Johnston Press PLC
25 August 2004
For Immediate Release 25 August 2004
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
Johnston Press plc, one of the UK's leading regional newspaper publishers,
announces interim results for the six months ended 30 June 2004.
KEY FINANCIALS
2004 2003 Change
£'m £'m
Turnover 261.2 248.5 +5%
Operating profit before operating exceptional items 92.0 84.1 +9%
Profit before tax 77.3 66.7 +16%
Headline earnings per share 19.45p 16.82p +16%
Interim dividend 2.4p 2.0p +20%
HIGHLIGHTS
• Actual and like-for-like advertising revenue growth of 6% - volume growth
of 4.6% being principal driver - growth across all advertising categories.
• Operating margin before operating exceptionals increased from 33.8% to
35.2% - increased operating profit from every publishing division.
• Increased emphasis on driving top line growth including 12 new product
launches.
OUTLOOK
Chief Executive, Tim Bowdler, said:
'We have made a good start to the second half. Whilst we expect continued
advertising revenue growth, the rate of increase is likely to slow due to the
stronger comparatives in the second half of 2003. Newsprint prices remain stable
and the Group continues to maintain a tight control of costs, giving the Board
confidence about the prospects for the remainder of 2004 and of achieving good
progress for the year as a whole.'
For further information please contact:
Tim Bowdler, Chief Executive or
Stuart Paterson, Finance Director: 020 7466 5000 (today) or
0131 225 3361 (thereafter)
Richard Oldworth/Suzanne Brocks
Buchanan Communications: 020 7466 5000
Chief Executive's
HALF YEAR STATEMENT
The six months to 30 June 2004 have been a good trading period for Johnston
Press. The rate of underlying advertising revenue growth was above our
expectations and this, when combined with the Group's ongoing focus on managing
an efficient business, has produced an excellent result.
Operating profit before operating exceptionals increased by 9.5% to £92.0
million. Strong cash generation resulted in borrowings falling to £378 million
at 30 June 2004 and a reduced interest charge of £13.8 million, down by 17.5%.
Headline earnings per share rose from 16.82p to 19.45p, an increase of 15.6%.
The interim ordinary dividend payable on 5 November 2004 will be 2.4p, an
increase of 20%.
The Board has been aware that over recent years the growth of earnings has been
consistently ahead of the growth in dividends, resulting in an increased level
of dividend cover. The increased interim dividend is designed to address this
whilst still providing sufficient financial flexibility for the Group going
forward.
Trading review
For the period under review, advertising revenue for the Group increased on an
actual and a like-for-like basis by 6.0%. Volume growth was the principal driver
behind this strongly improved performance with an increase of 4.6%. Part of
this improvement came from new revenue initiatives, primarily re-publishing
classified advertisements in the form of complementary specialist
advertising-only publications. Employment advertising revenues grew strongest,
up by 13.3%, partly reflecting improved trading conditions in the South of the
country. Being the highest yielding category, this more than offset the lower
yields of the newly launched publications such that overall yields increased by
1.4%. Increasing volumes of colour advertising, which carries a price premium,
also continued to assist yield growth.
All categories of advertising grew revenue over the six months. Whilst
employment advertising was strongest, property advertising also continued to
perform well, especially when bearing in mind the strong comparatives from the
previous period. Growth in motors advertising revenue was modest but other
classifieds were comfortably ahead. Display advertising recovered, demonstrating
good growth against weak comparatives which were affected by depressed national
advertising at the time of the Iraq war and as a result of the Competition
Commission inquiry into the acquisition of Safeway. In overall terms, consumer
sentiment in the markets where we operate has remained positive, underpinning
the Group's improved performance.
Increased emphasis has been placed throughout the business on driving top-line
growth. This has included a number of notable successes, such as the launch of
stand-alone recruitment publications which complement and extend our internet
search engine branding, further development of our lifestyle and exclusive homes
magazines and a greater use of the Group's scale to share ideas and best
practice. Work has also progressed on the creation of a common approach to
advertising supplements in order to attract additional national display
advertising.
