Results for the 52 weeks ended 28 December 2013

FOR IMMEDIATE RELEASE 28 March 2014

JOHNSTON PRESS PLC

RESULTS FOR THE 52 WEEKS ENDED 28 December 2013

Underlying operating profit* up 2.5%,

Debt continues to be paid down

Johnston Press plc ("Johnston Press" or "the Group"), one of the leading community media groups in the British Isles, announces its results for the 52 week period ended 28 December 2013.

Underlying operating profit* increased by 2.5% from £53.0m to £54.3m, the first increase in underlying operating profit for seven years.

Advertising revenues in 2013 declined 6.4% on an underlying basis. Unadjusted advertising revenues were down 10% but significant improvements in the second half reduced this decline to 4.4% in H2.

Digital revenues were up 19.4% in the full year and 25.3% in the second half of 2013. In our most strategically important area of digital display advertising, we saw revenue growth of 30.3% for the period, and 44.6% during H2.

In December 2013 we achieved an aggregate audience of 21.1m, an increase of 17.1% against December 2012. Digital audience growth for December was up 47.7% with unique users reaching 13.3m in December 2013.

Statutory loss before tax of £286.8m is due to significant exceptional items, largely the impairment of assets announced at the half year and restructuring costs.

Net debt was down £17.3m to £302.0m for the year with repayments of £33.1m partially offset by the increased PIK interest accrual of £12.1m.

Financial Highlights

^ Includes exceptional receipt of £10.0m (2012: £30.0m) in connection with the cancellation of contract printing arrangements with News International.

* Underlying is stated excluding exceptional revenues and after removing trading revenues following the cancellation of contract print arrangements with News International of £0.9m in 2013 and £10.0m in 2012

** Underlying operating profit is stated after removing trading revenues of £9.9m from 2012 and related costs associated with five titles that changed format from daily to weekly and closed free titles.

All Underlying figures are stated before IAS 21/39 adjustments and exceptional items - refer to the Financial Review for a more detailed description.

Key highlights for financial year 2013

· Revenue: Underlying total revenues at £291.9m, down 5.5% period on period

· Digital revenues: Up 19.4% period on period, from £20.6m to £24.6m

· Cost reduction:Operating costs, before exceptional and IAS 21/39 items, have reduced by £33.8m from £271.7m to £237.9m

· Operating margin before exceptional and IAS21/39 items: Up to 18.8%, from 17.3%

· Continued debt reduction:Net debt down £17.3m from December 2012 to £302.0m at 28 December 2013

· Exceptional items: Net exceptional costs before tax of £300.5m, net of a £10.0m receipt associated with the termination of the News International contract

Revenues

Total underlying revenues decreased by 5.5% period on period. Consumer confidence remained low in the first half of 2013, and this was reflected in advertiser spending, however the second half saw signs of improvement.

· Total advertising revenues declined 6.4% year on year on an underlying basis (unadjusted decline was 10.0% in the full year). The unadjusted decline narrowed in the second half to 4.4%.

· During 2013 digital revenue increased by 19.4%. Following flat half-on-half digital revenue growth in 2012, 2013 saw a return to digital growth of some 13.0% in the first half, rising to 25.3% in the second half.

· Newspaper sales revenues declined 2.1% on an underlying basis in 2013 (4.5% unadjusted).

Exceptional items

· The results include a net charge before tax of £300.5m in respect of exceptional items, the majority of which was announced at the time of the Interim Results in August 2013.

· The charge includes a non-cash accounting adjustment reducing the carrying value of our publishing titles by £202.4m, print assets by £63.7m and properties held for resale by £4.7m. £10.0m of cash was received from the cancellation of the remaining element of our News International print contract. There were other cash costs of £33.0m in connection with the further restructuring of the business and £5.7m of pension protection fund levy and other pension charges.

Refinancing

The Company announced on 27 December 2013 that it had reset its financial covenants through to the maturity of its debt facilities in September 2015 and intends pursuing a refinancing of its debt facilities in 2014. On 3 March 2014 the Company announced that as part of a proposed refinancing of its debt facilities it is considering a range of options including a potential equity fundraising. The Company is actively exploring these options and will make further announcements in due course. 

Outlook

In January and February 2014, advertising revenues are down 6.0%. The growth in underlying profits has continued into 2014 with an 8.0% increase in EBITDA (operating profit before depreciation and amortisation, exceptional items and IAS21/39 adjustments) to the end of February. Our digital growth remains strong, with audiences in the last reported ABC period to December 2013 up by 47.7% year on year to 13.3m unique users per month. In both January and February 2014, digital audiences have exceeded 15m with year on year growth of around 50%.

Although the economic outlook is starting to show signs of improvement, most evident in property and particularly employment, the Company will continue to manage our cost base while building on the strong digital growth in the second half of 2013.

Commenting on the annual results for 2013 and outlook, the Chief Executive, Ashley Highfield, said:

"We are delighted to see a return to underlying operating profit growth for the first time in seven years, with underlying operating profits in 2013 increasing by 2.5% on 2012. Having delivered EBITDA of £62.7m in 2013, January and February has seen an 8% increase in EBITDA year on year. Our digital growth remains strong, with significantly increasing audiences coming to our websites in 2013 and into 2014. Along with slowing declines in print advertising revenues, and a stable circulation revenue decline rate, these are clear indications of good progress during the year in the implementation of our strategy for growth.

During the year we completed the re-launch of our websites and our print titles, and took the first steps to re-invent community newspapers with significantly higher levels of user generated content. We invested further in technology to build our digital platforms, including launching DigitalKitbag, a one-stop-shop for digital marketing services aimed at the hundreds of thousands of Small and Medium sized Enterprises (SMEs) that we already serve in print. With the benefits of our actions coming through, coupled with strong digital growth and a slowing print decline, the Group is well positioned to make further progress in 2014.

For further information please contact:

Johnston Press 020 7466 5000 (today) or

Ashley Highfield, Chief Executive Officer 020 7614 2602 (thereafter)

David King, Chief Financial Officer

Buchanan 020 7466 5000

Richard Oldworth/Sophie McNulty/Clare Akhurst

Investor presentation and audio cast

A presentation for analysts and live audio cast will be held at 09.00am on Friday 28 March 2014 which will be available at:

http://mediaserve.buchanan.uk.com/2014/jp280314/registration.asp

A replay of the audio cast will be available after 11am on Friday 28 March on the Group website www.johnstonpress.co.uk and from the URL above.

Please see the conference call dial in details below:

Number: 02034281542

Participant Pin: 57239117#

The announcement for the period ended 28 December 2013 will be available at www.johnstonpress.co.uk/investors

Forward-looking statements

The report contains forward looking statements. Although the Group believes that the expectation reflected in these forward- looking statements are reasonable, it can give no assurance that the expectations will prove to have been correct. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward looking statements. The Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. 

Chairman's Statement

2013 was the year that we started to see signs of an improving economic climate and positive results from our strategy.

Strategy

2013 was another year of considerable change and innovation at Johnston Press, during which we made progress towards achieving our strategic aims and our longer-term vision to build a truly multimedia business.

For our business it remains essential that we increase our profitability. We must embrace the changes and innovations we are undertaking to increase our audience size and the revenue we generate as a result. Our digital business is key to this strategy, both in terms of new services and reaching new audiences in different demographics than our print business. However, our established print business has an essential role to play as we look to stabilise our print circulation and advertising revenues. We have incurred significant restructuring costs in the year as we implement changes to ensure our cost base is appropriate for our multimedia future.

In parallel with our operating strategy we are making good progress towards refinancing our debt. A successful refinancing would bring a level of financial stability that would allow us to invest more in delivering our short, medium and longer-term strategic objectives and would fast track Johnston Press into an organisation that is fit for a truly multimedia future.

Results

Our results for 2013 were affected by the difficult trading environment in the first half of the year. Nevertheless, there were strong results in some of our key advertising categories.

Total statutory revenues were affected by the termination of the News International contract and conversion of titles from daily to weekly and closure of certain titles.

Total underlying revenues ended the year down 5.5% from £308.8 million to £291.9 million, with underlying print advertising down 9.5% from £173.5 million to £157.1 million. The combined underlying print and digital advertising revenue was down 6.4% at £181.7 million. However, the rate of decline in our advertising revenues is narrowing and in the final quarter of 2013 the decline had narrowed to 5.3%. We are working to build on this momentum in 2014. Underlying newspaper sales revenue, supported by cover price increases, was down 2.1% from £89.6 million to £87.7 million.

