Annual Report and Accounts 2009 Accounts and Report Annual plc Press Johnston

Delivering the highest audience reach into local areas.

Johnston Press plc

108 Holyrood Road Edinburgh EH8 8AS

Tel: 0131 - 225 3361 Fax: 0131 - 225 4580 email: [email protected] Web Site: http://www.johnstonpress.co.uk Johnston Press plc Registration number 15382 Annual Report and Accounts 2009 advisers

Johnston Press plc is one of the top 3 largest local Solicitors Principal Bankers newspaper publishers in the UK and a major force on MacRoberts Barclays Bank plc 152 Bath Street 2nd Floor, Quay 2 the Internet. Glasgow Fountainbridge G2 4TB Edinburgh EH3 9QG Our aim is to serve local communities across a variety of Ashurst Broadwalk House Lloyds TSB Scotland plc channels, providing access to local information. We have 5 Appold Street Henry Duncan House London 120 George Street unique local content created by teams of local experts EC2A 2HA Edinburgh who believe that “Content is King”. Our coverage of local EH2 4LH Auditors stories and events is unrivalled across all media. Deloitte LLP National Australia Bank Chartered Accountants The Plaza and Statutory Auditors 50 Lothian Road Saltire Court Edinburgh 20 Castle Terrace EH3 9BY Edinburgh EH1 2DB The Royal Bank of Scotland plc 36 St Andrew Square Investment Bankers Edinburgh Citigroup EH2 2YB Citigroup Centre 33 Canada Square Registrars Canary Wharf Computershare Investor Services PLC London PO Box 82 E14 5LB The Pavilions Bridgewater Road Stockbrokers Bristol Deutsche Bank AG London BS99 7NH Winchester House 1 Great Winchester Street London EC2N 2DB

11.4 297 18.3 million million readers local websites total audience

Print titles Extending audience reach to 61.0 We provide a wide variety of Daily - 18 million page impressions per month, complementary publications to Weekly - 156 up 16.0% on 2008o layer the market, give consumer choice and increase advertising Weekly free - 97 6.9 million unique users per month, reach: Printing from up 15.0% on 2008o • Lifestyle magazines 8 regional print centres • Community newsletters • Commuter newspapers • Niche publications • Local events and exhibitions

This report has been printed on Edixion which is FSC certified and both mill and printer achieved ISO 14001 certification.

Designed and produced by corporateprm, Edinburgh and London. www.corporateprm.co.uk * see pages 10 and 45 o These web statistics are based on Webtrends 8. The prior period numbers and percentage increases have been restated on this basis. Key Financials Operational Summary

• Total revenue of £428.0 million down 19.5% on • Refinancing completed - 3 year agreement signed last year to September 2012 • Total print advertising revenues (excluding week • Year-on-year advertising revenue performance 53 in 2009*) down 27.4% on last year improved as the year progressed • Circulation revenues of £99.7 million (excluding • Continuing strong cost management with total week 53), down only 1.8% on last year costs (before non-recurring and IAS 21/39 items) • Operating profit (before non-recurring and IAS down £49.3 million on last year (excluding week 53 21/39 items) of £71.8 million representing an in 2009) operating margin of 16.8% • Successful roll-out of new editorial content • £126.0 million net impairment charge against management system (CMS) in two divisions intangibles, no additional impairment in the second • Upgraded jobs website through partnership with DMGT half of the year • Closure of presses in Scotland and ROI with printing • Reduction in net debt of £55.3 million to £422.1 being transferred to more efficient presses with million excluding term debt issue costs (see note 22) increased colour availability • Net cash inflow from operating activities of £89.2 million • No dividend proposed

Revenue (£’m) Digital Revenues (£’m) Operating Profit* (£’m) before non-recurring and IAS 21/39 items

5 year comparison 5 year comparison 5 year comparison 600 18 240

500 15 19.8 200 17.7 607.5 400 602.2 12 160 15.1 531.9 300 520.2 9 120 186.8 178.1 180.2 428.0 200 6 11.3 80 8.3 100 3 40 128.4

0 0 0 71.8 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09

Costs* (£’m) Operating Profit Margin*(%) Underlying EPS (p) before non-recurring and IAS 21/39 items before non-recurring and IAS 21/39 items note 14

5 year comparison 5 year comparison 5 year comparison 450 36 30

375 30 25

300 24 34.6 20 28.44 429.4 415.4 31.0 26.93 403.5 29.3 225 18 15 25.08 356.2 339.9 24.1 150 12 10

75 6 16.8 5 13.41

0 0 0 5.53 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09

overview governance financial statements 01 Introduction 14 Corporate Social Responsibility 45 Group Income Statement 02 Chairman’s Statement 23 Divisional Managing Directors 46 Group Statement of Comprehensive Income 24 Board of Directors and 47 Group Reconciliation of Shareholders’ Equity business review Group Management Board 48 Group Statement of Financial Position 04 Strategic Overview 26 Corporate Governance 49 Group Statement of Cash Flows 06 Operational Review 31 Directors’ Remuneration Report 50 Notes to the Consolidated Financial Statements 09 Performance Review 40 Directors’ Report 82 Company Balance Sheet 43 Directors’ Responsibility 83 Notes to the Company Financial Statements Statement 90 Group Five Year Summary 44 Independent Auditors’ Report 91 Notice of Meeting ibc Advisers

Johnston Press plc Annual Report and Accounts 2009 01 overview Chairman’s Statement

2009 was a difficult year for regional media and Johnston Press has been adapting its business to better meet the challenges of the current market and the changes faced by the industry.

The recessions in the United Kingdom and Republic underway. Users of our digital services continued to of Ireland have had a dramatic effect on advertising grow markedly during 2009 and the challenge for us revenues. Although conditions remain tough, now is to enhance the revenues from this increasing I am pleased to say that the past year has seen audience reach. a measure of stability returning to the markets in which we operate. Our business continues to deliver Financial Performance market leading operating margins and operations Total revenues during 2009 were £428.0 million, remain cash generative. The year was also marked a reduction of £103.9 million on 2008. This by the completion of a successful refinancing of our reflects the continued decline in advertising debt facilities in August, providing a stable platform revenues, particularly in the early part of the year. Ian Russell for our future development. Advertising revenues (print and digital) were down Chairman by £96.4 million or 26.0% year-on-year. The most Strategy badly affected areas were the classified pillars Your Board believes that our ability to provide of employment and property, however the latter local news, through a variety of media, to the saw year-on-year growth in both November and communities in which we operate remains December. Motors, which has been our most unrivalled. The decline of printed media in general challenging vertical for a number of years, also saw has been well documented, particularly as the year-on-year growth in December. number of online news providers continues to increase and there are further developments in the The decline in revenues throughout the year is methods of accessing them. Although it remains reflected in the operating profit before non-recurring an integral part of our business we are seeking to and IAS 21/39 items of £71.8 million, 44.1% down complement our in-print offering with additional on the previous year. This figure includes the impact projects and in particular, focussed commercial of the 53rd week in 2009 (see page 10) which development of revenue opportunities within digital contributed £2.1 million. This profit level represents media. an operating margin of 16.8%. Largely this has been achieved by further substantial cost savings We are also increasingly looking to develop being made across the Group as we continue to collaborative ventures with partners, particularly adapt to the changing trading environment and in the digital field, and a number of projects are restructure ourselves for the future.

02 Johnston Press plc Annual Report and Accounts 2009 The pre-tax loss for the year was £113.8 million, with a The Board is also extremely grateful to Peter and pre-tax profit of £43.3 million relating to trading before Martina for their services as Directors, again over a non-recurring and IAS 21/39 items. The non-recurring number of years. Freddie, Peter and Martina leave items related primarily to the impairment of publishing with our very best wishes for the future. titles, the write-off of the remaining value in the presses that have been closed and a one-off adjustment for During 2009 we welcomed Mark Pain and Camilla the cost of share warrants issued in the year. The Rhodes to our Board as Non-Executive Directors. balance represents the costs associated with the Mark was previously Group Finance Director of reduction in headcount during the year. Abbey National Group plc before taking on the same role at Barratt Developments Limited. He Net debt (excluding term debt issue costs) at 31 is a Non-Executive Director of Punch Taverns plc December 2009 was £422.1 million, down from and Northern Rock plc. Camilla enjoyed a very £477.3 million at the beginning of the year. In our successful career at News International where she Interim Results announcement in August 2009 we was Managing Director of Times Newspapers and reported that an agreement had been reached with News Group Newspapers and brings invaluable Your Board our lenders to refinance the Group’s debt facility. A publishing experience to the Board. Since the three year facility of £485.0 million has been put in year-end Geoff Iddison, Mastercard’s head of believes that our place and although the revised arrangements have e-commerce and m-commerce has also joined the resulted in an increased cost of borrowing, they Board as a Non-Executive Director. I am delighted ability to provide have removed the material uncertainty relating to a to welcome them all. possible breach of covenant tests which we referred local news, to last year. Employees Finally, I want to thank the management and staff through a variety Dividend and Share Price throughout the Group for their continual hard work The combination of stability returning to the markets in what have often been very difficult circumstances. of media, to the in which we operate, rigorous cost control and the Unfortunately it has been necessary to make platform provided by our refinancing has helped redundancies as we seek to adapt to the changing communities our share price to rise from 12.75p at 1 January markets in which we operate and restructure the 2009 to 22.25p at 31 December 2009, a modest business for the future. However, with the continued in which we improvement over the year, although still well below dedication of our employees I am confident that we historic levels. In line with our previously stated can ensure the future success of the Company. operate remains policy, and in accordance with the provisions of our revised financing arrangements, no dividend is Outlook unrivalled. proposed for the year. The Group will continue to Johnston Press has a long track record of delivering use any excess cash to reduce indebtedness. industry leading performance and, through the implementation of new technologies and systems Board Changes together with the successful integration of acquired I became Chairman in March 2009, succeeding businesses, has produced sustained operational Roger Parry who served as Chairman for eight improvements. These programmes have continued years and, in all, for twelve years as a Director. into 2010. In addition, despite the current challenges faced by the Group and our industry I would like to take the opportunity to thank him sector as a whole, we believe that Johnston Press for his dedicated work and leadership during his is well placed to benefit from any cyclical upturn. time on the Board and especially as Chairman. Since the successful refinancing of our debt announced at the end of August 2009 we have This year’s AGM will be held in Edinburgh on been trading in line with the expectations we had 30 April 2010 and will be marked by the departure at that time. That being the case we have no from the Board of Freddie Johnston, Peter Cawdron immediate plans to raise capital. and Martina King. Freddie’s departure from the Board is a genuine landmark for the Company. He has served as a Director for over 50 years and, of course, for many years was Chief Executive before becoming Chairman. He will be greatly missed. Ian Russell Chairman

Johnston Press plc Annual Report and Accounts 2009 03 business review Strategic Overview

Trading Debt Reduction 2009 proved to be an extremely difficult trading Despite the fall in advertising, the Group has year. The economy declined rapidly during remained operationally cash generative. Capital the first quarter and this was reflected in our expenditure was reduced to a minimum level and advertising revenue which fell, on a like-for-like excellence in cash collection has enabled us to basis, by 33.9% on the prior year. This was the reduce net debt (excluding term debt issue costs) worst quarterly decline we have seen during the from £477.3 million at the beginning of the year current economic downturn and proved to be a to £422.1 million at the year end. This reduction turning point. Throughout this Business Review, has been achieved despite the £14.6 million cash references to like-for-like financials can be taken cost associated with reducing the cost base John Fry to mean excluding week 53 from 2009 (see and fees of £16.0 million to facilitate our debt page 10). refinancing. While most of the reduction was due to internally generated cash, we were assisted by Total Group weekly advertising revenues having an improvement in the exchange rate of Sterling continued to decline moderately during the against the Euro. Most of this benefit has been first quarter, reached a base level in April and locked in by a reduction of our exposure to Euro continued at this level, taking into account the debt from e173.6 million to e48.0 million. seasonality of the business, until the end of the year. As prior year comparisons became lower, In order to accelerate the reduction in debt, the we have seen a reduction in our year-on-year sale of our titles in the Republic of Ireland was advertising decline from a high of -33.9% in the considered. Despite considerable interest for the first quarter to -11.2% in the last quarter. As we assets, a suitable price could not be achieved. Danny Cammiade move into 2010, this trend has continued with A decision was therefore made to abort the sale advertising being down 7.3% during the first nine process, although one small title was sold at weeks. During 2009 classified advertising has the end of the year. No further sales are being been particularly difficult with recruitment falling by contemplated. 49.4%, property by 42.6% and motors by 24.3% on a like-for-like basis. While there is no sign of Debt Refinancing improvement in the recruitment market we have At the half year we announced a refinancing seen a turnaround in property advertising which of our debt facilities to September 2012. The improved from a decline of 57.5% in the first primary goals of the refinancing were to extend quarter to a fall of only 4.4% in the last quarter. the term of the bank debt and to ensure that we have sufficient flexibility to operate the business A more detailed analysis of advertising trends by throughout the economic downturn. Since the Stuart Paterson category is included in the Performance Review. completion of the refinancing we have operated well within the new covenants and expect With advertising declining rapidly, the Group has to continue to do so. Further details of the focussed considerable attention on costs. Overall, refinancing are provided on page 12 and in operating costs (excluding non-recurring and IAS note 22. 21/39 items) in 2009 were £49.3 million lower than in 2008 on a like-for-like basis. This was Strategy achieved through consolidation of many back- Print Development office processes onto fewer sites, the closure of The development and maintenance of our two printing presses (one in Scotland and another audience is extremely important. While we do in the Republic of Ireland) and through investment not believe that underlying circulation trends can in improved IT systems. While we continue to be halted, it is possible to reduce the rate of believe that we must maintain local presence in fall. A series of actions have been implemented the markets in which we operate, this presence including increased organisational focus on can be achieved through editorial staff and local circulation, improved availability at those outlets advertising sales. Other functions such as printing, selling the majority of copies and product pre-press, circulation and telephone advertising improvement through increased pagination and sales can be managed better by having fewer the implementation of an editorial review process. sites. This consolidation, accompanied by investment in improved systems, has enabled The editorial review process is designed to us to maintain service to customers and editorial improve our print products by ensuring that our quality despite operating the Group with 25% newspapers focus on the needs of their local fewer people than 2 years ago. As implementation communities through a combination of customer of these improvements took place throughout the research and peer review. This has ensured that year we anticipate a further reduction in costs in our products can remain sharp and continue to 2010. serve their communities as these communities develop. The result has been a reduction in the

04 Johnston Press plc Annual Report and Accounts 2009 rate of decline of daily titles from -7.8% in the first currently access for free. As our content on local half to -6.3% in the second half. Similarly, weekly communities is often unique, we believe that we paid-for titles improved from a decline of -7.2% in are well positioned to test whether users would be the first half to -4.6% in the second. prepared to pay for their content delivered through local websites. A small scale test involving six of Launching new media products during a recession our local websites began in December. The test is typically extends the amount of capital required designed to help our understanding of the impact and the time taken to reach profitability. We have of our free digital offerings on print and whether therefore been cautious in investing in product customers are prepared to pay for news. It is our development during the past year. Despite this, belief that the issue is not only the willingness of our portfolio of magazines has been improved customers to pay for news content but also the through the outsourcing of design and content. ease of payment which particular mechanisms As markets improve, there will be scope to provide. No decision has been made to roll-out expand some of the Group’s initiatives around paywalls across our sites but we remain open to the core newspaper business. These will require developments in this area. modest investment. For some time, we have been running small scale Digital Development exhibitions across the Group and have made the During the year, the decision was made to cease decision to expand the scale of this business. development of our own internet solutions and We are leveraging the skills of Outbound, our replace some offerings by purchasing software emigration events and publishing business, to or licensing complete solutions. A deal was produce one large scale event in each division concluded with the Daily Mail Group Trust (DMGT) in 2010. Depending on the success of these to utilise their Jobsite software as the basis for an initiatives we will make further plans for expansion improved jobs offering. This change of philosophy from next year and beyond. has enabled us to move rapidly, upgrade our technology and provide customers with a better Our business definition of local media can solution. be expanded beyond newspapers into other types of media such as local television. We are A new editorial content management system actively involved in pitching for two of the three (CMS) has been purchased to replace in-house government funded pilots for the provision of local developed software. The editorial system was TV news. implemented in two of our divisions by the year- end. Similarly, our first upgraded website utilising Summary the new content management system is available The year ended with the Group in a much for customers to use. Both projects will be rolled stronger position than it began: advertising is more out across the entire business during 2010. stable; circulation trends have improved; digital revenues are growing; our cost base has reduced There has been considerable comment during significantly and lending facilities have been the past year around the issue of users paying renegotiated. We are therefore well positioned to for news content on websites which they take advantage of any upturn as it occurs.

Whether in our long standing newspapers or on our more recently acclaimed websites the key ingredient is their extensive content. We have a leading presence in our local markets with over 1,900 locally based journalists whose work is supported by numerous local contributions.

Johnston Press plc Annual Report and Accounts 2009 05 business review Operational Review

The Group’s strategy of evolving its organisational structure in line with trading conditions led to a number of operational changes in 2009. This forms part of our longer-term plan to centralise common business functions, leaving local companies to concentrate on the core competencies of news gathering and advertising sales. It ensures we remain focussed on the local communities that are so important to the success of community publishing.

Progress on this strategy was accelerated during include an online service for births, marriages and the year with the introduction of new technology deaths (i-Announce); upgraded technology for video in the publishing workflow in order to improve advertising; and packages for both local and national efficiency and the quality of our news and display advertisers that better meet their needs and information offering. Changes were also made to the extend their reach. organisational structure at regional and Group level with the disparate operations of telephone sales, As a consequence of these changes, digital revenues advertisement creation, transport and newspaper improved as the year progressed, ending positively at sales administration being brought together centrally +12.3% in the fourth quarter. Overall digital revenues as service functions for local operating companies. were down 10.6% for the year.

Digital IT Systems A key digital strategic aim of moving from bespoke Underpinning these changes is the continued use of to more appropriate and robust technology was technology as an enabler for business development. achieved during the year and long-term partnerships This approach has led to a transformation of the were established with several web providers. The organisation structure, with the most significant most significant change was the transformation of change being the introduction of a new editorial the Jobs Today classified portal through functionality content management system (CMS), which has provided by Jobsite, which is owned by DMGT. This been successfully deployed in Midlands and South created a step change for the user that generated divisions and will be installed Group-wide during additional viewers and therefore more advertising 2010. The system has improved the way text, opportunities. At the same time, employers were able pictures, audio and video content are captured and Digital Jobs to reach other markets, increasing prospects for new utilised in print, online and for mobile devices. With revenues. As a result, recruitment advertising online the addition of new working practices in editorial Revenues improved as the year progressed: revenue in the last departments, such as pre-formatting page design, Following the quarter increased by 15.7%, with the full year down workflow has greatly improved. partnership with DMGT, only 29.1% despite challenging market conditions. Jobsite made a positive Organisation Structure impact with digital The remaining classified search engines for property, In line with Group strategy, central units for transport recruitment revenue up motors and business listings are in the process of and logistics, newspaper sales and advertisement 15.7% in quarter four. moving away from bespoke technology and this creation have been set up or existing facilities workstream is expected to be completed in 2010. improved. In addition, regional teams have been established for telephone sales and editorial The introduction of new workflows and technology production, enabling common business processes to in the Group’s editorial departments was another be employed and best practice adopted. significant step forward. Once established, this will improve the user experience for both journalist and Towards the end of 2009, a new business unit viewer as well as online news content. As part of was created to oversee all aspects of the Group’s this project, external experts undertook a thorough transport operation and delivery of newspapers evaluation of our online readers’ needs in order to from press hall to point of sale. This has already led redesign the Group’s 297 sites. By the end of 2009, to efficiencies through improved purchasing and the next generation home page with a much cleaner planning of distribution. design and deeper content was being tested in Grantham and this will be rolled out across the Group The central newspaper sales team which provides in 2010. research, marketing and administration support in addition to sharing and monitoring best practice Extensive work on our advertising platforms was also was given more resource and the results have been carried out in 2009. Improvements for customers positive. Further benefits are anticipated when more

06 Johnston Press plc Annual Report and Accounts 2009 of our daily titles move to earlier delivery times and additional focus on consumer research with the Group when wholesale delivery arrangements are optimised now having over 6,000 active online reader panellists. as best practice guidelines are introduced. These consumer panellists provide feedback on newspaper content and offer a valuable insight into the The consolidation of advertisement creation (the views of our readers. We have also invested in specific design teams within pre-press departments which research projects to support our daily newspapers in prepare customer advertisements) continued with Edinburgh and Leeds and instigated new procedures the closure of teams based in Limerick, Sunderland, to evaluate the quality of our newspapers including Sheffield, Peterborough and Portsmouth. Our long- an initiative to canvass the opinion of peer groups, term objective is to have three units operating in consumers and staff. Leeds, Preston and Carn in Northern Ireland. In the last 18 months, the number of teams has reduced As a result of these initiatives sales performance has from twenty-five to six, made possible by the improved with daily newspapers improving from a technology that allows the seamless flow of scanned first half decline of -7.8% to -6.3% in the second half designs across the Group’s network. and weekly newspapers from -7.2% in the first half to -4.6% in the second. Encouragingly, over one third Telephone sales teams, which were historically of the Group’s weekly titles reported sales declines based in individual operating companies, have been of less than 3.0% in the second half of the year. The consolidated into larger hubs in each publishing recently published ABC figures for July to December division. For example, in the South division there 2009 show that we have the best performing titles, are now two teams as opposed to five and in in terms of circulation, compared with our main the Northwest there is one team rather than six. competitors. A total of fifty-seven disparate telephone sales teams have been integrated into twenty regional Daily newspapers continue to benefit from overnight hubs. The technology employed has made it printing and early delivery to outlets, particularly our possible to improve call handling, invest in specialist titles in Northampton, Kettering and Peterborough. management and monitor customer service levels. The Peterborough Evening Telegraph reported an increase in sales of 0.6% year-on-year for July to A similar project to consolidate editorial production December 2009, one of only two regional daily was completed in five of the seven publishing newspapers in the country to do so. The proportion divisions, creating twenty-five central sub-editing of daily newspaper copies on subscription or home units, a reduction of forty-three. Editorial page design delivery has also increased from 11.8% in 2008 to is now being shared across companies and other 13.1% in 2009. benefits include a more robust infrastructure for the preparation of news pages, scale efficiencies and Our digital audiences continue to be independently lower capital costs. audited by the industry body ABCe. Results for January to June 2009 indicated that our online Audience Delivery audience had increased by 11.9% against the Stabilising and developing sales of our daily and immediately preceding period and that our online weekly newspapers continues to be a strategic audience is the largest of all the regional media objective. This has been greatly enhanced by companies. Second half performance shows an increase of 11.6%.

Audience by Components Knowing what our readers and viewers want allows us to have extensive local market penetration wherever we publish. Whether it is just a catch up on the local news, the breaking news story, the local Internet 6.9m sports results or even a nostalgic look back on recent history, the local Dailies community publisher is the first port of call for many whether it be in Free 1.4m print or via digital channels. 5.4m Weekly paid for 4.6m

Johnston Press plc Annual Report and Accounts 2009 07 business review Operational Review continued

As part of our commitment to the industry we have in 2009, they successfully accommodated a greater been working with The Newspaper Society and other range and variation of print requirements including UK regional publishers to launch “Locally Connected”, smaller titles with shorter print runs. This enabled a database that provides, in a consistent format, the further efficiency gains to be achieved by moving combined in print and online audience for specific work from Leeds and Sunderland and restructuring markets. Major advertisers and agencies can then the working week at those sites. understand the total audience reach of our combined products and make more informed buying decisions. A decision was taken to close the press hall in Edinburgh and outsource the printing needs of the Business Development Scotland division to more modern presses operated The Group entered into a new phase of business by Trinity Mirror and News International. This reduced development during the year by forming separate operating costs and also increased colour availability working parties to review the display, recruitment, for The Scotsman, Edinburgh Evening News and property and motors advertising markets. Each team Scotland on Sunday. In addition, the press hall and was led by a senior manager and comprised a cross- associated commercial print activity in Kilkenny, section of commercial directors. We are currently Republic of Ireland, was closed and work transferred implementing the recommendations, which include to alternative Group sites at Limerick and Carn in Contract changes to pricing strategy, sales organisation structure, Northern Ireland. Print Revenues new advertising platforms and improvements to online (£’m) self-serve advertising. This work has enabled the Group The UK print industry currently has surplus capacity to have a deeper understanding of customers’ views, and this has led to a very competitive pricing 5 year comparison whilst at the same time identifying new opportunities to environment. Encouragingly, the majority of our 36 grow revenue. customers chose to retain their relationship with 30

35.9 us and only one significant contract, The Financial 35.0 24 32.7 Strategically it was agreed to increase resource Times, has been lost.

18 27.3 allocated to new revenue streams such as

12 21.1 high quality lifestyle magazines and large scale During 2009 the print division won industry 6 exhibitions. Consequently, a senior editorial manager awards for the best use of colour and was highly 0 was appointed to co-ordinate Group-wide magazine commended for coldset printing. 05 06 07 08 09 activity and an experienced manager from our inhouse exhibition company was appointed to Staff Development & Welfare support new exhibition activities operated by the In a year of significant change and restructuring, the local publishing centres. single most important challenge was to minimise the impact of redundancy on employees. This has been Print Division achieved by voluntary severance and redeployment The flexibility of the Group’s two main print sites, where possible. In addition, considerable time Dinnington and Portsmouth, was again evident and re-training has been invested in change during the year. Both presses are primarily suited to management programmes to assist employees products with high pagination and long print runs but affected.

UK Advertising Revenue 2009 Proportion by Category Our main source of income is advertising from providers of local goods and services wanting to reach our audiences. Johnston Press offers such advertisers an extremely effective Employment means of reaching local consumers through our print and digital Display 16.3% publications, a combination which is capable of delivering high 37.0% Property levels of household penetration and advertiser response. Other 12.3% classified Motors 24.8% 9.6%

08 Johnston Press plc Annual Report and Accounts 2009 Performance Review

The financially challenging environment that the Group operated in through 2008 continued into 2009 such that the Group continued to see very significant revenue losses over the course of the year. The impact of this was partially mitigated through a combination of the cost reduction and business re-engineering programmes started in 2008 and new initiatives in 2009. The result is that the cost base of the business has been repositioned and an operating margin (before non-recurring and IAS 21/39 items) of 16.8% was achieved.

