Johnston Press 2018 Interim Results Presentation. David King - CEO 29 August 2018

Save this PDF as:

Size: px
Start display at page:

Download "Johnston Press 2018 Interim Results Presentation. David King - CEO 29 August 2018"


1 Johnston Press 2018 Interim Results Presentation David King CEO 29 August

2 Highlights & Review Financial Update Operational Review Summary 2

3 JP + i H1 Split 2018 Operational Highlights & Challenges Operational Highlights & Challenges Strong performance from the i newspaper 61.0% increase in adjusted EBITDA to 6.0m ad revenue up 20% and circulation revenue up 17% helping to mitigate the broader decline in revenues digital audience up to 4.2m unique users (from 1.3m Dec 17) Statutory operating profit of 7.4m compared to 4.9m in the same period last year EBITDA of 19m at a margin of 20.4% Consistent with pressures across the industry, adjusted advertising revenues declined 15.0% with revenue from classified falling 28.5% Digital audiences grew to a record of 27.3m average unique users per month. The effects of algorithm and news feed changes by Google and Facebook contributed to total digital revenues declining by 7.4% (down 4.3% excluding classifieds) to 12.2m. Limited capacity to invest to counter the effects. Newspaper sales revenues resilient, falling by 1.7% to 38.9m, with price rises broadly offsetting circulation declines The Group s adjusted net debt position (excluding marktomarket) is 203.2m Interest payments made of 9.5m and pension payments of 5.3m in the period Source: IBM Digital Analytics, monthly averages for JanJun 2018 unless stated otherwise 3

4 JP + i Split Financial Highlights* Financial Highlights* Total adjusted revenue was 93.0m (: 101.3m) down 8.2%, (down 4.1% excluding classifieds) Adjusted operating profit 16.6m (: 16.2m) up 2.4% Adjusted Group EBITDA was 19.0m (: 19.7m) down 3.7% Adjusted EBITDA margin of 20.4% (: 19.5%) Adjusted net debt1 was 203.2m (as at 30 December 2017: 195.9m) Adjusted Costs in were 74.0m, 81.6m Pension deficit 40.7m * Presented on a continuing operations adjusted basis which includes the i and excludes the results of disposed or closed titles * * Ex finance leases 4

5 Progress on Strategic Review Update on status 29 March 2017 Group announced Strategic Review to assess the financing options for its 220 million 8.625% high yield bonds due June November 2017 Group announced formation of adhoc committee of bondholders to explore certain potential amendments to the Group's capital structure, combined with certain proposed amendments to the Group s pension scheme 5 June 2018 Group announced no agreement on those potential amendments reached; however, continued work with bondholder committee and other stakeholders on a range of options for repayment, restructuring, refinancing, satisfaction or other retirement of bonds prior to June June 2018 Further announcement to clarify that one of the options being explored is a Regulated Apportionment Agreement in relation to the Group s defined benefit pension scheme. The Group has recently commenced discussions with the relevant parties, including the Pension Trustees and the Pensions Regulator Strategic Review is ongoing we will provide a further update as soon as possible 5

6 Financial Update 6

7 Financial Headlines* Revenues i Operating costs (inc depreciation) 8.2% i 10.9 i 10.2% i i H1 17 H1 18 H1 17 H1 18 NB Depreciation 3.5m H1 17, 2,4m H1 18 Net debt EBITDA 3.7% i H1 17 *Financial information is presented on an Adjusted basis i H1 18 regional business the i newspaper Dec 17 June 18 Includes cash balances of 28.8m June 17, 25.0m Dec 17 and 17.6m in June 18 7

8 Revenues Adjusted Revenues1 ( m) JP i JP Group Change (%) Change (%) Change (%) Newspaper sales (9.0) (1.7) Contract printing (3.2) (3.2) (10.3) (8.3) (30.1) (28.5) (17.2) (15.0) Total revenues (12.6) (8.2) Total revenues excluding classified (8.5) (4.1) Print and digital advertising excluding classified Classified and other advertising3 Advertising Leaflets, syndication & other revenue2 1. Classified and other advertising includes property, motors, jobs and other advertising including features, entertainment and other classified. 2. Includes digital syndication revenue of 0.6 million (: 0.5 million). 8