Digital revenues again grew strongly in the year by 19.4% from £20.6 million to £24.6 million, with the second half of the year experiencing year-on-year digital revenue growth of 25.3%. The key digital categories of employment, property, motors and local display all showed strong year-on-year growth.

Despite this, our digital performance was not sufficient in preventing a decline in our total advertising revenue.

The Group's cost management was extremely impressive once again. Adjusted operating costs (before exceptional and IAS 21/39 items and including depreciation and amortisation), were reduced by £33.8 million from £271.7 million to £237.9 million which represents a year-on-year decline of 12.4%.

The resulting underlying operating profit was up 2.5% from £53.0 million to £54.3 million with underlying operating profit margins up from 17.2% to 18.6% year-on-year. This is a strong improvement on 2012 and led to the Group's first year-on-year underlying operating profit growth for seven years.

Chairman's Statement (continued)

Earnings per share (before exceptional and IAS 21/39 items) were 2.65p, compared to 3.42p in 2012 (Note 11). Underlying net profit after tax was £16.7 million (2012: £17.4 million). Cash flow performance was again strong, with net debt at the end of the year of £302.0 million, a reduction of £17.4 million from the start of 2013.

Total net exceptional items before tax were £300.5 million (2012: £16.6 million). These included £10.0 million revenue from the termination of a long-term printing contract with News International, a £202.4 million impairment of publishing titles, in part reflecting changes in the discount and growth rate assumptions applicable to the business and sector as a whole, a £68.4 million write down in the value of print press assets and property assets brought about as a result of structural rationalisations and closure of specific operations (particularly presses), £33.0 million on restructuring and £5.7 million of pension related Section 75 and pension protection fund levy expenses. This resulted in a statutory operating loss of £245.7 million. More information on these items can be found in the Financial Review section of this report.

Dividend

We continue to use excess cash to reduce the Group's debt and, as required under our financing arrangements, no dividend is proposed for the year.

Industry issues

Lord Justice Leveson made it clear in his enquiry into press standards that the local press was not guilty of any wrongdoing and should not be penalised by any new regulatory system. However, we felt that the Royal Charter proposals would not provide smaller titles with adequate protection from vexatious or speculative complaints and the costs associated with processing such claims. As a result, and in line with the significant majority of the industry, we have joined the process of establishing the Independent Press Standards Organisation.

The new regulatory body will have transparent processes, independence and authority to direct remedial action, call editors to account, investigate serious breaches of its code and impose appropriate and proportionate sanctions and fines in the worst cases.

Board

Geoff Iddison, who served as a Non-Executive Director from January 2010, stepped down from his role in June 2013. I would like to thank Geoff for his commitment and contribution to the Group over the past three-and-a-half years. He made a considerable contribution to the development of our digital strategy over this period and we wish him all the best for the future. Stephen van Rooyen joined the Board as a Non-Executive Director of the Company with effect from 1 June 2013. Stephen has held a number of senior roles at Sky since joining in 2006, and is currently Managing Director, Sales and Marketing. He was previously Director of Strategy at Virgin Media and has also worked at News International and Accenture in both Australia and the UK. I am confident Stephen's knowledge and perspective will add significant value to the business. We look forward to working with him in continuing to develop our business.

There was also significant change amongst our Executive Directors this year. As we announced at the end of 2012, Danny Cammiade stepped down as Chief Operating Officer at the end of March 2013. During May 2013 we announced that Grant Murray had stepped down as Chief Financial Officer and was succeeded by David King at the beginning of June 2013. David is a former Chief Executive Officer of Time Out Group and before that was Chief Financial Officer at BBC Worldwide.

Chairman's Statement (continued)

The Board regularly reviews both the balance of its membership and the issues it considers when it meets. The agenda for its meetings are structured to scrutinise both strategic and operational matters in an atmosphere of constructive challenge and debate. We have retained our programme of site visits for all our Non-Executive Directors and I am satisfied that the Board remains effective.

Employees

Our employees are, of course, key to our business and on behalf of the Board I wish to express our gratitude to them for their dedication throughout another year of considerable change. They have continued to deliver performance and products of a high quality, and their commitment will remain vital in the year ahead.

Outlook

The last several years have been impacted by the longest, and at times the deepest, recession in memory. However, the economic outlook in the markets in which we operate is more positive. This, coupled with the changes and innovations that we have made at Johnston Press, give the Board greater confidence in our future than at any time in recent years.

Ian Russell

Chairman

Chief Executive's Report

2013 was the year we returned to underlying operating profit growth.

We continue to transform our business into a modern multimedia organisation, growing our overall audience strongly, which will provide us with the best opportunity to succeed in 2014 and beyond.

2013 was an important year in our turnaround at Johnston Press as it was the year we posted our first underlying operating profit growth for seven years. This is an important milestone and indicates that our strategy for the business is the right one. We posted an underlying operating profit of £54.3 million, representing year-on-year growth of 2.5%.

Review of the year

2013 started with very difficult trading conditions but as the year progressed, conditions improved and we ended the year with a sense of optimism across many business sectors. The improving conditions were reflected in our trading performance which improved from quarter to quarter. With property playing a significant role in the economic recovery to date, we are well placed to take advantage of this, as our advertiser base comprises many businesses that benefit from higher volumes in the property market from estate agents to solicitors, and from furniture retailers to transport companies.

In response to the macro economic environment we have continued to transform Johnston Press. We have implemented a number of strategic initiatives that will continue to reduce our cost base, to stem the decline in top line revenue and accelerate our digital growth.

This transformation has allowed us to post the first positive year-on-year growth in underlying operating profit for seven years. We grew underlying operating profit by 2.5% year-on-year to £54.3 million, stopping the operating profit decline and taking Johnston Press back to underlying growth.

We have historically converted a high proportion of EBITDA into operating cashflow and we continue to do so, underpinned by controlled capital expenditure. This has allowed us to continue to reduce our net debt burden which has now declined by more than 37% since December 2008 from £476.8 million to £302.0 million in December 2013.

Our aggregate print and digital audience has grown from 18.1 million users in December 2012 to 21.2 million users in December 2013, a year-on-year growth of 17.1%. In the same period digital audiences grew from 9.0 million unique users to 13.3 million unique users, a growth of 47.7% year-on-year. This growth demonstrates that we continue to be relevant to both our readers and advertisers. Whilst overall circulation revenue declines were as anticipated in one or two very challenged economic markets, increasing cover prices during the recession created a greater circulation decline than expected.

As well as growing digital audiences, we grew digital revenues by 19.4% year-on-year, from £20.6 million in 2012 to £24.6 million in 2013, with very encouraging growth in some of our key digital categories. The property category grew by 125.0% year-on-year, the motors category grew by 200.0% year-on-year and total digital display advertising grew by 30.3%, albeit from a low base. These categories are well positioned for growth in 2014, as we develop our products and propositions with the benefit of a better economic climate.

The Group's digital employment business, operating in an exceptionally challenging economic environment for most of 2013, still managed to post revenue growth of 4.1% year-on-year.

Total display advertising grew by 30.3%, digital local display advertising grew by 32.7% year-on-year with national display advertising growing by 25.9% year-on-year, with combined growth in the second half of the year of 44.6%. This gives us further confidence for 2014.

Chief Executive's Report (continued)

We launched a new site for the entertainment market, WOW247.co.uk, to support further the Group's engagement with the local community and reach beyond newspaper footprints.

Our national advertising sales were depressed by the macro economic situation, which badly affected some of our largest retail clients. Our underlying total revenues for the year were down 5.5%, an improvement on the 7.9% decline we experienced in 2012. Amongst this, the quarterly run rates for advertising revenues are showing positive signs, the year-on-year declines for each quarter in 2013 were, 14.8%, 12.7%, 7.6% and 5.3% respectively, once again providing further encouragement for 2014.

The relaunch of the Group's newspaper titles into more modern standardised templates was successfully completed in 2013. The programme has helped quality control and given more time for editors to develop content in print and digital platforms and is unrivalled at this scale in the newspaper sector, driving both copy sales and the national advertising proposition.