The table below illustrates how the combined print migration of classified advertising towards the online and digital advertising revenues performed over environment we believe that by far the largest factor the course of the year. The table illustrates the influencing our revenues in 2009 was the economic performance for each of the four quarters of the cycle. year excluding the 53rd week in 2009 which has been eliminated to enable direct comparisons to Other classified and display advertising has historically be made. In the UK, the year-on-year advertising been more resilient through economic cycles and this decline in percentage terms peaked in the first was again evidenced with declines excluding the 53rd quarter at -34.2% and gradually improved through week of -10.8% and -13.4% respectively. to the last quarter at -10.6%. The most affected advertising categories were employment -49.0%, Overall the UK performance was a 26.5% decline property -41.8% and motors -23.3%, with all of when comparing against 2008 on a 52 week basis. these reflecting weak performance in their economic drivers, namely increasing unemployment, reduced The improvement in terms of rate of decline seen by the number of property transactions and reduced car UK was not evidenced in the Republic of Ireland where sales. As can be seen in the quarterly analysis, the economy stayed in deep recession throughout the both property and motors improved in the last year. This is illustrated by the overall decline in the fourth quarter of 2009, along with their economic drivers. quarter of -19.8% when compared to the decline of However employment was difficult throughout the -10.6% in the UK. In particular, the improvements in year as unemployment continued to grow. Although property and motors seen in the UK were not seen there continues to be an ongoing level of structural in the Republic of Ireland.

Advertising Revenue - Print & Digital by quarter (like-for-like)

Year March June September December 2009 2008 % 2009 2008 % 2009 2008 % 2009 2008 % 2009 2008 % Year/Quarter £m £m change £m £m change £m £m change £m £m change £m £m change

UK Employment 42.0 82.4 (49.0) 13.0 26.7 (51.3) 10.9 24.6 (55.5) 9.8 18.7 (47.5) 8.3 12.4 (33.3) Property 31.7 54.5 (41.8) 7.9 18.5 (57.3) 8.7 17.3 (49.7) 8.0 11.3 (29.3) 7.1 7.4 (2.9) Motors 24.8 32.3 (23.3) 6.7 9.4 (28.5) 6.3 8.8 (28.5) 6.5 8.3 (21.8) 5.3 5.8 (9.0) Other Classified 63.8 71.4 (10.8) 16.8 18.8 (11.0) 16.2 18.3 (11.6) 15.5 17.7 (12.3) 15.3 16.6 (8.2) Display 95.3 110.0 (13.4) 23.6 29.8 (20.8) 23.7 27.7 (14.6) 22.8 26.1 (12.9) 25.2 26.4 (4.0)

UK Total 257.6 350.6 (26.5) 68.0 103.2 (34.2) 65.8 96.7 (32.0) 62.6 82.1 (23.8) 61.2 68.6 (10.6)

Republic of Ireland 14.4 19.4 (25.3) 3.7 5.3 (28.7) 3.9 5.3 (25.5) 3.3 4.5 (26.2) 3.5 4.3 (19.8)

Group Total 272.0 370.0 (26.5) 71.7 108.5 (33.9) 69.7 102.0 (31.6) 65.9 86.6 (23.9) 64.7 72.9 (11.2)

Johnston Press plc Annual Report and Accounts 2009 09 business review Performance Review continued

The table below summarises the revenues and total Other revenues, of which just under half relates to costs for the Group for 2009 and 2008 as well as the delivery of advertising leaflets within our papers, isolating the impact of the additional 53rd week in were down by 16.9%. Advertising leaflets were 2009. down by 21.3% on a 52 week basis reflecting both a reduction in the distribution of our free Print advertising which is included in the total newspapers of 19.7% and reduction in general advertising analysis above declined by 27.4% when levels of advertising. The other significant drop in comparing the 52 weeks in each period. this revenue category was related to our decision to scale back emigration publishing business Newspaper sales fell by 1.8% on the same basis. which ran several emigration and foreign property This decline was driven by the circulation trends exhibitions and generated significantly reduced described in the Operational Review, partially offset revenues in 2009. by increased cover prices. Circulation trends did show improvement in the second half of the year In total, like-for-like revenues were down 20.3% influenced by actions we have taken as described year-on-year. on pages 6 and 7, a small increase in consumer confidence and the return of consumer interest in Total operating costs for the Group, excluding the property market. non-recurring and IAS 21/39 items, were £356.2 million. When the costs directly related to the 53rd Digital revenues reflecting the initiatives described week are excluded this represented a £49.3 million previously in the Business Review responded or 12.2% saving on 2008. This saving was achieved positively in the second half of the year with growth despite a significant increase in newsprint prices seen in the last quarter. The majority of the losses in when compared to 2008. This increase in price the first half of the year had been in the employment has effectively been reversed in the terms agreed category and these losses decreased significantly for 2010. following the partnership with DMGT on the Jobsite offering launched in August 2009. These significant cost reductions have been achieved through reaping the benefits of investment Contract print revenues decreased year on in technology, using our scale and consolidating year by 10.3% and although the majority of our printing operations as referred to previously. revenues are underpinned by long term contracts The majority of those savings are structural and the decline was primarily driven by the loss of a permanent and will not be reinstated when business printing contract for The Financial Times in Leeds. conditions improve. The balance of the loss was driven by competitive pricing in the contract printing market where, due to As a result of these restructuring and cost saving available capacity, pricing levels have come down. initiatives, the impact of the 19.5% fall in revenues (20.3% on a like-for-like basis) was to some extent mitigated such that the overall operating profit margin before non-recurring and IAS 21/39 items dropped from 24.1% to 16.8% for the 53 weeks or 16.4% for the 52 weeks.

Performance summary for 2009 and 2008

2009 Effect of 2009 2008 53 weeks 53rd week 52 weeks 52 weeks % change £’m £’m £’m £’m Like-for-like

Print advertising 256.3 2.0 254.3 350.6 (27.4) Newspaper sales 101.2 1.5 99.7 101.4 (1.8) Digital 17.7 0.1 17.6 19.8 (11.1) Contract printing 32.7 0.5 32.2 35.9 (10.3) Other 20.1 – 20.1 24.2 (16.9)

Total revenues 428.0 4.1 423.9 531.9 (20.3)

Costs (356.2) (2.0) (354.2) (403.5) (12.2)

Operating profit 71.8 2.1 69.7 128.4 (45.7) Operating margin 16.8% 51.2% 16.4% 24.1%

10 Johnston Press plc Annual Report and Accounts 2009 Principal Risks Facing the Business carrying value of all of its intangible assets for The risk factors detailed in last year’s report and indicators of impairment. In the first half of accounts are still those most likely to influence the the year this resulted in a net impairment of performance of the Group. publishing titles of £126.0 million. No further impairment has been recognised in the second The most important factors remain those that reflect half. Detail on the impairment test assumptions the general economic condition of the markets in and the carrying value by division are included which we operate, namely: in note 15. In addition, an impairment charge of £1.7 million has been recognised against the • Change in Gross Domestic Product cost of available for sale investments. • Change in unemployment rate b) In the second half of the year, as a • Level of property transactions consequence of seeking to improve the quality, • Level of new car sales cost effectiveness and efficiency of our print • Level of consumer confidence division, the Group announced the closure of • For 2010, impact of the General Election print presses in Edinburgh and Kilkenny. This has resulted in a write-down of £19.0 million, The negative trend in all of these factors during representing the net book value of the printing 2009 was the primary reason behind the cyclical assets less any potential resale value. drop in advertising revenues: c) As detailed in the Operational Review and above, the Group continues to re-engineer and In addition to these economic factors, the following reduce its cost base through the consolidation factors are those which we have greater influence or elimination of backroom and production over but unfortunately have a lesser impact than the activities. This unfortunately has resulted in wider economic environment: a reduction of 768 full time equivalent heads in the year with associated redundancy and a) Our ability to ensure that we maintain market reorganisation costs of £14.6 million. leadership at the local level in the classified and d) Costs of £0.5 million were incurred in relation display advertising categories. to the aborted disposal of the ROI business. b) Our success in growing revenue streams in In addition, costs of £0.6 million were incurred our existing market segments. This includes in writing down the value of assets retained revenue streams from our digital platforms as following disposal of one title at the end of the well as new print and related initiatives through year. building on the strength of our brands in local e) Finally, the Group has de-designated its derivative markets. financial instruments from being effective hedges c) Our ability to further re-engineer the processes such that the change in the mark-to-market and cost structure of the business in the face of valuations and retranslation of foreign any additional revenue reductions. denominated debt of these instruments are now d) Our ability to continually improve the efficient recorded in the Income Statement. The effect of operation of our business through appropriate this is illustrated in a separate column on the face investment in technology which improves both of the Income Statement and the detail on the our customers’ experience and our methods of adjustments is included in note 11c. operation. e) Our success in adapting to our customers’ Finance Income/Costs requirements in terms of the way they want The net finance income on pension assets/ to access and address their local information liabilities was £0.3 million as the expected return needs so that we continue to offer our on our pension fund assets marginally exceeded advertisers high levels of local market the interest costs on our pension liabilities by that penetration and response whilst monetising the amount. value of our unique content. f) The extent to which we are able to finance Finance costs for the Group for the year were £28.8 and secure future acquisition or partnership million (before non-recurring and IAS 21/39 items) opportunities which will create shareholder with a blended effective interest rate of 5.8%. This value. blend obviously includes for the first 8 months of the year the Group’s previous financing arrangements, Non-Recurring and IAS 21/39 Items which were replaced on 28 August 2009 with new In addition to the trading results detailed above and facilities as described later in this review. The costs earlier in this Business Review, there have been associated with the revised facilities are significantly several categories of non-recurring items incurred higher given the Group’s increased financial leverage by the business in the year and these are as follows: and the conditions existing in the credit and financial markets when this negotiation had to be completed. a) As has been the case in prior periods, the The blended rate in the new facilities for the final 4 Group is required under IAS 36 to test the months of the year, including the payment-in-kind

Johnston Press plc Annual Report and Accounts 2009 11 business review Performance Review continued

(PIK) accrual, was 8.5%. The fees associated with previous bank facility and loan note agreements. the refinancing were £16.0 million and these are This override agreement runs through to September being amortised over the life of the new facility. 2012 and provides facilities totalling £485.0 million. The impact of this was £1.7 million in addition to Of the total facility, £324.0 million relates to the the amortisation of the remaining fees related to the amount provided by the Group’s existing banking old facility of £0.5 million, incurred in the first half of group with the balance being the private placement the year. All of the Group’s US dollar based interest loan notes. The override agreement has increased payments on the private placement loan notes are finance costs, with a starting and maximum cash fully hedged with respect to currency and the overall margin in the case of the banks being LIBOR percentage of our sterling borrowings, which have plus 4.15% and in the case of the loan notes a been swapped to fixed rates is 72.5%. maximum coupon of 9.45%. The interest rates payable are based on leverage multiples determined A cost of £9.4 million has been recorded in 2009 by the ratio of the Group’s net debt to EBITDA and in relation to the warrants issued to lenders as part reduce based on agreed ratchets; the first reduction of the refinancing. This has been included in the occurs when the leverage reduces below 4.5x. Income Statement as a non-recurring finance cost. Arrangement fees were payable based on 1.625% Tax Rate of the total facility and a further 0.875% was The Group tax rate for the year, excluding non- payable to the banks for extending the term of recurring and IAS 21/39 items was 18.0% with the the existing facility. The facility is secured over the UK rate of 28% being reduced by the businesses in Group’s assets and share warrants over 5% of the Republic of Ireland and the Isle of Man, where the Company’s share capital have been issued to corporation tax rates are considerably lower at lenders. There is an agreed amortised schedule of 12.5% and zero respectively, and the release of a £75.0 million over the three years and it has further contingency no longer required in respect of our Isle been agreed that the portion of this amortisation of Man subsidiary. which relates to the loan note holders will include no make whole payment. Make whole is payable to the Earnings Per Share and Dividends note holders as compensation for the loss of future Basic earnings per share are -13.7p, significantly up interest payments on early repayment of debt. on 2008, when they were -68.0p for the following reasons: In addition to the cash interest margin payable as noted above, a payment-in-kind (PIK) margin • An underlying deterioration in trading which has will accumulate and be payable at the end of the had a negative impact; facility. This margin increases throughout the period of the facility however, if, by 15 May 2010, an • Significantly reduced impairment and other non- amount of £85.0 million or more is repaid, the PIK recurring charges in 2009 in comparison with margin is eliminated throughout the entire period of 2008, which has had a positive impact; the agreement. The PIK margin will also cease to accrue from the time £85.0 million has been repaid • The impact of marking to market the Group’s if this occurs after 15 May 2010. In addition, any financial derivatives, which are no longer amounts used to reduce debt up to 15 May 2010 designated as hedges under IAS39; and will not attract any make whole payment on the proportion that relates to the loan notes. • The gain on translation of foreign denominated debt. The new facility requires the testing of five different covenants, the majority of which are Excluding these non-recurring and IAS 21/39 tested quarterly. The first test of these was on 30 related items, earnings per share at the basic level September 2009. The quarterly tests are net debt were 5.5p down 58.8% on 2008. to EBITDA, interest cover and debt service cover, together with consolidated net worth which is tested There will no dividend paid relating to 2009. on a six monthly basis and capital expenditure on This reflects the Group’s desire to further reduce an annual basis. its outstanding debt and also the fact that we undertook during the refinancing not to pay Net debt at the end of the year was £422.1 million dividends until our ratio of net debt to EBITDA falls (excluding term debt issue costs), a reduction of below 3.5x. Hence, is unlikely that there will be any £55.3 million on the prior year. This is an excellent dividend paid relating to 2010. performance and was driven in particular by good working capital management and reduced capital Funding/Net Debt expenditure. The Group announced on 28 August 2009 new financing arrangements. These arrangements Liquidity and Going Concern were provided through an override agreement, The Board has undertaken a recent and thorough which amended and extended the terms of the review of the Group’s forecasts and the associated

12 Johnston Press plc Annual Report and Accounts 2009 risks. These forecasts extend for a period beyond Pensions one year from the date of approval of these financial The Group’s pension deficit has increased by statements. The extent of this review reflected the £65.9 million over the year. The increased deficit uncertain economic outlook and the current trends, has been the result of a number of factors, both together with the increased volatility in advertising positive and negative. Firstly, investment markets revenues experienced across the publishing and have been highly volatile over the last year and, media sectors. The improved trends, in terms of after a low point which coincided with our half year, reduced year-on-year declines that we experienced rallied towards the end of the year such that overall in the second half of 2009 have continued into investment performance contributed a positive the early part of 2010. The forecasts make key return of £50.3 million over the year. Offsetting this assumptions, based on information available to the was a significant reduction in the discount rate Directors, around: which is used to discount the value of the future liabilities of the scheme. This has meant that the • Future advertising revenues which show a value of these liabilities relating to this change have reduced decline in early 2010 with the balance increased by £52.1 million. of the year showing greater year-on-year stability reflecting the current external economic In addition to this negative impact, we have also environment, consistent with current market increased the longevity assumptions used for the views and existing advertising revenue trends. valuation in comparison to 2008. This change has resulted in a further increase in liabilities of £8.1 • Further cost reduction measures to reflect these million. The year-on-year change in the inflation lower revenues and the ongoing re-engineering assumptions has also had a negative impact on the of the business. overall value of projected liabilities of £40.2 million.

• Increased interest costs reflecting the new This increased deficit, despite the Group continuing financing arrangements. to meet its obligations under the schedule of contributions, together with the agreements made After applying reasonable downside scenarios during the refinancing process with the pension to the key assumptions underpinning the scheme trustees over increased future contributions Group’s forecasts, which extend beyond one from 2012, has resulted in the Group’s proposal year from the date of signing these financial to close the Defined Benefit section of the Plan to statements, the Directors are satisfied that the future accrual from 30 June 2010. This proposal Group would continue to operate within the is driven by the Group’s need to limit the risk on covenants determined by the override agreement. the pension scheme of increased longevity and The Directors therefore believe, on the basis of investment returns. This proposal was announced these current financial projections and facilities on 14 January 2010 and a consultation process available, that the Company and Group have is currently ongoing. As part of that proposal, the adequate resources to continue in operation for Group will continue to pay £2.2 million per annum the foreseeable future. Accordingly, the Directors towards the deficit in the scheme until the next continue to adopt the going concern basis in triennial valuation as at 31 December 2010 is preparing the financial statements. completed. Under the proposal, all members of the Defined Benefit section will become deferred under Financial Reporting that section and offered membership of the Defined In terms of impact on this report and accounts, Contribution section of the Plan. there are no significant changes in International Financial Reporting Standards from those in force at Control Processes the end of 2008. Under the technical provisions As discussed in the Corporate Governance of IAS 1, there is a requirement that when a Statement, the Group operates rigorous internal new standard is published which is applied control processes that assist in the efficient retrospectively, a third balance sheet as at the start operation of our businesses. Central to these of the comparative period should also be presented. processes and controls is the fact that the general The introduction of IFRS 8 on segmental reporting ledgers, fixed asset registers, expenses, payables falls within these provisions. However, given that system and payroll are controlled through our the segments being reported by our business have shared services centre in Peterborough together not changed following the adoption of IFRS 8 and with all cash processing for the UK and all the balance sheet previously reported in the 2007 advertising agency debt being processed through Annual Report & Accounts would not be amended a large single centre in Leeds. in any way, it has been decided that the inclusion of this third balance sheet would add no value for the reader.

Johnston Press plc Annual Report and Accounts 2009 13 governance Corporate Social Responsibility

The Board of Johnston Press has made a clear commitment to operating all of the Group’s business activities to the highest standards of business ethics and integrity. These principles are not only contained in the Group’s Corporate Social Responsibility Statement but it is also policy to include them in contracts of employment.

Business Ethics Each local Managing Director has responsibility within The code of ethics specifically requires adherence their operation for relationships with customers, to all legal requirements. It has a clear policy and suppliers and the community. These relationships procedure for addressing issues such as bribery, are subject to review by the Chief Operating Officer. corruption, conflicts of interest, espionage and the Certain materials and services are sourced centrally giving and receiving of gifts. The Group opposes all such as newsprint, plates, inks, motor vehicles forms of oppression and is a supporter of all human and legal and professional services and these rights. arrangements are subject to review by either the Chief Operating Officer or the Chief Financial Officer, The Group’s entire business is conducted in Europe, depending on the nature of the supply. wholly in the UK and Republic of Ireland. As part of the main Board’s review of Corporate An acceptable use policy has been developed for all Governance, the Directors review the Corporate of the company’s assets including but not restricted Social Responsibility Policy annually. to computer equipment, email facilities and use of the Internet. This policy is issued to employees with Health & Safety supporting guidance and is designed to protect both The Group has rigorous Health & Safety the employee and employer from misuse of assets. management and reporting processes in place. Health & Safety is at the core of our operations, and The Group has the absolute objective of always is a specific item on all business agendas at the local, acting as a fair and reasonable employer. We regional, Group and Board levels. There are Health also acknowledge and are keenly aware of our & Safety Committees in every Group Company and responsibilities to the many communities we serve; the Chief Operating Officer chairs the Group Health our readers, customers, suppliers, shareholders, & Safety Committee, which undertakes audit visits, other stakeholders and to the environment. As a sets Group policy, monitors compliance with those result of our key role in the community, a separate policies and spreads best practice. section is incorporated within this report detailing some of the many community orientated activities Our consistent reporting processes have now been in which the Group’s companies are involved. in place for more than five years allowing us to report some meaningful statistics and comparisons. Our Board Responsibility reporting procedures ensure that every accident, The Board has delegated the day-to-day including the most minor laceration or abrasion, responsibility for all matters related to Corporate is reported, and this reporting is a key part of our Social Responsibility and social issues to the control environment. It should, however, be noted Executive Directors. They are assisted by the that the vast majority of these are not reportable Company Secretary, who is generally the first point under RIDDOR requirements. of contact for any issues of this nature. As can be seen in table 1, 2009 was another Specific responsibility for environmental issues has year of progress across the Group in reducing the been delegated to the Chief Financial Officer, who number of accidents. There has been a reduction also chairs the Group’s Carbon Footprint Taskforce. in the number of employees involved in accidents in both our printing and publishing operations when Whilst recognising that the practices of recruitment, compared to 2008 and overall the percentage of employment and training are the responsibility of employees involved in accidents reduced to 4.4%. all managers within the Group, responsibility for This is our third consecutive year of improvements on formulating, updating and ensuring adherence to these measures. Following improved categorisation Group policies and relevant legislation has been of accident reporting in 2007, we know that 67% delegated to the Director of Human Resources, of the total number of accidents recorded relate who reports to the Chief Operating Officer. to slips, trips, falls, manual handling and bumps.

14 Johnston Press plc Annual Report and Accounts 2009 Table 1 - Health & Safety Statistics Accident Reporting

2009 2008 2007

Average total employees in Group (FTE) 6,146 7,124 7,664

Employees involved in accidents 273 359 409 - Publishing 3.2% 3.9% 3.8% - Printing 15.7% 14.4% 17.8% - Total 4.4% 5.0% 5.3%

Employees with RIDDOR reportable accidents 30 44 38 - Publishing 0.3% 0.5% 0.4% - Printing 1.9% 1.8% 1.5% - Total 0.5% 0.6% 0.5%

Total working days lost through accidents 881 1,197 718

This represents a slight increase in percentage Conduct and Contracts of Employment. Our terms (2008: 66%) although the total number of grievance and whistleblowing procedures also allow such incidents reduced. The year saw a reduction any employee to report behaviour that is contrary to in the number of RIDDOR reportable accidents. our policies or is in any way concerning to them. The rate per employee has remained static across the past three years although this is due to the Employee Representation reduction in our workforce. Poster campaigns All of our employees have the right to freedom of relating to the dangers of slips and trips and manual association and we recognise a number of trade handling accidents were run which has heightened unions at a subsidiary level in both the UK and in the awareness, improved working practices and Republic of Ireland. We also have employee forums increased reporting on minor accidents. at a Group and subsidiary level for the purposes of communication and consultation. Total working days lost reduced sharply in 2009 compared to 2008 and remained well below the Diversity national average. The Group recognises that a diverse workforce adds clear value to our employees, our customers, The Group also has a rolling programme of our shareholders and the communities we serve. independent audit visits covering property and We fully support the principle of equal opportunity Health & Safety risks. These visits are targeted at for all and oppose all forms of illegal and unfair the locations which have the highest risk profile discrimination. All of our Personnel Policies & along with a sample of other sites. Detailed reports Procedures, practices and training programmes are and recommendations are produced after each regularly reviewed to ensure that they fully comply visit which require follow-up and implementation by with the equality legislation in both the UK and the local management. This process is monitored by the Republic of Ireland. Group Management Board. Learning & Development Employee Involvement The growth of our people remains a priority and Employees we continue to deliver a wide range of learning and We employ over 6,000 employees in the UK and development programmes. In 2009 we delivered Republic of Ireland and this section of the report is over 1,000 programmes and in excess of 7,000 about how we manage, develop and reward all of training days covering all aspects of our business our people. Our aim is to attract, retain and engage including Advertising, Editorial, Digital Media, the best people in a challenging and supportive Newspaper Sales, Finance, Health & Safety, IT and culture that drives business performance. HR. In particular we invested heavily in editorial programmes related to the roll out of our new Employment Policies content management system. It is important that all of our managers and employees understand what is expected of them Identifying and developing leadership talent in terms of their behaviour and standards. This is at all levels, as well as succession planning, set out in our Value Statements, Personnel Policies will continue to be a priority. In support of this & Procedures, Employee Handbook, Codes of we developed and delivered a wide range

Johnston Press plc Annual Report and Accounts 2009 15 governance

Corporate Social Responsibility continued

of managerial and leadership development get specialist medical equipment. In Peterborough, programmes over the course of the year. the Evening Telegraph raised cash for equipment to help a youngster with breathing difficulties and, Reward & Recognition within three days, the Stamford Mercury collected Our subsidiary businesses have differing pay £3,500 to buy an electric wheelchair for a disabled structures based on the size of the organisation and girl. Readers of our Isle of Man newspapers raised local market conditions. Progression within these pay £20,000 for a young cancer sufferer. structures is based on competence, achievement of qualifications and performance. We also operate On a number of occasions, our newspapers stood bonus schemes for executive and sales staff. Despite up to fight for the man in the street. In one of the the extremely difficult trading conditions during the more unusual campaigns, the Coleraine Times year, in recognition of the hard work and dedication won a battle with bureaucracy to bring an electricity of our staff a Free Share award was made in respect supply to the tiny seafront home of pensioner, John of 2009. McCarter, who had lived without power for 27 years!

