ---------Total tax (credit)/charge (5,681) 22,640 35,899------------------------- --------- --------- --------- Reconciliation of tax (credit)/chargeStandard rate of corporation tax 30% 30% 30%Profit before tax at standard corporation tax rate 20,264 23,935 39,466Tax effect of items that are not 97 100 137deductible or nottaxable in determining taxable profitTax effect of share of results of associate - (11) (18)Gain on sale of properties rolled over - - (805)Effect of different tax rates on subsidiaries (1,430) (1,086) (2,677)Change in tax rate to 28% net of goodwilladjustment (24,228) - -Other items (437) (314) (24)Over/(under) provision in prior years 53 16 (180)------------------------- --------- --------- ---------Total tax (credit)/charge (5,681) 22,640 35,899------------------------- --------- --------- --------- Corporation tax for the interim period is credited at 8.4% (2006: charge 28.4%).Full tax computations have been prepared for the 26 weeks to 30 June 2007 andthe amount above reflects a credit of £25,929,000 relating to the Finance Actchanges in reducing the corporation tax rate to 28% effective from April 2008.The tax rate for the 26 weeks to 30 June 2006 represented the best estimate ofthe weighted average annual corporation tax rate expected for the full 2006financial year. b) Goodwill adjustment Following the reduction in the Corporation Tax rate in the 2007 Finance Actreferred to above, the related goodwill that was created solely on recognitionof the deferred tax liability on titles acquired since 1 January 2005 has beenadjusted. The reduction in goodwill is £5,669,000 being the equal and oppositeoffset to the deferred tax credit noted above. This adjustment in no wayreflects any reduction in the underlying value of the Group's trading assets. Notes to the Interim Financial Information (unaudited) - continued 6. Dividends 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Amounts recognised as distributions inthe period:Dividends paidOrdinary 17,818 16,072 24,961Preference 76 76 152------------------------- --------- --------- --------- 17,894 16,148 25,113------------------------- --------- --------- ---------Dividend paid per share Pence Pence PenceOrdinary 6.200 5.600 8.700Preference 6.875 6.875 13.750------------------------- --------- --------- --------- £'000 £'000 £'000Dividend proposed but not paid orincluded in the accounting records 9,486 8,911 17,848------------------------- --------- --------- --------- Pence Pence PenceDividend proposed per share 3.3 3.1 6.2------------------------- --------- --------- --------- The interim ordinary dividend of 3.3p per share (2006: 3.1p) is payable on 2November 2007 to shareholders on the register at close of business on 12 October2007. 7. Earnings Per Share 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Profit for the period 73,228 57,144 95,655Preference dividend (76) (76) (152)------------------------- --------- --------- ---------Profit after tax for basic EPSearnings 73,152 57,068 95,503Non-recurring items (after tax) - see note 4 & 5 (18,093) 1,600 9,838------------------------- --------- --------- ---------Underlying EPS earnings 55,059 58,668 105,341------------------------- --------- --------- --------- Number of shares 000's 000's 000'sWeighted number of ordinary shares for the purpose of basic EPS 288,000 287,057 287,328------------------------- --------- --------- ---------Effect of dilutive potential ordinary shares - share options 454 1,166 954------------------------- --------- --------- ---------Number of shares - diluted earnings per share 288,454 288,223 288,282------------------------- --------- --------- --------- Notes to the Interim Financial Information (unaudited) - continued 7. Earnings Per Share (continued) 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 Pence Pence PenceEarnings per shareUnderlying earnings per share 19.12 20.44 36.66Non-recurring items 6.28 (0.56) (3.42)------------------------- --------- --------- ---------Earnings per share - basic 25.40 19.88 33.24------------------------- --------- --------- ---------Earnings per share - diluted 25.36 19.80 33.13------------------------- --------- --------- --------- In the current period earnings per share has benefited from the reduction of 2%in the rate of corporation tax within the 2007 Finance Act. The UK deferred taxprovision has been reduced by 2% and, in line with IFRS, the majority of thisimpact requires to be reflected in the Income Statement because it refers to thedeferred tax on the value of the Group's publishing titles. The tax charge hasbeen reduced by £25,929,000 as a consequence. This has no impact on theunderlying EPS calculation. 