Preliminary Results

JOHNSTON PRESS PLC

RESULTS FOR THE 52 WEEKS ENDED 31 DECEMBER 2011

Johnston Press plc, one of the leading multi-platform community media groups in the UK and Ireland, announces results for the 52 weeks ended 31 December 2011.

KEY FINANCIALS

* before non-recurring and IAS21/39 items

Summary

·; In a challenging trading environment, the Group has maintained market leading operating margins in 2011 and cash generation from operations has remained strong. The underlying operating profit fell by 10.3% to £64.6m, the underlying operating margin for the year was 17.3% (2011:18.1%) and total cash generated by operations amounted to £71.2m supporting a 9.1% reduction in net debt.

·; The Group's loss before tax for the year was £143.8 million, primarily due to the impairment of the value of publishing titles of £163.7m, compared with the charge of £13.1m in 2010.

Revenues

·; Total advertising revenues decreased by 9.0% year on year with employment revenues continuing to contribute most to the decline. The rate of decline slowed from 10.1% in the first half to 7.7% in the second half.

·; Digital advertising revenues grew by 0.7%. This reflected an improving trend from -5.0% in the first six months to +8.6% in the second half, with the successful launch of Find it, our online business listing directory and DealMonster, our local voucher website.

·; Newspaper sales remained resilient with revenues down only 1.1% versus 2010.

Costs

·; Total operating costs (before non-recurring and IAS 21/39 items) reduced by £16.9m despite newsprint price increases of £7.6m.

Operating profit*

·; Operating profit before non-recurring and IAS 21/39 items of £64.6m reflected the significant cost savings above.

Non-recurring items

·; The results include a charge of £163.7m in respect of the write down of intangible assets, which mainly reflects a change in the discount rate used within the impairment calculation rather than a change in the underlying performance of these assets.

Continued debt reduction

·; The strong cash flow allowed the business to reduce borrowings by a further £35.0m during 2011.

·; It remains the Board's priority to continue to reduce the level of borrowings.

Financing

·; The terms of a new three year £393.0m secured facility announced today have been agreed by way of amending and extending the current facility agreement with a revised expiry date of 30 September 2015.

Summary and outlook

Challenging trading conditions in the first 15 weeks of 2012 have seen total advertising revenues fall by 10.6% versus last year with national advertising being particularly depressed across the industry. We are mitigating the shortfall in advertising revenues through tight operational control and cost management across the Group. In addition, the Group is continuing to develop its other revenue streams.

Commenting on the outlook, the Chief Executive, Ashley Highfield, said:

"Although the prospects for the economy remain downbeat in the short term, I believe we can return Johnston Press to being a growth business through the twin track approach of re-launching and revitalising our papers while simultaneously growing our websites, and taking full advantage of the opportunities created by technology and the changing media demands of our users to deliver innovative propositions."

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Chairman's Statement

Although trading conditions in 2011 remained difficult, we are renewing our strategy and increasing the pace of development of our services.

2011 brought considerable change to Johnston Press - not least the appointment in November of Ashley Highfield as our Chief Executive. The benefits to our business from the technological innovations in earlier years, together with successful new partnerships, allowed our development of new services to continue - despite very tough economic conditions - and we are building a truly multi-media company.

Since the start of 2012 we have successfully renegotiated our finance facilities to September 2015 which leaves us well placed to build on our new strategy and indicates the strength of our underlying business. More details can be found on page 9.

Strategy

We remain uniquely positioned to provide information to communities across the UK and Ireland who know and trust our brands. Although patterns of readership are changing, weekly papers, which are still at the heart of our offering, are resilient. However, our real opportunity for growth comes from the digital platforms which advances in technology are creating. We must embrace the diverse range of media our customers want to use to access our services. To meet these demands - and grow our advertising and other revenues - we need to develop new services and adopt new vehicles for delivering our strong local content.

Results

The last quarter of 2010 saw a deterioration in revenues and that trend continued into 2011. Although digital revenues grew by 0.7% to £18.4 million, total revenues for the year were down by £24.3 million to £373.8 million. This was primarily due to further declines in print advertising revenues which dropped by 9.7% to £212.9 million. Although further cost savings were achieved, operating profit (before non-recurring and IAS 21/39 items) declined to £64.6 million, 10.3% down on 2010. This represented an operating profit margin of 17.3%. Underlying earnings per share were 3.50p, compared to 3.67p in 2010. However, we recognised an impairment in the value of our publishing titles of £163.7 million, resulting in a pre-tax loss of £143.8 million in 2011. Our cashflow performance remained strong with net debt at the end of the year of £351.7 million, a reduction of £35.0 million from the beginning of the year.

Share Price and Dividend

The slow pace of economic recovery in the UK and Irish economies and the continued pressure on our revenues meant that our share price remained at low levels throughout the year. In accordance with the provisions of our financing arrangements, no dividend is proposed for the year. Excess cash will continue to be used to reduce the Group's indebtedness.

Industry Issues

It has been a year of considerable publicity and change for our sector. The Leveson Inquiry has scrutinised conduct across the newspaper industry. The practices which led to it were the subject of a detailed review of our editorial procedures and activities. I am pleased to say that we did not uncover any evidence of malpractice and we have been happy to co-operate fully with the Inquiry.

Board

There was considerable change in our Executive team during 2011. Our new Chief Executive Ashley Highfield joined us from Microsoft UK where he was Vice-President with responsibility for their consumer and online business, including their MSN content portal. He succeeded John Fry. Grant Murray joined as Chief Financial Officer in early May, succeeding Stuart Paterson. He brings considerable media sector experience to the role, most recently from his time at Guardian Media Group. In welcoming Ashley and Grant to the Board, I would also like to record my thanks to John and Stuart for their dedication to Johnston Press. Both Ashley and Grant will stand for election to the Board at our AGM in Edinburgh on 13 June.

Your Board regularly reviews the balance of its membership and monitors the matters it considers should be regularly scrutinised at its meetings. We do this to ensure healthy, open debate over key issues facing the Group and to challenge, constructively, the Executives and management. All our Non Executive Directors visit a range of our sites each year and undertake training for their roles. After a detailed review in 2011, I remain satisfied that our Board is effective.

Employees

Our employees are, of course, key to our business and on behalf of the Board I wish to express my gratitude to them for their dedication throughout a difficult year. The Group's staff have continued to deliver the highest quality in both performance and products, and their commitment will be vital in the year ahead.

Outlook

The outlook for 2012 for the economies of the UK and Republic of Ireland remains challenging. However, we believe there are opportunities for innovative and creative companies who can react to changes in how consumers obtain their media services and information.

Ian Russell

Chairman

Business Review - Chief Executive's Report

Since I joined Johnston Press at the start of November 2011, we have focussed on developing a strategy and plans for the future, at the same time as maintaining current business performance in a tough market, looking for opportunities to drive further operational savings and ensuring a successful outcome to our refinancing. In my first 90 days, I spent a lot of my time visiting more than 50 of our regional newspapers.

I will explain more about our vision below after reviewing our performance in 2011. However, I would like to start by thanking my predecessor for his work over the previous three years. John Fry guided Johnston Press through a very difficult period in its history and we wish him well for the future.