The operating profit margin in the period, before operating exceptionals,
increased from 33.8% to 35.2% with every publishing division increasing its
operating profit. We continue to invest heavily in new IT systems in order to
improve customer service and operating efficiency and the continuing
improvements in performance owe much to these initiatives.
Profitability of the Printing division improved despite internal Group-work
replacing some external contract printing. Costs were well controlled and
assisted by increased volumes, printing efficiencies have seen a further
improvement.
The two ongoing large projects to increase colour availability on our presses in
Leeds and Sunderland are progressing to plan with the former already in
production and the latter due for completion before the year-end. Progress has
also been made in identifying and securing a suitable site for our planned new
print works in Sheffield, which remains on schedule for completion by the end of
2006.
Newspaper sales revenues increased again by 1.7% underlining the strength of our
paid-for weekly titles where circulation grew by 0.3% and which comprise half of
our total newspapers. Changes in the Audit Bureau of Circulation's rules, which
resulted in a faster than planned reduction in bulk sales, contributed to a fall
of 4.9% in the average circulations of our daily titles. This masked a number of
improved underlying performances in which the Scarborough Evening News stood out
with a marginal increase in its full-price base sale. A number of initiatives
are in place, underpinned by a substantial market research programme, aimed at
securing a further improvement in performance.
Our electronic media activities continued to develop making a contribution of
£2.1 million to Group profitability, reflecting the growing success and
importance of the 167 websites which we operate. All three of our key classified
sites have been redesigned, upgraded and relaunched in recent months and work
continues on further enhancements to their functionality.
A number of important initiatives have been implemented to further improve our
staff development and retention programmes. In anticipation of new UK
regulations next year, we have also improved our employee communications by
introducing a formal Group-wide staff information and consultation process.
Borrowings
The Group continues to be strongly cash generative and this, combined with good
control of working capital, resulted in net debt reducing by £46 million to £378
million. At 30 June 2004, there was £173 million unutilised in our bank
facility. Interest cover for the period increased to 6.9 times.
Board
After eleven years on the Board, Sir Harry Roche retired at the AGM in April.
Harry's extensive industry experience and wise counsel have been of immense
value to the Board and we wish him well for a long and happy retirement.
Our Board structures remain compliant with all aspects of the Combined Code.
Outlook
We have made a good start to the second half. Whilst we expect continued
advertising revenue growth, the rate of increase is likely to slow due to the
stronger comparatives in the second half of 2003. Newsprint prices remain stable
and the Group continues to maintain a tight control of costs, giving the Board
confidence about the prospects for the remainder of 2004 and of achieving good
progress for the year as a whole.
T J BOWDLER
Chief Executive
25 August 2004
Group Profit and Loss Account
26 Weeks to 30 June 2004
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Turnover 2 261,228 248,456 491,843
Operating profit before operating exceptionals 92,044 84,069 163,033
Operating exceptionals 4 (1,058) (882) (2,452)
Operating profit 3 90,986 83,187 160,581
Share of associates' operating profit 142 231 581
Profit on ordinary activities before
interest and taxation 91,128 83,418 161,162
Net interest 5 (13,789) (16,719) (33,210)
Profit on ordinary activities before taxation 77,339 66,699 127,952
Taxation on profit on ordinary activities 6 (22,977) (19,834) (38,264)
Profit for the financial period 54,362 46,865 89,688
Dividends 7 (6,911) (5,740) (17,173)
Retained profit for the period 47,451 41,125 72,515
Earnings per Share 11
Headline 19.45p 16.82p 32.36p
Headline diluted 19.27p 16.72p 32.13p
Basic 19.10p 16.51p 31.57p
Basic diluted 18.92p 16.42p 31.35p
Group Balance Sheet
At 30 June 2004
Restated
(Note 1c)
At 30.6.04 At 30.6.03 At 31.12.03
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Fixed Assets
Intangible 927,557 927,557 927,557
Tangible 152,847 153,812 156,972
Investments 3,619 4,299 3,980
1,084,023 1,085,668 1,088,509
Current Assets
Stocks 2,834 2,219 2,961
Debtors: due within one year 75,920 74,202 59,734
due after more than one year 13,176 6,704 13,984
Cash at bank and in hand 9 10,482 7,176 9,944
102,412 90,301 86,623
Creditors: amounts falling due within one year (163,992) (134,454) (151,123)
Net current liabilities (61,580) (44,153) (64,500)
Total assets less current liabilities 1,022,443 1,041,515 1,024,009
Creditors: amounts falling due after more
than one year (322,545) (426,983) (372,750)
Provisions for liabilities and charges (16,530) (12,070) (16,327)
Net assets 683,368 602,462 634,932
Capital and Reserves
Called-up share capital 8 29,561 29,463 29,505
Reserves 653,807 572,999 605,427
Shareholders' funds 10 683,368 602,462 634,932
The Interim Report was approved by the Board of Directors on 25 August 2004.