One of the direct results of the relaunch programme is that we now have a platform to provide greater efficiencies in our content gathering operation from our journalists, freelance contributors and readers. Using web-based editorial software the Group is now allowing trusted contributors the ability to author content directly. If these trials are successful they will provide a blueprint for the Group to restructure the editorial content gathering operations and greatly increase the volume of locally supplied material, ensuring we remain at the heart of our communities.

We have managed our cost base efficiently during the year. Adjusted operating costs were reduced by £33.8 million in 2013, a 12.4% year-on-year reduction. This is on the back of a £37.6 million reduction in 2012 (a 12.2% year-on-year reduction). The closure of titles and changes in frequency, as well as the loss of the News International contract have contributed to the reduction in the cost base during 2013. Adjusted operating profit margins (before exceptional and IAS 21/39 items) have improved from 17.3% in 2012 to 18.8% in 2013, and on an underlying basis from 17.2% in 2012 to 18.6% in 2013.

One of the most important efficiency projects this year has been the identification and implementation of best practice across the Group in the editorial and the rationalisation of the sales and back-office functions. This has led to a reduction in the average number of staff we employ to 4,188, a year-on-year reduction of 13%. We are now a re-sized, flatter and more agile organisation with better technology and processes to support our journalists and sales teams. Our centralisation of 14 content centres into two, while saving considerable costs, caused some short-term drop-off in our 'other classified' revenue.

Exceptional items

Accounting standards (IAS 36) require us to assess the recoverable value of our publishing titles and print assets by discounting the future cash flows the Group expects to derive from these assets at a market discount rate. Our long-term forecast model is updated annually and used to satisfy this requirement and is updated more frequently if we identify impairment indicators. The reduction in the value of the publishing titles, of £202.4 million, is primarily driven by a change in the rate used to discount future cash flows from 11.0% (2012) to 12.0% (2013) for our UK publishing titles and from 11.0% (2012) to 15.9% (2013) for our Republic of Ireland titles (as a result of an increase in risk-free rates of return and a revised market view on optimal media sector debt equity structures) and an update to underlying anticipated cash flows as a result of recent trading results. Due to the intended disposal of the Republic of Ireland titles, they have been valued at fair value less estimated cost of disposal. The key cash flow assumptions for our publishing titles are explained in Note 12.

Chief Executive's Report (continued)

Exceptional items (continued)

The anticipated future cash flows from the printing assets have reduced following the buy-out of the Group's contracting printing arrangements with News International. The review led to the recognition of an exceptional write-down in the period of £62.3million (refer note 7) which has been recognised in the Income Statement.

In addition to the write-down of asset values, the Group incurred other restructuring costs (including redundancy costs) of £33.0 million (2012: £24.4 million) and includes a pension related expense of £4.4 million (2012: nil) relating to required contributions to the Pension Protection Fund and £1.3 million (2012: nil) of Section 75 debt.

Refinancing

In 2012 we successfully refinanced our existing lending facilities through to September 2015. The terms of our facilities provide strong incentives to implement an alternative debt structure by the end of 2014. We are now actively engaged in seeking a more fundamental restructuring of our debt that would provide a more normalised capital structure, which would in turn provide an optimal platform for the Company to continue its strategic initiatives.

Priorities for 2014

Press with changes and innovations being undertaken to transform our revenue base and sustain our cost leadership position. More specifically for 2014, I have identified a number of priorities that will keep us on track to deliver our vision.

At the heart of this is culture change. Having lost almost 1,600 staff (average number of employees) in two years and, having come through a period of acquisition before that, we now need to build our Company as 'one Johnston Press,' putting both quality local journalism and innovative marketing solutions for small and medium-sized businesses at our core.

The focus on quality will be key, I want to achieve a big increase in customer and reader satisfaction by improving our end-to-end processes across our sales and editorial functions.

To really drive the quality agenda we will invest more resources into training. We must give our sales teams and journalists the tools and skills to get their jobs done as simply and effectively as possible.

Accelerating the growth in our digital offerings will be achieved through an increased focus on mobile, and expanding the social engagement of our digital products.

Finally, I want Johnston Press to be a data-driven organisation, an organisation where we really start to use the data about our readers and customers, from subscriptions to out-bound marketing, from targeted and behavioural advertising to winning new customers. We must put data and insight at the heart of Johnston Press and with this in mind, we are continuing to invest in and develop our marketing database.

To enable the above priorities, I have commissioned five enabling projects around Journalism, Publishing, Commercial, Digital and Data.

Chief Executive's Report (continued)

Priorities for 2014 (continued)

I am pleased to say our work through the year helped to raise our share price to levels which had not been seen for some time. Although we wish to see this grow a great deal more, we are pleased that there has been recognition for the strategy we are following.

Employees

I have mentioned that our staff numbers have reduced significantly over the last year and I recognise that it has been a difficult year for many employees as they adjust to the changes needed to take the Group forward. Their professionalism and dedication has been tremendous and, although much more needs to be done to complete the delivery of our strategy, I would like to take the opportunity to thank all of them for their contributions through a very demanding time.

Summary

Last year, I stated that we remain exceptionally well placed to serve the demand for information about the communities in which people work and live. That remains the case but the way we do this is changing and the growth in our digital audiences continues to reflect this. To remain relevant to the communities we serve we are continually innovating. Examples of this are the launch of two initiatives in Harrogate and Bourne where editorial content is driven by the readers - an example of 'user generated content' in action. Early results are both encouraging and exciting and in the case of Bourne our audience across print and on-line has grown by over 150%. The demand from advertisers to reach those communities in a targeted and cost-effective manner also grows. We are on a clear journey to become the 'one-stop-shop' for advertisers and readers across all media in the communities we serve.

Ashley Highfield

Chief Executive Officer

Operational Review

Throughout 2013 we have focused on three key themes for the operational teams - restructuring, building our skills set and being properly equipped to develop further revenue opportunities as the Group continued to focus on delivering its strategic aims in print and digital.

We have made good progress in our on-going implementation of a new sales plan to up-skill, reorganise and better focus our face-to-face sales force on meeting local customer needs. This continues to be one of our most ambitious and, potentially most beneficial, projects.

The majority of our advertising customers are local businesses who we have served for many years. A great deal of work has been dedicated to an on-going review of many markets and sales teams to ensure we continue to have the right resources, technology and customer insight to meet the marketing requirements of local consumers. We are now able to offer more defined marketing solutions from the various media platforms we can provide. The review also includes an evaluation of sales skills and measures have subsequently been introduced to ensure that all existing and new employees attain an agreed standard of expertise.

This work has helped to embed the Group's multimedia face-to-face customer engagement programme and the organisation can fully benefit from the many digital platforms which have been advanced during the year.

To support media sales, the Group has made further improvements to its consolidated centre operations in Sheffield and Edinburgh. This has focused on implementing and developing best practices from the contact centre industry, using enhanced technology to manage the volume of enquiries and new customer relationship management systems to provide better customer insight.

These projects are now supporting our various business development, including the new digital platforms for property and motors, the Group's voucher website, DealMonster (which is now operational in 14 towns, cities or regional areas), as well as non-geographical markets for travel and shopping deals. A new site has also been launched for the entertainment market, WOW247.co.uk, to support further the Group's engagement with the local communities.

In addition, the Group's recruitment portal Jobstoday.co.uk, continues to grow with new services such as The SmartList which provides application filtering and other benefits for a fixed price to recruiters.

All of our local digital platforms can be accessed via a dedicated mobile website. We have 196 websites for our local titles, and a further 13 sites for e-commerce, such as DealMonster and SmartList. We have tablet apps for 18 titles on iPad, Amazon Kindle Fire and Google Play Android. In addition, 11 titles now have smartphone football apps on both iPhone and Android platforms. These solutions support the programme of change in print products and some of the relaunched newspapers, and were backed by expanded digital activity including the ability to subscribe to the newspaper and digital service for a single price. During 2013 we completed the relaunch of the Group's newspaper titles into more modern standardised templates. The programme has helped quality control and given more time for editors to develop content in print and digital platforms and is unrivalled at this scale in the newspaper sector, driving both copy sales and and the national advertising proposition.

The implementation of the re-launch programme has been assisted by changes made to our backroom fulfilment services. All aspects of production are now centralised to a single point enabling each newspaper to have the same workflows supported by a single design team for both advertising and editorial. These changes have included further consolidation of our press centres with the closure of the Peterborough, Leeds and Sunderland press halls over the past two years and also the partial outsourcing of advertisement creation work which has driven further efficiencies.