Review of the Year

The past 12 months were challenging for the Group as the rates of growth in the economies of the United Kingdom and Republic of Ireland again declined. We reported the deteriorating trend in certain advertising categories in the latter part of 2010 in last year's report. As anticipated at the time, that trend continued and we moved swiftly to address revenue declines and the impact of higher newsprint prices through a number of cost-saving measures. However this was not sufficient to prevent a decline in operating profit for 2011 to £64.6 million before non-recurring and IAS 21/39 items.

While structural decline continued to affect print advertising, three of our revenue streams - newspaper sales, digital advertising and contract printing - were all broadly unchanged or growing.

National advertising and print recruitment revenues remained particularly challenged, but internet advertising revenues finished 2011 strongly and there are many areas where the hard work and innovation of our staff is delivering positive results. Nevertheless, print advertising revenue declined by 9.7% over the course of the year, reflecting the difficult trading environment. Our challenge is to improve our performance across advertising categories and that will involve developing compelling propositions for our customers which stretch across the range of platforms our readers use to access our services. There is plenty of evidence within the Group to suggest we can rise to that challenge. A number of titles re-launched over the last 12 months produced significantly improved results both in absolute circulation terms and in circulation revenues. The re-launch format also proved more effective in cross-selling from print to online which bodes well for the rapidly increasing demand for access by mobile devices.

Cost control was again essential and like-for-like operating costs (excluding the impact of significant newsprint price increases) fell by £24.5 million over the course of the year. The number of staff employed by the Group fell to 5,245 in 2011, a reduction of 11.3% on 2010. Further efficiency measures are now under way including a reorganisation of our existing divisional structure and the introduction of a sales effectiveness programme across the Group after a trial in one region. The early results for this have been very positive and more detail can be found in the Operational Review on page 4. Further, we have started the process of consolidating our twelve contact centres into two. We aim to keep local editorial and local sales staff in the heart of the community, but increasingly centralise everything else. However, our internal reorganisation is not simply about costs. Of equal importance is the need to develop the Group into a simpler organisation - one more appropriate for its future needs as explained below.

Our review of future requirements led to a further rationalisation of our print capacity. In the last quarter of the year we announced the closure of our printing plant in Douglas, Isle of Man, and at the start of 2012 we began consultation on the closure of the print facility in Leeds. These moves reflect activity across the industry and are essential for ensuring the efficiency and streamlining of our operations. This leaves the Group with five modern print works at Portsmouth, Sheffield (Dinnington), Peterborough, Sunderland and Carn.

Refinancing

We are very pleased to announce the completion of our refinancing which provides the Group with lending facilities to take it through to September 2015. This is due in no small measure to our efforts over the last three years to significantly reduce our net debt by over £125 million, restructure our cost base, taking out over £90 million of costs, and introduce strong revenue initiatives for the future. Details of the refinancing can be found in the Performance Review. Further reduction in debt remains a priority for the Group in the coming years.

Future Strategy

We aim to put digital at the heart of Johnston Press. Newspapers will remain our primary revenue stream for many years to come, but the web and apps, accessed from PCs, tablets and smartphones, are becoming as important, if not more so, as an access method for an increasing percentage of our audience.

We have embarked on an ambitious plan to re-launch all our titles as far more integrated digital and print hybrid offerings, refreshed and revitalised in print, with new web, mobile and iPad offerings. In some cases the internet will become the hourly and daily pulse of a community and we will move to printing the physical paper just once a week - with overall audience uplift and a considerable increase in profitability for those titles. In all communities that we serve we aim to have a web audience at least as big as our newspaper circulation and to use print to actively cross-promote the web and vice versa, thus remaining relevant in a digital age, while not alienating our heartland audience.

It is clear the Group must undertake further radical change in its operations to be appropriately structured for the future and in recent months our strategic focus has been the subject of a great deal of work. Since joining the Group I have taken time to visit as many of our sites as possible. Our dedicated staff deliver a vast amount of good work and it has been extremely useful to meet a large number of them. I have found some titles are already handling web production, digital cross-promotion and digital advertising upsell very effectively and the re-launch of titles will ensure best practice is spread right across the Group.

We will also look to make much greater use of subscriptions and the bundling of content across a variety of platforms. In some cases, as already stated, the re-launch project means the move of some of our titles from daily to weekly publication. This is clearly a significant change and in each case it is based on detailed research into the readership habits of that community. It is vital that we develop a far greater synergy between our printed publications and online offerings - recognising the different ways that our users access content at different times of their day and week - through a further modernisation of our websites, with a particular focus on mobile devices. In December 2011 we completed the roll-out of specific mobile sites for each of our titles and that was followed by the introduction of our iPad app for The Scotsman early in 2012. The early signs are encouraging, with two-thirds of users of the mobile sites aged under 35.

Our aim is that these steps will allow us to create local portals providing a range of trusted information and media resources for the communities where we publish. Location-based services will be a key driver for becoming the information provider of choice, where local advertisers remain central to our offerings.

We are very much aware that in all aspects of these developments careful choices will need to be made regarding our use of resources, and our re-launch programme aims to be self-financing (after repayment of modest seed investment). Not least as there is a significant opportunity for cover price increases when we re-launch in many markets.

Looking a little further ahead, Johnston Press must look to diversify into new areas of business where we can put our existing strengths to good use. The introduction in 2011 of our successful Find it and DealMonster offerings showed what can be achieved and we will look at finding similar new business niches. These will be characterised by localness and a broad appeal to social media.

We have built a huge repository of valuable content from all our newspapers, held in a single database, all indexed with excellent metadata. The opportunity is therefore there to aggregate and publish this content around specific interest areas, creating new websites, and we will be launching the first of these in 2012.

Summary

Clearly there is much to do to reshape our business, and to succeed we must increase the pace at which we adapt to the new environment and continued rapid change in our sector. Although the prospects for the economy remain downbeat in the short term, I believe we can return Johnston Press to being a growth business through the twin track approach of re-launching and revitalising our papers while simultaneously growing our websites, and taking full advantage of the opportunities created by technology and the changing media demands of our users to deliver innovative propositions.

In cities and towns throughout the British Isles, we are a trusted brand in communities. I believe that in a world that values local communities more not less, where smartphones (and iPads) are becoming ubiquitous and social media intrinsic to people's lives, we are in a unique position to capture much of this new value being created across advertising, paid-for content and transactional revenues.

Ashley Highfield

Chief Executive Officer

Business Review - Operational Review

Focussing on customers and developing better advertising sales opportunities across multiple platforms was a key objective for the Group during 2011.

In support of this, a number of projects were initiated and progressed during the year, all geared to building new revenue within local communities while developing multi-platform audiences. They included an expanded customer engagement programme, further sales incentives to target and win new advertisers on longer term contracts in print and online, and a step change in technology to allow further improvement of our contact centres.

These initiatives, which are covered in more detail later in the review, helped support the development of the Group's operational aspects whilst enabling further cost reductions to be achieved in line with the current economic realities.

Business Development

A major aspect of our work during the year was to ensure that all operating units had clear strategies and structures for growing customer bases while at the same time improving relationships with advertisers who have loyally used our services over many years. A "sales effectiveness" study was undertaken in Southern England where new structures, customer propositions and incentives were trialled. This trial saw an uplift in sales of 19% and an increase in the forward order book with 80% of ads pre-booked by at least a week. Following the success of the trial, the programme is being rolled out across the Group, requiring changes to sales organisation structures.