9 Advertising revenues Adjusted Revenues ( m) JP i JP Group Change(%) Change (%) Change (%) (14. 7) (11.3) Transaction revenues (2.8) (2.7) Digital marketing services & Partnerships (6.3) (4.1) (10.2) (8.3) (30.1) (28.5) Total advertising revenues (17.2) (15.0) Print advertising exc classified and other (12.0) (10.0) (6.5) (4.3) (10.2) (8.3) Display local & national Print and Digital advertising excluding classified Classifieds and other advertising3 Digital advertising exc classified and other Print and digital advertising exc classified and other 1. Includes Public Notices, Births, Marriages & Deaths and Central digital display 2. Digital syndication revenue has been reclassified in the current period from Other Revenues 3. Classified and other advertising includes property, motors, jobs and other advertising including features, entertainment and other classified. 9

10 Operating costs Strong cost control drives continued cost reductions 85.1m 76.4m 10.9m i costs 11.3m i costs % 74.2m 65.1m Costs reduced 9.1m (12.3%) excluding the impact of the i Strong cost control across the business including production, editorial, advertising sales, property and administrative costs 3,242 Property costs move towards serviced offices 12 properties exited 0.6m Production costs down 1.1m 2,50 Absorbed paper price increases of 0.6m 0 0.1m apprenticeship levy absorbed in Q (levy introduced from Q2 2017) Editorial costs down 0.6m Ad sales costs down 4.6m 10

11 Profit summary Adjusted ( m)1 Change (%) Revenue (8.2) EBITDA Group (3.7) Operating profit JP (14.4) Operating profit i Change (%) Statutory Revenue (10.0) Adjusted EBITDA (3.7) Depreciation and amortisation (2.4) (3.8) (35.1) Impairment (3.5) (4.5) (100.0) (5.7) (6.6) Operating profit Group Adjusted to Statutory Reconciliation ( m) Closed titles and digital products Restructuring, pensions, LTIP (2017) and other Statutory operating profit 11

12 Profit after tax Adjusted Profit ( m) Continuing operations Adjusted operating profit Net financing costs Profit before tax Tax (charge) Adjusted profit after tax 1. Based on unrounded figures Change % (9.5) (9.5) 0.0 (0.1) (2.9) (1.2) (1.7) n/a (1.4) (24.4) 12

13 Continuing strong i performance JP + i Split Adjusted Performance ( m) FY 2017 Newspapers sales Print advertising Digital advertising Leaflets, syndication and other Total revenue (11.3) (10.8) (21.4) Operating profit EBITDA Total costs i newspaper was acquired on 10 April 2016 so is now included in the reported results on a like for like basis. EBITDA since acquisition is 18.6m against an acquisition cost of 24m 13

14 Net debt Bond outstanding 1 Bond discount (net) Bond marktomarket gain Bond marktomarket 30 June Dec 2017 (220.0) (220.0) (157.0) (165.8) Cash Balance Finance leases (0.8) (0.9) Dec 17 June 18 Excludes bond mark to market 1 Net Debt (140.2) (141.7) Net Debt (exc. bond MTM) (203.2) (195.9) Bond outstanding is stated after 5m bond buy back in August The Bond is due 1 June

15 Cash Flow m (5.3) (5.1) 0.2 Capex (2.1) (1.6) Financing costs (9.5) (9.5) Cash movement before disposals (7.6) (6.8) (7.4) 12.8 Cash generated 1 Pension Tax Net proceeds on disposal of East Anglia/East Midlands Other proceeds Cash movement in period 1 After exceptional costs and Strategic Review costs 15

16 Pension liability ( m) Assets (580.6) (608.6) (600.9) (615.6) Closing deficit (40.7) (47.2) (53.1) (67.7) Discount rate 2.7% 2.5% 2.7% 2.7% Inflation rate 3.2% 3.3% 3.4% 3.4% Life expectancy (years) Male aged Liabilities Refer to Appendix slide 34 for additional detail on the movements in the period 16

17 Our strategic priorities for 2018 Our strategic priorities: One Drive digital performance Two Three Build on the success of the i Optimise the regional print portfolio Four Five Reduce reliance on Grow our advertising regional newspaper customer base sales revenue and display advertising revenue 17