Operational Review (continued)

We are continuing to look at a number of markets and centres that still have accommodation which does not meet the requirements of the business going forward. We are looking at these properties in light of our 'Environment Charter'. The Charter is a commitment to provide accommodation and technology which will enable staff to conduct their specified tasks, primarily content gathering, in a modern and efficient way. Although a great deal of progress has been made in this regard, the projects will continue during 2014. Allied to this review, we are continuing to look at the technology and resources that our staff required. Accordingly, our programme to enhance technology systems across the Group has continued and many iPads and smartphones have been issued to sales staff, allowing them remote access to our customer relationship management system and providing much greater insight into our customers' needs. The Group has also equiped journalists to enable them to again work remotely in the heart of their local communities. This initiative has helped to greatly improve the quality, quantity and timeliness of multimedia content available on websites, mobile sites and tablet apps.

The importance of our staff remains paramount. We continue to invest in training and development along with further improvements to Group-wide communication. As we seek to re-inforce a shared culture through our 'one Johnston Press' initiative, features such as the Group's weekly e-newsletter and website 'The Word' become ever more important as a source of Group information. We again launched a staff satisfaction survey in 2013 to identify areas of improvement such as career development, recognition, training and leadership. Following the feedback from our initial survey we introduced a new annual Johnston Press plc awards scheme, to recognise and celebrate media and commercial excellence in our staff. Our first awards night was held in March 2013.

As our work to reshape Johnston Press continued through 2013, all aspects of the business were reviewed. As a consequence, we offered a voluntary redundancy programme to all our employees during the autumn which contributed to a reduction in average headcount of 609 over the period. This has allowed staff to accept enhanced terms to leave the Group and with a number of them doing so during the early part of 2014. Careful planning has been undertaken to ensure the efficiency of future operations and to maintain quality. The programme has allowed us to review and reform the way in which many services are provided, not least front counter operations and photography.

Financial Review

In 2013 we posted the first positive year-on-year growth in underlying operating profit for seven years. We grew underlying operating profit by 2.5% year-on-year to £54.3 million.

Introduction

This Financial Review, based on the condensed consolidated financial statements of the Group, provides commentary on the Group's performance during the 52 week period ended 28 December 2013.

Despite achieving some positive operational milestones in 2013, the financial result was adversely affected by a number of exceptional and one-off costs associated with the reshaping of the business.

Basis of presentation of results

In preparing commentary on performance, the financial impact of a number of significant accounting and operational items affecting the results have been adjusted for in arriving at the underlying results discussed in this Financial Review.

A reconciliation from the statutory to the adjusted and underlying results is provided below along with a description of the nature of the adjustments made.

Reconciliation of Statutory to Adjusted and Underlying Performance

Financial Review (continued)

1 Exceptional items set out in Note 7 to the condensed financial statements.

2 IAS 21/39 finance costs set out in Note 9 to the condensed consolidated financial statements.

3 Other adjustments have been made to reflect the impact of closed titles and the change of publication frequency of five titles from daily to weekly as well as the impact of the termination of the News International printing contracts in 2012 and 2013.

4 Operating costs include cost of sales and are stated before depreciation and amortisation.

5 EBITDA is earnings before interest, tax, depreciation and amortisation.

Exceptional items

Exceptionals mainly relate to the impairment of publishing titles and assets and restructuring costs incurred in reshaping the business as it progressively moves from a print to digital business as well as cutting our costs to maintain margins. Exceptional items include the following:

· £10.0 million revenue from printing contract termination;

· £202.4 million impairment of publishing titles;

· £68.4 million write downs in the value of presses and property assets;

· £34.0 million on restructuring and other costs; and

· £5.7 million PPF levy and Section 75 provision.

Refer to the discussion of 'Exceptional items' for further details.

"IAS 21/39"

These accounting adjustments relate to the fair value movement in derivatives and currency exchange and are separated out to assist the reader in understanding the operating results of the business:

· £1.7 million charge on changes in fair value hedges; and

· £1.5 million gain on retranslation of foreign denominated borrowings.

Financial Review (continued)

"Other Adjustments" to reflect "Underlying" business

The Group results were impacted by operational changes which included the closure or merging of titles in previous years and the conversion of five titles from daily to weekly publications. In addition, a significant print contract was terminated with News International with the remaining contracts bought out in 2013.

The details of the Other Adjustments are as follows:

· In each reported year, the revenues lost due to the closure in previous periods of 54 free titles and 4 paid-for titles, together with the conversion of five newspapers from daily to weekly publications have been removed from revenue; and

· the Group removes from operating profit an amount of cost that is equal to

(i) 100 per cent of the lost revenue from the newspapers that were closed or converted to weekly publication;

(ii) costs equivalent to 10% of revenue for 2012 to cater for an allocation of shared costs to reorganised titles; and

(iii) the actual cost of sales of the discontinued printing operations for News International, together with mitigating cost savings and revenue from new print contracts which commenced in 2012.

In the case of the News International contract, these "Underlying" business adjustments reconcile to amounts in the Group's accounting records. In the case of revenue lost from newspaper closures and conversions to weekly publications, the revenue adjustments represent an estimate that is based on the financial performance of the affected publications in the periods immediately prior to and immediately following the change. In the case of the associated adjustments to operating profit relating to newspaper closures and conversions, the cost adjustment that is equal to lost revenue is an estimate of the cost benefit arising as a result of the closure or conversion based on an assumption these activities were at a break-even position, but also recognising the benefit derived by these titles from shared costs.

Financial Review (continued)

Performance Review

1 Operating costs includes depreciation, amortisation and exceptional items.

2 Digital advertising includes all digital revenues including DealMonster and other marginal non advertising digital revenues.

Advertising revenue

Total advertising revenues in 2013 were £181.7 million, a decline of 10% from previous year. The underlying decline was 6.4% after adjusting for the impact of changing five titles from daily to weekly. All of this decline was from the print advertising categories which had an underlying decline of 9.5%, with digital revenues growing by 19.4%. The overall reduction in the rate of decline in total advertising revenues as the year progressed was encouraging, with declines improving from quarter to quarter. The quarter one to quarter four year on year declines were 14.8%, 12.7%, 7.6% and 5.3% respectively.

Print and Digital Advertising

Revenue Analysis

1 Reflects the impact of closed titles and the change of publication frequency of five titles from daily to weekly.

Financial Review (continued)

Print and Digital Advertising

Half- Yearly Revenue Analysis

Our advertising categories are driven by a number of key macro indicators including GDP, and the level of unemployment and levels of consumer confidence. Throughout the year as the forecasts for these indicators improved, so did our performance and the second half of the year was significantly better than the first half, with decline rates in total advertising revenues moving from 14.9% in January to June to 4.4% in July to December.

Property

A strong property market with growing volumes of property transactions from both new build and older properties will fuel growth in our Property advertising business in both print and digital. We saw early signs of this in the second half of the year primarily driven by government backed schemes. This is an important advertising category and a healthy property market will not only benefit this category but can also benefit local display as businesses servicing home buyers and owners increase advertising spend. Despite this, the first half of 2013 still remained a very difficult market and as a result we saw this category decline by 10.8% year on year in 2013, with the January to June declines of 13.4% but encouragingly July to December declines reduced to 7.4%. Property Print advertising recorded an annual decline of 12.7%, while Digital advertising grew 125% albeit from a low base.

Employment

Our employment category was our strongest performing category over the year and generated £20.3m in 2013, a single digit annual decline of 7.3%. There was a stark difference in the first half of the year and second half of the year performance, with January to June 2013 recording an annual decline of 14.4% and July to December 2013 recording annual growth of 2.1%. Most of the 2013 growth was digital led with digital employment growing by 4.1% year on year and print declining by 13% year on year. Digital employment revenue now accounts for 37% of our total employment revenue and is the category with the highest proportion of digital revenue. While the Employment market remains strong, our improving performance in this category and changing mix from print to digital is expected to continue into 2014.

Motors

2013 remained difficult for both new and used car dealers. Encouragingly however, the macro indicators for new car registrations is more positive for 2014 and we did witness some of this improvement in the second half of the year. Overall the motors category generated £14.9m of revenue in 2013, an annual decline of 13.4%. Importantly the second half year annual decline was only 5.2% on the back of the first half year decline of 20%. The print category accounted for all the decline, with annual decline rates 17.2% and digital growing by 200%.