During 2011, a number of new digital advertising ventures were developed. Find it, our new online business listings directory and review website, was launched across the Group in March 2011, in partnership with Qype. This enables our website users to find reputable local businesses (from a trustworthy plumber to a great local restaurant), aided by other customers' reviews and ratings. In 2011, we sold more than 10,000 premium listings with the site generating over £1.4 million in new revenue.

Perhaps the most exciting new venture was the launch of DealMonster, a local voucher website. It commenced in September and now operates in the Edinburgh, Blackpool, Sunderland, Leeds, Sheffield, Milton Keynes, Bedfordshire, Northamptonshire and Lancashire regions with further launches planned in 2012. The venture depends on leveraging off both existing advertiser relationships and our own local media for the marketing of this platform. Unlike some of the other players in this space, our focus is absolutely on local deals and although it is still an early stage business, we are very encouraged by performance to date.

In December, we launched 211 local mobile sites across our portfolio, specifically designed to cater for screen size and device functionality in smartphones. The sites feature local news, sport, lifestyle and community content. Importantly, they enable us to reach a younger demographic, with 67% of users under the age of 35. Approximately 22% of our online traffic now comes from mobile devices.

Another significant step forward was our partnership with Localstars, a UK-based organisation that has successfully automated the creation of online display advertisements, allowing our local advertisers to seamlessly buy both print and digital services. As a result, local digital display advertising grew 55% year-on-year in Q4.

In print, we continued to innovate. We were the first local community media company to "wrap" around the newspaper a translucent advertisement (for a new ASDA store opening in Wakefield). We also published adverts with QR codes which allow the reader to scan a code with a mobile phone to obtain further product detail.

Work continued to build a separate exhibitions and events business with new shows successfully launched in Edinburgh for Outdoor Pursuits, Brighton for Homes & Gardens and Leeds for Yorkshire Food and Drink. We also ran a second Pet Show in Peterborough following the success of the first in 2010. These events attracted significant footfall and a strong exhibitor base giving confidence that a successful enterprise can be built.

Customer service is fundamental to the development of our revenue and profit and we continued to invest in engagement initiatives to understand and improve customer relations. It was encouraging to see the improvements recorded in call and e-mail handling as well as the satisfaction levels of new customers. Customer queries and post-sales follow-up were identified as areas for improvement and they will be a key focus in 2012.

Our Staff

With more than 5,200 employees, training and development is vital for ensuring we have the right people equipped with the appropriate skills and technology to provide a first-class service. To support this, a comprehensive suite of training was actioned during the year encompassing more than 800 sales courses, 270 management tutorials and 1,900 classroom training days. More than 1,500 journalists developed their print and digital skills, 400 journalists learned how to work remotely using new technology and trainee journalists were supported as they worked towards achieving senior status.

We introduced additional employee benefits during the year including changes to the pension scheme to help employees save more for their retirement and a 'smart holiday' benefit giving staff the opportunity to take additional unpaid leave.

Communication with employees continues to be of high importance and during 2011 we introduced and resourced 'The Word', a weekly digital newsletter and website for our employees. It has quickly become a site of interesting news, information and facts about people, the Group and events, attracting interest from the majority of employees every week.

IT and Support Services

Underpinning the increasing focus on our customers and their multimedia requirements the Group's IT and support functions continued to play a major role in ensuring that our employees are appropriately equipped. Following the centralisation work undertaken in the latter stages of 2010, good progress was made in achieving the stated objective of having a single view of the customer aligned to one content management system for editorial and commercial assets.

In 2011 the central IT team trialled and developed supporting technology for the "sales effectiveness" study and the execution of local digital display advertising plans.

Engaging with and managing a number of technical partners was a key part of the overall Group strategy. Our teams developed a new digital platform with Zoopla, a leading property portal, with a new service launching in 2012. They continued to work with Jobsite to ensure the Group has a market-leading online recruitment offering. In addition, partnerships with social media providers such as Pluck will mean our websites have the right level of user participation.

Just as important has been the need to have a robust IT infrastructure that supports the Group's 206 offices. In 2011 we made a number of investments which included:

• The roll-out of new smartphones for all mobile phone users to improve communication, particularly for journalists;

• A new wide area network provider which has improved capacity and reduced cost;

• A central library system which combines data into a single, searchable repository with more than 32 million items accessible by all journalists. On average, 100,000 new print and web articles, photographs and pages are imported into the library each week.

Audience Delivery

Engaging with our readers and viewers by providing compelling local content and making it easy for them to purchase our newspapers continues to be a key operational strategy.

The success of our programmes to maintain newspaper sales revenue can be demonstrated by an 80% uplift of readers being retained using our discount vouchers and a 24% growth in customers paying by direct debit for direct delivery. These initiatives, coupled with a positive approach to pricing our titles appropriately for their value, have helped keep newspaper sales revenue at a more consistent level than prior years, at £95.6 million.

We continue to evaluate the quality and reader impression of our products with an ongoing programme of research which also looks at format and frequency. Findings resulted in decisions in 2011 to convert broadsheet newspapers in Lancaster, Falkirk, Hemel Hempstead and on the Isle of Man to compact format. In every case, circulation sales improved with an average increase of 8.4% achieved.

A number of specialist digital journalists were recruited to help provide local content using our local brands through mobile, tablet and smartphone applications. A new iPad app was launched at The Scotsman and recently, a Yorkshire Post app. These should help to ensure that digital audiences grow at a greater rate in 2012 than the 11% achieved in 2011.

Services Division

Providing efficient workflows to meet the needs of both our internal and external customers is an area of activity that continues to evolve and improve. As in previous years our services division was able to further develop production and supporting processes. These included the introduction of new technology allowing further centralisation for advertisement creation, changes to creative teams to allow best practice to be shared across the Group, and new helpdesk facilities for property advertisers.

In addition, changes to the way our transport and logistics teams were managed improved efficiency and created a more cohesive approach from print site to point of sale. Further enhancements to the presses in Dinnington and Portsmouth created new revenue opportunities by offering different newspaper formats.

Business Review - Performance Review

The difficult economic and trading environment that the Group experienced in the previous year continued throughout 2011 and this was reflected in the 6.1% decline in total Group revenues (2010: 6.0%). However, costs were again tightly managed with the impact on the 2011 operating margin* of 17.3% minimised (2010: 18.1%). Operating profit was £64.6 million*, but due to a non-recurring impairment charge of £163.7 million, the Group recorded a loss before tax of £143.8 million. In April 2012, the Group agreed an extension of its finance facilities to September 2015.

The decline in revenues in 2011 was almost entirely due to print advertising revenues, with the other categories of the Group's revenues being relatively stable in spite of the economic conditions within its markets. As shown in Table 1, taken collectively the non-advertising revenue streams, (amounting to £142.5 million, or 38.1% of total Group revenue) were down by only 1.0% year-on-year.