Disability Access The hard work of volunteers was marked by the Workforce Our Disability Access policy is included in our Harrogate Advertiser with its Volunteer Oscars statistics Personnel Policies and Procedures manual. As awards scheme. The Edinburgh Evening News part of our ongoing property and Health & Safety successfully campaigned for a Queen’s Gallantry Our total workforce is audits we continually review the provisions made Medal to be awarded to Ewan Williamson, the represented by 49.0% at all of our locations to ensure that we do not male and 51.0% female city fire-fighter who died in action at a blaze; the and our age profile is as discriminate, in terms of access, against disabled campaign culminated in a formal nomination by the follows: employees or customers. Solutions have been put Chancellor of the Exchequer. The Sheffield Star’s in place involving modification, removal, avoidance “Save a Life” scheme saw the paper working with or circumvention of potential barriers at all of our health professionals to highlight major health issues. Over 60 6.9% locations. We also ensure that any refurbishment or 50 – 59 18.5% upgrading to our premises, where practical, takes The Doncaster Free Press and Worksop Guardian into account the need to enhance access for all of supported food parcel campaigns for British troops 40 – 49 24.1% our disabled stakeholders. in Afghanistan, as did the Stamford Mercury and 30 – 39 24.9% several other group titles. The Chorley Guardian Reflecting the importance of our digital publishing conducted a “We salute you” campaign recognising Under 30 25.6% activities, the Group develops its core internet sites the bravery of troops in Afghanistan. This theme was to WAI single ‘A’ Standards. All pages are created also picked up by several other titles. using XHTML and CSS 2.0; this method provides support for our users accessing our sites via screen Prime Minister Gordon Brown and Transport Minister readers. All our newspaper sites have a sitemap that Lord Adonis backed a Wakefield Express campaign enables easy navigation on screen. The Group also for security improvements at a rail station after a supports the “Talking Newspapers” charity as one of brutal rape and numerous assaults. It resulted in its nominated charities. improved arrangements being introduced. There was also Government backing for the Derbyshire Times in Community Involvement and Fundraising its bid to fight obesity in the county. Our newspapers and websites were again at the forefront of a series of community campaigns and The Bucks Herald recruited Prince William to support events – highlighting their close links with the areas a continuing campaign which will help fund flying they serve. They have also been responsible for fund- experience for injured service personnel. raising for a wide variety of good causes. Two main supermarkets have agreed to label meat A 15 year old boy in Northamptonshire underwent a with detailed information on where the product is bone marrow transplant after a successful search for from - not where it is processed – as a result of a a donor led by the Northampton Chronicle & Echo. Yorkshire Post ‘Clearly British’ campaign. The paper The Scarborough Evening News raised cash for a highlighted a loophole in the law which allowed meat teenager with cerebral palsy and other health issues imported from overseas to be labelled British. Now who needed specialist equipment. “Just for Taylor” the paper is pressing for a similar change for the was a campaign by the Hartlepool Mail to raise hard-pressed dairy industry. £10,000 for four year old Taylor Stallard who needed a motorised wheelchair. At Sunderland, the Echo’s Blackpool Council’s leader ordered a review of readers pledged £21,500 in two weeks to give a spending after a Gazette campaign to expose mother of four suffering from cancer a life-prolonging the wasting of cash by public bodies. The South drug. Staff at the Bourne Local backed fundraising to Yorkshire Times was at the forefront of a campaign raise money for baby twins with a terminal illness. for zero tolerance against violent offenders. The Portsmouth News worked with police to put the The Blackpool Gazette’s “William’s Wish” appeal focus on burglaries and what readers could do to raised £2,500 in days to help a local disabled boy prevent them.

16 Johnston Press plc Annual Report and Accounts 2009 “March for Mansfield’s Heroes” is the title of a Plans to introduce parking charges in Pocklington campaign spearheaded by the Chad newspaper were successfully opposed by a campaign led by to raise £20,000 for a permanent war memorial in the Post. The Burnley Express ran a high profile the town in honour of servicemen and women. The campaign against juvenile crime and anti social Grantham Journal also campaigned for cash to build behaviour, resulting in a 25% reduction in crime. In a war memorial. Preston, the Lancashire Evening Post spearheaded a fundraising campaign for improvements to a crime hit The 10 year campaign by the West Sussex Gazette area helping to fund a £1.5 million community centre. and West Sussex County Times for the South Downs to be designated a national park came to The 2018 bid to bring the World Cup to England is fruition with the Government’s decision to grant being supported by several newspapers including the status. It resulted in a huge walk led by broadcaster Sheffield Star and Sunderland Echo. Ben Fogle, the President of the Campaign for National Parks. Efforts to boost health service facilities were again at the forefront of campaigns run by our titles. The Three trains a day will run directly between Halifax Wigan Observer’s “Heartbeat” campaign aims to and London as a result of a campaign spearheaded raise £1.0 million to turn a cardiac unit into a centre by the Halifax Courier. The “Building a Better Brid” of excellence; the Wigan and Leigh Reporter’s “Light project run by the Bridlington Free Press set out for a Life” campaign raised £40,000 for a hospice; at to tackle seven social sins – violence, dog-fouling, Kettering, the Evening Telegraph has been running vandalism, alcohol abuse, litter, yobbish behaviour a £100,000 campaign to equip a recovery area for and motoring offences like speeding and drink- people who have undergone heart surgery; and driving. £50,000 was raised by the Shields Gazette for a new heart monitor at South Tyneside District Hospital. The Other campaigns included The Londonderry Lynn News baby unit appeal reached a successful Sentinel’s “Save our Cathedral” campaign which climax, hitting its £150,000 target. At Doncaster, the resulted in Government funding for St. Columb’s Free Press is close to reaching a £600,000 target to Cathedral being brought forward. The Ballymena buy a cancer scanner for the town’s cancer detection Times joined a successful campaign to save trust. The Burnley Express ran an appeal to raise Harryville Primary School from closure and the more than £90,000 for Pendleside Hospice. The Dromore Leader and Larne Times joined the fight to Yorkshire Post teamed up with Oxfam for an event save local nursing homes in their areas. Morecambe’s which had 600 competitors and raised £385,000 for only theatre was saved after a campaign by the charity through an endurance test in the Yorkshire Morecambe Visitor. Dales.

A number of titles ran campaigns aimed at One of the more light hearted local events was restoring the feel-good factor to their recession hit backed by the Banbury Guardian – a “Strictly communities. These included the Wigan Observer, Banbury” contest, mirroring the TV “Strictly Come Yorkshire Evening Post, St Helens Reporter, Morley Dancing” programme with local celebrities, including Observer & Advertiser, the Scarborough Evening the Editor, learning to dance and raising cash for News, Northumberland Echo, Mansfield Chad, charity at the same time. Matlock Mercury, Ripon Gazette, Knaresborough Post, Wetherby News, Harrogate Advertiser, Boston A swimathon organised by the Leamington Courier Standard, Banbridge Leader, Lurgan Mail, Tyrone raised £10,000 for good causes; the Rugby Times, Portadown Times, Luton News, Bedfordshire Advertiser is fundraising with a target of £25,000 to Times and Milton Keynes Citizen. repair the roof of St Andrew’s Church in the town and in Northampton, the Chronicle & Echo supported In Limerick, the Leader was at the heart of a a number of charitable causes including raising campaign to help recovery after the closure of the £120,000 for the Macmillan coffee morning and Dell plant and the loss of 1,900 jobs. £30,000 for a hospice.

At the same time our titles are quick to celebrate More than £1,000 was raised by the Bridlington success. The Fife Free Press organised a champions Free Press Anniversary 150 fund for good causes. day to mark Raith Rovers being presented with the The Donegal Democrat hosted “Gabrielle’s Diary’s Scottish Second Division trophy. The Kilkenny People Annual Ball” to raise funds for Autism Support. was at the heart of celebrations to mark the city’s The event was attended by several hundred guests. 400th birthday and the Tipperary Star celebrated its centenary with exhibitions and supplements. A number of titles acted as media sponsors of various charitable causes. The Sunderland Echo spearheaded “Keep Wearside Working” giving readers access to skills programmes During 2009 the Group increased its open door to help them boost prospects of employment. policy for local schools, colleges and community

Johnston Press plc Annual Report and Accounts 2009 17 governance

Corporate Social Responsibility continued

organisations. Many local communities took the base of a Sheffield war memorial was first advantage of these schemes to tour the Group’s revealed in the Sheffield Star. production facilities. Major awards won in 2009 Breaking News Our journalists won a number of awards during Our newspapers and websites were again at the the year. forefront of news coverage in their communities – regularly breaking stories that went on to get Hard-hitting investigations gained the Yorkshire major coverage in national and international Post awards including recognition for writer Rob media. Waugh as runner-up in the Paul Foot Award for investigative journalism. The investigations were The Lancashire Evening Post broke the story into spending conducted by Leeds Metropolitan that governors at Kirkham Prison ran a raffle for University officials; the Sheffield Wednesday FC inmates – with the prize being a day out! The takeover, and Leeds City Credit Union. Scotsman exposed the terminal difficulties at the Dunfermline Building Society which led to Vicky Carr, a trainee reporter on the Harrogate its collapse and exposed the crisis within the Advertiser and Wetherby News achieved the best Glasgow Housing Association. Scotland on National Certificate Examination (NCE) result for Sunday broke the story of the sacking of an five years. SNP minister’s aide over his internet attacks on opposition politicians. The title also exposed Other awards received are summarised in the the safety risk at Scotland’s oil depots, the SNP table opposite. plans to keep military bases, the Orange Order mobilising to defend the Union and revealed the Customer Services weeks of delays for swine flu jabs. It is Group policy to provide the highest standard of service to all of our customers. Each operating The Portsmouth News led the way in breaking company has staff appointed to respond to all stories about Portsmouth FC – including the customer enquiries. There are strict procedures sacking of manager Tony Adams and the takeover for resolving customer complaints or queries by an Arab businessman. In Luton, our papers regarding service and these are carefully broke news of the disruption by Muslim extremists monitored by management. of a homecoming parade by Bedfordshire’s local regiment. Local management in each operation are responsible for ensuring that their companies and A reader helped the Peterborough Evening all their employees comply with the requirements Telegraph capture a photograph of a Lamborghini of all customer and competition related legislation. supercar on fire – a picture which was later carried It is Group policy that the interests of Johnston by various media including Top Gear. Press always require strict compliance and no one in the Group has authority to give any order More than 15,000 people clicked on to the or direction that would result in a violation of this Longford Leader’s website on Christmas Day to policy. To monitor this, and for training purposes, read exclusive coverage of the fire at St Mel’s the Group undertakes mystery shopping exercises Cathedral. The Limerick Leader had an exclusive where independent organisations interact with our interview with the Bishop of Limerick before his business to provide feedback on our processes resignation over a child abuse scandal. and procedures.

A Morecambe Visitor story about a cab driver who With the development of our regionalised call tried to sell his kidney on the internet for £25,000 centres, the Group is striving to increase the to pay for a new kitchen was followed widely and levels of response, professionalism and overall sparked a national debate on the ethics of this experience for our customers. type of action. The Group has also developed a series of An exclusive interview with the deputy governor of customer service related metrics which are in the Bank of England carried in the Scarborough place across the organisation and are subject Evening News was followed up by national media. to review by the Executive Directors at the The Wakefield Express broke the story about a twice yearly business reviews undertaken with wedding photographer whose pictures were so each operation. We have also commissioned bad he became the laughing stock of the nation. independent audits of our customer services in an effort to drive continual improvement. The Group The story about the youth who prompted national Sales Charter introduced in 2004 has become outrage after urinating on poppy wreaths at enshrined in our operations to ensure that our

18 Johnston Press plc Annual Report and Accounts 2009 Major awards won in 2009:

Press Gazette Regional Press Awards Photographer of the year: Simon Hulme, Yorkshire Post

O2 Media Awards Newspaper of the year: Yorkshire Post Editorial team of the year: Worksop Guardian Business journalist: Greg Wright, Yorkshire Post Yorkshire digital journalist: David Behrens, Yorkshire Post North West digital journalist: William Watt, Blackpool Gazette Feature writer: Tom Richmond, Yorkshire Post Lancashire and Manchester young journalist: Natalie Banks, Chorley Guardian BIBA Awards Regional Insurance journalist of the year: Conal Gregory, Yorkshire Post Watson Wyatt HR journalism award: Greg Wright, Yorkshire Post

Yorkshire Press Awards Newspaper of the year: Yorkshire Post Weekly newspaper: Dewsbury Reporter Journalist of the year: Martin Smith, Sheffield Star Weekly reporter: Claire Armstrong, Dewsbury Reporter Sports writer: Martin Smith, Sheffield Star Best multi media news delivery: Graham Walker, Sheffield Star Campaign of the year: Wakefield Express Feature writer: Rod McPhee, Yorkshire Evening Post Reporter: Jonathan Reed, Yorkshire Post Photographer: Simon Hulme, Yorkshire Post Business writer: Greg Wright, Yorkshire Post Breaking news story: Scarborough Evening News Trainee reporter: Ruby Kitchen, Harrogate Advertiser Business coverage: Laura Crothers, Scarborough Evening News

Scottish Press Awards Campaign of the year: The Scotsman Journalist of the year: Bill Jamieson, The Scotsman Scoop of the year: Gerri Peev, The Scotsman Sports photographer: Jane Barlow, The Scotsman Gaelic journalist of the year: Alasdai H Caimbeul, The Scotsman Sports feature writer: Tom English, Scotland on Sunday Feature writer: Peter Ross, Scotland on Sunday

First ScotRail Photography Awards Feature photography: Phil Wilkinson, Scotland on Sunday Picture essay: Ian Rutherford, The Scotsman

North East Awards Journalist of the year: Paul Watson, Hartlepool Mail Splash subbing award: Keith McCaffery, Hartlepool Mail

Other Awards Best website: lep.co.uk (Lancashire Evening Post) Midlands weekly photographer of the year: Marisa Cashill, Derbyshire Times National Police Award for digital innovation: Whitby Gazette Designer: Graeme Windell, Portsmouth News North West Society of Editors daily newspaper of the year: Blackpool Gazette Racing Post Tipster’s trophy: Steve Simpson, Blackpool Gazette Mid-West Ireland newspaper of the year: Limerick Leader Best news story: David Hurley, Limerick leader Best sports story: John Hogan, Limerick Leader Best news photograph: Owen South, Limerick Leader Best general photograph: Adrian Butler, Limerick Leader NCTJ Media Law award: David Seymour, Boston Standard Society of Editors award for best interview: Chantal Spittles, Worksop Guardian

Johnston Press plc Annual Report and Accounts 2009 19 governance

Corporate Social Responsibility continued

customers and advertisers are always dealt with in to continue to benefit from rebates against the a fair and equitable manner; our terms of trade are Climate Change Levy Tax as well as targeting published in the Group’s newspapers as well as sites where base load consumption levels are not being linked to all of the Group’s websites. Equal showing required reductions and subjecting them attention is paid to the service that we provide to to detailed audits. our readers and viewers with each editor directly responsible for any complaints. The Editorial Energy management continues to be a priority for Review Group, a body of senior Group editors, the Group and preparations are well underway also meets regularly to discuss editorial policy for the introduction of the CRC Energy Efficiency and issues related to content. The Group also Scheme from April 2010. conforms to the Press Complaints Commission Code of Practice. Table 2 below summarises the consumption of energy. Environmental The Group acknowledges that the protection The Group’s total electricity consumption fell of the environment is one of its key corporate by 11.1% in the year. The throughput in our responsibilities. We aim to comply with all print centres was down by 25.9% and their relevant regulations and see the identification, consumption per tonne of newsprint fell by 6.9%. management and control of environmental risks as Although the economic downturn and the closure being an implicit requirement for adherence to the of two of our print works towards the end of Combined Code on Corporate Governance and the year had an impact on our electricity usage, the responsibilities of the Directors. much of the saving is down to the efforts in our publishing centres and the increased awareness The Group has a long established scoring of energy management across the business, methodology and audit programme developed championed by the Carbon Footprint Taskforce by independent environmental risk consultants to and our Employee Forums. A greater percentage facilitate the ongoing monitoring and control of our of our titles are now being printed on the modern policies and procedures. A rolling programme of triple-width presses which are more efficient. Gas internal audits of environmental impacts and risks consumption was down by 14.5% in total, helped is conducted throughout the year. Additionally, by the replacement of old boilers and the closure audits by external independent consultants have of the heatset press which was a major user. The continued in order to verify the findings of these ongoing programme of inspecting boilers, making internal reviews. Detailed reports are produced sure they are fit for purpose, time controlled and after each visit and the implementation of all sized correctly continues and is now delivering recommendations is monitored by management. tangible benefits.

The Group continues to benefit from its investment The water consumption for the Group decreased in more energy efficient equipment as well as by over 18.0% in the year. The numbers for the the time and effort put into the monitoring and previous year have again had to be restated given control of energy consumption. The equipment some corrected billing for our suppliers relating introduced for this control has enabled the Group to the last quarter of 2008. Much of the decrease

Table 2 - Consumption of Energy

2009 2008* % 2007 % Electricity - kWh 49,362,652 55,505,620 (11.1) 60,789,592 (8.7) -print centres kWh/tonne 160.0 171.9 (6.9) 184.2 (6.7)

Gas - kWh 24,213,684 28,309,064 (14.5) 31,258,224 (9.4) - print centres kWh/tonne 51.6 62.6 (17.6) 77.5 (19.2)

Water - m³ 85,598 104,379 (18.0) 122,456 (14.8) - print centres m³/tonne 0.27 0.34 (25.9) 0.42 (35.7)

* 2008 has been adjusted to recognise delayed charges

20 Johnston Press plc Annual Report and Accounts 2009 Table 3 - Motor Vehicle Data

2009 2008 % 2007 % 2006 % 2005* %

Total Fleet (No of vehicles) 1,631 1,811 (9.9) 2,057 (12.0) 2,109 (2.5) 1,960 7.6

Total Fleet CO2 rating 265,321 296,425 (10.5) 338,154 (12.3) 355,145 (4.8) 337,726 5.2 Average CO2 rating 163 164 (0.6) 164 (0.7) 168 (2.4) 172 (2.3)

*Adjusted to include acquisitions completed in December 2005

is due to the commissioning of the system to plants to be optimised across the varying demand recycle the water used for blanket washing at cycles. Printing plate processors, air compressors, Portsmouth Web. The significant drop per tonne chilled water plant and boilers can now be of throughput in the print centres of 25.9% is due brought on and off line more efficiently to meet to the increased percentage of our throughput peak demands whilst saving energy during low going through the more efficient Dinnington and demand periods. Portsmouth presses. Newsprint In the 2007 Annual Report, the Group confirmed Since 1991, the industry, through the Newspaper that it had achieved the target originally set in Society, has agreed targets with the Government 2003 for an overall reduction of 7% in its energy on the recycled content of British newspapers. consumption by 2010. After this was achieved by The target for the year 2000 was 40% and the end of 2006, a new target was established was steadily raised to 70%. The industry has of a further 10% reduction between 2007 and consistently surpassed these targets and currently 2010. In 2009 we consumed over 17.1% less 87% of all newsprint in the UK comes from kWh of energy than in 2006 and have therefore recycled paper. achieved that target one year early. Budgets have been set for 2010 encompassing further year-on- Newspapers cannot be recycled indefinitely due year improvements and new longer term targets to the process requiring some virgin fibre to will be set by the Carbon Footprint Taskforce in maintain paper strength. All virgin fibre comes conjunction with our external advisers. from environmentally sound, renewable resources which are monitored and certificated; mainly We have also continued to make progress on softwood coniferous forests, where, for every tree reducing the Group’s car and van fleet. Total number cut down, two or more are planted. Newspapers of vehicles reduced by 9.9% in the year, although are not responsible for rainforest devastation as again this was principally driven by the reduction in the hardwoods from such forests are not used in headcount. The overall CO2 rating of the fleet came newsprint manufacture. down by 10.5% reflecting the smaller fleet and our policy of only purchasing new vehicles that had Emissions to Air lower ratings than those they replaced. With limited The Group decommissioned its last heatset press capital expenditure in the year, the average CO2 during the year, along with its oxidiser unit which rating per vehicle only dropped marginally. Full details continued to remove pollutants with an efficiency are shown in table 3. We expect this to improve in of 99.6% up until the press was shutdown. The 2010 as we roll out a new car leasing programme. heatset press passed its last SEPA inspection prior to the decommissioning. New Initiatives The migration of volumes to more energy and Waste waste efficient presses continued in 2009. Three The Group continued the migration of titles to short older presses were decommissioned in the year cut-off presses in 2009 reducing both paper and as the Group continued to reap the benefits of the ink usage. The next generation of ink optimisation investment in new printing technology undertaken software was installed across the production sites over the last five years. resulting in a 9% reduction in ink usage.

The focus on the Group’s carbon footprint resulted New ways of reducing and recycling waste were in numerous energy saving initiatives coming to introduced in the year, packaging materials for fruition in the year. Motion sensors, intelligent completed newspaper bundles were reduced or timers and the latest Building Management eliminated across all production sites and raw technologies were upgraded across the Group’s material packaging was recycled on site for the main production sites. This allowed the efficiency first time, as paper reel wrappers were cut for of the heating, lighting, power, air and water re-use as newspaper bundle wrapping.

Johnston Press plc Annual Report and Accounts 2009 21 governance

Corporate Social Responsibility continued

Water and solvents continue to be cleaned and Carbon Footprint recycled on site wherever possible. The Group’s The Group established its Carbon Footprint largest production facility at Dinnington near Taskforce under the Chairmanship of S R Sheffield is now classed as a low water user by Paterson, our Chief Financial Officer, in 2008. the local Environmental Agency. This taskforce developed the Group’s environmental policy and is responsible for The Group continued its relationship with two co-ordinating the Group’s activities in this area. industry leading waste partners and remains committed to optimise the recycling of waste Due to significant pressures across the business in streams through waste management and 2009, the Group did not meet as often as planned segregation. All paper waste is returned to paper but the intention is to address this in 2010. mills for recycling, and all chemical waste is treated through audited and certificated waste Many of the Carbon Footprint Taskforce initiatives, processes. which are designed to reduce our impact on the environment, are implemented through the Environmental Policy Employee Forums that operate at all of our The Group’s environmental policy is to ensure publishing centres. Reducing the environmental that every aspect of our activities is conducted in impact of our operations has been an initiative accordance with sound environmental practices that has been embraced by the forums and has through: resulted in many local projects. We are pleased with how they have continued to promote these • Minimising the consumption of natural activities despite the difficult trading environment. resources and energy, whilst consuming material goods in moderation. All newsprint The aims of the Carbon Footprint Taskforce are as consumed in the printing of our newspapers follows: will either be from recycled sources or from sustainable managed forests. The objective is • Establish Group Policy and objectives to have at least 75% of our consumption from • Promote the general aims of “reduce, reuse, recycled sources. recycle” • Pursuing our Energy Policy in which our • Work through the established Employee original aim is to reduce our consumption of Forums energy on a like-for-like basis. • Co-ordinate Group-wide initiatives • Reducing the creation of waste by the • Agree, under the auspices of the Newspaper adoption of improved operating practices Society, a standard method of measuring and by the recycling of materials whenever the Carbon Footprint (Scope 2) and seek to practical. reduce this (base year 2006) by 25% over the • Ensuring all waste and effluent is disposed of next 5 years in a safe and responsible manner. • Run an annual Group Environmental Award • Ensuring all emissions to air comply with relevant current and planned legislation and The Group continues to work in partnership that at least 99.5% of all Volatile Organic with Dell, its principal supplier of IT equipment, Compounds are removed during the process. to develop a disposal channel for redundant • Complying with all environmental legislation. IT equipment. During 2009, we continued our programme of gathering end of life items Johnston Press aims to foster among its staff, from divisional centres and sending them to suppliers, customers, shareholders, other Dell regional collection points, minimising the stakeholders and communities local to its environmental and transportation impact. Once operations an understanding of environmental collected and audited, Dell works with developing issues in the context of its business. Our collective countries to provide the re-purposed computer task is to ensure that we continually improve the systems to schools and emerging industry, where environmental impact of our activities. there is a shortage of such hardware. Anything which cannot be used in this way is broken down Through this policy, Johnston Press recognises into its constituent parts and reused in industry its responsibility towards the protection of the to avoid disposal into landfill, ensuring total environment and issues this statement as a compliance with all WEEE Regulations and waste commitment of both management and employees legislation. to minimising the environmental impact of its operations. Shareholders Members of the Board (Executive and Non- Executive) have met a number of shareholders during the past year to discuss Corporate Governance and Corporate Social Responsibility matters and to address any questions raised by them.