18 JP + i Review Split Corporate Priorities for 2018 Progress update on priorities: Status Audience growth has slowed down following Drive digital performance algorithm and news feed changes Build on the success of the i Optimise the regional print portfolio Profit up over 60% Circulation decline reducing in larger markets but cost saving not tracking ad revenue reduction. Reduce reliance on regional newspaper sales i = 18% of Group, contract print 7% of Group revenue and display advertising revenue revenue Grow our advertising customer base Slow progress, but accelerating in June and July On track Partial progress Not on track 18

19 Current Topics Gender pay Report published 28 March Effective 25 May 2018, new The impact of search engines regime for protecting and and social media on the sector 71% participation and controlling use of personal is under review formed to address the engagement increased to information issues and make 64% (62%) Gender Pay Review Group recommendations to Board Annual YourSay employee Cairncross Review survey ran late showed gap of 15% GDPR Engagement Aim to: Reduce gap 50/50 balance in The Group will participate fully Gives individuals greater in the review, with the Robust actions plans to rights to know how objective of sustaining quality maintain focus on and personal data is being used journalism in the long term. improve engagement and makes it easier to opt out Recent pulse survey SLT within 5 years indicates employee Diverse candidate engagement remains on a shortlists positive trend Changes the way that we get and record permission to hold and process individuals data Targeted development plans How GDPR operates in practice will develop over time need to monitor and adapt as it develops 19

20 Current Trading and Outlook Q Difficult trading conditions across the sector remain in line with expectations i continuing to deliver strong growth in revenues and profits Downward pressure on revenues in our regional portfolio continues Classified and other remains weak but accounts for only 13.0% of revenues in H1 18, down from 16.7% in the prior period. Recently seen falling advertising yield, while Facebook traffic is down following algorithm changes While there has been a slow down in digital national revenue, national print revenue may benefit as advertisers seek a safe environment Cost reduction remains a necessity given the continued pressure on revenues Image to be updated 20 20

21 JP + i Split Conclusion Focus is on driving digital traffic that can be monetised Small investment in i continues, most recently in a Scottish edition Circulation revenue was stable in Resource is focused on areas of greatest opportunity Innovation and creativity continues, most recently recognised with nominations for multiple awards in the British Journalism Awards for Specialist Media 2018 Cost control remains a priority Strategic Review ongoing We are tracking in line with current expectations 21

22 Thank You 22

23 Contact Details David King, CEO 2 Cavendish Square London, W1G OPU Telephone: 44(0) Investor Relations: Edelman Alex Simmons Ben Fenton

24 End of presentation 24

25 Appendices 25

26 Statutory to Adjusted Revenue reconciliation Revenue m Statutory Closed/sold titles Adjusted (2.0) Closed/sold titles As part of the review of the Group's portfolio, 4 titles were closed in 2017 and in late 2017 notice was served on the DMGT Metro contract. Also includes 0.3m in 2017 of revenue from the East Anglia and East Midlands titles disposed in January EBITDA For all revenue adjustments the associated cost of sales and operating costs have been adjusted see following page. 26

27 Statutory to Adjusted reconciliation m m Statutory Operating Profit Restructuring Strategic Review Impairment Pensions (0.1) (0.3) Disposals/ i acquisition costs Other Adjusting items/exceptionals Adjusted Operating Profit Depreciation and amortisation Adjusted EBITDA Restructuring costs Restructuring costs include redundancy ( 0.9m) and business and sales transformation ( 1.1m) costs. The prior year also includes property related restructuring ( 0.3m) and onerous contracts ( 0.3m). Strategic Review Strategic Review costs include financial adviser fees, fees for legal and pensions advice to the Company, Pensions Trustees and Bondholder Committee ( 2.7m) and a retention bonus for 13 staff members which do not include Directors ( 0.5m) Impairment An impairment of 3.5m includes the charge against publishing titles ( 2.0m), presses ( 0.6) and other property, plant and equipment ( 0.8m) Pensions Pensions costs adjustments include PPF levy and pension admin costs ( o.6m) Disposals / i newspaper acquisition costs The Group received 0.1m cash receipt from a change in control of the Newark Advertiser which was previously disposed by the Group included a one off payment associated with the i ( 0.5m), loss on sale of Johnston Publishing East Anglia ( 0.5m) and profit on sale of Sheffield and Peterborough properties. Other Other adjustments in the prior period include long term incentive plans of senior management ( 1.2m) 27