Financial Review (continued)

Display

Display advertising is sensitive to a number of macro indicators including the ones that drive our classified categories of Employment, Property and Motors. Our advertisers in these classified categories use display advertising both to generate sales, but also we believe for local brand awareness. 2013 started with tight control over marketing budgets for many of our Display advertising customers both at a local and national level. As with our other categories, there were signs of increasing spend during the year and this was reflected in the performance for this category in the latter months. Overall display advertising generated £77.2m in 2013, an annual decline of 10.1%, with the first half of the year declining by 13.6% year-on-year and the second half declining by 6.5% year-on-year. Print advertising declined by 13.5% year-on-year and digital grew by 30.3% year-on-year.

Other

The Other category includes Entertainment, Public Notices and Other Classified, DealMonster and other marginal digital income. This combined category generated £44.4m in revenue, representing an annual decline of 9.4%, with print declining 12.1% and digital growing by 10%. Public Notices in print performed comparatively well with an annual decline rate of 6.8%, Other classified and Entertainments had the biggest decline rates of 17% and 23% respectively. The digital growth of 10% was driven by Public Notices.

Audience growth

Our digital advertising as a whole has benefited from substantial traffic growth, following further investment in our websites, and increased levels of content. In summary we have more visitors to our websites, who visit more frequently, more pages and higher sell through rates with higher average order values.

Non advertising revenue

Newspaper sales generated £87.7 million in the year against £91.8 million in 2012, a decline of 4.5%. This decline was halved to 2.1% after taking account of the closed titles and change of frequency of the 5 titles from daily to weekly. 2013 was the year that we completed the relaunch of all our titles and continued our strategy of cover price increases. Our relaunched titles have standardised templates that we believe will be more attractive to readers and make it easier for advertisers to buy across multiple titles.

Contract printing revenue was down 56.2% compared to 2012 and was almost exclusively a result of the termination of the News International Contract.

Financial Review (continued)

Operating Costs

In the period ended 28 December 2013, operating costs including exceptional items and IAS21/39 adjustments increased by £230.1 million to £548.4 million (2012: £318.3 million). Total operating costs before exceptionals reduced by £33.8 million to £237.9 million (2012: £271.7 million).

On an underlying basis, after adjusting for exceptionals and IAS21/39 adjustments (as well as making adjustments for the closure of titles, changes in frequency of publication and stripping out the costs associated with the termination of the News International print contract), underlying operating costs decreased by £18.2 million to £237.6 million (2012: £255.8 million).

Refer to the section on Exceptional items for a description of exceptional operating expenses.

Operating Profit

In 2013 we posted the first positive year on year growth in underlying operating profit for seven years. Underlying operating profit grew by 2.5% year on year to £54.3 million from £53.0 million. This compares favourably with previous years. We have stemmed the rate of profit decline.

Despite underlying profit growth, the trading environment in the Group's markets continued to be difficult during 2013 albeit with early signs of improvement in the latter part of the year. Advertising revenues remained under pressure throughout the year but we saw significant improvements in the rate of decline as each quarter passed. Total underlying Group revenues were down £16.9 million to £291.9 million, a decline of 5.5%.

The revenue declines were mitigated by cost reductions, which were reduced from £255.8 million to £237.6 million, a year on year underlying reduction of 7.1%.

Our gross margin remains strong and grew from 17.2% to 18.6% on an underlying basis for the year, despite a level of investment in the online business.

Financial Review (continued)

Exceptional items

In addition to the trading results discussed above, a number of items have been identified as exceptional either due to the size or nature of the item. Total net exceptional items before tax was £300.5 million (2012: £16.6 million) and included:

· £10.0 million revenue from the termination of a long term printing contract with News International;

· £202.4 million impairment of publishing titles, in part reflecting changes in the discount and growth rate assumptions applicable to the business and sector as a whole;

· £68.4 million write down in the value of presses and property assets brought about as a result of structural rationalisations and closure of specific operations (particularly presses);

· £33.0 million on restructuring and other costs designed to reduce staff costs and enable operating efficiencies and £1.0 million on professional fees and aborted disposal costs; and

· £5.7 million net pension charge due to accrual of Pension Protection Fund levies of £4.4 million and a section 75 debt of £1.3 million.

The only exceptional items that involved significant cash outflows for the Group in 2013 were the restructuring costs of £33.0 million of which £9.4 million was paid in the period with the balance to follow in subsequent years, and pension related costs. Further details are included in the cash flow statement and notes and in Note 5 to the condensed financial statements.

IAS 21/39 Items

IAS 21/39 items relate to the fair value movement in the Group's derivative financial instruments (primarily interest rate caps and foreign exchange call options) as well as the retranslation of the Group's US dollar and Euro denominated borrowings. The net charge for the year was £0.2 million (2012: charge of £2.8 million). Further details are shown in Note 9 to the condensed consolidated financial statements.

Finance Income and Costs (excluding IAS 21/39 items)

Net finance costs excluding IAS 21/39 items for the 52 week period ended 28 December 2013 were £41.0 million, a decrease of £3.4 million or 7.7 per cent from net finance costs of £44.4 million for the 52 week period ended 29 December 2012. The largest component of net finance costs was interest on loans, which were £39.8 million in 2013 and £42.1 million in 2012.

The £3.4 million decrease in net finance costs was primarily due to reduced debt levels and includes a £0.9 million decrease associated with pensions.

In accordance with Group policy, the Group's interest rate exposure (excluding any impact of exchange rates) is hedged through interest rate caps. Accordingly, the Group's exposure to interest rate increases is limited.

Loss Before Tax

The Group's loss before tax was £286.8 million (2012: loss before tax of £6.8 million). The significant difference between 2013 and 2012 was the exceptional expense recognised in 2013 of £300.5 million as discussed previously.

Financial Review (continued)

Tax Rate

The statutory tax credit of £74.8 million (2012: £12.4 million) comprises a current tax charge of £0.6 million (2012: £3.7 million) and a deferred tax credit of £75.4 million (2012: credit of £16.1 million).

The tax credit of £74.8 million for the period and the £62.4 million increase was primarily attributable to the recognition of the tax benefit arising on the impairment write-down on intangible publishing title assets and benefit of reorganisation costs as well as the benefit of the change in tax rate to 23% from 1 April 2013.

The Group's effective tax rate was 26.1% for the 2013 financial year and 182.8% in its 2012 financial year. The 23.25% basic tax rate applied for the 2013 period was a blended rate due to the tax rate of 24.0% in effect for the first quarter of 2013, changing to 23.0% from 1 April 2013 under the section 6 of the Finance Act 2012.

Earnings Per Share and Dividends

Basic loss per share was 32.74p, compared with earnings of 0.88p in 2012. The deterioration of basic earnings per share reflects the following:

· Impairments and write down of assets totalled £270.8 million in 2013 compared with £24.8 million in 2012;

· Other exceptional operating expenses items totalled £39.8 million in 2013 compared with £21.8 million in 2012;

· A reduction in the operating profit before exceptional and IAS 21/39 items of £2.1 million;

· A £6.0 million decrease in finance costs including a £0.9 million decrease in net finance expense on pension assets/liabilities;

· IAS 21/39 movements in 2013 were a charge of £0.2 million compared to a charge of £2.8 million in 2012; and

· The increase in tax credits of £62.4 million.

Excluding exceptional and IAS 21/39 items, the adjusted earnings per share of 2.65p was down from the previous year's comparative of 3.42p.

The Group's finance arrangements preclude the payment of ordinary dividends until the ratio of net debt to EDITDA falls below 2.5 times.

Cashflow, Financing and Net Debt

Net debt at 28 December 2013 was £302.0 million, a reduction of £17.3 million on the prior year. The Group remained cash generative throughout the year, with net cash received from operating activities of £51.7 million including £10.0 million received from News International. The cash was primarily used for cash interest payments of £24.8 million and to repay borrowings and loan notes of £33.1 million. The Group maintained tight control of net capital expenditure with £7.4 million spent, while proceeds received from the disposal of surplus assets (primarily property sales, titles and the disposal of closed presses) were £5.7 million.

The maximum cash interest margin payable in the case of the bank facilities is LIBOR plus 5.0%, and in the case of the loan notes, a cash interest coupon rate of up to 10.3%. 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 interest, a PIK margin accumulates and is payable at the end of the facility. The PIK accrual has increased from £8.5 million to £20.3 million reflecting a non-cash charge of £11.8 million in the period. The PIK margin rate is again based on the absolute amount of the debt outstanding and leverage multiples and reduces based on agreed ratchets. If the loan facilities are fully repaid prior to 31 December 2014, the rate of the PIK margin accrued throughout the period of the agreement will be recalculated at a substantially reduced rate.