22 Johnston Press plc Annual Report and Accounts 2009 Divisional Managing Directors

From left to right: B L Brennan Republic of Ireland, C G Green North, G T Fearon South, M J Long Northern Ireland, J Bills Group Projects Director, D G Crow Printing, N J Mills Midlands, A R Davies Group IT, M Hilton Northwest, M F Johnston Scotland, C J Pennock Group Newspaper Sales and Marketing

Johnston Press plc Annual Report and Accounts 2009 23 governance Board of Directors

I S M Russell CBE J A Fry MBA * S R Paterson MA, CA * Chairman (57) Chief Executive Officer (53) Chief Financial Officer (52) Joined the Board in 2007. Chairman of Joined the Board in 2009. Formerly Chief Joined the Board in 2001. Chartered the Audit Committee until 11 March 2009. Executive of the Norwich based regional Accountant. Former Finance Director Chairman of the Nomination Committee media group, Archant. Previously President of Aggreko plc. Non-Executive Director from 12 March 2009. Chairman of of Dun & Bradstreet for UK, Europe, Middle of Devro plc and Mirago plc. Advanced Power AG and of Remploy Ltd. East and Africa, and a consultant with Bain & [email protected] Non-Executive Director of the Mercantile Company. Non-Executive Director of James Trust plc and British Assets plc, adviser Southall & Co Ltd. to Clyde Bergemann Power Group and [email protected] Chairman of the campaign board for the University of Edinburgh. [email protected]

F P M Johnston CBE M A Pain M A King Non-Executive (74) Non-Executive (48) Non-Executive (49) Joined the Board in 1959 and intends to Joined the Board in 2009. Chairman of Joined the Board in 2003 and intends step down at the AGM. Former Managing the Audit Committee from 1 May 2009 to step down at the AGM. Member of Director and Chairman of the Group. and member of the Nomination and the Remuneration, Audit and Nomination Former Non-Executive Director of the Remuneration Committees from 1 January Committees. Former Managing Director, Scottish Mortgage Investment Trust plc and 2010. Former Group Finance Director Country Operations Europe, at Yahoo! Lloyds TSB Scotland plc. Former President at Barratt Developments Ltd and Abbey UK Ltd. Non-Executive Director of Capita of the Newspaper Society. National Group plc. Non-Executive Director Group plc, IMD plc and Debenhams plc. [email protected] of Punch Taverns plc, Northern Rock plc [email protected] and LSL Property Services PLC. [email protected]

Group Management Board

M A Vickers A J Richardson L Cunningham Director of Human Resources Business Development Manager Digital Strategy Director

24 Johnston Press plc Annual Report and Accounts 2009 * Also on Group Management Board

D Cammiade * P E B Cawdron A R Marshall Chief Operating Officer (49) Non-Executive (66) Non-Executive (58) Joined the Board in 2005. Joined the Joined the Board in 1998 and intends to Joined the Board in 2008. Member of the Group in 1992 through its acquisition of TR step down at the AGM. Senior Independent Nomination Committee from 1 January Beckett Ltd. Appointed Managing Director Director. Chairman of Remuneration 2010. Executive Director of Usaha Tegas of West Sussex County Times Ltd in 1994 Committee from 30 January 2009. Member Sdn. Bhd. Serves on the Boards of several and held various Divisional Managing of the Audit and Nomination Committees. companies listed on the Bursa Malaysia Director roles until appointed Director Former Group Strategy Development Securities Berhad including Astro All of Operations in 2001. Chairman of the Director of Grand Metropolitan PLC. Asia Networks plc as Executive Deputy Newspaper Society Marketing Committee. Chairman of Punch Taverns plc and Spice Chairman. [email protected] plc. Non-Executive Director of GCap [email protected] Media plc, Capita Group plc, BUPA and Prostrakan Group plc. [email protected]

C A Rhodes G M Iddison Non-Executive (51) Non-Executive (52) Joined the Board in 2009. Member of the Joined the Board on 1 January 2010. Nomination Committee from 1 January Global head of e-commerce and 2010. Former Managing Director of Times m-commerce for Mastercard. Previously Newspapers and News Group Newspapers, Chief Executive of Jagex Limited. News International. [email protected] [email protected]

P M McCall L A Dixon Company Secretary Group Head of Finance

Johnston Press plc Annual Report and Accounts 2009 25 governance Corporate Governance

The Company is committed to the principles of Corporate In addition to the normal agenda at Board meetings, which Governance contained in the revised Combined Code on is described below, the Directors consider one operational or Corporate Governance that was issued in 2008 by the special topic at each meeting. During the last twelve months Financial Reporting Council (“the Code”) for which the Board this has included business risks, circulation and audience reach is accountable to shareholders. of paid for newspapers, national sales, digital publishing, the Group’s debt facilities, human resources trends and issues and Statement of Compliance with The Code of Best Practice IT strategy. The Company has complied with the Provisions set out in Section 1 of the Code throughout the year, other than a departure from Board Meeting Agenda Section A.3.2 in the early part of 2009 when, due to resignations, The Board receives a formal schedule of matters specifically the Board was temporarily unbalanced in terms of the proportion reserved to it for decision, such as future strategy, acquisitions of independent Non-Executive Directors. This was addressed and disposals, dividend policy, approval of the Annual Report through the appointment of M A Pain and C A Rhodes during and Accounts, capital expenditure, trading and capital budgets 2009 and G M Iddison on 1 January 2010. In light of the planned and Group borrowing facilities. The Board considers reports retirement from the Board of F P M Johnston, P E B Cawdron from the Chief Executive Officer, Chief Financial Officer and Chief and M A King, a process is underway to recruit an additional Operating Officer and Minutes of the Board and Committees are independent Non-Executive Director. circulated to all Board members. It has also made the Company Secretary responsible to the Board for the timeliness and quality Statement of Application of The Principles of Good of information provided to it. Governance The Company has applied the principles set out in Section 1 Board Responsibilities of the Code as reported above. Further explanation of how the The Board acknowledges the division of responsibilities for principles have been applied is set out below and, in connection running the Board and managing the Company’s business. with directors’ remuneration, in the Directors’ Remuneration I S M Russell succeeded R G Parry as Non-Executive Chairman Report. on 12 March 2009, and P E B Cawdron was Senior Independent Director throughout the year. On 5 January 2009, J A Fry In December 2009 the Financial Reporting Council published final replaced T J Bowdler as Chief Executive Officer following the proposals for amendments to the Code for public consultation previously announced retirement of T J Bowdler on 31 December with the intention that the amended Code will apply to all 2008. P E B Cawdron will not seek re-election at the Annual companies with financial years beginning on or after 29 June General Meeting on 30 April 2010 and will be succeeded as 2010. The Company is reviewing the proposed changes with a Senior Independent Director by M A Pain. view to ensuring its ongoing compliance with the Code. The Senior Independent Director is available to address any Board Effectiveness concerns that shareholders may have that have not been The Board considers that it has shown its commitment to leading resolved through the normal communication channels of the and controlling the Company by meeting ten times in the year, Chairman or Executive Directors. and can meet when necessary for any matters which may arise. The Remuneration Committee met on three occasions, the Audit Throughout 2009, the Nomination Committee was chaired by Committee three times and the Nomination Committee met I S M Russell. The Remuneration Committee was chaired by seven times. S J Waugh who resigned as a Non-Executive Director of the Company on 30 January 2009 following his appointment to a The Board sets the strategic aims and objectives of the Group, government post; P E B Cawdron succeeded him as Chairman ensuring that the Group has sufficient financial and human of the Remuneration Committee with effect from that date. This resources to meet its objectives. The Board also sets the was a temporary appointment and it was intended that a further Group’s values and standards and ensures that its obligations change would take place later in 2009. Due to the length of time to its shareholders and others are understood and met. that the Non-Executive Director recruitment process took, P E B Management is responsible for the application of the aims and Cawdron remained as Chairman of the Remuneration Committee objectives on a day-to-day basis, as well as monitoring the for the remainder of the year and will be succeeded by G M financial achievements of the business. The Board reviews the Iddison when he steps down from the Board at the forthcoming performance of management in meeting the agreed objectives Annual General Meeting. I S M Russell stepped down as and goals, plans the succession of key executives, and Chairman of the Audit Committee when he was appointed Non- determines appropriate remuneration levels. Executive Chairman of the Company. M A Pain, who joined the Board as an independent Non-Executive Director on 1 May 2009, The core values of the Board are integrity, independence and succeeded I S M Russell as Chairman of the Audit Committee. objectivity. All Directors must take decisions in the interests of the Company and all of its shareholders. The terms of reference of each of the Board’s Committees are displayed on the Company’s website in the Investor Centre At least one Board meeting each year is devoted to strategy section. and to the consideration of a plan for the long term growth and development of the Group. This is reviewed and discussed as appropriate at the other Board meetings held during the year.

26 Johnston Press plc Annual Report and Accounts 2009 Board Attendance All Directors are expected to attend all Board and meetings of Board Committees of which they are a member unless unable to do so. The table below indicates their attendance (the figures in brackets indicate the total meetings held during the year):

Remuneration Audit Nomination Board Committee Committee Committee (10) (3) (3) (7)

R G Parry1 1 — — — I S M Russell5 10 — 1 7 J A Fry 10 — — — S R Paterson 10 — — — D Cammiade 9 — — — P E B Cawdron 9 3 3 6 F P M Johnston 10 — — — M A King 10 3 3 7 S J Waugh2 1 — — — A R Marshall 8 — — — G Patterson1 2 1 — — M A Pain3 7 — 2 — C A Rhodes4 5 — — —

1 Resigned 24 April 2009 2 Resigned 30 January 2009 3 Appointed 1 May 2009 (attended all Board and Committee meetings in period post appointment) 4 Appointed 13 July 2009 (attended all Board Meetings in period post appointment) 5 Stepped down as a member of the Audit Committee on 12 March 2009

Board Balance Nomination Committee Of the Company’s current eleven Directors, three are Executive The Nomination Committee is chaired by I S M Russell. Reporting and the remainder Non-Executive, of whom five are regarded to the Board, its duty is to seek suitably skilled and experienced as independent, excluding the Chairman. These numbers candidates, with sufficient time to devote to the role, as Non- include G M Iddison who joined the Board on 1 January 2010. Executive Directors and to oversee all Board appointments. The process of recruiting a further independent Non-Executive Once the role of a vacancy has been determined, the Committee Director has commenced. Following that appointment and the appoints external recruitment consultants to assist with the search. retirement of F P M Johnston, M A King and P E B Cawdron, In addition to I S M Russell, the Nomination Committee comprised the Board is satisfied that it will have a sufficient independent P E B Cawdron and M A King during the year. With effect from Non-Executive element to satisfy the relevant provisions of the 1 January 2010, the Committee comprised I S M Russell, M A Code. Pain, C A Rhodes, A R Marshall and G M Iddison.

A R Marshall was appointed as a Non-Executive Director on The Board undertook an evaluation of its performance during 27 June 2008. He is regarded as non-independent because the year. This included a review of the effectiveness of this he was appointed to the Board as the nominee Director of Committee, considering its composition, chairmanship, whether Usaha Tegas, which owns 20% of the Company’s issued it fulfilled its role as outlined in the terms of reference, its share capital. F P M Johnston is regarded as non-independent reporting and overall performance. This evaluation process was because he has a large shareholding in the Company and undertaken by the Committee itself as well as by all members previously served the Group in an executive role. of the Board. The results of this process were positive and confirmed the effectiveness of the Committee. P E B Cawdron has served on the Board for more than nine years. The unanimous view of the Board is that his experience Information and Professional Development and professional knowledge has been invaluable to the Board The Chairman arranged a detailed induction process for both and that he has continued to be independent. He will also retire M A Pain and C A Rhodes. This included meetings and from the Board at the forthcoming Annual General Meeting. discussions with advisers and senior management where appropriate, together with the preparation of a full induction As a consequence of the resignation of S J Waugh, pack and seminars both internally and externally. A similar G E Patterson and R G Parry in the early part of 2009, the process is being undertaken for G M Iddison. A more extensive Company temporarily did not comply with the requirement programme was developed for J A Fry which included a full of the Code that at least half of the Board should consist tour of the Group’s operations. of independent Non-Executive Directors. The Company has addressed this position through the recruitment of new G M Iddison was appointed Chairman of the Remuneration independent Non-Executive Directors and will continue to Committee, effective from 1 May 2010, and a detailed review its compliance with the Code. training programme has already been outlined which will involve internal briefings and the input of Hewitt New Bridge Street, the Committee’s advisers.

Johnston Press plc Annual Report and Accounts 2009 27 governance

Corporate Governance continued

All Board members have access to independent advice on International and UK Accounting Standards Boards relating to any matters relating to their responsibilities as Directors and as the disclosures which are included in this Annual Report. members of the various Committees of the Board. The Company Secretary is available to all Directors and he is responsible for Statement of Directors’ Responsibilities ensuring that all Board procedures are complied with. The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law Board Performance Evaluation and regulations. During the last year, the Board has conducted a rigorous evaluation of its own performance. This involved the completion Company law requires the Directors to prepare financial of an assessment questionnaire by all Directors covering the statements for each financial year. Under that law the Directors performance of the Board, individual Directors, the Company are required to prepare the Group financial statements in Secretary and Board Committees. Other topics included the accordance with International Financial Reporting Standards conduct of meetings, the provision of information, relationships, (IFRSs) as adopted by the European Union and Article 4 of strategy, training, the response to the current economic the IAS Regulation and have elected to prepare the parent recession and the overall effectiveness of the Board. There Company financial statements in accordance with United was a continued emphasis on a scoring system for assessing Kingdom Generally Accepted Accounting Practice (United individual, Committee and Board performance, together with Kingdom Accounting Standards and applicable law). Under a focus on the future strategy of the Group, especially in company law the Directors must not approve the accounts the area of digital publishing. The completed questionnaires unless they are satisfied that they give a true and fair view of were submitted to the Company Secretary who prepared a the state of affairs of the Company and of the profit or loss of summary of the conclusions which was presented to the Board the Company for that period. meeting in January 2010. Separately, the Secretary produced a detailed report summarising any individual recommendations In preparing the parent Company financial statements, the for the consideration of the Chairman. This was followed up by Directors are required to: meetings as appropriate with individual Directors. • select suitable accounting policies and then apply them Training consistently; Training is undertaken as required during the year. The • make judgments and accounting estimates that are feedback from the recent questionnaires will assist in the reasonable and prudent; training plan for the forthcoming year. The Board arranges • state whether applicable UK Accounting Standards have for its Non-Executive Directors to visit the Group’s principal been followed, subject to any material departures disclosed locations at certain intervals to discuss the operations with and explained in the financial statements; local management. In addition, all Directors are encouraged to • prepare the financial statements on the going concern visit at least two of the Group’s centres during the year where basis unless it is inappropriate to presume that the they will receive a presentation and a tour of the business. company will continue in business. Individual Directors also attend a range of seminars presented by professionals throughout the year. In preparing the Group financial statements, International Accounting Standard 1 requires that Directors: When the Non-Executive Directors meet without the Executive Directors present, training is one of the standard topics for the • properly select and apply accounting policies; Board to consider, both individually and collectively. • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and Board Re-election understandable information; It is the policy of the Board that all Directors are subject • provide additional disclosures when compliance with the to election at the first Annual General Meeting after their specific requirements in IFRSs are insufficient to enable appointment and thereafter to re-election every three years. users to understand the impact of particular transactions, All Directors who have served nine years or more or who are other events and conditions on the entity’s financial position above age 70, and who wish to stand for re-election, are and financial performance; and subject to re-election annually. • make an assessment of the Company’s ability to continue as a going concern. I S M Russell as Chairman has, following the formal evaluation process described above, considered the performance of The Directors are responsible for keeping adequate accounting the Directors subject to election or re-election at the 2010 records that are sufficient to show and explain the Company’s Annual General Meeting and is satisfied that the individuals’ transactions and disclose with reasonable accuracy at performance continues to be effective and that they have any time the financial position of the Company and enable demonstrated a clear commitment to the role. them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for Separately, the Non-Executive Directors met without I S M safeguarding the assets of the Company and hence for taking Russell, who will be subject to re-election at the 2010 Annual reasonable steps for the prevention and detection of fraud and General Meeting, and were satisfied that he continues to be other irregularities. effective and has demonstrated a commitment to the role. The Directors are responsible for the maintenance and Financial Reporting integrity of the corporate and financial information included The Board has shown its commitment to presenting on the Company’s website. Legislation in the United Kingdom appropriate information about the Group’s financial position by governing the preparation and dissemination of financial complying with best practice and all standards issued by the statements may differ from legislation in other jurisdictions.

28 Johnston Press plc Annual Report and Accounts 2009 Going Concern granted for all acquisitions and disposals submitted after After making enquiries, the Directors have formed a judgement, due enquiry. at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources • Formal Board approval of the annual budget for the to continue in operational existence for the foreseeable future. forthcoming financial year. This includes detailed and For this reason, they continue to adopt the going concern basis comprehensive budgets covering each operating business. in preparing the financial statements. Further detail is contained in the Business Review on pages 4 to 13. • Formal Board reporting of the key functional departments’ future strategy as part of the operational topics considered Internal Control at Board meetings during the year. The Board has applied principle C.2 of the Code by establishing a continuous process for identifying, evaluating • Review by the Audit Committee on a six-monthly basis of the and managing the significant risks the Group faces. The Board work performed by the Internal Financial Control Committee regularly reviews the process which has been in place from (IFCC) based on a programme of work agreed in advance. the start of the year to the date of approval of this report and The IFCC is chaired by the Group Head of Finance who is which is in accordance with the revised guidance on internal responsible for the conduct of control reviews in selected control published in October 2005 (the Turnbull Guidance). The locations by members of the Committee who are independent Board is responsible for the Group’s system of internal control of the location visited. The IFCC is also responsible for the and for reviewing its effectiveness. Such a system is designed review of detailed financial control checklists submitted by to manage rather than eliminate the risk of failure to achieve each operation to head office monthly. This work is strongly business objectives and can only provide reasonable and not supported by the Group’s financial accounting centre absolute assurance against material misstatement or loss. which ensures a consistent and compliant approach to the processing of transactions and ensures a uniform control In compliance with Provision C.2.1 of the Code, the Board regularly process across the Group’s operations. reviews the effectiveness of the Group’s system of internal control. The Board’s monitoring covers all controls, including financial, • Review by the Audit Committee of the conclusions of the operational and compliance controls and risk management. It is Group’s external auditors in their annual audit and review based principally on reviewing reports from management to consider of the half-year results. These reviews include discussion of whether significant risks are identified, evaluated, managed and any control weaknesses or issues identified by the auditors. controlled and whether any significant weaknesses are promptly remedied or indicate a need for more extensive monitoring. The • The conduct of risk assessment involving all senior Board has also performed a specific assessment for the purpose of managers of the Group’s businesses in addition to the this annual report. This assessment considers all significant aspects Executive Directors. A risk matrix is reviewed on a regular of internal control arising during the period covered by the report basis both in the local operations and by the Group including work of the Internal Financial Control Committee. The Audit Management Board. One risk is discussed at every monthly Committee assists the Board in discharging its review responsibilities. executive meeting both locally and at Group level. These risk assessment sessions are held at each operation and During the course of its review of the system of internal control, will evaluate and address the risks identified. The results the Board has not identified nor been advised of any failings or of these assessments are addressed in the Chief Operating weaknesses which it has determined to be significant. Therefore Officer’s monthly report to the Board. During 2009, the a confirmation in respect of necessary actions has not been Group Management Board focussed particularly on considered appropriate. The key elements of the ongoing continuous customer care metrics; impairment testing of the Group’s process during the period under review have been: publishing titles; disaster recovery plans in fewer, larger pre-press and press centres; national advertising sales; • Formal Board reporting by the Chief Executive Officer, management succession planning; digital strategy; bad Chief Financial Officer and Chief Operating Officer on the debts in the economic slowdown; management stretch; Group’s performance and on any emerging risks and daily newspaper sales; and corporate strategy. issues. The monthly management accounts break down the results of the Group’s operations by individual business On an ongoing basis, steps are taken to embed best practice performance and all significant variations against budget into all the operations of the business and to deal with areas and the previous year are fully examined. The day-to- of improvement which come to management’s and the Board’s day responsibility for managing the Group’s operations attention. rests with local experienced Senior Executives and the Group has a clear organisational structure which includes In addition, the Group Management Board has the ongoing appropriate delegation of authority. The Executive Directors responsibility to set policies, procedures and standards as ensure that regular contact is maintained with all Senior detailed in the Group’s policy guidelines. These are reviewed Executives. The Group Management Board, comprising and revised on an annual basis and a tailored version has been the Executive Directors, the Company Secretary, the Group released for all the businesses in the Republic of Ireland. The Head of Finance, the Director of Human Resources, the guidelines include policies on: Digital Strategy Director and the Business Development Manager, meets every month to review financial and • Finance operational issues as well as the risks facing the Group. • Cash/treasury controls • Authorisation levels • Formal Board approval for capital expenditure over • Trading £250,000 and for other investment decisions. Approval was • Customer service

Johnston Press plc Annual Report and Accounts 2009 29 governance

Corporate Governance continued

• Commercial and competition At the meeting to review the Annual Report and Accounts, the • Technology Committee formally considers the non-audit services provided • Property management by the Group’s external auditors and the effectiveness of the • Human resources including pension administration, audit process. These are fully explored and discussed and the disability and health and safety Committee is satisfied that the objectivity and independence of the • Environmental issues and energy management external audit is safeguarded. During 2009 the Company has used • Legal and regulatory compliance several professional firms for different projects and the Republic of • Business continuity Ireland taxation compliance and advisory work is undertaken by a professional firm other than the Group’s auditors. The Directors at the Board meeting in January 2010 reviewed the need for an internal audit department and concluded that As explained on page 28, the Board undertook an evaluation they did not believe it necessary for the Group to maintain such of its performance during the year. This included a review of the a department given the very effective role played by the IFCC effectiveness of this Committee considering its composition, and the current independent review and monitoring procedures chairmanship, whether it fulfilled its role as outlined in the terms of in operation. reference, its reporting and overall performance. This evaluation process was undertaken by the Committee itself as well as by all Audit Committee members of the Board. The results of this process were positive and The Audit Committee is chaired by M A Pain, a chartered confirmed the effectiveness of the Committee. accountant. M A King, P E B Cawdron, a chartered accountant, and C A Rhodes (who was appointed to the The Committee oversaw the appointment of Deloitte LLP in Committee with effect from 1 January 2010) are also members. 2002 and have a primary responsibility for the appointment, All are independent Non-Executive Directors. re-appointment and removal of auditors. The Audit Committee conducted a formal evaluation of the effectiveness of the The Committee has written terms of reference that outline external audit process. The Committee has approved the its authority and duties. The terms include a review of the extension of the current external audit contract by one year and arrangements by which staff may, in confidence, raise concerns recommended to the Board the reappointment of the external about possible improprieties in matters of financial reporting or auditors. On this recommendation of the Audit Committee, the other areas. Directors will be proposing the reappointment of Deloitte LLP at the Annual General Meeting on 30 April 2010. The Audit The Committee meets once during the year with the Partner at Deloitte rotated at the commencement of the 2007 Company’s external auditors to discuss and agree the audit interim review. programme for the forthcoming year, together with any proposed non-audit work. Dialogue with Institutional Shareholders The Board encourages and seeks to build a mutual Any significant non-audit work by the auditors is approved understanding of objectives between the Company and its by the Committee in advance of any engagement letter being institutional shareholders. As part of this process, the Chief signed. Executive Officer and Chief Financial Officer make twice yearly presentations to institutional shareholders and meet with The two other scheduled meetings follow the interim financial shareholders to discuss any issues of concern and to obtain review and the year-end audit. They cover a comprehensive feedback. In addition, they communicate regularly throughout report from the external auditors on their work and their the year with those shareholders who request a meeting. conclusions. The Committee focusses in particular on the areas of financial judgement by the Group. As part of the main Board The Chairman and the Senior Independent Director personally it also reviews the summary of the Group’s key business risks contact the leading shareholders in the Company on an annual and discusses any revisions. The Committee is actively involved basis to address any concerns and discuss any issues. The Board in the ongoing review of internal controls by the main Board. receives a report on any discussion with shareholders and the written feedback that follows the half yearly presentations is circulated to the In addition, these two meetings consider a report on the work Board. Brokers’ reports and analysts’ briefings are included in the of the IFCC. Its work is described in the Internal Control section Board papers sent to the Directors in advance of meetings. and, given the detail and comfort included in the report, the Committee regards this approach as the most effective way The Board receives a quarterly update on the shareholder to review the financial controls in the business rather than register with a summary of the main movements in establish an internal audit function. shareholdings since the previous report.

The Audit Committee meetings to consider the financial results Members of the Board have met with institutional shareholders of the Group are attended by the Chief Financial Officer, Group during the year to consider Corporate Governance matters. Head of Finance and the Company Secretary, who acts as All the Non-Executive Directors are prepared to meet with Secretary to the Committee, with minutes being circulated to shareholders to understand more fully their views. all Board members. The Chairman, Chief Executive Officer and Chief Operating Officer are also invited to attend if required Annual General Meeting to do so by the Committee. Towards the close of relevant The Board seeks to encourage shareholders to attend its meetings, all Executives leave in order for the Committee to Annual General Meeting. It is the policy of the Board that all have a private discussion with the auditors. The Chairman also Directors should attend the Annual General Meeting and be has a private meeting with the audit partner during the course available to answer shareholders’ questions. The Company of the year to discuss any relevant issues. uses the Annual General Meeting to communicate with private investors and encourages their participation. All Directors attended the AGM in 2009. 30 Johnston Press plc Annual Report and Accounts 2009 Directors’ Remuneration Report

This report has been prepared in accordance with Schedule Company and HNBS are displayed on the Company’s website 8 to the Large and Medium-sized Companies and Groups in the Investor Centre section. (Accounts and Reports) Regulations 2008. It also meets the relevant requirements of the Listing Rules of the Financial There is an ongoing training programme for the Committee Services Authority and describes how the Board has applied which consists of an annual update on any changes in the principles of good governance relating to Directors’ regulations and also best practice. In addition, each member remuneration as set out in the Combined Code. As required of the Committee attends various seminars throughout the by the Act, a resolution to approve the report will be proposed year. Other specific training is arranged as required. A training at the Annual General Meeting of the Company at which the programme is being prepared for G M Iddison who is to financial statements will be approved. The Act requires the succeed P E B Cawdron as Chairman of the Committee. auditors to report to the Company’s members on certain parts of the Directors’ Remuneration Report and to state whether As explained on page 28, the Board undertook an evaluation in their opinion those parts of the report have been properly of its performance during the year. This included a review of prepared in accordance with the Accounting Regulations. The the effectiveness of this Committee considering its composition, report has therefore been divided into separate sections for chairmanship, whether it fulfilled its role as outlined in the terms audited and unaudited information. of reference, its reporting and overall performance. This evaluation process was undertaken by the Committee itself as well as by The Remuneration Committee all members of the Board. The results of this process were The Committee was chaired by S J Waugh, an independent positive and confirmed the effectiveness of the Committee. Non-Executive Director, until his retirement from the Board on 30 January 2009, and has subsequently been chaired by The terms of reference of the Committee are displayed on the P E B Cawdron, an independent Non-Executive Director. Company’s website in the Investor Centre section. These are M A King, another independent Non-Executive Director, was a reviewed annually by the Board. member throughout the year, G E Patterson, an independent Non-Executive Director, was a member of the Committee until Remuneration Policy he stepped down as a Director at the Annual General Meeting Executive remuneration packages are prudently designed to on 24 April 2009 and G M Iddison and M A Pain were attract, motivate and retain directors of the high calibre needed appointed as members of the Committee with effect from to maintain the Group’s strong position in its local markets, to 1 January 2010. P E B Cawdron will not be seeking election at drive the future success of the business and to reward them the Annual General Meeting on 30 April 2010 and G M Iddison for maximising and protecting long term value to shareholders. will chair the Committee with effect from that date. Throughout 2009 there were four main elements of the The Committee is required to meet at least annually and as remuneration package for Executive Directors and senior necessary. During 2009 it met on three occasions, with two management: of these meetings being held by telephone. • Basic annual salary and benefits; The Committee is charged with recommending to the Board • Performance related bonuses; the remuneration of the Chairman and Executive Directors as • Performance Share Plan; and well as changes to employment conditions, the Performance • Pension arrangements. Share Plan, Share Incentive Plan, other long-term incentive plans and the Sharesave Plan, together with the introduction of The Company’s policy is that a substantial proportion of the any new incentive or remuneration schemes. The Committee remuneration of the Executive Directors should be performance is consulted on, and notified of, all senior management related. As described below, Executive Directors may appointments and related remuneration. It is also consulted on earn annual bonus payments together with the benefits of major organisational changes. participation in share schemes.