Of these non-advertising revenues, the Group's circulation revenues of £95.6 million proved particularly resilient, down only 1.1% relative to 2010. Year-on-year circulation declines of 7.9% for dailies and 6.1% for weekly paid-for titles were offset by cover price increases to maintain this revenue. Contract printing revenues were virtually unchanged year-on-year with a decline of 0.4%. Other revenues declined by 1.5% year-on-year, this was principally due to the reduction in leaflet revenues from the closure of a number of free newspapers. The overall effect of these closures was to improve operating profit. Excluding this leaflet revenue, the remaining revenues within this revenue stream (including exhibitions and readers offers) grew by 10.4%.

Within advertising revenues, total digital revenues were up 0.7% in 2011 at £18.4 million. Digital employment revenues declined 9.2% due to the reduced upsell from print employment advertising revenues. Excluding employment, digital revenues increased 7.7% which is more reflective of the digital activity and performance following the launch of several new products in 2011. Local digital display revenues had the highest level of growth with a 24.0% increase in revenues. Digital revenues will be an area of greater focus and activity in the future, and it is anticipated that this will result in accelerated digital growth.

Table 1

Performance Summary for 2011 and 2010

Table 2

Print and Digital Advertising Revenue Analysis

1 A digital revenue stream with a value of £1.7 million in 2010 has been reclassified from other classifieds to display advertising.

*Before non-recurring and IAS 21/39 items (page 7)

Table 2 highlights that the display advertising decline in 2011 in the UK was limited to 3.0% (2010: 1.7%). Local display revenue was 2.6% lower than 2010, but was strong in the second half of 2011 with a decline of only 0.9%. National display, down 3.9% year-on-year, was affected in the second half of 2011 as national retailers reduced advertising budgets, impacting across all of the industry.

The advertising revenue decline was mainly due to classified advertising, with employment advertising accounting for almost half of the classified decline. The decline in UK employment advertising revenues of 25.5% across the year was disappointing, although the rate of decline reduced from 30.8% to 17.4% between the first and second halves of the year (and the exit rate in the final quarter of the year was 12.0%). A large part of this was due to the recent high levels of UK unemployment, but it also reflected the increasing impact of online competition. It is clear that this category of advertising will be of less importance to the Group in the future than it has been historically, and with £25.1 million revenue in 2011, employment now represents only 6.7% of the Group's total revenues.

The other categories of classified advertising also showed year-on-year declines, again reflecting the economic conditions within these markets. Motors advertising declined by 10.0% compared with 2010, reflecting the drop in new car sales particularly in the second half of 2011. The decline in property advertising of 7.6% experienced throughout the year was actually less than might have been expected given the slowdown in property transactions in the UK and there was an improving trend in other classifieds between the first and second halves of the year.

Total print advertising, which is included in the advertising revenue analysis above, declined by 9.7% compared with 7.1% in 2010.

The economic environment in Ireland remained very challenging with the year-on-year advertising decline of 19.1% being the same as in 2010. Our operations there remain profitable, but it is unlikely that we will see a significant improvement in the performance of these operations until there is a wider improvement in the Irish economy.

Total operating costs for the Group, excluding non-recurring and IAS 21/39 items, were £309.2 million, a decrease of £16.9 million from 2010. However, costs were affected by significant price increases for newsprint, which increased newsprint costs on a like-for-like basis by £7.6 million. Underlying cost reductions were £24.5 million excluding the newsprint price increase. Costs savings were made across virtually all areas of the business with further restructuring of the operations during the year to increase efficiency, particularly in relation to transport, distribution and production.

The performance of the Group will continue to be affected by the economic conditions in the UK, and the ongoing cyclical downturn as indicated by the current trends in GDP, unemployment, property transactions, new car sales and the levels of consumer confidence. However, the outlook for the Group will also depend on a number of other factors, including:

• Growing new revenues streams (particularly digital) in the Group's existing market segments;

• Maintaining market leadership in its existing markets;

• Ability to adapt to customer requirements through new sales propositions and advertising channels;

• Continuously improving existing efficient operations through technology and improved processes; and

• Further re-engineering of the cost base of the business.

Non-recurring and IAS 21/39 items

In addition to the trading results discussed above, a number of items have been identified as non-recurring either due to the nature of the item or their materiality.

The most significant of these items is the impairment of intangibles. The Group is required under accounting standards to test the carrying value of its intangible assets (the Group's publishing titles) against the present value of anticipated discounted future cash flows from those assets for indications of impairment. In 2011, management reassessed the discount rates and growth rates used in this calculation with regard to the on-going volatility in the economic environment and increased the discount rate used from 8.94% in 2010 to 11.00% in 2011. Changing the discount rate has resulted in an impairment charge being recognised in the period of £163.7 million (2010: net charge of £13.1 million). Details of the impairment test assumptions and the carrying values by CGU are included in note 9. A non-recurring tax credit of £44.0 million has been recognised following the release of a deferred tax liability in relation to the impaired publishing titles.

Other non-recurring items included:

• The Group announced the closure of the Isle of Man print press in late 2011, and in early 2012, the closure of the Leeds print press. As a result, the book value of the print presses have been written down to their estimated realisable value on disposal. A non-recurring accelerated depreciation charge of £5.2 million has been recognised due to the write down.

• Restructuring costs of £4.3 million were incurred as the Group continued to restructure the way in which it carries out its business to drive efficiencies and cost savings. Unfortunately this resulted in a number of redundancies, the cost of which has been recorded as non-recurring items.

• A £1.9 million credit was recognised resulting from a pension exchange exercise. Further details are shown below in the pension section.

• A property that is currently classed as held for sale, has been written down to the value likely to be realised in the current property market; this has resulted in a non-recurring charge of £0.6 million.

• Included in non-recurring tax is the impact of the reduction in the UK rate of deferred tax to 25.0%, a credit of £14.9 million.

It should be noted that the only non-recurring items which involved cash outflows for the Group in 2011 were the restructuring costs of £4.3 million. All other non-recurring items were non-cash transactions.

IAS 21/39 items relate to the fair value movement in our derivative financial instruments (primarily cross currency and interest rate swaps), as well as the retranslation of our US dollar and Euro denominated borrowings. The net charge for the year was £0.7 million (2010: credit of £3.2 million). Further details are shown in note 6.

Finance Income and Costs

Finance costs for the year were £38.5 million (2010: £41.9 million). The reduction from the previous year reflects the reduction in the level of debt during the year and the benefit of lower interest rates from our interest rate swaps, partially offset by higher payment-in-kind (PIK) interest rates.

The interest charge in the year reflects a blended rate of 9.9%, which includes PIK, and is comparable with the rate of 10.0% for the previous year. The charge in the Income Statement also includes £5.3 million in respect of the amortisation of the fees associated with the Group's finance facilities from refinancing in 2009.

The Group's exposure to the US dollar interest payments and principal payments on the private placement loan notes are 96.1% hedged from a currency perspective. The overall percentage of borrowings which have been swapped to fixed rate interest rate liabilities is 89.4%.

The net finance income on pension assets/liabilities was £2.3 million as the expected return on the pensions fund assets was higher than the interest cost on the fund liabilities.

Loss Before Tax

The Group's loss before tax for the year was £143.8 million (2010: profit before tax of £16.5 million). This loss is primarily due to the impairment of the value of publishing titles of £163.7 million, compared with the charge of £13.1 million in 2010. Other significant differences between 2011 and 2010 which affected the loss before tax were the lower operating profit in 2011 and the loss from movements in the fair value of our derivatives, offset by lower finance costs due to the lower net debt in the year.