Financial Review (continued)

Cashflow, Financing and Net Debt (continued)

There is an agreed repayment schedule of £70.0 million over three years with £30.0 million remaining payable as at 28 December 2013, of which £5 million was paid on 31 December 2013. In addition, a pay-if-you-can (PIYC) repayment schedule was agreed totalling £60.0 million over three years, with £52.5 million remaining payable at 28 December 2013 of which £7.5 million was paid on 31 December 2013.

Five-year share warrants over the Company's share capital have been issued to the Group's lenders. Warrants for 2.5% of the Company's share capital were issued on completion of the new financing arrangements and a further 5.0% were issued in September 2012. In addition, the exercise period for the 5.0% warrants issued to the lenders in August 2009 was extended to make the expiry of all the warrants coterminous in September 2017. As a result, warrants equivalent to a total of 5.1% of the Company's issued ordinary share capital have been issued. During 2013, 44,428,306 warrants were exercised, generating £4.4 million of cash for the group.

Net Asset Position

At the period end, the Group had net assets of £97.1 million, a decrease of £176.8 million on the prior year. The movements in the net asset position from the prior year includes £202.4 million on impairment of publishing titles in part reflecting changes in the discount and growth rate assumptions applicable to the business and sector as a whole; £68.4 million write downs in the value of presses and property assets brought about as a result of structural rationalisation and the exit of the remaining News International contract; increased centralisation, divisional and title reorganisations and closure of specific operations particularly presses; and £24.4 million on redundancy accruals relating to restructuring. These were partially offset by a £43.0 million reduction in the deficit on the defined benefit plan as the actual return on assets exceeded the expected return and a £67.8 million reduction in deferred tax principally due to the tax effecting of the intangible write downs and change in tax rates.

Pensions

The Group's defined benefit pension plan deficit (as assessed under IAS 19) decreased by £43.0 million over the year to £78.3 million. The decrease in the deficit was largely due to improvements in the asset valuations partially offset by increased inflation assumptions.

The amount of contributions committed to be paid to the scheme during 2014 is £5.7 million (2013: £5.7 million) plus share of asset disposal proceeds, as agreed as part of the formal actuarial valuation undertaken as at 31 December 2010.

The Pension Fund Trustees are taking professional advice, including actuarial input, to determine whether any employer debt is payable to the Plan following the previous cessation of five participating employers. At period end, £1.3 million has been provided for.

During the period the Pension Fund Trustees have agreed to carry out a formal actuarial valuation at 31 December 2012, effective as at one year ahead of the next planned valuation date of 31 December 2013. The outcome of the review will not be formalised until after the reporting date. The Trustees have indicated that they will seek an increase in the committed annual contributions. The Trustees are also consulting with the Group about planned changes to the investment strategy of the Plan to reduce the level of risk.

The levy payable by the Pension Fund to the Pension Protection Fund for the year to 31 March 2013 was £3.1 million and for the year to 31 March 2014 is £3.2 million. The Group has committed to the Pension Fund to underwrite any annual charge in excess of £0.7 million. The Group has paid £1.5 million during 2013 and at period end accrued £1.0 million in connection with the year to 31 March 2013 and a further £1.9 million has been provided for the nine month period to 28 December 2013 within trade and other payables. It is expected that this levy will continue in 2014. The level of increase in charges is not known at this point.

Financial Review (continued)

Pensions (continued)

The Johnston Press Pension Plan is subject to a potential increase in its liabilities due to benefit equalisation not having taken effect for a specific group of members. The Group's lawyers have advised that an application to court be made and are confident of a successful outcome in the case. The Group is aiming to issue an application to court in the first half of 2014 with the expectation that the hearing would take place before the end of 2014. No provision has been made in the financial statements as the Group's management does not consider that there is any probable loss however the maximum obligation in relation to this matter is expected to be in the region of £8 million, based on the most recent calculations.

IAS 19 (revised 2011) - "Employee benefits" is effective for annual periods beginning on or after 1 January 2013 and will therefore be applied in the next accounting period. The key changes are the deferral of actuarial gains and losses will no longer be permitted and the deficit should be recognised in full on the balance sheet (subject to any restrictions in IFRIC 14); the finance cost, which is currently the difference between the interest on liabilities and expected return on assets will be replaced by a net interest cost. In most cases the finance cost will increase as the expected return on assets will effectively be based on the discount rate (i.e. the returns available on AA-rated corporate bonds) with no allowance made for any outperformance expected from the Plan's actual asset holding; more disclosure will be required about the risks posed by the Plan. Had the Standard been applied in the current financial year, the Group's profit before tax would have been reduced by approximately £5.2 million.

Capital Expenditure

In the financial periods ended 28 December 2013 and 29 December 2012, the Group incurred capital expenditure of £7.3 million and £5.2 million respectively. Of this, £4.3 million was spent on infrastructure and £3.0 million on developing the digital platforms.

Financial Reporting

With the exception of the application of IAS 19 (revised) - Employee Benefits in 2014, the IFRS standard changes applicable in 2014 are not expected to have a material impact on the financial statements of the Group in future periods. Additional details on changes in the standards are included in Note 3 to the Condensed Consolidated Financial Statements.

Control Processes

As discussed in the Report of the Audit Committee, the Group operates internal control processes that assist in the efficient operation of the Group's 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, with all cash processing and sales ledger balances for mainland UK being controlled through a single centre in Leeds. Plc related expenditure is managed in Edinburgh.

Financial Review (continued)

Factors Affecting Future Group Performance

The performance of the Group will continue to be affected by the economic conditions in our markets, cyclical conditions, structural and business specific circumstances and trends in employment, 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:

· Successful implementation of the Group's strategy;

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

· Trends seen in the last half of 2013, continuing in 2014;

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

· Continually improving existing efficient operations through technology infrastructure and improved processes; and

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

Liquidity and Going Concern

The Group and the Company continues to adopt the going concern basis of accounting in preparing the consolidated financial statements.

The Group's bank facilities and private placement loan notes contain three quarterly covenant tests, Consolidated EBITDA to Consolidated Net Borrowing Costs, Consolidated Net Borrowings to Consolidated EBITDA, and Consolidated Net Cash Flow to Total Debt Service, in addition to a Consolidated Net Worth covenant which is tested at the half year and year end. In December 2013 the Company and its lenders agreed to reset financial covenants until September 2015, providing the Company with the opportunity to pursue a full refinancing in 2014. When tested throughout the year and at 28 December 2013, the covenants were all met.

The Group has continued to report improving trends in underlying profitability, has reduced its net debt from £319.3 million at 29 December 2012 to £302.0 million at 28 December 2013, and is now exploring the opportunity to repay its existing bank facilities and private placement loan notes, through a combined debt and equity capital refinancing during 2014.

The Board has undertaken a recent and thorough review of its forecasts and associated risks. These forecasts extend for a period of 12 months from the date of approval of these financial statements and demonstrate anticipated compliance with financial covenants over this forecast period, albeit with limited headroom. The Directors are satisfied that it is reasonable to adopt the going concern basis of accounting following this review, further details of which are set out below.

Financial Review (continued)

The forecasts make key assumptions, based on information available to the Directors, on a number of items including:

· External advertising forecasts;

· Current print advertising run rates;

· Growth in digital revenues;

· The impact of newspaper cover price increases on circulation revenues;

· Existing and planned cost reduction measures;

· Planned disposals of non-strategic assets;

· Projected debt service and interest costs over the next 12 months;

· Expected future cost of the PPF levy; and

· The levels of advisory fees and other costs incurred in exploring refinancing if it were subsequently delayed or aborted.

The Directors recognise that some of the assumptions referred to above are not within the Group's control, and around which therefore there remains some uncertainty. Good progress has been and continues to be made against all of the key assumptions: the overall economic environment is improving, digital revenues are growing strongly, circulation revenues are stabilising, cost savings targets have been met, good progress has been made on planned asset disposals, and debt reduction continued, as evidenced by underlying increases in operating profits and margins, and debt reduction.