The remuneration of the Non-Executive Directors, other than The Committee reviews the performance criteria attached to the Chairman, is determined by the Executive Directors and short and long-term incentives each year and their appropriate ratified by the Board. mix to ensure that they are aligned with the Company’s strategic objectives and future direction. No member of the Committee has any personal financial interest (other than as a shareholder), conflicts of interest arising from The Committee has also considered the structure of Directors’ cross directorships or day to day involvement in the running of remuneration packages from a risk perspective. It is satisfied the business. The Committee makes recommendations to the that the packages, which include a base salary, an annual Board. Other Directors attend meetings when invited by the bonus (with significant deferral) and market competitive long- Committee and the Company Secretary acts as secretary to term incentives, do not encourage inappropriate risk-taking. the Committee. No Director plays a part in any discussion In addition, risk is taken into account when setting the targets about his or her own remuneration. under variable incentive schemes. This is done by ensuring that targets, while stretching, are realistic, attainable, for the long- The Committee has appointed Hewitt New Bridge Street term benefit of the Company and achievable without taking (HNBS) to provide advice on structuring directors’ remuneration inappropriate business risks. packages. HNBS attended two of the meetings of the Committee during the year and provided advice as required In reviewing Remuneration Policy, the Committee has the by the Committee but did not provide any other services to discretion to take into consideration corporate performance the Company in 2009. The terms of engagement between the on environmental, social and governance (ESG) issues.

Johnston Press plc Annual Report and Accounts 2009 31 governance

Directors’ Remuneration Report continued

The Committee ensures that ESG risks are not raised by Basic Salary the incentive structure through inadvertently motivating An Executive Director’s basic salary is determined by the irresponsible behaviour. Committee prior to the beginning of each calendar year and when an individual changes position or responsibility. Service Contracts In deciding appropriate levels, the Committee considers the The Executive Directors have one year rolling contracts, Group as a whole and relies on objective research carried out terminable by either party on 12 months’ notice. The most by its external consultants which gives up to date information recently executed contracts for J A Fry, S R Paterson and D on comparator groups of companies. As a benchmark, it Cammiade are dated 23 September 2008, 24 May 2001 and aims to pay broadly at the median level against other media 27 February 2006 respectively. In the event of termination, the companies and companies of a broadly similar size. Executive Directors would be entitled to remuneration for the notice period and the Committee will seek to firmly apply the In addition to basic salary, the Executive Directors receive principles of mitigation following termination. certain benefits in kind, principally a car or a cash buyout and private medical insurance. In the event of termination of employment, payment of any element of bonus to Executive Directors will depend upon the With effect from 1 January 2010 the salaries of S R Paterson, relevant circumstances and whether they are treated as a good D Cammiade and J A Fry remained unchanged at £360,720, or bad leaver. In the former scenario, a payment of bonus on a £323,592 and £525,000 respectively. pro rata basis up to the date of departure may be paid at the time that bonuses are paid to other Executives. Performance Related Bonus The Committee considers and approves the objectives that The Executive Directors’ service contracts do not provide any must be met for each financial year if a cash bonus is to entitlement to payment in lieu of notice. be paid. In setting the appropriate bonus parameters, the Committee, having taken advice, takes into account the Executive Directors’ service contracts, which include details Company’s internal budgets and analysts’ expectations for the of remuneration, will be available for inspection at the Annual forthcoming year. The bonus increases as performance above General Meeting. target increases and the targets are especially stretched at the top end. The Committee believes that this ties any incentive Executive Directors are entitled to accept up to two Non- payments to the interests of shareholders. Executive appointments outside the Company provided that the Chairman’s permission is obtained. The Remuneration The maximum bonus level is set at 150% of salary and there is Committee decides whether any fees are retained by the a level of compulsory deferral in shares for three years of 50% Director. In addition, the Executive Directors are entitled to of the bonus payable. A forfeiture clause applies to the shares accept any positions connected with the newspaper industry for bad leavers. or any business in which the Company holds an investment. For the 2009 calendar year, of the 150% maximum bonus, In 2009, S R Paterson held an external non-executive post and 115% of salary was based on a profit target stretched at the received £40,000 in fees. J A Fry also held an external non- top end, which was set by the Board on the recommendation executive post and received fees of £14,000. of the Remuneration Committee. The remaining 35% of the bonus was based on individual key performance targets, which The appointments of Non-Executive Directors of the Company were specific, clearly measurable and payable only if a specific are terminable at will, subject to a three month notice period. profit related threshold was achieved. It is the Committee’s policy that any future Board appointments will be made on the same terms. The Non-Executive Directors Of the profit related bonus, 55% of salary was payable on have letters of appointment dated: achievement of a challenging target with additional sums payable on a sliding scale which was stretched at the top end P E B Cawdron 25 January 2002 to achieve maximum bonus of 115%. F P M Johnston 25 January 2002 M A King 25 April 2003 Based on actual adjusted operating profit for the 2009 financial I S M Russell 14 January 2007 year, which was between threshold and target performance, a A R Marshall 27 June 2008 profit based bonus equal to 50.1% of salary was payable. M A Pain 17 April 2009 C A Rhodes 10 July 2009 The individual key performance targets varied by Executive G M Iddison 1 December 2009 Director. These included a successful refinancing, newspaper sales, level of net debt, implementation of management F P M Johnston, P E B Cawdron and M A King will retire information systems and organisational change, together with from the Board at the Company’s Annual General Meeting strategic and financial targets. Since the 2009 profit threshold on 30 April 2010. was achieved, bonus was payable for the attainment of individual key performance targets. All Executive Directors A copy of the standard letter of appointment for the Chairman achieved the majority of their individual KPIs. In accordance and Non-Executive Directors is displayed on the Company’s with the Company’s policy, 50% of the Executive Directors’ website in the Investor Centre section. bonuses have been deferred for three years.

For the 2010 financial year, the profit element will be reduced to 85% of salary, with 30% of salary being based on cash

32 Johnston Press plc Annual Report and Accounts 2009 flow performance and 35% based on individual performance In 2009, after consultation with major shareholders, the targets. For the profit and cash elements, if the target levels Committee decided that, in light of the economic conditions are not achieved, bonus is lost at a significantly faster rate than prevailing at the time, PSP awards would be based entirely bonus earned for above target performance. on the Company’s TSR against the constituents of the FTSE All-Share Media sector, excluding any FTSE 100 Retention Bonus participants (on the grounds of size). In addition, awards As disclosed in last year’s report, S R Paterson was awarded a will only vest if the Committee is satisfied that the one-off conditional cash retention bonus of £250,000 in August Company’s underlying performance has achieved 2008 contingent on him remaining a Director of the Company, an appropriate level of improvement. In deciding the and not serving notice on or prior to 5 January 2011, two appropriate performance metric(s) to apply, the Committee years after J A Fry was appointed Chief Executive Officer. The felt that TSR was the best measure of performance since retention bonus will not be pensionable. it aligns the interests of executives and investors and setting TSR targets was more straightforward at a time In the event that S R Paterson is dismissed for any reason when economic uncertainty made it difficult to set financial before 5 January 2011, other than in the case of summary targets over the three-year period. dismissal, the retention bonus will be payable in full in addition to the terms of his service contract. If S R Paterson resigns or 25% of awards will vest if the Group achieves the median terminates his office for any reason or is summarily dismissed TSR performance of the comparator group over the three before 5 January 2011 he will forfeit all rights to receive the year period with 100% allocation if the Group achieves retention bonus. The retention bonus will not become payable upper quartile performance and there is a sliding scale early in the event of a takeover or winding up of the Company between the two levels. and will continue on its original terms. When setting 2009 award levels, the Committee was Share Schemes mindful of the fall in share price since awards were made The Company operates a number of Share Schemes and these in 2008 and, therefore, made awards to S R Paterson over are described below. 981,920 shares and to D Cammiade over 862,912 shares, being the same number of shares awarded in 2008. In a) A Performance Share Plan (PSP) with awards being shown each case the award represented 53.3% of salary as at the below and in note 30 to the financial statements. Under the date of grant. In 2009, instead of an award under the PSP, rules of the PSP, Performance Shares may be granted over J A Fry received a one-off long-term award on different a three year performance period to the Executive Directors terms (see b) below). and certain senior Executives on an annual basis. The scheme rules permit 125% as a normal annual maximum In 2010, the Committee considered the re-introduction and 150% of salary in exceptional circumstances. No of a financial metric to be used in conjunction with TSR payment is made by the Executives for the award itself, for awards to be made in 2010. However, following nor for the shares that actually vest. shareholder consultation, the Committee concluded that this would not be viable at this stage of the Group’s Prior to 2007, awards were based 50% on Total recovery and therefore it has decided to retain TSR (with Shareholder Return (TSR) and 50% on EPS growth. For the an underlying financial performance underpin) as the 2007 and 2008 awards, the EPS element was replaced by sole performance condition for 2010 PSP awards. It is Return on Capital Employed (ROCE). expected that the level of award as a percentage of salary will be 73.0% which, when the Committee determined For awards before 2007, 25% of the EPS element will vest the percentage, was broadly equivalent to the number of on an EPS growth of RPI plus 3% per annum up to 100% shares awarded to S R Paterson and D Cammiade last of the allocation for an EPS growth of RPI plus 8% per annum, year. J A Fry will also receive an award of 73% of salary. with a sliding scale between the lower and upper limits. The Committee proposes a further review of the For the 2007 award, 25% of the ROCE related part of performance measures applying to PSP awards in 2011 the award will vest if, on average over the six half years with a view to assessing the potential reintroduction between 2007 to 2009, ROCE exceeds the Company’s of a financial measure to be used alongside TSR. The Weighted Average Cost of Capital (WACC) by 2%. For full Committee will consult with major shareholders on any vesting, average ROCE must exceed WACC by 4% with proposed move away from 100% TSR. there being pro rata vesting for intermediate performance. The same condition applies to 50% of the 2008 award Following the vesting of any PSP awards, a payment in except for performance being measured over the period shares and/or cash will be made equivalent to the dividend between 2008 and 2010. that would have been paid on the shares that vest during the performance period. The remaining 50% of all of these awards will vest based on Total Shareholder Return (TSR) performance relative to When a PSP award is approved, the Company ensures the FTSE 350 Media Companies as at the date of grant. that sufficient shares are purchased by the Johnston Press plc Employee Share Trust, administered by Computershare 25% of this allocation will vest if the Group achieves the Plan Managers in Jersey, to meet the projected number of median TSR performance of the comparator group over shares required at the end of the performance period. the three year period with 100% allocation if the Group achieves upper quartile performance and a sliding scale between the two levels.

Johnston Press plc Annual Report and Accounts 2009 33 governance

Directors’ Remuneration Report continued

b) As explained in last year’s Remuneration Report, as part The Option will normally lapse upon J A Fry ceasing to of his recruitment terms J A Fry had been promised a hold employment or be a director within the Company’s long-term incentive award (“Option”) based on share price group. However, if he ceases to be an employee or a targets, but that subsequent events meant that such an director because of his death, injury, disability, retirement, award was no longer fit for purpose and impractical to redundancy, the sale or transfer of his employing company implement. It was also explained that an alternative LTIP or business out of the Company’s group or in other was being considered and that the Group would consult circumstances at the discretion of the Remuneration with shareholders before the terms were finalised and any Committee, then the Option will normally vest on the award granted. The Committee, after much consideration, date when it would have vested if he had not ceased came to the view that the performance conditions applying such employment or office, subject to: (i) the original to J A Fry’s award should be the same as that applying performance conditions measured at that time; and (ii) to the PSP awards made to other senior employees and pro-rating the Option to reflect the period of time that he that his award would only differ in amount and in relation was an officeholder or employee during the performance to specific promises regarding change of control which period, although the Remuneration Committee can were agreed when he was recruited. Following shareholder decide not to pro-rate if it regards it as inappropriate consultation, the award was made on 30 June 2009 (the to do so in the particular circumstances. Alternatively, “Grant Date”) under Listing Rule 9.4.2R and the relevant the Remuneration Committee may determine that the terms are set out below. Option should become capable of exercise at the time of cessation, subject to: (i) the performance conditions The Option was granted on terms substantially similar to measured at that time; and (ii) pro-rating by reference to the the terms of the Company’s Performance Share Plan 2006. time of cessation as described above.

The Option will normally become exercisable on or following In the event of a takeover or winding up of the Company the third anniversary of the Grant Date, subject to the (not being an internal corporate reorganisation) the Option satisfaction of performance conditions and the Executive will become capable of exercise early subject to the extent being employed in the Company’s group at that time. that the performance conditions have been satisfied at that time. In the event of an internal corporate reorganisation The Option was granted subject to a performance the Option will normally be replaced by an equivalent new condition which compares the rank of the Company’s TSR option over shares in a new holding company unless the against a comparator group comprising the constituents of Remuneration Committee decides that the Option should the FTSE All-Share Media Sector (excluding the Company, become capable of exercise on the basis which would companies in the FTSE 100 and investment trusts) (the apply in the case of a takeover. “Comparator Group”) over three years commencing on 13 June 2009. The Option is also subject to a financial If a demerger, special dividend or other similar event underpin. is proposed which, in the opinion of the Remuneration Committee, would affect the market price of shares to a Subject to the satisfaction of the financial underpin, the material extent, then the Remuneration Committee may Option will become capable of exercise over 25% of the decide that the Option will become exercisable on the basis shares held under the Option if, at the end of the performance which would apply in the case of a takeover as described period, the rank of the Company’s TSR against the TSR of above. the members of the Comparator Group is at least median, and over 100% of the shares if the Company’s TSR is in The Option will not confer any shareholder rights until the upper quartile. For performance between median and the Option has been exercised and J A Fry has received upper quartile, the Option will become exercisable on a shares. The Option may only be satisfied using shares straight-line basis between 25% and 100% based on purchased by the trustees of the Company’s employees’ ranking and interpolation between rankings. trust in the market. Neither newly issued nor treasury shares may be used to satisfy the Option. The Option may, Under the terms of the financial underpin, notwithstanding however, be satisfied in cash. the extent to which the TSR condition may have been satisfied, no part of the Option may become exercisable In the event of any variation of the Company’s share unless, over the performance period, the Remuneration capital or in the event of a demerger, payment of a special Committee, in its discretion, considers that the Company’s dividend or similar event which materially affects the market underlying financial performance has achieved an price of the shares, the Remuneration Committee may appropriate level. make such adjustment as it considers appropriate to the number of shares subject to the Option. J A Fry will be entitled to receive a payment (in cash and/ or shares) on or shortly following the date that the Option The terms of the Option may be amended in any respect, becomes exercisable, of an amount equivalent to the provided that the prior approval of shareholders is obtained dividends that would have been paid on vested shares in for any amendments that are to the advantage of J A Fry in respect of dividend record dates occurring between respect of the terms governing the basis for determining his 1 January 2009 and 31 December 2012 (or, if earlier, the entitlement to, and the terms of, the shares or cash to be date that the Option becomes exercisable). acquired and the adjustment of the Option.

34 Johnston Press plc Annual Report and Accounts 2009 The requirement to obtain the prior approval of Both schemes were operated in 2009. shareholders will not, however, apply to any minor alteration made to benefit the administration of the Option, to take e) A Share Incentive Plan (SIP) for all eligible employees. The account of a change in legislation or to obtain or maintain SIP has been approved by HM Revenue and Customs and favourable tax, exchange control or regulatory treatment for is in two parts. The first is a Partnership Scheme, which the Executive or for any company in the Company’s group. allows employees to purchase shares in the Company, Shareholder approval will also not be required for any worth up to £1,500 in any tax year, on a monthly basis in a amendments to the performance condition. tax efficient manner. The second element is a Free Shares Scheme, which provides employees who have joined the No payment was made on the grant of the Option. The scheme with free shares up to a maximum value. The Option is not transferable, except on death. The Option is shares are held in a UK resident Trust administered by EES not pensionable. Corporate Trustees Ltd and, after a period of five years, the shares may be withdrawn free of any tax and national c) The Executive Share Option Scheme was replaced by insurance. Shares may be withdrawn from the Trust earlier the PSP and no options have been granted under in certain circumstances although early withdrawal may the Scheme since 30 June 2005. There are options result in a charge to tax and national insurance. Employees outstanding and details are shown below and in note 30. who leave the Group as a bad leaver within three years Current Executive Directors have no outstanding interests in of the shares being awarded forfeit the Free Shares. For this scheme. All options were granted for nil consideration. Free Shares, the Committee sets a minimum Group profit These options are only capable of being exercised if the target and a base fund to be utilised to purchase shares compound real growth in the Group’s underlying earnings in the Company. Performance above the target generates per share is between 3% to 5% depending on the level additional amounts payable into the fund on a sliding of the grant. In order to exercise a grant above 0.5 scale up to a maximum payout. The Free Shares are times or above 1 times salary, the growth in the Group’s allocated to employees based on hours worked and are underlying earnings per share must exceed the growth in not pro rata to salary. In the calendar year 2009, the profit the retail price index by more than 4% or 5% per annum achievement met the minimum target set by the Committee respectively. The Committee has decided that there will be and therefore an award totalling shares to the value of £1.0 no retesting of performance on any options granted after million will be made. 1 January 2004 and performance will be measured over a single three year period. For options granted prior to 31 It is not possible to invite employees based in the Republic December 2003, performance is always tested from a fixed of Ireland to participate in the SIP. base over a period of at least three years and may not be retested after the fifth anniversary of the option grant. At the 2007 AGM, shareholders approved the Johnston Press Restricted Stock Unit Scheme (the “RSU Scheme”), The exercise price of the options granted under the for use in the Republic of Ireland, which mirrors as closely Executive Share Option Scheme is equal to the market as possible the UK Free Shares Scheme. However, the value of the Company’s shares at the time when the Irish Commissioner would not approve any scheme which options were granted. includes a forfeiture provision if employees leave and, therefore, tax will be payable by Irish employees when In the event of a change in control of the Company, any beneficial ownership of shares acquired under the RSU options granted are exercisable within one month of the scheme passes to the employees after a period of five option holders being notified of the change in control. In years. such circumstances the performance conditions will apply. However, in exceptional circumstances the Committee may, f) The Share Matching Plan was suspended on 1 January at its discretion, treat the performance condition as satisfied 2007. Previously it applied to the Executive Directors and taking into account the underlying performance of the certain Senior Executives. Participants invested part of their Company up until the relevant event. annual bonus in buying shares in the Company and they had the prospect of receiving extra matching shares after All the Executive Share Options granted in 2005 lapsed in three years, paid for by the Company. The matching ratio 2008 due to the performance conditions not being met. ranged from 0.5 times to 2 times the number of shares that could have been acquired with the pre-tax equivalent of d) A SAYE Sharesave Plan, the Johnston Press 2007 the annual bonus invested, subject to achieving compound Sharesave Plan, for eligible employees under which options real growth in the Group’s underlying earnings per share may be granted at a discount of up to 20% of market of between 3% to 8% per annum over a fixed three year value, subject to the employee entering into a monthly period. Minimum and maximum levels of awards applied to savings contract, with a maximum aggregate savings equal participants. to £250 per month. Consistent with the legislation and normal practice, the SAYE Sharesave Plan does not require The Share Matching Plan permitted a payment to be made the imposition of performance conditions. (in cash or shares) on the vesting of an award equivalent to the dividends that would have been paid on the shares that A scheme was introduced during 2006 to provide vested during the performance period. employees in the Republic of Ireland with a similar benefit. This was amended during 2008 and approved by the Irish When any grant of matching shares was approved, the Revenue to ensure that the grant price calculation mirrors Company ensured that there were sufficient shares to the Johnston Press 2007 Sharesave Plan. cover the projected number of shares required to meet

Johnston Press plc Annual Report and Accounts 2009 35 governance

Directors’ Remuneration Report continued

the maximum match for the current year, together with the based on a percentage of pensionable salaries plus a fixed number of shares required to cover previous awards based annual amount to recover the deficit. These arrangements were on performance to date within the vesting period and agreed between the trustees of the JPPP and the Company. projections for the coming year. These shares are held in The Executive section of the Plan provides for a retirement age the Johnston Press plc Employee Share Trust. of 62, a maximum pension of two thirds of salary based on either a 45th accrual rate or a full two thirds at retirement date, The performance conditions for the matching awards a member’s contribution of 10.5% of salary with a spouse’s granted in 2006 were not met and the awards have lapsed. pension of a third of pensionable salary in the event of death It is expected that the same will apply to the matching in service. There are no provisions for beneficial rights on early awards granted in 2007. retirement apart from a number of employees in The Scotsman section of the defined benefit scheme. The employee and The number of shares held by the Johnston Press plc employer contributions were increased in 2005 to increase the Employee Share Trust to meet the outstanding one-off funding level of the scheme which is currently in deficit. award to J A Fry, the Matching Share grants and awards of Performance Shares on 2 January 2010 was 11,874,938. As part of the refinancing completed in August 2009, the Company undertook to make additional, substantial payments The Company Secretary is responsible for ensuring the into the Plan from April 2012, dependent on the next triennial exercise criteria are met for all Share Schemes and this is actuarial valuation due as at 31 December 2010. verified by the Committee. Employer contributions to the defined contribution section of Options under c) and d) above are satisfied by the issue of the JPPP vary depending on age, employee contribution and new shares. As indicated, the Johnston Press plc Employee position in the Company. Rates vary between 4% and 12% of Share Trust currently holds shares purchased in the open salary. market sufficient to meet awards under a), b) and f). Shares are purchased in the open market to satisfy the Free Shares award In addition to the JPPP, the Group participates in three final within e). salary schemes in the Republic of Ireland. Two are multi- employer industry schemes and the third is for a small number Shareholding Guidelines of employees in Limerick. There are no financial implications Executive Directors are expected to retain 50% of shares which to the Group if these schemes are terminated. The Group also vest under Executive share plans, after allowing for sufficient inherited a number of defined contribution schemes. sales of shares to meet tax liabilities, until a holding to the value of 100% of salary has been achieved. The Group launched and operates a defined contribution scheme in the Republic of Ireland, the Johnston Press (Ireland) Dilution Pension Scheme (JPIPS). All employees who are not members At the end of 2009 the total number of options and share of a pension scheme or those employees who are members of awards granted, less lapsed, over new issuable shares under other defined contribution schemes have been invited to join the Share schemes over the previous 10 years was 3.5% of the JPIPS. Employer contribution rates vary from 3% to 12%. the issued share capital with a maximum limit of 10%. For discretionary schemes only, the total number of options and D Cammiade is an uncapped member of the Executive section share awards granted, less lapsed, over new issuable shares of the JPPP. If the proposed closure of the defined benefit over the last 10 years was 0.5% of the issued share capital section of the JPPP is implemented, the Committee has with a maximum limit of 5%. agreed that the Company will make contributions of 20% of D Cammiade’s basic salary to the defined contribution section of Pension Arrangements the JPPP (or a suitable private pension scheme) rising to 25% Throughout 2009, the Group operated one main pension once he reaches the age of 50, and to match any contributions scheme for UK employees, the Johnston Press Pension Plan made by D Cammiade up to a maximum of 5% of salary. S R (JPPP), with defined benefit and defined contribution sections. Paterson does not participate in the JPPP and the Company The defined benefit section is closed to new members. On 14 has agreed instead to make a contribution equivalent to 25% January 2010 the Company announced a consultation process of his basic salary into his private pension scheme. With effect on a proposal to close the defined benefit section to future from 1 January 2005, the Company has also agreed to match accrual. If the proposal is implemented then it is anticipated any additional annual contribution made by S R Paterson, up that the defined benefit section will be closed to future accrual to a maximum of 5% of salary. J A Fry is entitled to receive a on 30 June 2010. The assets of the JPPP are totally separate percentage of salary into his private pension scheme. For the from the assets of the Company and of the Group, and are first year of his employment this was 30% increasing by 1.25% invested by independent fund managers. per annum each year up to a maximum of 40%.

A professional independent trustee and member nominated Non-Executive Directors trustees are appointed to the pension scheme. A firm of All Non-Executive Directors have specific terms of engagement external actuaries and consultants act as advisers. Pension and their remuneration is determined by the Board within scheme members receive a report from the trustees and a the limits set by the Articles of Association and based on statement of their benefits each year. independent surveys of fees paid to Non-Executive Directors of similar companies. The basic annual fee paid to each Non- Contributions to the JPPP (defined benefit section) are at Executive Director is £40,000. The Non-Executives receive a fixed annual amount paid monthly. Based on the triennial further fees for additional work performed for the Company valuation at 31 December 2007, annual contributions are in respect of chairing the Remuneration Committee and

36 Johnston Press plc Annual Report and Accounts 2009 Audit Committee, together with responsibilities as Chairman with the Remuneration Committee based on individual roles and Senior Independent Director. The Chairmen of the Audit and responsibilities. The targets for the performance related and Remuneration Committees and the Senior Independent bonuses are primarily profit related but also include personal Director each receive an additional £7,500 per annum. The performance based targets. The maximum bonus for 2009 Chairman’s fee is £130,000 per annum. was 100% of salary with a compulsory deferral of 30% of the bonus; 70-75% of the 100% maximum bonus relates to the Non-Executive Directors cannot participate in the bonus plans profit based element and 25-30% for KPIs. There is no change or in any of the Company’s share schemes and are not eligible to the annual bonus structure or quantum for 2010. to join the Company’s pension schemes. A number of the executives below Board level are currently During 2009 the Board agreed that 50% of Non-Executive members of the defined benefit section of the JPPP. The Directors’ net fees would be paid in the form of shares. Non- Company contributes a maximum of 12% of salary to those Executive Directors’ fees are paid on a quarterly basis. who are members of the defined contribution scheme. The Performance Share Plan and other share scheme benefits and Senior Executives Below Board Level performance conditions are as described for the Executive The four elements of the remuneration package are described Directors except the maximum level of PSP awards to date has on page 31. Salaries for senior executives below Board level been 50% of salary and will remain so for 2010. are determined by the Executive Directors after consultation

Performance Graph The following graph shows the Company’s performance, measured by total shareholder return, compared with the performance of the FTSE 350 and FTSE Media Sector also measured by total shareholder return. The FTSE 350 and FTSE Media Sector have been selected for this comparison because the former measures the performance of stocks in general and the latter measures the performance of companies operating in the same sector as the Company.