Group Cash Flow Statement
26 Weeks to 30 June 2004
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating profit 90,986 83,187 160,581
Exceptional items (42) (536) (669)
Depreciation 9,374 8,397 18,016
Amount written off employee share option trust 233 147 287
Loss/(profit) on sale of fixed assets 50 (7) 31
Profit on sale of business - - (338)
Increase in working capital (12,248) (9,306) (10,635)
Decrease in unfunded pension provision - - 300
Net cash inflow from operating activities 88,353 81,882 167,573
Income from fixed asset investments 627 811 1,197
Net interest paid (12,941) (15,955) (31,894)
Preference dividends paid (76) (76) (152)
Returns on investment and servicing of finance (12,390) (15,220) (30,849)
Taxation (11,745) (7,732) (23,548)
Purchase of tangible fixed assets (8,502) (9,211) (19,103)
Sale of tangible fixed assets 1,089 51 1,015
Sale of investment - - 35
Purchase of investment - Employee share option trust (791) (238) (238)
Capital expenditure and financial investment (8,204) (9,398) (18,291)
Sale of subsidiary undertaking/business - 608 608
Acquisitions and disposals - 608 608
Equity dividends paid (11,366) (10,195) (15,863)
Net cash inflow before financing 44,648 39,945 79,630
Issue of ordinary share capital 1,543 449 1,390
Repayment of loan capital - net (note 9) (42,278) (52,147) (93,607)
Finance leases (13) (11) (24)
Financing (40,748) (51,709) (92,241)
Increase/(decrease) in net cash 3,900 (11,764) (12,611)
Notes to the Accounts
26 Weeks to 30 June 2004
1. Basis of Preparation
a) The Interim Reports for the six months ended 30 June 2004 and 30 June
2003 are unaudited, but have been prepared on the basis of accounting
policies expected to be adopted in the annual accounts for the year
ending 31 December 2004. These are consistent with those set out in
the audited accounts for the year ended 31 December 2003. The results
for the year ended 31 December 2003 are an abridged version of the
Company's full accounts, which carried an unqualified auditors' report
and which have been filed with the Registrar of Companies.
b) The Group continues to apply the provisions of FRS10 in respect of the
valuation of intangible fixed assets. In the assessment of the value
of publishing titles, shown as intangible assets, it has been decided
that these should not be depreciated since they have an indefinite
life, and impairment tests, in accordance with FRS11, support this
treatment.
c) The publication of UITF Abstract 38 amended the accounting treatment
of shares held in an Employee Share Trust. The value of shares at 30
June 2003, £609,000, has been re-categorised from investments to a
reduction from shareholders' funds.