The risks described are not new. However, in the event that a number of the following were to happen concurrently, before the Group has successfully refinanced - a deteriorating economic climate, a lack of successful execution of the strategy by the Group, the delay or inability to continue to make cost savings, unexpected increase in raw materials, a lack of success or delays in completing the sale of non-core property and other assets and the Group incurred significant additional adviser and other costs in connection with a refinancing without the benefit of a successful refinancing - and thus the Group were to breach its financial covenants, then this would give lenders, acting in their majority, the ability to demand repayment of the facilities. As discussed, the Group has renegotiated its covenants and is in constructive discussion with its existing lenders and Pension Trustees with a view to achieving a successful refinancing during 2014.

Despite the covenant reset, the Group forecasts show limited headroom and therefore in accordance with Accounting Standards and the UK Financial Reporting Council guidance for Directors on going concern, it is appropriate for the Directors to recognise a material uncertainty, which may give rise to significant doubt over the Group's and the Company's ability to continue as a going concern, and if the majority of lenders chose to exercise their rights in such an event, the Group and the Company may be unable to realise assets and discharge their liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

Nevertheless, after making enquiries and considering the uncertainties above, the Directors have a reasonable expectation that the Group and the Company will continue to trade within the terms of its existing financial arrangements and will have adequate resources to continue operating in the normal course of business for the foreseeable future. Thus the Directors continue to adopt the going concern basis of accounting in preparing the consolidated and parent company financial statements.

Directors' Responsibility Statement

We confirm to the best of our knowledge:

The responsibility statement below has been prepared in connection with the Company's full annual report for the year ending 28 December 2013. Certain parts thereof are not included within this announcement.

1. The Consolidated 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 Chairman's Statement, Chief Executive's Report, Operational Review and Financial Review, include 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.

This responsibility statement was approved by the board of directors on 28 March 2014 and is signed on its behalf by :

Ashley Highfield David King

Chief Executive Officer Chief Financial Officer

28 March 2014 28 March 2014

Group Income Statement for the 52 week period ended 28 December 2013

1 The presentation of the 29 December 2012 exceptional item numbers has been revised to split out separately exceptional operating expenses of £21,824,000 and exceptional impairment of £24,780,000 to be consistent with the format of current year disclosures.

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

The comparative period is for the 52 week period ended 29 December 2012.

Group Statement of Comprehensive Income for the 52 week period ended 28 December 2013

1 Relates to actuarial gain of £29,025,000 (2012: loss of £15,877,000) for the Johnston Press Pension Plan (refer note 15), and a net actuarial loss of £90,000 (2012: £nil) for two other pension related liabilities.

Group Statement of Changes in Equity for the 52 week period ended 28 December 2013

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

Group Statement of Financial Position at 28 December 2013

The comparative numbers are as at 29 December 2012.

The condensed financial statements of Johnston Press plc, registered in Scotland (number 15382), were approved by the Board of Directors and authorised for issue on 28 March 2014.

They were signed on its behalf by:

Ashley Highfield David King

Chief Executive Officer Chief Financial Officer

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

Group Cash Flow Statement for the 52 week period ended 28 December 2013

1 The presentation of the 29 December 2012 'cash generated from operations' number has been revised to be consistent with current year disclosures.

2 Includes exceptional cash receipts of £10.0 million (2012: £30.0 million) due to the termination of the News International printing contract in 2012 and 2013.

3 Interest paid in 2012 has been revised to include £4,594,000 that in the prior year was incorrectly classified as 'cash generated from operations'. A subsequent amendment has also been made to note 17 (refer therein). This adjustment did not in any way impact the prior year income statement, assets, liabilities or equity and is purely presentational in nature.

The comparative period is for the 52 week period ended 29 December 2012.

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

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013

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 week period ended 29 December 2012 have been filed with the Registrar of Companies and those for the 52 week period ended 28 December 2013 will be filed following the Company's Annual General Meeting in 2014. The auditor's reports on the statutory accounts for the 52 week periods ended 29 December 2012 and 28 December 2013 were unqualified, however the report on the 52 week period ended 28 December 2013 did include an emphasis of matter regarding a material uncertainty in relation to going concern. Neither report contained a statement under Sections 498 (2) or (3) of the Companies Act 2006.

The condensed consolidated financial statements of Johnston Press Plc have been prepared on a going concern basis (discussed further in the Financial Review) and under the historical cost convention, except for the revaluation of certain properties and financial instruments, share-based payments and defined benefit pension obligations that are measured at revalued amounts or fair value at the end of each reporting period. The accounting policies adopted in the preparation of this condensed consolidated financial statement are consistent with those applied by the Group in its audited consolidated financial statements for the period ended 28 December 2013.

Whilst the financial information included in this 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 Results Announcement constitutes a dissemination announcement in accordance with Section 6.3 of the Disclosure and Transparency Rules (DTR). The 2013 Annual Report and Accounts for the 52 weeks ended 28 December 2013 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 April 2014.

2. Basis of preparation

The Group's business activities, together with factors likely to affect its future development, performance and financial position and commentary on the Group's financial results, its cash flows, liquidity requirements and borrowing facilities are set out in the Financial Review on pages 10 to 21.

The financial statements have been prepared for the 52 week period ended 28 December 2013. The 2012 information relates to the 52 week period ended 29 December 2012.

3. Adoption of new or amended standards and interpretations in the current year

The following new and revised Standards and Interpretations have been adopted for the 52 week period ended 28 December 2013. 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.

· IAS 1 (amended) Presentation of Items of Other Comprehensive Income

· IFRS 1 (amended) First time adoption of IFRS - Government Loans

· IFRS 1 (amended) First time adoption of IFRS - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

· IAS 12 (amended) Deferred Tax: Recovery of Underlying Assets

· IFRS 7 (amended) Disclosures - Offsetting Financial Assets and Financial Liabilities

· IAS 32 (amended) Offsetting Financial Assets and Financial Liabilities

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013

(continued)

3. Adoption of new or amended standards and interpretations in the current year (continued)

· Annual Improvements to IFRS 2009 - 2011 Cycle

o IFRS 10 Consolidated Financial Statements

o IFRS 11 Joint Arrangements

o IFRS 12 Disclosure of Interests in Other Entities

o IAS 27 (revised) Separate Financial Statements

o IAS 28 (revised) Investments in Associates and Joint Ventures

The following new standards, amendments to standards and interpretations that are expected to impact the Group, which have not been applied in these financial statements, were in issue, and endorsed and applicable to reporting periods commencing from 1 January 2013 onwards. These standards will be applied to the financial statements for the 53 week period commencing 29 December 2013:

IAS 19 (revised 2011) - Employee benefits: is effective for annual periods beginning on or after 1 January 2013. The key changes are the deferral of actuarial gains and losses will no longer be permitted and the deficit should be recognised in full on the balance sheet (subject to any restrictions in IFRIC 14); the finance cost, which is currently the difference between the interest on liabilities and expected return on assets will be replaced by a net interest cost. In most cases the finance cost will increase as the expected return on assets will effectively be based on the discount rate (i.e. the returns available on AA-rated corporate bonds) with no allowance made for any outperformance expected from the Plan's actual asset holding. More disclosure will be required about the risks posed by the Plan. Had the Standard been applied in the current financial year, the Group's loss before tax would have been increased by approximately £5.2 million.

IFRS 13 Fair Value Measurement:is mandatory for annual periods beginning on or after 1 January 2013 with earlier application permitted. Once adopted, IFRS 13 Fair Value Measurement applies whenever another IFRS requires or permits fair value measurements, or disclosures about fair value measurements, with some limited exceptions. The IFRS also applies to measurements such as fair value less costs to sell that are clearly based upon fair value, as well as to disclosures about such items. IFRS 13 provides a consistent framework with a single definition of fair value as 'the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date'. IFRS 13 includes extensive disclosure requirements. The impact on the amounts recognised in the consolidated financial statements has not yet been assessed.

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013

(continued)

3. Adoption of new or amended standards and interpretations in the current year (continued)

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 endorsed by the EU). 

· Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment Entities (endorsed 20 November 2013)

· IAS 36 (amendments) - Recoverable Amount Disclosures for Non-Financial Assets (endorsed 19 December 2013)

· IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting (endorsed 19 December 2013)

· IFRIC 21 - Levies (Issued 20 May 2013, endorsement expected Q2 '14 to be effective 1 January 2014)

· IFRS 9 Financial Instruments amendments (Issued 19 November 2013, endorsement postponed). IFRS 9 will impact the presentation of certain disclosures in the financial statements.