Total Shareholder Return Source: Thomson Reuters This graph shows the value at 31 December 2009 of £100 invested 200 FTSE 350 Index in Johnston Press plc on 31 December 2004 FTSE All Share compared with the 150 Media Sector value of £100 invested in the FTSE 350 Index Johnston Press and the FTSE All Share 100 Media Index. The other

Value (£) Value plotted points are the intervening financial 50 year ends.

0 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2004 2005 2006 2007 2008 2009

Johnston Press plc Annual Report and Accounts 2009 37 governance

Directors’ Remuneration Report continued

Directors’ Remuneration - Audited Section a) Directors’ Remuneration The total amounts for Directors’ remuneration and other benefits were as follows:

2009 2008 £’000 £’000

Emoluments 2,600 1,686 Gains on exercise of share options* — 17 Money purchase contributions 266 108

2,866 1,811

* No shares were sold as part of the exercise of share options in 2008.

b) Directors’ Emoluments Amounts shown below are emoluments received for the period of directorship: Performance Related Bonus Deferred Total Salary/Fees Taxable Benefits1 Cash Shares3 Emoluments 2009 2008 2009 2008 2009 2009 20082 2009 2008 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Chairman I S M Russell 114 48 — — — — — 114 48 R G Parry 43 130 — — — — — 43 130 Executive Directors J A Fry 525 — 14 — 210 210 — 959 — T J Bowdler — 573 — 11 — — — — 584 S R Paterson 361 361 2 2 146 146 — 655 363 D Cammiade 324 324 18 18 124 124 — 590 342 Non-Executive Directors P E B Cawdron 50 51 — — — — — 50 51 F P M Johnston 40 40 — — — — — 40 40 M A King 40 40 — — — — — 40 40 S J Waugh 4 48 — — — — — 4 48 A R Marshall 40 20 — — — — — 40 20 G E Patterson 13 20 — — — — — 13 20 M A Pain 32 — — — — — — 32 — C A Rhodes 20 — — — — — — 20 —

1,606 1,655 34 31 480 480 — 2,600 1,686

1 Taxable benefits include car, telephone, life insurance and health insurance. 2 The Executive Directors waived their entitlement to performance related bonuses in 2008. 3 Half of the Executive Directors’ bonus is paid in shares, deferred for 3 years with potential forfeiture.

c) Pension Benefits The following Directors had accrued pension benefits under the Group’s defined benefit scheme:

Total Increase in Total Transfer value of Increase in Years of accrued accrued Transfer accrued total accrued value of pensionable pension at pension value of pension at pension at pension service 27.12.08 during year increase 02.01.10 27.12.08 02.01.10 during year £’000 £’000 £’000 £’000 £’000 £’000 £’000

D Cammiade 19 142 7 10 149 1,969 2,719 716

D Cammiade was a member of the Group Pension Schemes before the introduction of the pensionable salary cap in May 1989. In addition to the above, the Group funded £108,300 (2008: £108,300) into a defined contribution scheme for S R Paterson and £157,500 (2008: £nil) into the personal pension plan of J A Fry. All Executive Directors have life cover of four times basic salary.

38 Johnston Press plc Annual Report and Accounts 2009 d) Share Schemes Number of options during the year At Granted/ At 28.12.08 Awarded Exercised Lapsed 02.01.10

Savings Related Scheme J A Fry — 31,730 — — 31,730 S R Paterson 25,531 31,730 — (25,531) 31,730 D Cammiade 53,208 54,370 — (44,547) 63,031 Share Matching Plan S R Paterson 26,581 — — (6,963) 19,618 D Cammiade 22,141 — — (6,152) 15,989 Performance Share Plan J A Fry* — 5,000,000 — — 5,000,000 S R Paterson 1,170,146 961,920 — (100,902) 2,031,164 D Cammiade 1,049,705 862,912 — (90,516) 1,822,101

*This award relates to J A Fry’s one-off long-term incentive award which was made on 30 June 2009.

The above Savings Related Scheme options are exercisable as follows:

J A Fry 31,730 at a price of 28.6p between 01.11.2012 and 30.04.2013

S R Paterson 31,730 at a price of 28.6p between 01.11.2012 and 30.04.2013

D Cammiade 8,661 at a price of 204.93p between 01.11.2009 and 30.04.2010 54,370 at a price of 28.6p between 01.11.2014 and 30.04.2015

The matching awards granted under the Share Matching Plan are exercisable for a nominal total payment of £1 as shown below. The matching factor ranges from 0.5 times to 1.5 times the number of shares granted for awards made before 2006 and from 2006 onwards the matching factor ranges from 0.5 times to 2 times.

35,607 between 30.03.2010 and 29.03.2017 - market price on award 30 March 2007 331.63p

The awards within the Performance Share Plan are exercisable at nil cost at the end of the three year vesting period. The breakdown by individual is shown above and the total awards to the Executive Directors for each year are as follows:

203,601 awards will vest on 05.06.2010 - market price on award on 5 June 2007 326.31p 1,824,832 awards will vest on 25.09.2011 - market price on award on 25 September 2008 37.5p 6,824,832 awards will vest on 30.06.2012 - market price on award on 30 June 2009 16.5p

The options, matching awards and performance shares listed above, other than those in the Savings Related Scheme, are only exercisable subject to the level of achievement of the performance criteria denoted in the Directors’ Remuneration Report.

The middle market price of the Ordinary Shares, adjusted for the discount element of the Rights Issue, was as follows:

On 1 January 2009 12.75p Highest price during year 44.25p On 31 December 2009 22.25p Lowest price during year 5.13p

This Report was approved by the Board of Directors on 11 March 2010 and signed on its behalf by:

Peter Cawdron

Johnston Press plc Annual Report and Accounts 2009 39 governance Directors’ Report

The Directors present their annual report on the affairs of the Group, together with the financial statements and auditors’ report for the period ended 2 January 2010. The Corporate Governance report set out on pages 26 to 30 forms part of this report.

Principal Activities The Group’s main activities are the publishing of local and regional weekly, evening and morning newspapers, both paid-for and free, together with associated websites, as well as specialist publications in print, online or via mobile technologies.

Review of Business The results for the year 2009 are set out in the Group Income Statement on page 45. The Group loss for the period before taxation was £113,775,000 (2008: loss of £429,258,000) which results in a net loss for the period of £87,258,000 (2008: loss of £365,470,000). Details of the business activities during the year, the financial results, the financial position and the principal risks and uncertainties facing the Group are set out in the Business Review on pages 4 to 13.

Dividends No interim dividend was paid and the Directors recommend no final dividend for the period. In the short term, the Board believes the most important use of available cash is to reduce the Group’s net debt position. The preference dividend was paid on 30 June and 31 December 2009.

Share Capital Details of share capital are shown in note 27.

Environmental Policy The Board acknowledges that environmental protection is one of the Company’s business responsibilities. It aims for a continuous improvement in the Company’s environmental performance and to comply with all relevant regulations. Following an internal audit and an assessment by external advisers, the Group put in place, and there is in force, a documented environmental policy to monitor performance and to take action where appropriate. Further details of this policy are provided in the Corporate Social Responsibility Statement.

Donations Charitable donations amounted to £29,000 (2008: £41,000). There were no payments for political purposes.

Supplier Payment Policy The Company’s policy is to settle terms of payment with suppliers when agreeing the terms of each transaction, ensuring that suppliers are made aware of the terms of payment, and to abide by the terms of payment. Trade creditors of the Group at the end of the period were equivalent to 29 days purchases (2008: 17 days), based on the average daily amount invoiced by suppliers during the period.

Financing Policy and Derivatives The Group’s policies are set out in notes 21 to 23 and note 32, these also including details of financial instruments and derivatives.

Auditors Each of the persons who is a Director at the date of approval of this report confirms that:

(1) so far as the Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and (2) the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of s.418 of the Companies Act 2006.

Forward-looking Statements Where the Directors’ Report (including the performance highlights, business review, operational review, performance review, and corporate governance report) contains forward-looking statements these are made by the Directors in good faith based on the information available to them at the time of their approval of this report. These statements will not be updated or reported upon further. Consequently such statements should be treated with caution due to the inherent uncertainties including both economic and business risk factors underlying such forward looking statements or information.

Directors and their Interests Under the Company’s Articles of Association, each Director is subject to retirement every three years and to election at the first Annual General Meeting after their appointment. In addition, any Director who has served more than 9 years automatically offers himself/herself for re-election every year.

F P M Johnston, P E B Cawdron and M A King are resigning from the Board at the Annual General Meeting and the Directors who are retiring and offering themselves for re-election are I S M Russell and S R Paterson. Directors appointed during the period and after the end of the period and who are seeking election are M A Pain, C A Rhodes and G M Iddison.

40 Johnston Press plc Annual Report and Accounts 2009 The Directors during the period and their direct interests in the share capital of the Company were as follows:

Ordinary Shares of 10p each % of Share capital 2 January 2010 27 December 2008

I S M Russell 0.1% 921,176 815,420 J A Fry — — — S R Paterson — 245,123 234,676 D Cammiade — 207,157 196,710 P E B Cawdron — 44,005 19,600 F P M Johnston 1.6% 10,488,910 10,469,386 M A King — 18,865 3,600 A R Marshall — 26,032 — M A Pain — 18,180 — C A Rhodes — 16,722 — G M Iddison – — –

M A Pain, C A Rhodes and G M Iddison were appointed directors on 1 May 2009, 13 July 2009 and 1 January 2010 respectively. F P M Johnston, P E B Cawdron and M A King have announced their resignations effective from the Annual General Meeting on 30 April 2010.

In addition to the shareholdings shown above, which are all held beneficially, J A Fry, S R Paterson and D Cammiade hold an interest in 11,874,938 (2008: 8,895,972) shares by virtue of their status as potential beneficiaries of the Johnston Press plc Employee Share Trust.

No Director had any material interest in any contract, other than a service contract, with the Company or any subsidiary at any time during the year.

Structure of Shares Details of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital during the year are shown in note 27. The Company’s issued share capital was 639,739,965 shares at the end of the year. As part of the refinancing completed on 28 August 2009, the Company issued warrants over 5% of its issued share capital to the Group’s lenders. These warrants are exercisable at any time over the 5 year period ended 27 August 2014 at an exercise price of 10p.

The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company. The redeemable cumulative preference shares carry 13.75% interest but do not carry voting rights. The percentage of the issued nominal value of the ordinary shares is 98.3% of the total issued nominal value of all share capital.

There are no specific restrictions on the size of a holding or on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.

Details of employee share schemes are set out in note 30.

No person has any special rights of control over the Company’s share capital and all issued shares are fully paid. With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the Combined Code on Corporate Governance issued by the Financial Reporting Council, the Companies Acts and related legislation. The Articles themselves may be amended by special resolution of the shareholders. A special resolution making certain amendments to the Articles will be proposed at the forthcoming Annual General Meeting. The powers of Directors are described in the Main Board Terms of Reference, copies of which are available on request, and the Corporate Governance Statement on pages 26 to 30.

Substantial Shareholdings So far as the Directors are aware the only holders of 3% or more of the Ordinary Share Capital of the Company and any other major shareholders, other than Directors, as at the date of this report are as follows: Ordinary Shares of 10p each Nature of % Holding Number Holding

PanOcean Management Ltd (on behalf of Usaha Tegas) 20.0 127,947,952 Direct Orbis Investment Management Ltd 9.2 58,935,549 Indirect Jupiter Asset Management Ltd 4.7 29,797,022 Indirect Legal & General Group of Companies 4.1 26,121,481 Direct Standard Life Investments Ltd 3.1 19,755,545 Direct

Johnston Press plc Annual Report and Accounts 2009 41 governance

Directors’ Report continued

Employee Involvement It is the policy of the Group to encourage and develop all members of staff to realise their maximum potential. Wherever possible, vacancies are filled from within the Group and adequate opportunities for internal promotion are created. The Board is committed to a systematic training policy.

The Group supports the principle of equal opportunities in employment and opposes all forms of unlawful or unfair discrimination on the grounds of race, age, nationality, religion, ethnic or national origin, sexual orientation, gender or gender reassignment, marital status or disability.

It is also the policy of the Group, where possible, to give sympathetic consideration to disabled persons in their application for employment with the Group and to protect the interests of existing members of the staff who are disabled.

The Group is committed to a comprehensive training and development programme creating the opportunity for employees to maintain and improve their performance and to develop their potential to a maximum level of attainment. In this way, staff will make their best possible contribution to the organisation’s success.

Close Company Status So far as the Directors are aware the Company is not a close company for taxation purposes.

Change of Control In the event of a change in control the Group’s lenders, both the Private Placement loan note holders and the various Banks have the option to declare all amounts outstanding repayable.

Directors’ Liability As permitted by the Companies Act 2006 (the “Act”), the Company has insurance cover for the Directors against liabilities in relation to the Group.

Electronic Voting The Company has made provision for shareholders to vote electronically on the Resolutions to be considered at the Annual General Meeting and full instructions are included on the Form of Proxy enclosed with this Annual Report.

Special Business Five resolutions (resolutions 10 to 14) are set out under special business in the notice of this year’s Annual General Meeting. The first of these resolutions will be proposed as an ordinary resolution and the others as special resolutions.

The purpose of the first of these resolutions is to renew the Directors’ authority to allot shares in the Company. Part (i) of Resolution 10 seeks authority to allot shares up to a maximum nominal amount of £21,322,533 representing 33.33% of the existing issued ordinary share capital. The second part of resolution 10 is new and seeks authority to allot a further 33.33% of the existing ordinary share capital, in accordance with recommended best practice. This additional authority will be applied to fully pre-emptive rights issues only and the authorisation will be valid for one year only. The Directors have, however, no current intention of exercising this authority.

The second resolution Resolution 11 (which is the first of the four special resolutions), relates to the limited power given to the Directors to allot equity securities for cash representing up to 5% of the existing issued ordinary share capital, without the statutory pre-emption provisions of the Act applying. This power, which accords with normal practice, expires on the date of this year’s Annual General Meeting. The purpose of the resolution is to renew this power for a further year.

The third item of special business is the renewal of the authority of the Company to purchase its own ordinary shares as permitted under its Articles of Association. This resolution will, if passed, give authority to make such purchases in the market. The Directors have no immediate intention of using such authority and would do so only when they consider it to be in the best interests of shareholders generally and an improvement in earnings per share would result. This Resolution specifies the maximum number of ordinary shares which may be purchased (representing approximately 10% of the Company’s existing issued ordinary share capital) and the minimum and maximum prices at which they may be bought, reflecting the requirements of the Act and the Financial Services Authority.

Resolution 13 relates to proposed changes to the Company’s constitution resulting from the full implementation of the Act. Part (i) of Resolution 13 proposes the deletion of all the provisions of the Memorandum of Association of the Company which, by virtue of the Act, are to be treated as provisions of the Articles of Association of the Company. Part (ii) of this resolution proposes the adoption of new Articles of Association of the Company in substitution for, and to the exclusion of the existing Articles of Association, with effect from the conclusion of the AGM. An explanation of the principal proposed amendments to the Articles of Association is set out in the appendix to the Circular issued with this Annual Report and Accounts and the form of the new Articles of Association, together with a copy of the existing Memorandum and Articles of Association marked to show the changes being proposed in Resolution 13 can be viewed at http://www.johnstonpress.co.uk/jpplc.

The final resolution to be proposed is to permit the Company to call General Meetings (other than Annual General Meetings) on not less than 14 days clear notice as permitted by the Act.

42 Johnston Press plc Annual Report and Accounts 2009 Auditors A resolution to re-appoint Deloitte LLP as the Company’s auditors will be proposed at the forthcoming Annual General Meeting.

By Order of the Board

P McCall Secretary 108 Holyrood Road Edinburgh EH8 8AS 11 March 2010

Directors’ Responsibility Statement

We confirm to the best of our knowledge: 1. the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

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

On behalf of the Board

J A Fry S R Paterson Chief Executive Officer Chief Financial Officer 11 March 2010 11 March 2010

Johnston Press plc Annual Report and Accounts 2009 43 Independent Auditors’ Report to the members of Johnston Press plc

We have audited the financial statements of Johnston Press plc Opinion on financial statements for the 53 week period ended 2 January 2010 which comprise the In our opinion: Group Income Statement, the Group Statement of Comprehensive • the financial statements give a true and fair view of the state Income, the Group Reconciliation of Shareholders’ Equity, the of the Group’s and of the parent Company’s affairs as at 2 Group Statement of Financial Position and Parent Company January 2010 and of the Group’s and the parent Company’s Balance Sheet, the Group Statement of Cash Flows, and the loss for the 53 week period then ended; related notes 1 to 43. The financial reporting framework that has • the Group financial statements have been properly prepared in been applied in the preparation of the group financial statements accordance with IFRSs as adopted by the European Union; is applicable law and International Financial Reporting Standards • the parent Company financial statements have been properly (IFRSs) as adopted by the European Union. The financial reporting prepared in accordance with United Kingdom Generally framework that has been applied in the preparation of the parent Accepted Accounting Practice; and company financial statements is applicable law and United • the financial statements have been prepared in accordance Kingdom Accounting Standards (United Kingdom Generally with the requirements of the Companies Act 2006; and, as Accepted Accounting Practice). regards the Group financial statements, Article 4 of the IAS Regulation. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Opinion on other matters prescribed by the Companies Act 2006. Our audit work has been undertaken so that we might 2006 state to the company’s members those matters we are required In our opinion: to state to them in an auditors’ report and for no other purpose. • the part of the Directors’ Remuneration Report to be audited To the fullest extent permitted by law, we do not accept or has been properly prepared in accordance with the Companies assume responsibility to anyone other than the Company and the Act 2006; and Company’s members as a body, for our audit work, for this report, • the information given in the Directors’ Report for the financial or for the opinions we have formed. year for which the financial statements are prepared is consistent with the financial statements. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors’ Matters on which we are required to report by exception Responsibilities, the Directors are responsible for the preparation of We have nothing to report in respect of the following: the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements Under the Companies Act 2006 we are required to report to you if, in accordance with applicable law and International Standards on in our opinion: Auditing (UK and Ireland). Those standards require us to comply • adequate accounting records have not been kept by the parent with the Auditing Practices Board’s (APB’s) Ethical Standards for Company, or returns adequate for our audit have not been Auditors. received from branches not visited by us; or • the parent Company financial statements and the part of Scope of the audit of the financial statements the Directors’ Remuneration Report to be audited are not in An audit involves obtaining evidence about the amounts and agreement with the accounting records and returns; or disclosures in the financial statements sufficient to give reasonable • certain disclosures of directors’ remuneration specified by law assurance that the financial statements are free from material are not made; or misstatement, whether caused by fraud or error. This includes an • we have not received all the information and explanations we assessment of: whether the accounting policies are appropriate require for our audit. to the Group’s and the parent Company’s circumstances and have been consistently applied and adequately disclosed; the Under the Listing Rules we are required to review: reasonableness of significant accounting estimates made by the • the Directors’ Statement contained within the Business Review directors; and the overall presentation of the financial statements. in relation to going concern; and • the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review.

Colin Gibson CA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditors Edinburgh, United Kingdom 11 March 2010

44 Johnston Press plc Annual Report and Accounts 2009 financial statements Group Income Statement for the 53 week period ended 2 January 2010

2009 2008 Before non- recurring and Non- Before non- Non- IAS 21/39 recurring IAS recurring recurring items items 21/39 Total items items Total Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000

Revenue 6 427,996 — — 427,996 531,899 — 531,899 Cost of sales (264,312) — — (264,312) (294,787) — (294,787)

Gross profit 163,684 — — 163,684 237,112 — 237,112

Operating expenses 7 (91,900) (36,398) — (128,298) (108,698) (16,675) (125,373) Impairment of intangibles 7/15 — (126,000) — (126,000) — (417,522) (417,522) Intangible adjustment 7/12 — — — — — (93,893) (93,893)

Total operating expenses (91,900) (162,398) — (254,298) (108,698) (528,090) (636,788)

Operating profit/(loss) 8 71,784 (162,398) — (90,614) 128,414 (528,090) (399,676) Investment income 10 72 — — 72 807 — 807 Net finance income on pension assets/liabilities 11a 268 — — 268 3,489 — 3,489 Change in fair value of hedges 11c — — (12,295) (12,295) — — — Retranslation of USD debt 11c — — 11,756 11,756 — — — Retranslation of Euro debt 11c — — 15,211 15,211 — — — Finance costs 11b (28,805) (9,390) — (38,195) (33,963) — (33,963) Share of results of associates 18 22 — — 22 85 — 85

Profit/(loss) before tax 43,341 (171,788) 14,672 (113,775) 98,832 (528,090) (429,258) Tax 12 (7,795) 38,571 (4,259) 26,517 (26,577) 90,365 63,788

Profit/(loss) for the period 35,546 (133,217) 10,413 (87,258) 72,255 (437,725) (365,470)

Earnings per share (p) 14 Earnings per share - Basic 5.53 (20.82) 1.63 (13.66) 13.41 (81.40) (67.99) Earnings per share - Diluted 5.53 (20.82) 1.63 (13.66) 13.41 (81.40) (67.99)

The above revenue and profit/(loss) is derived from continuing operations. There were no IAS 21/39 items in 2008 as explained in note 11c. The accompanying notes are an integral part of these financial statements.

The comparative period is for the 52 weeks ended 27 December 2008.

Johnston Press plc Annual Report and Accounts 2009 45 financial statements Group Statement of Comprehensive Income for the 53 week period ended 2 January 2010

Hedging and Revaluation Translation Retained Reserve Reserve Earnings Total £’000 £’000 £’000 £’000

Loss for the year — — (87,258) (87,258) Actuarial loss on defined benefit pension schemes (net of tax) — — (51,721) (51,721) Revaluation adjustment (88) — 88 — Exchange differences on translation of foreign operations — (7,639) — (7,639) Reclassification on de-designation of hedge relationships — (7,939) — (7,939) Deferred taxation — 2,223 — 2,223

Total comprehensive loss for the period (88) (13,355) (138,891) (152,334)

For the 52 week period ended 27 December 2008

Loss for the year — — (365,470) (365,470) Actuarial loss on defined benefit pension schemes (net of tax) — — (8,785) (8,785) Revaluation adjustment (63) — 63 — Exchange differences on translation of foreign operations — 19,019 — 19,019 Change in fair value of interest rate swaps — (11,504) — (11,504) Change in fair value of cross currency swaps — 10,687 — 10,687 Deferred taxation — 228 (323) (95)

Total comprehensive (loss)/income for the period (63) 18,430 (374,515) (356,148)

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

46 Johnston Press plc Annual Report and Accounts 2009 Group Reconciliation of Shareholders’ Equity for the 53 week period ended 2 January 2010

Share-based Hedging and Share Share Payments Revaluation Own Translation Retained Capital Premium Reserve Reserve Shares Reserve Earnings Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening balances 65,080 502,818 10,064 2,396 (4,412) 26,561 (88,687) 513,820

Total comprehensive loss for the period — — — (88) — (13,355) (138,891) (152,334)

Recognised directly in equity: Dividends (note 13) — — — — — — (152) (152) Share warrants issued — — 9,390 — — — — 9,390 Own shares purchased — — — — (592) — — (592) Provision for share-based payments (note 30) — — (108) — — — — (108)

Net changes directly in equity — — 9,282 — (592) — (152) 8,538

Total movements — — 9,282 (88) (592) (13,355) (139,043) (143,796)

Equity at the end of the period 65,080 502,818 19,346 2,308 (5,004) 13,206 (227,730) 370,024

For the 52 week period ended 27 December 2008

Opening balances 29,944 332,750 8,679 2,459 (3,435) 8,131 305,247 683,775

Total comprehensive (loss)/ income for the period — — — (63) — 18,430 (374,515) (356,148)

Recognised directly in equity: Dividends (note 13) — — — — — — (19,419) (19,419) New share capital subscribed 35,136 170,068 — — — — — 205,204 Own shares purchased — — — — (977) — — (977) Provision for share-based payments (note 30) — — 1,385 — — — — 1,385

Net changes directly in equity 35,136 170,068 1,385 — (977) — (19,419) 186,193

Total movements 35,136 170,068 1,385 (63) (977) 18,430 (393,934) (169,955)

Equity at the end of the period 65,080 502,818 10,064 2,396 (4,412) 26,561 (88,687) 513,820

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

Johnston Press plc Annual Report and Accounts 2009 47 financial statements Group Statement of Financial Position at 2 January 2010

2009 2008 Notes £’000 £’000 Non-current assets Goodwill 15 864 864 Other intangible assets 15 922,513 1,057,022 Property, plant and equipment 16 219,608 260,498 Available for sale investments 17 970 2,712 Interests in associates 18 30 60 Trade and other receivables 21 16 18 Derivative financial instruments 23/32 15,794 36,488

1,159,795 1,357,662

Current assets Inventories 20 3,293 6,557 Trade and other receivables 21 88,822 149,268 Cash and cash equivalents 21 12,279 20,135 Derivative financial instruments 23/32 — 303

104,394 176,263

Total assets 1,264,189 1,533,925

Current liabilities Trade and other payables 21 50,366 54,319 Tax liabilities 57,896 99,705 Obligations under finance leases — 13 Retirement benefit obligation 24 5,111 5,980 Borrowings 22 31,465 7,864 Derivative financial instruments 23/32 1,045 —

145,883 167,881

Non-current liabilities Borrowings 22 398,090 510,311 Derivative financial instruments 23/32 5,806 7,615 Retirement benefit obligation 24 78,997 12,231 Deferred tax liabilities 25 261,454 318,692 Trade and other payables 21 2,077 1,802 Long term provisions 26 1,858 1,573

748,282 852,224

Total liabilities 894,165 1,020,105

Net assets 370,024 513,820

Equity Share capital 27 65,080 65,080 Share premium account 502,818 502,818 Share-based payments reserve 19,346 10,064 Revaluation reserve 2,308 2,396 Own shares (5,004) (4,412) Hedging and translation reserve 13,206 26,561 Retained earnings (227,730) (88,687)

Total equity 370,024 513,820

The comparative numbers are as at 27 December 2008.