Tax Rate

The Group tax rate for the year, excluding non-recurring and IAS 21/39 items, was 22.4%. This rate is considerably lower than the UK tax rate of 26%. The overall rate was reduced by the lower rates that apply to profits generated in the Republic of Ireland and the Isle of Man.

Cashflow, Financing and Net Debt

Net debt at the year end was £351.7 million (excluding any reduction from unamortised financing fees) a reduction of £35.0 million on the prior year. The Group remained strongly cash generative throughout the year, with net cash in from operating activities of £67.9 million. This cash was primarily used for cash interest payments of £25.6 million and to repay borrowings. The Group maintained tight control of capital expenditure with £1.8 million spent, while proceeds received from disposal of surplus assets were £2.6 million.

Reducing the Group's debt continues to be a key objective of the Board. During 2011, the Group operated under the finance facilities that were put in place in 2009. The Group accelerated the remaining facility reduction of £20.0 million that was due in June 2012 to April 2011. This enabled the Group to continue to reduce its level of debt and the interest cost through lower non-utilisation fees, cash interest payments and PIK interest accrual. The borrowings have been classed as current liabilities at 31 December 2011, as at that date, the facilities were due to mature within one year.

The Group's current facilities do not expire until September 2012, but the Group and its lenders have now agreed the key terms associated with the renewal and extension of these facilities through to September 2015. Further details are shown below.

Net Asset Position

At the period end, the Group had net assets of £284.4 million, a decrease of £126.8 million on the prior year. The impairment of £163.7 million against publishing titles was the main cause for this decrease, offset by the deferred tax credit on this of £44.0 million. Other movements in the net asset position were the decrease in the deferred tax liability of £14.9 million from the change in the UK tax rate, offset by the increase in the retirement benefit obligation of £43.2 million (discussed further below). In addition, there was a reduction in the net book value of property, plant and equipment (including assets held for sale) of £23.8 million, due to the low capital expenditure in the year and write down in the value of presses as discussed above.

Refinancing

The Group is pleased to announce that following negotiations with its lenders, a new secured facility amounting to £393.0 million has been agreed in April 2012, by way of amending and extending the current override agreement. This extends the maturity of the facilities to 30 September 2015.

The starting and maximum cash margin in the case of the bank facilities is LIBOR plus 5.00% and, in the case of the loan notes, a cash interest coupon rate of up to 10.30%. The interest rates are based on the absolute amount of debt outstanding and leverage multiples and reduce based on agreed ratchets.

In addition to the cash margin, a payment-in-kind (PIK) margin will accumulate and is payable at the end of the facility. The PIK margin rate is again based on the absolute amount of debt outstanding and leverage multiples and reduces based on agreed ratchets. Further, if the loan facilities are fully repaid prior to 31 December 2014, the rate at which the PIK margin accrued throughout the period of the agreement will be recalculated at a substantially reduced rate.

There is an agreed repayment schedule of £70.0 million over the three years. In addition, a pay-if-you-can (PIYC) repayment schedule has also been agreed totalling £60.0 million over the three years.

New 5 year share warrants over the Company's share capital will be issued. On completion of the new arrangements, warrants over a further 2.5% of the Company's share capital will be issued with the issue of a further 5.0% in September 2012. In the event that the Company does not obtain the necessary authority to grant those warrants due to be issued in September 2012, the lenders would instead become entitled to an equity based fee at the maturity of the facility, the terms of which would be materially worse than if the warrants were issued as proposed. In addition, the exercise period for the 5.0% warrants issued to the lenders in August 2009 will be extended to make the expiry of all warrants coterminous in September 2017.

The new facilities include the same type of financial covenants as were within the previous facilities. 

Fees payable are approximately £11.5 million. This represents a significant reduction on the fees associated with the 2009 refinancing.

Liquidity and Going Concern

The Board has undertaken a recent and thorough review of the Group's forecasts and associated risks. These forecasts extend for a period beyond one year from the date of approval of these financial statements. The extent of this review reflected the economic outlook and the current revenue and cost trends, together with the on-going volatility in advertising revenues. The forecasts make key assumptions, based on information available to the Directors, around:

• Future advertising revenues which show reducing declines in 2012, consistent with current market views; and

• Further cost reduction measures to reflect lower revenues and the on-going re-engineering of the business.

Following a thorough review of these forecasts and projections and, after taking account of reasonable downside scenarios to the key assumptions underpinning these forecasts, the Directors are satisfied that the Group will be able to operate within the new financing terms determined by the amended and extended finance agreement and covenants.

Having reached agreement on these new financing terms, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operation for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.

Pensions

The Group's defined benefit pension deficit increased by £43.2 million over the year. The increase in the deficit was the result of the following factors, both positive and negative.

Investment markets remained volatile during 2011, with returns falling short of those assumed by £27.0 million. In addition there was a further reduction in the discount rate applied to the scheme liabilities which resulted in an increase in the value of liabilities of £42.0 million. A change in the longevity assumptions has increased liabilities by £23.0 million while a decrease in the assumptions relating to inflation (including a change in the assumed rate of deferred revaluations) has resulted in a £33.0 million reduction in liabilities. Changes to other demographic assumptions, relating to dependants' pensions and the likelihood of deferred pensioners taking up the pension increase exchange offer in future, have resulted in a further £9.0 million reduction in liabilities.

In 2011, the Group offered a number of existing pensioners the opportunity to take part in a pension exchange where, for a higher pension today, they give up a proportion of future increases. This resulted in a gain of £1.9 million. It is expected that this offer will be run for all other members in 2012.

Other movements totalling £5.0 million made up the balance of the increase.

The pension fund was also subject to a triennial valuation carried out as at 31 December 2010. The result of this valuation gave rise to a new schedule of contributions and funding plan to reduce the deficit. As a result, the annual level of contributions under the schedule of contributions increases from £2.2 million to £5.7 million with effect from 1 June 2012.

Financial Reporting

In terms of this report, there are no significant changes in International Financial Reporting Standards from those in force at the end of 2010.

Control Processes

As discussed in the Corporate Governance Statement, the Group operates rigorous internal control processes that assist in the efficient operation of our businesses. Central to these processes and controls is the fact that the general ledgers, fixed asset registers, payables system, expenses and payroll are controlled through our shared services centre in Peterborough, together with all cash processing and sales ledger balances for the mainland UK being controlled through a single centre in Leeds.

Earnings Per Share and Dividends

Basic earnings per share was a loss of 14.24p, down from a profit of 5.61p in 2010 for the following reasons:

• An impairment loss recognised of £163.7 million in 2011 (2010: £13.1 million);

• A reduction in the underlying operating profit before non-recurring and IAS 21/39 items, partially offset by lower finance costs;

• Total IAS 21/39 movements in 2011 were a charge of £0.7 million compared to a credit of £3.2 million in 2010; and

• Offsetting these movements were non-recurring tax credits of £14.9 million relating to the change in deferred tax rate, and £44.0 million from the release of deferred tax on intangibles which reduced the loss per share (2010: £22.5 million non-recurring tax credits).