· IFRS 14 Regulatory Deferral Accounts (Issued 30 January 2014, endorsement expected Q1 '15 to be effective 1 January 2016)

· Annual Improvements to IFRS's 2010 - 2012 Cycle (Issued 12 December 2013, endorsement expected Q4 '14)

· Annual Improvements to IFRS's 2011 - 2013 Cycle (Issued 12 December 2013, endorsement expected Q4 '14)

The directors do not expect that the adoption of the standards listed will have a material impact on the financial statements of the Group in future periods.

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.

The Group continues to assess the impact of adopting the above new or amended standards and interpretations in future accounting periods.

4. Critical Accounting Judgements and Key Sources of Estimation Uncertainty

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Exceptional items

Exceptional items include significant transactions such as the costs associated with restructuring of businesses along with material items including for example revenue received on the termination of significant print contracts, significant pension related costs, the disposal or exit of a significant property directly linked to restructuring and impairment of intangible and tangible assets together with the associated tax impact. The Company considers such items are material to the Income Statement and their separate disclosure is necessary for an appropriate understanding of the Group's financial performance. These items have been presented as a separate column in the Group Income Statement.

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013

(continued)

4. Critical Accounting Judgements and Key Sources of Estimation Uncertainty (continued)

Valuation of publishing titles on acquisition

The Group's policies require that a fair value at the date of acquisition be attributed to the publishing titles owned by each acquired entity. The Group's management uses its judgement to determine the fair value attributable to each acquired publishing title taking into account the consideration paid, the earnings history and potential of the title, any recent similar transactions, industry statistics such as average earnings multiples and any other relevant factors.

The publishing titles are considered to have indefinite economic lives due to the historic longevity of the brands and the ability to evolve the brands in the changing media environment.

Assets held for sale

Where a property or a significant item of equipment (such as a print press or property no longer required as part of Group operations) is marketed for sale, management is highly committed to the sale and the asset is available for immediate sale, the Group classifies that asset as held for sale. If the asset is expected to be sold within twelve months, the asset is classed as a current asset. The value of the asset is held at the lower of the net book value or the expected realisable sale value. The Directors have estimated the sale values based on the current price that the asset is being marketed at and advice from independent property agents. The actual sale proceeds may differ from the estimate.

Provisions for onerous leases and dilapidations

Where the Group exits a rented property, an estimate of the anticipated total future cost payable under the terms of the operating lease, including rentals, rates and other related expenses, is charged to the Income Statement at the point of exit as an onerous lease. Where there is a break clause in the contract, rentals are provided for up to that point. In addition, an estimate is made of the likelihood of sub-letting the premises and any rentals that would be receivable from a sub tenant. Where receipt of sub-lease rentals is considered reasonable, these amounts are deducted from the rentals payable by the Group under the lease and provision charged for the net amount.

Under the terms of a number of property leases, the Group is required to return the property to its original condition at the lease expiry date. The Group has estimated the expected costs of these dilapidations and charged these costs to the Income Statement. No discounting has been applied to the provision as the effect of the discounting is not considered material.

Valuation of share-based payments 

The Group estimates the expected value of equity-settled share-based payments and this is charged through the Income Statement over the vesting periods of the relevant awards. The cost is estimated using a Black-Scholes valuation model. The Black-Scholes calculations are based on a number of assumptions and are amended to take account of estimated levels of share vesting and exercise.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the period end date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013

(continued)

4. Critical Accounting Judgements and Key Sources of Estimation Uncertainty (continued)

Impairment of publishing titles and print presses

Determining whether publishing titles are impaired requires an estimation of the value in use of the cash generating units (CGUs) to which these assets are allocated. Key areas of judgement in the value in use calculation include the identification of appropriate CGUs, estimation of future cash flows expected to arise from each CGU, the long-term growth rates and a suitable discount rate to apply to cash flows in order to calculate present value. The Group has identified its CGUs based on the seven geographic regions in which it operates. This is considered to be the lowest level at which cash inflows generated are largely independent of the cash inflows from other groups of assets and has been consistently applied in the current and prior periods. £202.4 million impairment loss has been recognised in 2013 (2012: nil). The carrying value of publishing titles at 28 December 2013 was £538.5 million (2012: £742.3 million). Details of the impairment reviews that the Group performs are provided in Note 12.

Determining whether print presses are impaired requires an estimation of the value in use of each print site. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the print sites and a suitable discount rate in order to calculate present value.

Valuation of pension liabilities

The Group records in its Statement of Financial Position a liability equivalent to the deficit on the Group's defined benefit pension schemes. This liability is determined with advice from the Group's actuarial advisers each year and can fluctuate based on a number of factors, some of which are outside the control of management. The main factors that can impact the valuation include:

· the discount rate used to discount future liabilities back to the present date, determined each year from the yield on corporate bonds;

· the actual returns on investments experienced as compared to the expected rates used in the previous valuation;

· the actual rates of salary and pension increase as compared to the expected rates used in the previous valuation;

· the forecast inflation rate experienced as compared to the expected rates used in the previous valuation; and

· mortality assumptions.

Details of the assumptions used to determine the liability at 28 December 2013 are set out in Note 15.

5. 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 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.

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013 (continued)

6. Segment Information

a) Segment revenues and results

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

1 The presentation of the 29 December 2012 exceptional item numbers has been revised to be consistent with current year disclosures.

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

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.

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013 (continued)

6. Segment Information (continued)

c) Other segment information

7. Exceptional Items

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013 (continued)

7. Exceptional Items (continued)

Revenue

The Group has recognised revenue of £10.0 million (2012: £30.0 million) during the period as a result of a termination fee payable on the final aspect of a long term contract with News International. The prior year income represents an earlier termination of aspects of the contract.

Operating expenses - pensions

During 2013, the pension regulator has requested payment of PPF levies amounting to £3.1 million and £3.2 million for the years ending 31 March 2013 and 31 March 2014 respectively, £1.3 million of which will be settled by the Johnston Press Pension Plan, leaving £6.3 million (2012: nil) payable by the Company, in accordance with the agreed Schedule of Contributions. £4.4 million has been charged to the income statement for the period to 28 December 2013. Additionally, the Group incurred a Section 75 debt amounting to £1.3 million (2012: nil) following the wind up of certain companies in prior years. In 2012, the Group offered a number of existing pensioners the opportunity to take part in a pension exchange where, for a higher pension today, they forgo a proportion of future increases. This resulted in a gain of £1.5 million.

Operating expenses - restructuring costs

Restructuring costs primarily relate to various reorganisation processes designed to reduce the size and cost of overhead functions (2013: £24.4 million, 2012: £21.6 million), early lease termination costs (2013: £3.0 million, 2012: £nil), empty property costs (2013: £1.4 million, 2012: £1.4), dilapidations (2013: £1.4m, 2012: £0.2) and other associated legal and consulting fees (2013: £2.8 million, 2012: £1.2 million) .

Operating expenses - gain on disposal

During 2012, the Group recognised a gain of £1.0 million from the disposal of a significant property.

Operating expenses - other

The Group incurred other operating expenses of £0.7 million (2012: £nil) relating to to legal fees in relation to the exploration of refinancing and £0.5 million (2012: £nil) relating to legal fees for an aborted disposal.

Impairment of intangible assets, property, plant and equipment and assets held for sale

In the period ended 28 December 2013, an impairment of £202.4 million (2012: £nil) was recognised by the Group for publishing titles largely due to changes in the discount and growth rate assumptions applicable to the business and sector as a whole.

The Group also incurred charges for write down in the value of presses and property assets (2013: £68.4 million, 2012: £24.8 million). During the period, as a result of structural rationalisations, increased centralisation, divisional and title reorganisations and closure of specific operations particularly presses, the Group carried out a review of the recoverable amount of its print manufacturing plant and related equipment. These assets are used in the Group's print segment. The review led to the recognition of an impairment loss of £62.3 million which has been recognised in the Income Statement. The Group also estimated the fair value less costs to sell of its print plant and related equipment, which is based on the recent market prices of assets with similar age and obsolescence. The fair value less costs to sell is less than the value in use and hence the recoverable amount of the relevant assets has been determined on the basis of their value in use. The discount rate used in measuring value in use was 12% per annum.

Notes to the Condensed Consolidated Financial Statements for the 52 week period ended 28 December 2013 (continued)