2. Turnover
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
£'000 £'000 £'000
Turnover represents:
Newspapers and contract printing
Continuing operations 261,228 248,456 491,843
3. Operating Profit
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
£'000 £'000 £'000
Operating profit represents:
Newspapers and contract printing
Continuing operations 90,986 83,187 160,581
Notes to the Accounts
26 Weeks to 30 June 2004
4. Operating Exceptional Items
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
£'000 £'000 £'000
Redundancy and restructuring costs 1,058 882 2,790
Profit on sale of business - - (338)
1,058 882 2,452
5. Net Interest
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
£'000 £'000 £'000
Interest receivable and similar income (596) (373) (1,114)
Interest paid 14,031 16,727 33,599
13,435 16,354 32,485
Exceptional item:
Provision for impairment of investment in Mirago 354 365 725
13,789 16,719 33,210
6. Taxation
The taxation charge for the six months to 30 June 2004 has been provided on
the basis of the estimated effective tax rate for the year to 31 December
2004. The charge for the six months to 30 June 2004 includes a tax credit
of £423,000 (26 weeks to 30 June 2003 - £374,000) in respect of the
exceptional items in notes 4 and 5.
7. Dividends
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
£'000 £'000 £'000
Preference 76 76 152
Ordinary 6,835 5,664 17,021
6,911 5,740 17,173
The interim ordinary dividend of 2.4p per share (2003 - 2p) is payable on 5
November 2004 to shareholders on the register at close of business on 15
October 2004.
Notes to the Accounts
26 Weeks to 30 June 2004
8. Share Capital
At At At
30.6.04 30.6.03 31.12.03
000's 000's 000's
Ordinary shares of 10p each 284,555 283,574 283,994
13.75% Cumulative Preference shares of £1 each 756 756 756
13.75% 'A' Preference shares of £1 each 350 350 350
The increase from 31 December 2003 in the number of Ordinary shares arose
from the exercise of 560,105 share options under the Group's Sharesave and
Executive Share Option Schemes.
9. Analysis of Net Debt
Other
31 December non-cash 30 June
2003 Cash flow changes 2004
£'000 £'000 £'000 £'000
Cash at bank and in hand 9,944 538 - 10,482
Overdrafts (15,032) 3,362 - (11,670)
(Decrease)/increase in net cash (5,088) 3,900 - (1,188)
Bank loans (247,933) 41,964 - (205,969)
Senior notes (132,785) - - (132,785)
Loan stock (41,778) 314 - (41,464)
Finance leases (66) 13 - (53)
Term debt issue costs 4,478 - (675) 3,803
Net debt (423,172) 46,191 (675) (377,656)
Interest cover
(excluding exceptional items) 5.0 times 6.9 times
Of the £10,482,000 cash at bank and in hand, £1,577,000 is held on deposit
to guarantee the 1999/2006 Loan Stock interest for one year.
Notes to the Accounts
26 Weeks to 30 June 2004
10. Reconciliation of Movements in Shareholders' Funds
Restated
(Note 1c)
26 weeks to 26 weeks to 52 weeks to
30.6.04 30.6.03 31.12.03
£'000 £'000 £'000
Profit for the financial period 54,362 46,865 89,688
Dividends (6,911) (5,740) (17,173)
Movement in own shares (558) (77) 62
Share issues (net) 1,543 449 1,390
Net increase in shareholders' funds 48,436 41,497 73,967
Opening shareholders' funds 634,932 560,965 560,965
Closing shareholders' funds 683,368 602,462 634,932
11. Earnings per Share
The calculation of earnings per share is based on the following profits and
weighted average number of shares:
Headline Basic/Diluted
June 2004 June 2003 June 2004 June 2003
£'000 £'000 £'000 £'000
Profit for the financial period 54,362 46,865 54,362 46,865
Exceptional items (note 4 and 5) 1,412 1,247 - -
Tax effect of exceptional items (423) (374) - -
Preference dividend (76) (76) (76) (76)
55,275 47,662 54,286 46,789
June 2004 June 2003
No. of shares No. of shares
Weighted average number of shares
For headline/basic earnings per share 284,202,948 283,423,426
Exercise of share options 2,688,173 1,597,148
For diluted earnings per share 286,891,121 285,020,574
Headline figures are presented to show the effect of excluding exceptional
items from earnings per share.
12. The Interim Statement is being sent to shareholders. Further copies will be
available from the Company's registered office at 53 Manor Place, Edinburgh
EH3 7EG.
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