28 Revenue summary with and without i Adjusted Revenues ( m) 2 (Including i newspaper) (Traditional JP titles) Change 1 (%) Change 1 (%) (11.3) (14.7) Transaction revenues (2.7) (2.8) Digital marketing services & Partnerships (4.1) (6.3) Print and digital advertising (excluding classified and other) (8.3) (10.2) Classified and other advertising (28.5) (30.1) Total advertising (15.0) (17.2) Newspaper sales (1.7) (9.0) Contract printing (3.2) (3.2) Leaflets, print syndication & other revenue (8.2) (12.6) Display local & national Total revenues 28

29 Print advertising performance Adjusted Revenues ( m) Change Display local & national (2.0) (13.1) (0.4) (4.1) Print advertising (ex classified) (2.4) (10.0) Classified and other advertising (4.3) (30.7) (6.7) (17.7) Transaction revenues1 Print advertising revenues % 1. Includes Public Notices, Births, Marriages & Deaths & i Announce 29

30 Digital advertising performance Adjusted Revenues ( m) Change Display local & national (0.4) (5.9) Transaction revenues Digital marketing services & Enterprise (0.1) (4.1) Digital advertising ex classified (0.4) (4.3) Classified and other advertising (0.5) (18.0) (0.9) (7.4) Digital advertising revenues % 1. Includes Public Notices, Births, Marriages & Deaths & i Announce 2. Enterprise includes partnership revenues, reader holidays and other B2B services. 3. Classified and other advertising revenue includes property, jobs and motors. 30

31 Finance costs ( m) (9.5) (9.5) (9.5) (9.5) (0.4) Total finance costs (9.5) (9.9) Net finance expense on pension (liabilities)/assets (0.5) (0.9) 8.8 (4.4) (1.2) (15.2) Interest on bond Investment income Total net operating finance costs Exceptional finance costs issuance costs Fair value gain/(loss) on bond Total IFRS finance (costs)/ income 31

32 Earnings per share Continuing Operations Earnings* ( m) Number of ordinary shares (m) EPS (pence) Adjusted Basic EPS *Earnings is earnings/(loss) after tax less preference dividends and has been calculated on unrounded numbers. 32

33 Group Balance Sheet ( m) Non current assets Valuation of titles Other Current assets Assets held for sale Stock, debtors and other Cash Creditors pensions borrowings* trade, accruals & other Provisions & deferred tax Net liabilities *After marktomarket on bond (40.7) (157.8) (34.9) (19.2) (252.6) (47.2) (166.7) (37.6) (17.2) (268.7) (53.1) (147.9) (39.7) (24.9) (265.6) (88.3) (93.5) (22.2) 33

34 Pension liability ( m) Deficit at the beginning of the period H H H H (47.2) (67.7) (67.7) (27.0) (27.0) (90.0) (90.0) Gain/(loss) on plan assets in excess of interest (20.9) 13.6 (0.9) (7.6) (3.9) (Loss)/gain from changes in financial assumptions 23.3 (13.1) (104.2) (59.9) Gain/(loss) from changes to demographic assumptions (0.7) (6.7) 53.2 Experience gain/(loss) on defined benefit obligation (5.0) Movement in defined benefit obligation under IFRIC (3.9) Net interest Company contributions Closing deficit Deficit Adjusted (0.5) (1.7) (0.9) (4.3) (0.4) (2.9) (1.5) (40.7) (47.2) (53.1) (67.7) (23.2) (27.0) (87.1) (40.7) (47.2) (53.1) (56.0) (23.2) (27.0) (87.1) Each of the financial assumptions were reviewed in light of market conditions resulting in the application of a discount rate of 2.7% (up from 2.5% at 30 December 2017). This is within an acceptable range of assumptions for a scheme of 16 year duration. Demographic assumptions CMI 2017 model with smoothing parameter 6.5 applied whereas an approximate +0.5 age rating and period smoothing parameter 6.5 was applied at 31 Dec to estimate the effect of the updated tables. Deficit Adjusted excludes volatility from negotiations on mortality levels now set at 19.8 years for males at

35 End 35