8. Investment Income 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Interest on bank deposits 203 327 504Income from available-for-saleinvestments 46 78 79------------------------- --------- --------- --------- 249 405 583------------------------- --------- --------- --------- 9. Finance Costs a) Net finance income on pension assets/liabilities 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Interest on pension liabilities 10,701 7,350 19,217Expected return on pension assets (12,935) (8,822) (22,599)------------------------- --------- --------- ---------Net finance income on pensionassets/liabilities (2,234) (1,472) (3,382)------------------------- --------- --------- ---------b) Finance costsInterest on bank overdrafts and loans 22,759 21,347 43,752Interest on obligations underfinance leases 1 14 15Amortisation of term debt issue costs 195 160 334------------------------- --------- --------- ---------Total finance costs 22,955 21,521 44,101------------------------- --------- --------- --------- Notes to the Interim Financial Information (unaudited) - continued 10. Derivative Financial Instruments The Group has applied hedge accounting in accordance with the provisions of IAS39. The fair value of the Group's financial instruments is as follows: 30.6.07 £'000 LiabilitiesCross-currency and other interest rate swapsClosing balance at 31 December 2006 11,539------------------------- ---------Movement in fair value during the period including (123)exchange movements------------------------- ---------Closing balance at 30 June 2007 11,416------------------------- ---------Current -Non-current 11,416------------------------- --------- In the period to 30 June 2006 the dollar denominated senior notes weretranslated at the hedge contracted rate. The opening balances for these seniornotes and the related hedging translation reserve have been restated at theapplicable period end rate. There is no impact on net income reported in theprior period. 11. Notes to the Cash Flow Statement 26 Weeks to 26 Weeks to 52 Weeks to 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000Operating profit 87,981 99,402 171,630 Adjustment for:Goodwill adjustment - non-recurring 5,669 - -Depreciation of property, plant andequipment 11,515 10,011 29,785Cost of LTIP benefits 1,173 240 2,281Profit on disposal of property,plant and equipment (87) (1,583) (3,175)Currency differences 444 94 (328)IAS 19 pension funding (150) (944) (1,652)Decrease/(increase) in inventories 1,546 1,652 (151)Increase in receivables (17,362) (16,735) (5,405)Decrease/(increase) in payables 3,911 (3,941) (5,845)------------------------- --------- --------- ---------Cash generated from operations 94,640 88,196 187,140------------------------- --------- --------- --------- Notes to the Interim Financial Information (unaudited) - continued 12. Net Debt Cash Non-cash 1.1.07 Flow Changes 30.6.07Net debt £'000 £'000 £'000 £'000 Debts due after one yearBank loans (546,408) 21,240 - (525,168)Loan notes (8,101) - - (8,101)Senior notes (197,819) - 3,082 (194,737)Term debt issue costs 1,179 - (195) 984--------------------- -------- ---------- -------- --------- (751,149) 21,240 2,887 (727,022)--------------------- -------- ---------- -------- --------- Debts due within one yearBank overdraft (2,119) (8,802) - (10,921)Loan notes (171) - - (171)Finance leases (5) 1 - (4)Term debt issue costs 396 - - 396--------------------- -------- ---------- -------- -------- (1,899) (8,801) - (10,700)--------------------- -------- ---------- -------- --------Cash and cash equivalents 24,636 1,057 - 25,693--------------------- -------- ---------- -------- --------Impact of currency hedges (18,009) - (3,082) (21,091)--------------------- -------- ---------- -------- --------Net debt (746,421) 13,496 (195) (733,120)--------------------- -------- ---------- -------- -------- The analysis of net debt is as follows: Restated (note 10) 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Cash and cash equivalents 25,693 24,991 24,636Bank overdrafts (10,921) (3,536) (2,119)--------------------- ---------- -------- --------Net cash balances 14,772 21,455 22,517--------------------- ---------- -------- --------Debt due within one year 225 (5,263) 225Debt due after one year (727,022) (779,373) (751,149)Finance leases (4) (34) (5)Fair value of currency hedges (21,091) (7,174) (18,009)--------------------- ---------- -------- --------Bank loans, loan notes and finance leases (747,892) (791,844) (768,938)--------------------- ---------- -------- --------Net debt (733,120) (770,389) (746,421)--------------------- ---------- -------- -------- Notes to the Interim Financial Information (unaudited) - continued 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: 30.6.07 30.6.06 31.12.06 £'000 £'000 £'000 Included in operating expenses 784 694 1,495--------------------- ---------- -------- -------- The cumulative provision for share-based payments of £4,072,000 (2006:£3,464,000) is shown as a reserve on the Balance Sheet. 