Excluding non-recurring and IAS 21/39 items, the underlying earnings per share at the basic level of 3.50p was down from the previous year's comparative of 3.67p due to the lower operating profit.

There will be no dividend recommended by the Board relating to 2011. This reflects the Group's focus on further reducing the debt levels of the business, and is also in line with the Group's finance arrangements which preclude the payment of any dividend until the ratio of net debt to EBITDA falls below 2.5 times.

Directors' Responsibility Statement

We confirm to the best of our knowledge:

1. the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

2. the business review, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board

Ashley Highfield Grant Murray

Chief Executive Officer Chief Financial Officer

25 April 2012 25 April 2012

Group Income Statement

for the 52 week period ended 31 December 2011

The above revenue and profit/(loss) are derived from continuing operations. The accompanying notes are an integral part of these financial statements.

The comparative period is for the 52 week period ended 1 January 2011.

Group Statement of Comprehensive Income

for the 52 week period ended 31 December 2011

Group Reconciliation of Shareholders' Equity

for the 52 week period ended 31 December 2011

The accompanying notes are an integral part of these financial statements.

Group Statement of Financial Position

at 31 December 2011

The comparative numbers are as at 1 January 2011.

The financial statements of Johnston Press plc, registered number 15382, were approved by the Board of Directors and authorised for issue on 25 April 2012.

They were signed on its behalf by:

Ashley Highfield, Chief Executive Officer Grant Murray, Chief Financial Officer

The accompanying notes are an integral part of these financial statements.

Group Statement of Cash Flows

for the 52 week period ended 31 December 2011

The comparative period is for the 52 week period ended 1 January 2011.

The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011

1. General Information

The financial information in the Preliminary Results Announcement is derived from but does not represent the full statutory accounts of Johnston Press plc. The statutory accounts for the 52 weeks ended 1 January 2011 have been filed with the Registrar of Companies and those for the 52 weeks ended 31 December 2011 will be filed following the Group's Annual General meeting on 13 June 2012. The auditor's reports on the statutory accounts for the 52 weeks ended 1 January 2011 and 31 December 2011 were unqualified, and do not contain a statement under Sections 498 (2) or (3) of the Companies Act 2006.

Whilst the financial information included in this Preliminary Results Announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. This Preliminary Results Announcement constitutes a dissemination announcement in accordance with Section 6.3 of the Disclosure and Transparency Rules (DTR). The 2011 Annual Report and Accounts for the 52 weeks ended 31 December 2011 will be made available on the Company's website at www.johnstonpress.co.uk, at the Company's registered office at 108 Holyrood Road, Edinburgh EH8 8AS, and sent to shareholders in early May 2012.

2. Adoption of New and Revised Standards

The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had any significant impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements.

The following amendments were made as part of Improvements to IFRSs (2010):

The amendments made to Standards under the 2010 improvements to IFRSs have had no impact on the Group.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

2. Adoption of New and Revised Standards (continued)

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods, except as follows:

• IFRS 9 will impact both the measurement and disclosures of Financial Instruments;

• IFRS 12 will impact the disclosure of interest the Group has in other entities;

• IFRS 13 will impact the measurement of fair value for certain assets and liabilities as well as the associated disclosures;

• IAS 19 (revised) will impact the measurement of the various components representing movements in the defined benefit pension obligation; and associated disclosures, but not the Group's total obligation. It is likely that following the replacement of expected returns on plan assets with a net finance cost in the Income Statement, the profit for the period will be reduced and correspondingly other comprehensive income increased.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

3. Business Segments

Information reported to the Chief Executive Officer for the purpose of resource allocation and assessment of segment performance is focussed on the two areas of Newspaper Publishing (in print and online) and Contract Printing. Geographical segments are not presented as the primary segment is the UK which is greater than 90% of Group activities.

4. Segment Information

a) Segment revenues and results

The following is an analysis of the Group's revenue and results by reportable segment:

* Inter-segment sales are charged at prevailing market prices.

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

4. Segment Information (continued)

The segment result represents the (loss)/profit earned by each segment without allocation of the share of results of associates, investment income, finance costs (including in relation to pension assets and liabilities) and income tax expense. This is the measure reported to the Group's Chief Executive Officer for the purpose of resource allocation and assessment of segment performance.

b) Segment assets

For the purposes of monitoring segment performance and allocating resources between segments, the Group's Chief Executive Officer monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of available-for-sale investments and derivative financial instruments.

c) Other segment information

5. Non-Recurring Items

In addition to the non-recurring items above, the Group has treated a £14.9 million tax credit from the change to the UK deferred tax rate as non-recurring and recognised a £44.0 million tax credit following the release of the deferred tax liability on the impaired intangible assets. In 2010, an £8.9 million tax credit and the release of £13.6 million tax provision were treated as non-recurring.

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

6. Finance Costs

c) IAS 21/39 items

All movements in the fair value of derivative financial instruments are recorded in the Income Statement. In the current period, this movement was a net charge of £0.7 million (2010: credit of £2.6 million), consisting of a realised credit of £0.5 million and an unrealised charge of £1.2 million.

The retranslation of foreign denominated debt at the period end resulted in a net credit of £nil (2010: credit of £0.6 million) being recorded in the Income Statement. The retranslation of the Euro denominated publishing titles is shown in the Statement of Comprehensive Income.

7. Tax

UK corporation tax is calculated at 26.5% (2010: 28.0%) of the estimated assessable profit/(loss) for the period. The 26.5% basic tax rate applied for the 2011 period was a blended rate due to the tax rate of 28.0% in effect for the first quarter of 2011, changing to 26.0% from 1 April 2011 under the 2011 Finance Act. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdiction.

The tax credit for the period can be reconciled to the (loss)/profit per the Income Statement as follows:

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

8. Earnings per Share

The calculation of earnings per share is based on the following (losses)/profits and weighted average number of shares:

Underlying figures are presented to show the effect of excluding non-recurring and IAS 21/39 items from earnings per share. Diluted earnings per share are presented when a company could be called upon to issue shares that would decrease net profit or increase loss per share.

The Group's average share price in 2011 was below the option price for any potential dilutive shares, accordingly no dilutive shares are shown.

As explained in note 13, the preference shares qualify as equity under IAS 32. In line with IAS 33, the preference dividend and the number of preference shares are excluded from the calculation of earnings per share.

9. Goodwill and Other Intangible Assets

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

9. Goodwill and Other Intangible Assets (continued)

The exchange movement above reflects the impact of the exchange rate on the valuation of publishing titles denominated in Euros at the period end date. It is partially offset by a decrease in the euro borrowings.

Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination.

The carrying amount of publishing titles by cash generating unit (CGU) is as follows:

The Group tests the carrying value of publishing titles held within the publishing operating segment for impairment annually or more frequently if there are indications that they might be impaired. The publishing titles are grouped by CGUs, being the lowest levels for which there are separately identifiable cash flows independent of the cash inflows from other groups of assets, which were arrived at by considering the cash inflows for the publishing titles and how they are generated across portfolios of complementary titles in various geographic markets. 