The financial statements of Johnston Press plc, registered number 15382, were approved by the Board of Directors and authorised for issue on 11 March 2010.

They were signed on its behalf by:

J A Fry, Chief Executive Officer S R Paterson, Chief Financial Officer

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

48 Johnston Press plc Annual Report and Accounts 2009 Group Statement of Cash Flows for the 53 week period ended 2 January 2010

2009 2008 Notes £’000 £’000

Cash generated from operations 28 93,881 144,548 Income tax paid (4,715) (17,635)

Net cash in from operating activities 89,166 126,913

Investing activities Interest received 72 807 Dividends received from associated undertakings 52 64 Proceeds on disposal of property, plant and equipment 785 1,791 Proceeds on disposal of titles 131 — Purchases of property, plant and equipment (3,946) (23,221) Acquisition of businesses — (1,530) Net cash in businesses acquired — 51

Net cash used in investing activities (2,906) (22,038)

Financing activities Dividends paid (152) (19,419) Interest paid (27,841) (33,053) Interest paid on finance leases (13) (4) Repayments of borrowings (42,851) (184,467) Arrangement fees on refinancing (16,027) — Repayment of loan notes — (61,644) Issue of shares — 42,744 Net proceeds from rights issue — 162,460 Purchase of own shares — (977) Decrease in bank overdrafts (7,232) (7,850)

Net cash used in financing activities (94,116) (102,210)

Net (decrease)/increase in cash and cash equivalents (7,856) 2,665 Cash and cash equivalents at the beginning of period 20,135 17,470

Cash and cash equivalents at the end of the period 12,279 20,135

The comparative period is for the 52 weeks ended 27 December 2008.

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

Johnston Press plc Annual Report and Accounts 2009 49 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010

1. General information

Johnston Press plc is a company incorporated in the United Kingdom under the Companies Act. The address of the registered office is given on the back page. The nature of the Group’s operations and its principal activities are set out in note 5 and in the Business Review on pages 4 to 13.

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 3.

2. Adoption of new and revised Standards

In the current period, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in these financial statements.

Standards affecting presentation and disclosure

IAS 1 (revised 2007) The Group has adopted the amendments to IAS 1 early. IAS 1 (revised 2007) has Presentation of Financial Statements introduced a number of changes in the format and content of the financial statements. In addition, the revised Standard requires the presentation of a third balance sheet at 2007 because the entity has applied certain changes in accounting policies retrospectively. However, as discussed on page 13, as there is no change to the 2007 balance sheet, a third balance sheet would add no value so has not been included.

IFRS 8 Operating Segments The Group has early adopted IFRS 8. IFRS 8 is a disclosure Standard that requires a reassessment of the Group’s reportable segments (see notes 5 and 6). As a result of this reassessment no changes have been made.

Improving Disclosures about The amendments to IFRS 7, which the Group has adopted early, expand the Financial Instruments disclosures required in respect of fair value measurements and liquidity risk. The Group (Amendments to IFRS 7 has elected not to provide comparative information for these expanded disclosures in Financial Instruments: Disclosures) the current period in accordance with the transitional reliefs offered in these amendments.

Standards affecting the reported results and financial position

Amendment to IAS 39 The amendment to IAS 39 permits an entity to reclassify non-derivative financial Financial Instruments: Recognition and Measurement assets out of the ‘fair value through profit or loss’ (FVTPL) and ‘available for sale’ and IFRS 7 Financial Instruments: Disclosures regarding (AFS) categories in very limited circumstances. Such reclassifications are permitted reclassifications of financial assets from 1 July 2008. Reclassifications of financial assets made in periods beginning on or after 1 November 2008 take effect only from the date when the reclassification is made.

No such reclassifications have been made on early adoption of this amendment to the Standard.

The following amendment was made as part of Improvements to IFRSs (2008).

Amendment to IFRS 2 Share-based Payment - The amendments clarify the definition of vesting conditions for the purposes of IFRS Vesting Conditions and Cancellations 2, introduce the concept of ‘non-vesting’ conditions and clarify the accounting treatment for cancellations.

The amendment has been applied retrospectively in accordance with the relevant transitional provisions. No prior period adjustments have been made.

Standards not affecting the reported results or the financial position

The following new and revised Standards and Interpretations have been adopted in the current period. 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 23 (revised 2007) The principal change to the Standard was to eliminate the option to expense all Borrowing Costs borrowing costs when incurred. This change has had no impact on these financial statements.

Amendments to IAS 32 The revisions to IAS 32 amend the criteria for debt/equity classification by permitting Financial Instruments: certain puttable financial instruments and instruments (or components of Presentation and IAS 1 Presentation of instruments) that impose on an entity an obligation to deliver to another party a pro- Financial Statements - Puttable Financial Instruments rate share of the net assets of the entity only on liquidation, to be classified as and Obligations Arising on Liquidation equity, subject to specified criteria being met.

50 Johnston Press plc Annual Report and Accounts 2009 2. Adoption of new and revised Standards (continued)

Standards not affecting the reported results nor the financial position (continued) Amendments to IAS 39 Financial Instruments: Recognition and Measurement - The amendments provide clarification on two aspects of hedge accounting: Eligible Hedged Items identifying inflation as a hedged risk or portion, and hedging with options.

Embedded Derivatives The amendments clarify the accounting for embedded derivatives in the case of a Amendments to IFRIC 9 Reassessment of Embedded reclassification of a financial asset out of the ‘fair value through profit or loss’ (FVTPL) Derivatives and IAS 39 Financial Instruments: category as permitted by the October 2008 amendments to IAS 39 Financial Recognition and Measurement Instruments: Recognition and measurement (see above).

IFRIC 16 Hedges of a Net Investment The Interpretation provides guidance on the detailed requirements for net investment in a Foreign Operation hedging for certain hedge accounting designations.

IFRIC 18 Transfers of Assets from Customers The Interpretation addresses the accounting by recipients for transfers of property, (adopted for transfers of assets from customers plant and equipment from ‘customers’ and concludes what item of property, plant received on or after 1 July 2009) and equipment transferred meets the definition of an asset from the perspective of the recipient. The recipient should recognise the asset at its fair value on the date of transfer, with credit recognised in accordance with IAS 18 Revenue.

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

IFRS 1 (amended)/IAS 27 (amended) Cost of an investment in a Subsidiary, Jointly Controlled Entity or Associate IFRS 3 (revised 2008) Business Combinations IAS 27 (revised 2008) Consolidated and Separate Financial Statements IAS 28 (revised 2008) Investments in Associates IFRIC 17 Distributions of Non-cash Assets to Owners Improvements to IFRSs (April 2009)

The Directors do not expect that the adoption of these Standards and Interpretations in future periods will have a material impact on the financial statements of the Group.

3. Significant accounting policies

Basis of accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting policies adopted are set out below.

Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to the Saturday closest to 31 December each year for either a 52 or 53 week period. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the Group Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

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 Business Review on pages 4 to 13. In addition, note 32 to the financial statements include the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities, and its exposures to liquidity risk and credit risk.

The financial statements have been prepared for the 53 weeks ending 2 January 2010. The 2008 information relates to the 52 week period ended 27 December 2008.

Johnston Press plc Annual Report and Accounts 2009 51 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

3. Significant Accounting Policies (continued)

Going concern The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the forseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements. Further detail is contained in the Business Review on pages 12 and 13.

Non-recurring items Non-recurring items include significant exceptional transactions, the fundamental restructuring of businesses and material one-off items such as the disposal of a significant property 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.

Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3, including publishing titles, are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 ‘Non Current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

Investment in associates An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these Group financial statements using the equity method of accounting. Investments in associates are carried in the Group Statement of Financial Position at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments.

Publishing titles The Group’s principal intangible assets are publishing titles. The Group does not capitalise internally generated goodwill or publishing titles. Titles separately acquired after 1 January 1989 are stated at cost and titles owned by subsidiaries acquired after 1 January 1996 are recorded at Directors’ valuation at the date of acquisition. These publishing titles have no finite life and consequently are not amortised. Every six months impairment tests are undertaken, as outlined below for goodwill, to determine any diminution in the recoverable amount below carrying value. The recoverable amount is the higher of the fair value less costs to sell and the value in use based on the net present value of estimated future cash flows discounted at the Group’s pre-tax weighted average cost of capital. Any impairment loss is recognised as an expense immediately. An impairment loss recognised for publishing titles can be reversed in a subsequent period if the discounted cash flows justify the treatment.

Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least every six months. Any impairment is recognised immediately in profit or loss and cannot be subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units expected to benefit from the synergies of the combination. Cash generating units to which goodwill has been allocated are tested for impairment every six months, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit, second to the value of publishing titles and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Goodwill can also arise as an equal and opposite offset to deferred tax on publishing titles acquired after 1 January 2005 under the technical provisions of IAS 12.

On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP valuation subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

52 Johnston Press plc Annual Report and Accounts 2009 3. Significant Accounting Policies (continued)

Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.

Advertising revenue is recognised on publication and circulation revenue is recognised at the point of sale. Printing revenue is recognised when the service is provided.

Foreign currencies The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each period end, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the close of business on the last working day of the period. Non- monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non- monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the period end date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s hedging and translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Property, plant and equipment Property, plant and equipment balances are shown at cost, net of depreciation and any provision for impairment. In certain cases, the amounts of previous revaluations of properties conducted in 1996 or 1997 or the fair value of the property at the date of the acquisition by the Group have been treated as the deemed cost on transition to IFRSs. Depreciation is provided on all property, plant and equipment, excluding land, at varying rates calculated to write-off cost over the useful lives. The principal rates employed are:

Heritable and freehold property (excluding land) 2.5% on written down value Leasehold land and buildings equal annual instalments over lease term Web offset presses (excluding press components) 5% straight line basis Mailroom equipment 6.67% straight line basis Pre-press systems 20% straight line basis Other plant and machinery 6.67%, 10%, 20%, 25% and 33% straight line basis Motor vehicles 25% straight line basis

Inventories Inventories are stated at the lower of cost and net realisable value. Cost incurred in bringing materials to their present location and condition comprises; (a) raw materials and goods for resale at purchase cost on a first-in first-out basis; and (b) work in progress at cost of direct materials, labour and certain overheads. Net realisable value comprises selling price less any further costs expected to be incurred to completion and disposal.

Financial instruments Financial assets and financial liabilities are recognised in the Group’s Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets Investments are recognised and derecognised on the trade date in accordance with the terms of the purchase or sale contract and are initially measured at fair value, plus transaction costs.

Available for sale financial assets Listed and unlisted investments are shown as available for sale and are stated at fair value. Fair value of listed investments is determined with reference to quoted market prices. Fair value of unlisted investments is determined by the Directors. Gains and losses arising from changes in fair value are recognised directly in equity, with the exception of impairment losses which are recognised directly in the Income Statement. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in equity is included in the Income Statement for the period.

Johnston Press plc Annual Report and Accounts 2009 53 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

3. Significant Accounting Policies (continued)

Dividends on available for sale equity investments are recognised in the Income Statement when the Group’s right to receive the payment is established.

Trade receivables Trade receivables do not carry any interest. They are stated at their nominal value as reduced by appropriate allowance for estimated irrecoverable amounts. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. Other trade receivables are provided for on an individual basis where there is evidence that an amount is no longer recoverable.

Impairment of financial assets Financial assets are assessed for indicators of impairment at each period end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance for estimated irrecoverable amounts. Changes in the carrying value of this allowance are recognised in the Income Statement.

Derivative financial instruments The Group’s activities and funding structure give rise to some exposure to the financial risks of changes in interest rates and foreign currency exchange rates. The Group enters into a number of derivative financial instruments to manage its exposure to these risks, including interest rate swaps, cross currency swaps and forward foreign exchange contracts. Further details of derivative financial instruments are given in note 32.

With effect from the start of the current period, the Group elected to de-designate its interest rate and cross currency swaps and has ceased to apply the hedge accounting principles of IAS 39, ‘Financial Instruments: Recognition and Measurement’. With effect from that date, the Group now re-measures each derivative at its fair value at the period end date with the resultant gain or loss being recognised in profit or loss immediately. All such changes in the fair value of the Group’s derivatives are shown in a separate column on the face of the Group Income Statement.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with the changes in fair value recognised in profit or loss.

Financial liabilities and equity Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

On 28 August 2009, the Company issued share warrants over 5% of its issued share capital to lenders as part of the refinancing package agreed on that date. The warrant instruments will be settled by the Company delivering a fixed number of ordinary shares and receiving a fixed amount of cash in return and so qualify as equity under IAS 39. The Binomial Option pricing model has been used to assess the fair value of the warrants issued and the full cost has been recognised as a non-recurring finance cost in the Income Statement in the period.

Trade payables Trade payables are not interest-bearing and are stated at their nominal value.

Borrowings Interest-bearing loans and bank overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premia payable on settlement or redemption and direct issue costs, are charged to the Income Statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Fees incurred in negotiating borrowings are held on the Statement of Financial Position and amortised to the Income Statement over the term of the underlying debt.

Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Assets held under the finance leases are capitalised within property, plant and equipment and are depreciated over the shorter of the lease terms and their useful lives. The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the Income Statement over the period of the leases on the effective interest method. All other leases are classified as operating leases and rentals are charged on a straight line basis over the lease term.

54 Johnston Press plc Annual Report and Accounts 2009 3. Significant Accounting Policies (continued)

Development grants Development grants for revenue expenditure are recognised as income over the periods necessary to match them with the related costs and are deducted in reporting the related expense. Grants relating to property, plant and equipment are treated as deferred income and released to the Income Statement over the expected useful lives of the related assets.

Operating profit/(loss) Operating profit/(loss) is stated after charging restructuring or other non-recurring costs but before investment income, other finance income, finance costs and the share of the results of associates.

Taxation The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the period end date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax based values used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

On transition to IFRS, a deferred tax liability has been recorded in respect of publishing titles and properties that do not qualify for any tax allowances that were acquired through business combinations. Given that the Group elected, under IFRS 1, not to restate pre-transition business combinations under IFRS 3, this pre-transition deferred tax element was charged against retained earnings. Any such fair value on future business combinations will form part of the goodwill on acquisition and both the goodwill and related deferred tax liability will be included in any impairment test in relation to the relevant cash generating unit.

Deferred tax assets and liabilities are offset when the relevant requirements of IAS 12 are satisfied.

Retirement benefit costs The Group provides pensions to employees through various schemes.

Payments to defined contribution retirement benefit schemes are charged to the Income Statement as an expense as they fall due. Payments made to the industry-wide retirement benefit schemes in the Republic of Ireland are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

For defined benefit retirement benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each period end date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the Income Statement and presented in the Statement of Comprehensive Income. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the Statement of Financial Position represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.

Share-based payments The Group issues equity settled share-based benefits to certain employees. The Group has elected to apply IFRS 2 to all share-based awards and options granted post 7 November 2002 but not vested at 31 December 2004. These share-based payments are measured at their fair value at the date of grant and the fair value of share options is expensed to the Income Statement on a straight-line basis over the vesting period. Fair value is measured by use of the Black Scholes model, as amended to take account of the Directors’ best estimate of probable share vesting and exercise.

Johnston Press plc Annual Report and Accounts 2009 55 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

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, which are described in note 3, 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.

Deferred tax balances on publishing titles and properties not eligible for tax allowances Deferred tax amounting to £257,372,000 at 2 January 2010 (2008: £288,460,000), has been provided pursuant to IAS 12 (Income Taxes) on the values of the publishing titles in the Group’s Statement of Financial Position.

Management has considered it appropriate to provide this entire deferred tax balance in order to comply with the technical requirements of IAS 12 despite the fact that management cannot foresee any future circumstances in which such a tax liability would arise. If a decision was taken to dispose ­of any of the assets concerned, it is unlikely that the titles would be sold separately from the legal entities that own the assets. As such, management is confident that this tax provision will never be required to be paid.

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.

Valuation of share-based payments The Group estimates the expected value of share-based payments and this is charged through the Income Statement over the vesting periods of the relevant payments. The cost is estimated using a Black Scholes valuation model. The Black Scholes calculations are based on a number of assumptions that are set out in note 30 and are amended to take account of estimated levels of share vesting and exercise. This method of estimating the value of the share-based payments is intended to ensure that the actual value transferred to employees is provided in the share- based payments reserve by the time the payments are made.

Valuation of warrants issued On 28 August 2009, the Company issued share warrants over 5% of its issued share capital to lenders as part of the refinancing package agreed on that date. The cost of these warrants has been assessed using the Binomial Option Pricing model and charged through the Income Statement as a financing cost. As the warrants can be exercised at any time over a five year model, this method estimates the present cost to the Company for providing the shares in the future. The Binomial Option Pricing calculations are based on a number of inputs including exercise price, current share price, rate of return, stock volatility and expected dividend yields. Management has made a number of judgements in assessing a number of these inputs based on historic experience, and calculated a cost of £9,390,000 which has been recognised as a non-recurring finance cost in the Income Statement.

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.

Impairment of goodwill and publishing titles Determining whether goodwill or publishing titles are impaired requires an estimation of the value in use of the cash generating units to which these assets are allocated. The value in use calculation requires the Group to identify appropriate cash generating units, to estimate the future cash flows expected to arise from each cash generating unit and a suitable discount rate in order to calculate present value. An impairment loss was identified in both 2009 and 2008 and provided for in the accounts. The carrying amount of goodwill was £864,000 at 2 January 2010 and the carrying amount of publishing titles was £922,513,000 at the same date. Details of the impairment reviews that the Group performs are provided in note 15.

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 outwith 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. This is determined each year based on the yield on corporate bonds • the actual returns on investments experienced as compared to the expected rates used in the previous pension scheme 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 • mortality assumptions.

Details of the assumptions used to determine the liability at 2 January 2010 are set out in note 24.

Bad debt allowance The trade receivables balance recorded in the Group’s Statement of Financial Position comprises large numbers of comparatively small balances. An allowance is made for the estimated irrecoverable amounts from debtors and this is determined by reference to past default experience. Further details are shown in note 21.

56 Johnston Press plc Annual Report and Accounts 2009 5. Business and Geographical Segments

Adoption of IFRS 8, Operating Segments The Group has early adopted IFRS 8, ‘Operating Segments’. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive Officer to allocate resources to the segments and to assess their performance. In contrast, the predecessor Standard (IAS 14 ‘Segment Reporting’) required the Group to identify two sets of segments (business and geographical), using a risks and returns approach, with the Group’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments.

As such, the segmental information required by IAS 34 included in note 6 below, is presented in accordance with IFRS 8. There has been no change to the Group’s reportable segments which were reported under IAS 14, which remain Newspaper Publishing (in print and online) and Contract Printing.

6. Segment Information a) Segment revenues and results The following is an analysis of the Group’s revenue and results by reportable segment:

Newspaper Contract Newspaper Contract publishing printing Eliminations Group publishing printing Eliminations Group 2009 2009 2009 2009 2008 2008 2008 2008 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Revenue

External sales 395,294 32,702 — 427,996 496,000 35,899 — 531,899 Inter-segment sales — 67,305 (67,305) — — 71,525 (71,525) —

Total revenue 395,294 100,007 (67,305) 427,996 496,000 107,424 (71,525) 531,899

Inter-segment sales are charged at prevailing market prices.

Result Segment result before non-recurring items 61,590 10,194 — 71,784 121,818 6,596 — 128,414 Non-recurring items (138,432) (23,966) — (162,398) (521,090) (7,000) — (528,090)

Net segment result (76,842) (13,772) — (90,614) (399,272) (404) — (399,676)

Cost of issuing warrants - non-recurring (9,390) — Investment income 72 807 Net finance income on pension assets/liabilities 268 3,489 IAS 21/39 adjustments 14,672 — Finance costs (28,805) (33,963) Share of results of associates 22 85

Loss before tax (113,775) (429,258)

Tax 26,517 63,788

Loss after tax (87,258) (365,470)

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment result represents the profit/(loss) 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.

Johnston Press plc Annual Report and Accounts 2009 57 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

6. Segment Information (continued)

b) Segment assets

2009 2008 £’000 £’000

Assets Newspaper publishing 1,080,533 1,300,353 Contract printing 166,892 194,069

Total segment assets 1,247,425 1,494,422

Unallocated assets 16,764 39,503

Consolidated total assets 1,264,189 1,533,925

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

c) Other segment information

Newspaper Contract Newspaper Contract publishing printing Group publishing printing Group 2009 2009 2009 2008 2008 2008 £’000 £’000 £’000 £’000 £’000 £’000

Additions to property, plant and equipment 2,172 235 2,407 12,970 4,751 17,721 Depreciation expense (inc. non-recurring items) 12,432 29,550 41,982 11,763 20,065 31,828 Net impairment of intangibles 126,000 — 126,000 417,522 — 417,522

7. Non-Recurring Items

2009 2008 £’000 £’000

Non-recurring operating items: Impairment of intangible assets (note 15) 126,000 417,522 Intangible asset adjustment (note 12) — 93,893 Restructuring costs of existing business 14,573 9,675 Write down of value of presses in existing businesses 18,950 7,000 Impairment of unlisted investments 1,742 — Costs related to aborted disposal of Republic of Ireland businesses 531 — Write down of assets relating to disposed title 602 —

Total non-recurring operating items 162,398 528,090

Non-recurring finance costs: Warrants issued (note 22) 9,390 —

Total non-recurring items 171,788 528,090

58 Johnston Press plc Annual Report and Accounts 2009 8. Operating Profit/(Loss)

2009 2008 £’000 £’000 Operating profit/(loss) is shown after charging/(crediting): Depreciation of property, plant and equipment (note 16) 23,032 24,828 Non-recurring write down of value of presses 18,950 7,000 Profit on disposal of property, plant and equipment (259) (730) Movement in allowance for doubtful debts (note 21) (1,715) 1,968 Redundancy costs 13,333 10,389 Staff costs (note 9) 171,124 198,014 Auditors’ remuneration: Audit services Group 100 110 Subsidiaries 230 255 Operating lease charges: Plant and machinery 345 629 Other 5,455 5,742 Net foreign exchange gains 12 (80) Cost of inventories recognised as expense 49,854 53,840

Staff costs shown above included £2,866,000 (2008: £1,811,000) relating to remuneration of Directors.

In addition to the auditors’ remuneration shown above, the auditors received the following fees for non audit services.

2009 2008 £’000 £’000

Review of Interim Financial Statements 35 35 Audit of circulation and distribution figures of the Group’s newspaper titles 27 302 Taxation compliance 86 89 Taxation advisory 83 134 Rights Issue — 247 Review of Group strategy — 1,000

231 1,807

All non-audit services were approved by the Audit Committee. The higher fees in 2008 were incurred in relation to the industry required audit of the circulation and distribution of newspapers, provision of independent assurance services on the working capital report during the Rights Issue process and a review of Group strategy which was conducted by a team independent of the audit. The Audit Committee considers that these non-audit services have not impacted the independence of the audit process. In 2009, the audit of the circulation and distribution of our newspapers was carried out by the industry body, Audit Bureau of Circulation Limited (ABC).

In addition, an amount of £22,000 (2008: £22,000) was paid to the external auditors for the audit of the Group’s pension scheme.

9. Employees

The average monthly number of employees, including Executive Directors and key management personnel, was:

2009 2008 No. No.

Editorial and photographic 2,222 2,510 Sales and distribution 2,932 3,660 Production 1,029 1,004 Administration 652 747

6,835 7,921

£’000 £’000 Staff costs: Wages and salaries 150,349 170,859 Social security costs 14,104 16,065 Other pension costs (note 24) 6,779 9,705 Cost of share-based awards (note 30) (108) 1,385

171,124 198,014

Full details of the Directors’ emoluments, pension benefits and share options are included in the audited part of the Directors’ Remuneration Report on pages 38 and 39.

Johnston Press plc Annual Report and Accounts 2009 59 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

10. Investment Income

2009 2008 £’000 £’000

Income from available for sale investments 3 3 Interest receivable 69 804

72 807

11. Finance Costs 2009 2008 £’000 £’000

a) Net finance income on pension assets/liabilities Interest on pension liabilities 20,941 23,321 Expected return on pension assets (21,209) (26,810)

(268) (3,489)

b) Finance costs Interest on bank overdrafts and loans 24,346 33,281 Payment-in-kind interest accrual 2,193 — Interest on obligations under finance leases — 1 Amortisation of term debt issue costs 2,266 681 Non-recurring cost of issuing share warrants 9,390 —

38,195 33,963

c) IAS 21/39 items Following the de-designation of our derivative financial instruments from the start of the period, all movements in their fair value are now recorded in the Income Statement. In the current period, this movement was a charge of £20.2 million, offset by a credit of £7.9 million relating to the release from equity of amounts previously booked under IAS 39 hedge accounting.

The retranslation of our foreign denominated debt at the period end resulted in a credit of £27.0 million being recorded in the Income Statement. The retranslation of the Euro denominated publishing titles is shown in the Statement of Comprehensive Income.

12. Tax 2009 2008 £’000 £’000

Current tax 6,389 19,459 Deferred tax (note 25) (Credit)/charge for year (32,906) 2,397 Charge relating to the Finance Act 2008 on abolition of IBA’s — 8,249 Deferred taxation adjustment relating to the impairment of publishing titles — (93,893)

(26,517) (63,788)

UK corporation tax is calculated at 28.0% (2008: 28.5%) of the estimated assessable profit/(loss) for the period. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdiction.

Under IFRS, on acquisition of the publishing titles a deferred tax provision was created with an equal and opposite offset in goodwill. In the 2008 period, the non-recurring adjustment to publishing titles was a tax credit related to the deferred tax on the publishing titles in the UK at the rate of 28.0% and in the Republic of Ireland at the rate of 20%. The adjustment impacted publishing titles instead of goodwill, the original offsetting entry, as IAS 36, ‘Impairment of assets’ dictates that any impairment must first be allocated to goodwill, regardless of how that balance arose originally. Recording the adjustment resulted in the closing deferred tax position representing the recorded value of publishing titles at the appropriate tax rates in the UK and Republic of Ireland.