14. Acquisition On 23 April 2007, the Group acquired eight weekly newspaper titles in Scotlandfrom Archant Limited for a cash consideration of £11,205,000. This transactionhas been accounted for 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 - 2,862 2,862Publishing titles - 10,220 10,220Property, plant and equipment 111 392 503Inventories 59 (29) 30Trade and other receivables 901 (17) 884Cash and cash equivalents 1 - 1Trade and other payables (102) (189) (291)Taxation - 76 76Deferred tax liability on publishing titles - (2,862) (2,862)--------------------- ---------- -------- -------- 970 10,453--------------------- ---------- -------- --------Total consideration 11,423--------------------- ---------- -------- -------- Notes to the Interim Financial Information (unaudited) - continued 14. Acquisition (continued) £'000 Satisfied by:Cash 11,205Directly attributable costs 218--------------------- -------- 11,423--------------------- -------- Net cash flows arising on consolidationCash consideration 11,413 Cash and cash equivalents acquired (1)--------------------- --------Net cash outflow arising on completion 11,412--------------------- -------- The resultant impact of this acquisition on goodwill and other intangible assetsis as follows: Publishing Goodwill Titles £'000 £'000CostAt 1 January 2007 130,271 1,353,462Acquisition 2,862 10,220Non-recurring adjustment - see note 5b (5,669) ---------------------- -------- --------At 30 June 2007 127,464 1,363,682--------------------- -------- -------- Accumulated impairment lossesAt 1 January 2007 and 30 June 2007 - ---------------------- -------- -------- Carrying amountAt 30 June 2007 127,464 1,363,682--------------------- -------- --------At 31 December 2006 130,271 1,353,462--------------------- -------- -------- Notes to the Interim Financial Information (unaudited) - continued 15. Retirement Benefit Obligation The valuation of the Group's pension scheme is updated at the end of eachaccounting year and at the half year. Full details of the valuation at 31December 2006 are outlined in the financial statements to that date. The majorassumptions and disclosures for the 26 weeks to 30 June 2007 and the 52 weeks to31 December 2006 are as follows. Major assumptions: Valuation at Valuation at 30.06.07 31.12.06 Discount rate 5.8% 5.1%Expected return on scheme assets 6.9% 6.9%Expected rate of salary increases 4.1% 3.8%Future pension increases 3.1% 2.8%Life expectancyMale 18.1 years 18.1 yearsFemale 21.0 years 21.0 years--------------------- ---------- ---------- 26 Weeks to 52 Weeks to 30.06.07 31.12.06 £'000 £'000Amounts recognised in the Income Statement inrespect of defined benefit schemes: Current service cost 2,274 5,194Interest cost 10,701 19,217Expected return on scheme assets (12,935) (22,599)------------------------- ---------- ---------- 40 1,812------------------------- ---------- ---------- 30.06.07 31.12.06 £'000 £'000Amounts included in the balance sheet: Present value of defined benefit obligations 393,739 420,913Fair value of scheme assets (386,733) (375,474)------------------------- ---------- ----------Total liability recognised in balance sheet 7,006 45,439Amount included in current liabilities (4,548) (4,272)------------------------- ---------- ----------Amount included in non-current liabilities 2,458 41,167------------------------- ---------- ---------- Notes to the Interim Financial Information (unaudited) - continued 16. Post Balance Sheet Event On 15 August 2007 the Group disposed of Best Asian Media Limited, although itretains the rights to the publishing titles of that business. This will ensure afuture income stream from the revenues associated with those titles. There willbe a loss on disposal as a result which will be reflected in the accounts forthe year to 31 December 2007. 17. Contingent Liability In March 2004, HMRC issued a tax assessment for £86 million against one of theRIM Group companies Johnston Press acquired in 2002. With interest the potentialliability now exceeds £100 million. The assessment relates to the sale of theRIM companies by United Business Media Plc (UBM) in 1998. At a SpecialCommissioner's hearing in 2006, the Chairman ruled in favour of HMRC. Thisdecision was appealed to the High Court and in March of this year the Judgeupheld the decision of the Special Commissioner. An appeal has been lodged withthe Court of Appeal and this will be heard in the Spring of 2008. The Groupunderstands UBM remains confident of an eventual successful outcome and noprovision has been made in these financial statements. In the event of provenliability the Group holds a full tax indemnity from UBM. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Johnston Press PLC