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are the discount rate; expected changes to selling prices and direct costs during the period; and growth rates.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the relevant underlying assets. The discount rate applied to future cash flows in 2011 was 11.0% (2010: 8.94%). In 2011, management updated its assessment of the discount rate, to reflect their views of the current risk profile of the underlying publishing title assets. In the absence of asset specific rates for the Group's intangible assets, management determined the discount rate with regard to the current economic environment and the risks that the regional media industry is facing. The rate was compared against the rate being applied by publicly traded competitors for similar groups of assets and the Group's weighted average costs of capital. Given the operating activities across the Group's portfolio, and within the individual CGUs, have similar trading characteristics and risk profiles, it is considered appropriate to use the same estimated discount rate for each of the CGUs.

Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. These include changes in cover prices and advertising rates as well as movement in newsprint and production costs and inflation.

Discounted cash flow forecasts are prepared using:

• the most recent financial budgets and projections approved by management for 2012 - 2016 which reflect management's current experience and future expectations on revenues and costs for the markets in which the CGUs operate, and consider external analysts' views of revenue trends; 

• cashflows for 2017 to 2031 that are extrapolated based on an estimated annual long-term growth rate of 1.0%;

• a discounted residual value of 5 times the final year's cashflow; and

• capital expenditure cashflows to reflect the cycle of capital investment required.

The present values of the cash flows are then compared to the carrying value of the assets to determine if there is any impairment loss.

The total impairment charge recognised in 2011 was £163.7 million (2010: net impairment charge of £13.1 million). This was primarily due to the increase in the discount rate applied to all CGUs and changes to the short term growth rates. The impairment charge by CGU was Scotland £23.8 million; North £58.6 million; North West £35.3 million; Midlands £6.4 million; South £26.3 million; Northern Ireland £6.3 million; and Republic of Ireland £7.0 million.

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

9. Goodwill and Other Intangible Assets (continued)

The Group has conducted a sensitivity analysis on the impairment test of each CGU's carrying value. The following table illustrates the additional impairment charge for each CGU that would result if the long-term growth rate decreased by 0.5% or if the discount rate was increased by 0.5%.

10. Borrowings

The borrowings are disclosed in the financial statements as:

The Group's borrowings as at 31 December 2011 have been classed as current borrowings, due to the lending facilities maturing on 30 September 2012. Subsequent to the balance sheet date, the Group has entered into an amended and restated finance agreement, details of which are shown in note 16, with a new maturity date of 30 September 2015.

The Group's net debt is:

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

10. Borrowings (continued)

Analysis of borrowings by currency:

At 2011 period end

At 2010 period end

The following finance facility details are as at 31 December 2011 and do not reflect the new finance agreements signed in April 2012, as detailed in note 16.

Credit facilities

The Group has credit facilities in place with bank lenders and private placement loan note holders until 30 September 2012. The facility is secured (see note 15) and share warrants over 5% of the Company's share capital have been issued to the lenders and note holders. Interest rates payable on all facilities are based on leverage multiples and reduce based on agreed ratchets relating to the Group's ratio of net debt to EBITDA. 

Bank loans

The Group has credit facilities with a number of banks. The total facility is £273.9 million (2010: £287.2 million) of which £55.0 million is unutilised at the balance sheet date (2010: £40.3 million). The credit facilities are provided under two separate tranches as detailed below.

Facility A

Facility A is a revolving credit facility of £55.0 million, available to be drawn down up to 30 September 2012. This facility includes a bank overdraft facility of £10.0 million (2010: £10.0 million). The loans can be drawn down on a one, two or three monthly basis. Interest is payable at LIBOR plus a maximum cash margin of 4.15% (2010: 4.15%). 

Facility B

Facility B is a term loan facility of £218.9 million (2010: £232.2 million) with full repayment due on 30 September 2012. Interest is payable quarterly at LIBOR plus a cash margin of up to 4.15% (2010: 4.15%), depending on covenants.

Under the terms of the finance agreement, committed reductions of the facilities were due in 6 monthly intervals from 30 June 2010. However, all of the scheduled reductions were brought forward at the request of the Group, with the 2010 reductions executed on 30 September 2010 and the June 2012 facility reduction executed on 28 April 2011. No further scheduled facility reductions remain.

Hedging

In accordance with the credit agreements in place, the Group hedges a portion of the bank loans via interest rate swaps exchanging floating rate interest for fixed rate interest. At the balance sheet date, borrowings of £200.0 million (2010: £245.0 million) were arranged at fixed rates and expose the Group to fair value interest rate risk.

Private placement loan notes

The Group has total private placement loan notes of £39.1 million and $158.2 million (2010: £41.0 million and $165.9 million). The notes are repayable in full on 30 September 2012. Interest is payable quarterly at fixed coupon rates up to 9.45% (2010: 9.45%) depending on covenants. 

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

10. Borrowings (continued)

As noted with Facility B, committed reductions of the facilities were due in 6 monthly intervals from 30 June 2010. However all of the 2010 and 2011 reductions were made during 2010, and the 2012 facility reduction was executed in 2011.

2003 Private placement loan notes

The 2003 Private placement loan notes are made up of:

• £39.1 million at a coupon rate of up to 9.45% (2010: £41.0 million at a coupon rate of up to 9.45%); and

• $67.4 million at a coupon rate of up to 8.9% (2010: $70.7 million at a coupon rate of up to 8.90%). 

Of the $67.4 million, $32.4 million has been swapped into floating sterling of £20.5 million and $35.0 million has been swapped into fixed sterling of £22.2 million to hedge the Group's exposure to US dollar interest rates (2010: $35.7 million into floating sterling of £22.6 million and $35.0 million into fixed sterling of £22.2 million).

2006 Private placement loan notes

The 2006 Private placement loan notes are made up of:

• $32.2 million at a coupon rate of up to 9.33% (2010: $33.8 million at a coupon rate of up to 9.33%); and

• $58.6 million at a coupon rate of up to 9.43% (2010: $61.4 million at a coupon rate of up to 9.43%).

The total amount of $90.8 million has been swapped back into fixed sterling of £31.4 million (2010: £32.9 million) and floating sterling of £17.3 million (2010: £18.1 million), again to hedge the Group's exposure to US dollar interest rates. 

Payment-in-kind interest

In addition to the cash margin payable on the bank facilities and private placement loan notes, a payment-in-kind (PIK) margin accumulates and is payable at the end of the facility. This margin increases throughout the period of the facility. The PIK margin is eliminated if £85.0 million is repaid on the facilities excluding the scheduled facility reductions. The PIK accrues at a margin of between 1.35% and 3.05%.

Interest rates:

The weighted average interest rates paid over the course of the year, were as follows:

11. Derivative Financial Instruments

Derivatives that are carried at fair value are as follows:

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

12. Retirement Benefit Obligation

Throughout 2011 the Group operated the Johnston Press Pension Plan (JPPP), together with the following schemes:

• A defined contribution scheme for the Republic of Ireland, the Johnston Press (Ireland) Pension Scheme.

• An ROI industry-wide final salary scheme and a final salary scheme for a small number of employees in Limerick which has been closed to future accruals. A third ROI industry wide final salary scheme was contributed to prior to February 2011 when the Group ceased contributions and this scheme is being wound up. There are no additional financial implications to the Group if these schemes are terminated. Consequently, the Group's obligations to these schemes is included in Long Term Provisions and the details shown below exclude these schemes.

The JPPP is in two parts, a defined contribution scheme and a defined benefit scheme. The latter is closed to new members and closed to future accrual. A curtailment credit of £6.3 million was recognised in the Group Income Statement in the prior period reflecting the closure to future accrual. The assets of the schemes are held separately from those of the Group. The contributions are determined by a qualified actuary on the basis of a triennial valuation using the projected unit method. The contributions to the defined benefit scheme are fixed annual amounts with the intention of eliminating the deficit. Based on the outcome of the triennial valuation at 31 December 2010, the fixed annual amounts increase to £5.7 million from 1 June 2012 under the schedule of contributions agreed between the Company and the JPPP Trustees. As the defined benefit scheme has been closed to new members for a considerable period the last active member is scheduled to retire in 35 years with, at current mortality assumptions, the last pension paid in 55 years. On a discounted basis the duration of the pension liabilities is circa 20 years. The financial information provided below relates to the defined benefit element of the JPPP.

During 2011, the Company carried out a pension exchange exercise whereby a number of pensioner members were made an offer by the Company to exchange some of their future pension increases for a one-off increase in pension, where the new uplifted amount would no longer be eligible for increases in payment. The impact of this was a non-recurring credit in the Group Income Statement of £1.9 million in the year.

The composition of the trustees of the JPPP is made up of an independent Chairman, a number of member nominated (by ballot) trustees and several Company appointed trustees. Half of the trustees are nominated by members of the JPPP, both current and past employees. The trustees appoint their own advisers and administrators of the Plan. Discussions take place with the Executive Directors of the Company to agree matters such as the contribution rates.

The defined contribution schemes provide for employee contributions between 2-6% dependent on age and position in the Group, with higher contributions from the Group. In addition, the Group bears the majority of the administration costs and also life cover.

The pension cost charged to the Income Statement was as follows:

Major assumptions:

The expected rate of salary increases is no longer relevant to the calculation of Plan liabilities given its closure to future accrual and so is noted as 'not applicable' in the table above.

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

12. Retirement Benefit Obligation (continued)

The valuation of the defined benefit scheme's funding position is dependent on a number of assumptions and is therefore sensitive to changes in the assumptions used. The impact of variations in the key assumptions are detailed below:

• A change in the discount rate of 0.1% pa would change the value of liabilities by approximately 1.7% or £8.5 million.

• A change in the life expectancy by one year would change liabilities by approximately 3.0% or £14.0 million.

Amounts recognised in the Income Statement in respect of defined benefit schemes:

There was no current service cost in 2011 as the Defined Benefit scheme has been closed to future accrual (2010: £1,064,000 current service cost, of which £798,000 was included in cost of sales and £266,000 included in operating expenses). An actuarial loss of £49,584,000 (2010: gain of £14,064,000) has been recognised in the Group Statement of Comprehensive Income in the current period. The cumulative amount of actuarial gains and losses recognised in the Group Statement of Comprehensive Income since the date of transition to IFRS is a loss of £84,465,000 (2010: loss of £34,881,000). The actual return on scheme assets was a £1,198,000 loss (2010: £36,491,000 return).

Amounts included in the Statement of Financial Position:

As at 31 December 2011 the required amounts of contributions to be paid to the scheme during 2012 was £2,200,000 (2010: £4,444,000); following the completion of the triennial valuation, these contributions increase to £5,700,000 from 1 June 2012.

Movements in the present value of defined benefit obligations:

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

12. Retirement Benefit Obligation (continued)

Movements in the fair value of plan assets:

Analysis of the plan assets and the expected rate of return:

Five year history:

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

13. Share Capital

The Company has only one class of ordinary shares which has no right to fixed income. All the preference shares carry the right, subject to the discretion of the Company to distribute profits, to a fixed dividend of 13.75% and rank in priority to the ordinary shares. Given the discretionary nature of the dividend right, the preference shares are considered to be equity under IAS 32.

14. Notes to the Cash Flow Statement

Cash and cash equivalents (which are presented as a single class of assets on the face of the Statement of Financial Position) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

15. Guarantees and Other Financial Commitments

a) Lease commitments

The Group has entered into non-cancellable operating leases in respect of motor vehicles and land and buildings, the payments for which extend over a period of years.

Notes to the Consolidated Financial Statements

for the 52 week period ended 31 December 2011 continued

15. Guarantees and Other Financial Commitments (continued)

At the period end date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Operating lease payments represent rentals payable by the Group for certain of its office properties and motor vehicle fleet. Leases are negotiated for an average term of 10 years in the case of properties and 4 years for vehicles. The rents payable under property leases are subject to renegotiation at various intervals specified in the lease contracts. The Group pays insurance, maintenance and repairs of these properties. The rents payable for the vehicle fleet are fixed for the full rental period.

b) Assets pledged as security

Under the refinancing agreement signed on 28 August 2009, the Group and all its material subsidiaries have entered into a security agreement with the Group's bankers and Private Placement loan note holders. The security provided includes a fixed charge over the assets of the Group including investments, fixed assets, goodwill, intellectual property and a floating charge over its present and future undertakings.

16. Post Balance Sheet Event

As explained in note 11, the Group currently meets its day-to-day and long term funding requirements through facilities that were due to expire on 30 September 2012. In April 2012, the Group announced the amendment and restatement of these finance facilities until 30 September 2015. The facilities consist of a revolving credit facility, a term loan facility and private placement loan notes, with a total available facility of £393.0 million.

Interest margins

The starting and maximum cash margin in the case of the bank facilities is LIBOR plus 5.00% and, in the case of the loan notes, a cash interest coupon rate of up to 10.30%. The interest rates are based on the absolute amount of debt outstanding and leverage multiples and reduce based on agreed ratchets.

Payment-In-Kind

In addition to the cash margin, a payment-in-kind (PIK) margin of a maximum rate of 4.0% will accumulate and is payable at the end of the facility. The PIK margin rate is again based on the absolute amount of debt outstanding and leverage multiples and reduces based on agreed ratchets. Further, if the loan facilities are fully repaid prior to 31 December 2014, the rate at which the PIK margin accrued throughout the period of the agreement will be recalculated at a substantially reduced rate.

Repayment

There is an agreed repayment schedule of £70.0 million over the three years. Repayments are due every six months with the first scheduled for 30 June 2012. In addition, a pay-if-you-can (PIYC) repayment schedule has also been agreed totalling £60.0 million over the three years, beginning 30 June 2012.

Warrants

New 5 year share warrants over the Company's share capital will be issued. On completion of the new arrangements, warrants over a further 2.5.0% of the Company's share capital will be issued with the issue of a further 5.0% in September 2012. In the event that the Company does not obtain the necessary authority to grant those warrants due to be issued in September 2012, the lenders would instead become entitled to an equity based fee at the maturity of the facility, the terms of which would be materially worse than if the warrants were issued as proposed. In addition, the exercise period for the 5.0% warrants issued to the lenders in August 2009 has been extended to make the expiry of all warrants coterminous in April 2017.

Covenant tests

The new facilities include the same type of financial covenants as were within the previous facilities.

Fees

Fees payable are approximately £11.5 million. This represents a significant reduction on the fees associated with the 2009 refinancing.