There is no equivalent adjustment in the current period as there has been no impairment of goodwill.

60 Johnston Press plc Annual Report and Accounts 2009 12. Tax (continued) The tax credit for the period can be reconciled to the loss per the Income Statement as follows:

2009 2008 £’000 % £’000 %

Loss before tax (113,775) 100.0 (429,258) 100.0

Tax at 28% (2008: 28.5%) (31,857) (28.0) (122,339) (28.5) Tax effect of share of results of associate (6) — (24) — Tax effect of (income)/expenses that are non taxable/deductible in determining taxable profit 5,290 4.7 51,679 12.0 Tax effect of investment income 15 — (1) — Effect of different tax rates of subsidiaries 383 0.3 (1,299) (0.3) Adjustment in respect of prior years (715) (0.6) (53) — Non-recurring charge relating to 2008 Finance Act — — 8,249 1.9 Losses carried back 373 0.3 — —

Tax credit for the period and effective rate (26,517) (23.3) (63,788) (14.9)

13. Dividends 2009 2008 £’000 £’000 Amounts recognised as distributions to equity holders in the period:

Final dividend for the period ended 27 December 2008 of nil (2007: 6.7p) — 19,267

Preference Dividends 13.75% Cumulative Preference Shares 104 104 13.75% “A” Preference Shares 48 48

152 19,419

No dividend is to be recommended to shareholders at the Annual General Meeting making a total for 2009 of £nil (2008: £nil).

14. Earnings per Share

The calculation of earnings per share is based on the following losses and weighted average number of shares: 2009 2008 £’000 £’000 Earnings

Loss for the period (87,258) (365,470) Preference dividend (152) (152)

Earnings for the purposes of basic and diluted earnings per share (87,410) (365,622) Non-recurring and IAS 21/39 items (after tax) 122,804 437,725

Earnings for the purposes of underlying earnings per share 35,394 72,103

2009 2008 No. of shares No. of shares Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 639,739,926 537,784,956

Effect of dilutive potential ordinary shares: - share options — 1,543,723 - warrants 5,680,278 —

Number of shares for the purposes of diluted earnings per share 645,420,204 539,328,679

Earnings per share (p) Basic (13.66) (67.99) Underlying 5.53 13.41 Diluted - see below (13.66) (67.99)

Underlying figures are presented to show the effect of excluding non-recurring and IAS 21/39 items from earnings per share.

Diluted earnings per share are presented when a company could be called upon to issue shares that would decrease net profit or increase loss per share. No adjustment has been made in 2009 or 2008 to the diluted loss per share, as the dilution effect of the share options and warrants would be to decrease the loss per share.

As explained in note 27, the preference shares are considered to be equity under IAS 32. In line with IAS 33, the preference dividend and the number of preference shares are excluded from the calculation of earnings per share.

Johnston Press plc Annual Report and Accounts 2009 61 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

15. Goodwill and Other Intangible Assets

Publishing Goodwill Titles £’000 £’000 Cost

Opening balance 145,254 1,330,154 Exchange movements — (8,509) Disposal of titles — (8,666)

Closing balance 145,254 1,312,979

Accumulated impairment losses

Opening balance (144,390) (273,132) Net impairment losses for the period — (126,000) Disposal of titles — 8,666

Closing balance (144,390) (390,466)

Carrying amount

Closing balance 864 922,513

Opening balance 864 1,057,022

The exchange movement above reflects the impact of the exchange rate on the valuation of publishing titles in the Republic of Ireland at the period end date and before the impairment. It is offset by a decrease in the euro borrowings.

At the end of 2009, the Group disposed of the subsidiary Tallaght Publishing Ltd. The value of the titles which were disposed of as part of the sale had previously been impaired in full.

Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination. The carrying value of goodwill and publishing titles by CGU is as follows:

Goodwill Publishing Titles 2009 2008 2009 2008 £’000 £’000 £’000 £’000 Newspaper publishing segment CGUs:

Scotland Newspaper Division — — 76,877 120,322 North Newspaper Division — — 366,717 405,128 Northwest Newspaper Division — — 116,288 109,183 Midlands Newspaper Division 864 864 176,592 176,592 South Newspaper Division — — 81,711 80,111 Northern Ireland Newspaper Division — — 73,272 71,856 Republic of Ireland Newspaper Division — — 31,056 93,830

864 864 922,513 1,057,022

The Group tests goodwill and publishing titles for impairment annually, or more frequently if there are indications that they might be impaired.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. These assumptions have been revised in the year in light of the current economic environment. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Given the current volatility in the debt and equity markets, this has led to an increase in the cost of capital and therefore the discount rate applied to future cash flows has increased from 8.85% in 2008 to 9.59% 2009. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

62 Johnston Press plc Annual Report and Accounts 2009 15. Goodwill and Other Intangible Assets (continued)

The Group prepares discounted cash flow forecasts derived from the most recent financial budgets approved by management for the next three years and extrapolates cash flows for 20 years from the date of testing based on an estimated annual growth rate of 1%. A discounted residual value of 5 times the final year’s cashflow is included in the forecast. The present value of the cash flows are then compared to the carrying value of the asset.

Given the recession in the UK and Republic of Ireland during 2009 and the effect on forecast cash flows in 2010, a net impairment charge of £126.0 million, relating entirely to publishing titles, has been recorded in the period. This comprises a further impairment charge of £136.1 million relating to the Scotland, North and Republic of Ireland divisions, net of a reversal of impairment of £10.1 million in relation to the Northwest, South and Northern Ireland divisions.

The Group has conducted a sensitivity analysis on the impairment test of each CGU’s carrying value. A decrease in the long term growth rate of 0.5% would result in a further impairment for the Group of £39.0 million, and an increase in the discount rate of 0.5% would result in a further impairment of £41.0 million.

The only CGU that has not been impaired is the Midlands Division. For the carrying value of the goodwill and intangibles to be impaired in this division, a decrease in the growth rate of more than 0.10%, or an increase in the discount rate of over 0.10%, would be required.

16. Property, Plant and Equipment

Freehold land Leasehold Plant and Motor and buildings buildings machinery vehicles Total £’000 £’000 £’000 £’000 £’000

Cost At 29 December 2007 101,124 5,460 309,182 23,503 439,269 Additions 4,552 14 11,898 1,257 17,721 Acquisition of subsidiaries — — 6 15 21 Disposals (450) (400) (9,164) (6,605) (16,619) Exchange differences 170 204 2,486 116 2,976

At 27 December 2008 105,396 5,278 314,408 18,286 443,368

Additions 240 116 1,706 345 2,407 Disposals (194) (132) (22,343) (1,833) (24,502) Exchange differences (51) (64) (688) (19) (822)

At 2 January 2010 105,391 5,198 293,083 16,779 420,451

Depreciation At 29 December 2007 8,144 1,494 140,856 15,394 165,888 Disposals (100) (94) (8,932) (6,432) (15,558) Charge for the period 2,128 179 19,103 3,418 24,828 Non-recurring write down in period — — 7,000 — 7,000 Exchange differences 26 21 604 61 712

At 27 December 2008 10,198 1,600 158,631 12,441 182,870

Disposals (99) (120) (22,011) (1,699) (23,929) Charge for the period 7,516 175 12,774 2,567 23,032 Non-recurring write down in period — — 18,950 — 18,950 Exchange differences (7) (7) (65) (1) (80)

At 2 January 2010 17,608 1,648 168,279 13,308 200,843

Carrying amount At 2 January 2010 87,783 3,550 124,804 3,471 219,608

At 27 December 2008 95,198 3,678 155,777 5,845 260,498

Assets currently marketed for sale included within the carrying amount above were £5,596,000 at the end of the period (2008: £136,000).

Assets in the course of construction There were no assets in the course of construction at the start or end of the period.

Johnston Press plc Annual Report and Accounts 2009 63 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

17. Available for Sale Investments

The Group’s available for sale investments are:

2009 2008 £’000 £’000

Listed investments at fair value 2 2

Unlisted investments Cost 4,494 4,494 Provision for impairment (3,526) (1,784)

Unlisted investments carrying amount 968 2,710

Total investments 970 2,712

An additional provision for impairment on the fair value of unlisted investments has been recognised in 2009 of £1,742,000. This reflects the current economic conditions in the UK, and the Directors believe that the investment has no significant market value in the current climate.

18. Interests in Associates

The Group’s associated undertakings at the period end are:

Place of Proportion of Proportion Method of incorporation ownership of voting accounting Name and operation interest power held for investment

Classified Periodicals Ltd England 50% 50% Equity method

The 25% interest in Free Admart Ltd held at the end of the prior period was disposed of in February 2009 for £1.

The aggregate amounts relating to associates are: 2009 2008 £’000 £’000

Total assets 67 177 Total liabilities (10) (26) Revenues 76 215 Profit 22 85

19. Investments in Subsidiaries

A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion owned, is given in note 36 to the Company’s separate financial statements.

20. Inventories

2009 2008 £’000 £’000

Raw materials 3,144 6,322 Work-in-progress — 8 Goods for resale 149 227

3,293 6,557

64 Johnston Press plc Annual Report and Accounts 2009 21. Other Financial Assets and Liabilities

Trade and other receivables 2009 2008 £’000 £’000

Current: Trade receivables 49,505 66,385 Allowance for doubtful debts (8,055) (9,770)

41,450 56,615 Prepayments 4,828 6,833 Other debtors (see note below) 42,177 85,531 Corporation tax recoverable 367 289

Total current trade and other receivables 88,822 149,268

Non-current: Trade receivables 16 18

Trade receivables The average credit period taken on sales is 59 days (2008: 57 days). No interest is charged on trade receivables. The Group has provided for estimated irrecoverable amounts in accordance with its accounting policy described in note 3.

Before accepting any new credit customer, the Group obtains a credit check from an external agency to assess the potential customer’s credit quality and then defines credit terms and limits on a by-customer basis. These credit terms are reviewed regularly. In the case of one-off customers or low value purchases, pre-payment for the goods is required under the Group’s policy. The Group reviews trade receivables past due but not impaired on a regular basis and considers, based on past experience, that the credit quality of these amounts at the period end date has not deteriorated since the transaction was entered into and so considers the amounts recoverable. Regular contact is maintained with all such customers and, where necessary, payment plans are in place to further reduce the risk of default on the receivable.

Included in the Group’s trade receivable balance are debtors with a carrying amount of £17.0 million (2008: £30.7 million) which are past due at the reporting date but for which the Group has not provided as there has not been a significant change in credit quality and the Group believes that the amounts are still recoverable. The Group does not hold any security over these balances. The weighted average age of these receivables (past due) is 32 days (2008: 35 days).

Ageing of past due but not impaired trade receivables

2009 2008 £’000 £’000

0 - 30 days 11,865 19,546 30 - 60 days 2,477 5,512 60 - 90 days 656 1,868 90+ days 1,976 3,808

Total 16,974 30,734

Movement in the allowance for doubtful debts

2009 2008 £’000 £’000

Balance at the start of the year 9,770 7,802 (Decrease)/increase in the allowance recognised in the Income Statement (note 8) (1,715) 1,968

Total 8,055 9,770

Johnston Press plc Annual Report and Accounts 2009 65 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

21. Other Financial Assets and Liabilities (continued)

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the balance sheet date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

Included in the allowance for doubtful debts are individually impaired trade receivables with a balance of £26,000 (2008: £378,000) which are owed by customers who have been placed in liquidation. These amounts have been provided for in full.

Ageing of impaired trade receivables Impaired trade receivables are those that have been provided for under the Group’s bad debt provisioning policy, as described in the accounting policy in note 3. The ageing of impaired trade receivables is shown below.

2009 2008 £’000 £’000

0 - 30 days 325 164 30 - 60 days 311 204 60 - 90 days 727 1,116 90+ days 6,692 8,286

Total 8,055 9,770

The Directors consider that the carrying amount of trade and other receivables at the balance sheet date approximates their fair value.

Other debtors As explained in note 29c, UBM announced that during its financial year ended 31 December 2009 it reached an agreement with HMRC in relation to the dispute regarding its sale of the RIM companies in 1998. The amount of tax in dispute was agreed at £36.4 million and so the tax liability and related debtor balance (reflecting the amount receivable from UBM under the indemnity) have been reduced from £80.0 million to £36.4 million in the current period.

Cash and cash equivalents Cash and cash equivalents totalling £12,279,000 (2008: £20,135,000) comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

Trade and other payables 2009 2008 £’000 £’000

Current: Trade creditors and accruals 45,729 48,397 Other creditors 4,637 5,922

Total current trade and other payables 50,366 54,319

Non-current: Trade and other creditors 2,077 1,802

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 29 days (2008: 17 days). The Group has financial risk management policies in place to ensure all payables are paid within the agreed credit terms.

The Directors consider that the carrying amount of trade payables approximates their fair value.

22. Borrowings

2009 2008 £’000 £’000

Bank overdrafts 1,022 8,254 Bank loans - sterling denominated 233,746 166,000 Bank loans - euro denominated 43,193 169,003 2003 Private placement loan notes 96,238 101,245 2006 Private placement loan notes 67,428 74,177 Term debt issue costs (14,265) (504) Payment-in-kind interest accrual 2,193 —

Total borrowings 429,555 518,175

66 Johnston Press plc Annual Report and Accounts 2009 22. Borrowings (continued)

The borrowings are disclosed in the financial statements as:

2009 2008 £’000 £’000

Current borrowings 31,465 7,864 Non-current borrowings 398,090 510,311

429,555 518,175

The Group’s net debt is:

Gross borrowings as above 429,555 518,175 Finance leases — 13 Cash and cash equivalents (12,279) (20,135) Impact of currency hedge contracted rates (9,483) (21,238)

Net debt at currency hedge contracted rates 407,793 476,815 Term debt issue costs 14,265 504

Net debt excluding term debt issue costs 422,058 477,319

Analysis of borrowings by currency:

At 2009 period end Total Sterling Euros US Dollars £’000 £’000 £’000 £’000

Bank overdrafts 1,022 1,022 — — Bank loans 276,939 233,746 43,193 — 2003 Private placement loan notes 96,238 46,200 — 50,038 2006 Private placement loan notes 67,428 — — 67,428 Term debt issue costs (14,265) (14,265) — — Payment-in-kind interest accrual 2,193 2,193 — —

429,555 268,896 43,193 117,466

At 2008 period end

Bank overdrafts 8,254 8,254 — — Bank loans 335,003 166,000 169,003 — 2003 Private placement loan notes 101,245 46,200 — 55,045 2006 Private placement loan notes 74,177 — — 74,177 Term debt issue costs (504) (504) — —

518,175 219,950 169,003 129,222

Refinancing On 28 August 2009, the Group renegotiated its credit facilities with both its bank lenders and private placement loan note holders. The renegotiated facilities extended the term of the previous bank agreement until 30 September 2012. The facility is secured and share warrants of 5% of the Company’s share capital have been issued. There is an agreed amortisation schedule of £75.0 million over the three years on which no make whole payment to the private placement loan notes is applicable. Interest rates payable on all facilities are based on leverage multiples and reduce based on agreed ratchets relating to the Group’s ratio of net debt to EBITDA.

Bank loans The Group has credit facilities with a number of banks. The total facility is £324.0 million (2008: £630.0 million) of which £47.1 million is unutilised at the balance sheet date (2008: £295.0 million). The credit facilities are provided under two separate tranches as detailed below.

Facility A Facility A is a revolving credit facility of £55.0 million, available to be drawn down up to 30 September 2012. This facility includes a bank overdraft facility of £10.0 million (2008: £30.0 million). The loans can be drawn down on a one, two or three monthly basis. Interest is payable at LIBOR plus a maximum cash margin of 4.15% (2008: revolving credit facility of £630.0 million, at LIBOR plus 1%).

Johnston Press plc Annual Report and Accounts 2009 67 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

22. Borrowings (continued)

Facility B Facility B is a term loan facility of £269.0 million, with full repayment due on 30 September 2012. Fixed repayments are due in 6 monthly intervals from 30 June 2010. Interest is payable quarterly at LIBOR plus a maximum cash margin of 4.15%.

Hedging In accordance with the credit agreements in place, the Group hedges a portion of the bank loans via interest rate swaps exchanging floating rate interest for fixed rate interest. Borrowings of £200.0 million (2008: £268.1million) were arranged at fixed rates and expose the Group to fair value interest rate risk. Further details on all of the Group’s derivative instruments can be found in note 32.

Private placement loan notes The Group has total private placement loan notes of £46.2 million and $187.1 million. The notes are repayable in full on 30 September 2012, with fixed repayments at 6 monthly intervals from 30 June 2010. Interest is payable quarterly at fixed coupon rates up to 9.45% depending on covenants.

2003 Private placement loan notes The 2003 Private placement loan notes are made up of:

• £46.2 million at a coupon rate of up to 9.45% (2008: £46.2 million at a fixed rate of 6.3%); and

• $79.7 million at a coupon rate of up to 8.90% (2008: $79.7 million at a fixed rate of 5.75%).

Of the $79.7 million, $44.7 million has been swapped into floating sterling of £28.3 million and $35.0 million has been swapped into fixed sterling of £22.2 million to hedge the Group’s exposure to US dollar interest rates (2008: $79.7 million swapped into floating sterling of £50.5 million).

2006 Private placement loan notes The 2006 Private placement loan notes are made up of:

• $38.1 million at a coupon rate of up to 9.33% (2008: $38.1 million at a fixed rate of 6.18%); and

• $69.3 million at a coupon rate of up to 9.43%. (2009: $69.3 million at a fixed rate of 6.28%).

The total amount of $107.4 million has been swapped back into fixed sterling of £37.1 million (2008: £37.1 million) and floating sterling of £20.4 million (2008: £20.4 million), again to hedge the Group’s exposure to US dollar interest rates.

Payment-in-kind interest In addition to the cash margin payable on the bank facilities and private placement loan notes, a payment-in-kind (PIK) margin will accumulate and is payable at the end of the facility. This margin increases throughout the period of the facility. If, by 15 May 2010, an amount of £85.0 million or more is repaid, the PIK margin is eliminated throughout the period of the agreement. The PIK margin is also eliminated from the time £85.0 million has been repaid if this occurs after 15 May 2010. In addition, any amounts used to reduce debt up to 15 May 2010 will not attract any make whole payment. The PIK accrues at a margin of between 1.35% and 3.05%.

Interest rates: The weighted average interest rates paid over the course of the year, encompassing the previous and new facilities, were as follows:

2009 2008 % %

Bank overdrafts 2.0 6.1 Bank loans 6.0 5.8 2003 Private placement loan notes 5.6 6.9 2006 Private placement loan notes 5.6 6.5

5.8 6.1

23. Derivative Financial Instruments

Derivatives that are carried at fair value are as follows:

2009 2008 £’000 £’000

Interest rate swaps - current (liability)/asset (1,045) 303 Interest rate swaps - non-current liability (5,806) (7,615) Cross currency swaps - non-current asset 15,794 36,488

8,943 29,176

68 Johnston Press plc Annual Report and Accounts 2009 24. Retirement Benefit Obligation

Throughout 2009 the Group operated the Johnston Press Pension Plan (JPPP), together with the following schemes:

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

• Two ROI industry-wide final salary schemes and a third final salary scheme for a small number of employees in Limerick. There are no additional financial implications to the Group if these schemes are terminated. Consequently, the Group’s obligations to these schemes is included in Long Term Provisions and the details shown below exclude these schemes.

The JPPP is in two parts, a defined contribution scheme and a defined benefit scheme. The latter is closed to new members and a proposal was announced on 14 January 2010 to close the scheme to future accrual from 30 June 2010, subject to consultation with members which is currently ongoing. The assets of the schemes are held separately from those of the Group. The contributions are determined by a qualified actuary on the basis of a triennial valuation using the projected unit method. The contributions are fixed annual amounts and a percentage of salary with the intention of eliminating the deficit within 10 years from the date of the last triennial valuation on 31 December 2007. As the defined benefit section has been closed to new members for a considerable period the last active member is scheduled to retire in 36 years with, at current mortality assumptions, the last pension paid in 56 years. On a discounted basis the duration of the pension liabilities is circa 20 years. The financial information provided below relates to the defined benefit element of the JPPP.

The composition of the trustees of the JPPP is made up of an independent Chairman, a number of member nominated (by ballot) trustees and several Company appointed trustees. Half of the trustees are nominated by members of the JPPP, both current and past employees. The trustees appoint their own advisers and administrators of the Plan. Discussions take place with the Executive Directors of the Company to agree matters such as the contribution rates. Over the past few years the trustees have reduced the risk exposure to UK equities from a level of 75% of the Plan to 63.1% at 2 January 2010.

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

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

2009 2008 £’000 £’000

Defined benefit schemes 1,070 2,904 Defined contribution schemes and Irish schemes 5,709 6,801

6,779 9,705

Major assumptions: Valuation at Valuation at 2009 2008

Discount rate 5.7% 6.3% Expected return on scheme assets 7.1% 6.7% Expected rate of salary increases 4.0% 3.3% Future pension increases 3.5% 2.8% Life expectancy Male 19.8 years 19.5 years Female 22.9 years 22.4 years

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

• A change in the discount rate of 0.1% pa would change the value of liabilities by approximately 2% or £9.0 million.

• A change in the life expectancy by one year would change liabilities by approximately 3% or £14.0 million.

Johnston Press plc Annual Report and Accounts 2009 69 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

24. Retirement Benefit Obligation (continued)

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

2009 2008 £’000 £’000

Current service cost 1,070 2,904 Interest cost 20,941 23,321 Expected return on scheme assets (21,209) (26,810)

802 (585)

Of the current service cost for the year, £803,000 (2008: £2,178,000) has been included in cost of sales and £267,000 (2008: £726,000) has been included in operating expenses. An actuarial loss of £71,288,000 (2008: £12,227,000) has been recognised in the Group Statement of Comprehensive Income in the current period. The cumulative amount of actuarial gains and losses recognised in the Group Statement of Comprehensive Income since the date of transition to IFRS is a loss of £48,945,000 (2008: gain of £22,343,000). The actual return on scheme assets was £50,346,000 (2008: £65,620,000 loss).

Amounts included in the Statement of Financial Position: 2009 2008 £’000 £’000

Present value of defined benefit obligations 446,114 340,060 Fair value of scheme assets 362,006 321,849

Deficit in scheme 84,108 18,211

Past service cost not yet recognised in Statement of Financial Position — —

Total liability recognised in Statement of Financial Position 84,108 18,211 Amount included in current liabilities (5,111) (5,980)

Amount included in non-current liabilities 78,997 12,231

Movements in the present value of defined benefit obligations: 2009 2008 £’000 £’000

Balance at the start of the period 340,060 406,900

Service costs 1,070 2,904 Interest costs 20,941 23,321 Contribution from scheme members 3,261 3,730 Changes in assumptions underlying the defined benefit obligations 100,425 (80,193) Benefits paid (19,643) (16,602)

Balance at the end of the period 446,114 340,060

Movements in the fair value of scheme assets: 2009 2008 £’000 £’000

Balance at the start of the period 321,849 393,757

Expected return on scheme assets 21,209 26,810 Actual return less expected return on scheme assets 29,137 (92,340) Contributions from the sponsoring companies 6,193 6,494 Contributions from scheme members 3,261 3,730 Benefits paid (19,643) (16,602)

Balance at the end of the period 362,006 321,849

70 Johnston Press plc Annual Report and Accounts 2009 24. Retirement Benefit Obligation (continued)

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

Expected Fair value return of assets 2009 2008 2009 2008 % % £’000 £’000

Equity instruments 8.2 7.6 228,426 186,673 Debt instruments 5.2 5.4 86,157 90,118 Property 6.2 5.6 19,186 22,529 Other assets 4.8 1.5 28,237 22,529

7.1 6.7 362,006 321,849

Five year history:

2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Present value of defined benefit obligations 446,114 340,060 406,900 420,913 364,727 Fair value of scheme assets 362,006 321,849 393,757 375,474 309,538

Deficit in the scheme 84,108 18,211 13,143 45,439 55,189

Experience adjustments on scheme liabilities Amount (£’000) (100,425) 80,193 30,179 2,547 (37,623)

Percentage of scheme liabilities (%) (22.5%) 23.6% 7.4% 0.6% (10.3%)

Experience adjustments on scheme assets Amounts (£’000) 29,137 (92,340) (4,895) 7,828 36,454

Percentage of scheme assets (%) 8.0% (28.7%) (1.2%) 2.1% 11.8%

The estimated amounts of contributions expected to be paid to the scheme during 2010 is £5,111,000 (2008: £5,980,000).

Johnston Press plc Annual Report and Accounts 2009 71 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

25. Deferred Tax

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting periods. Properties Accelerated tax Intangible Pension Share based Other timing not eligible depreciation assets balances payments differences Total £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 29 December 2007 — 22,234 377,656 (4,730) (5) 165 395,320 Reclassification 5,389 — (5,389) — — — — Charge/(credit) to income 8,249 (1,064) (93,893) 3,073 (318) 706 (83,247) Debit/(credit) to equity — — — (3,442) 323 (228) (3,347) Acquisition of businesses — — 289 — — — 289 Currency movements — 25 9,797 — — (145) 9,677

At 27 December 2008 13,638 21,195 288,460 (5,099) — 498 318,692

Charge/(credit) to income (87) (5,700) (28,961) 1,516 — 326 (32,906) Debit/(credit) to equity — — — (19,968) — (2,223) (22,191) Currency movements — (17) (2,127) — — 3 (2,141)

At 2 January 2010 13,551 15,478 257,372 (23,551) — (1,396) 261,454

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (before offset) for financial reporting purposes: 2009 2008 £’000 £’000

Deferred tax liabilities 286,401 323,791 Deferred tax assets (24,947) (5,099)

261,454 318,692

Temporary differences arising in connection with interests in associates are insignificant.

72 Johnston Press plc Annual Report and Accounts 2009 26. Long Term Provisions

Obligations to industry Post sponsored Unfunded retirement pension pensions health costs schemes Total £’000 £’000 £’000 £’000

At the start of the period 1,220 327 26 1,573 Actuarial valuation — — 374 374 Paid during the period (31) (32) (26) (89)

At the end of the period 1,189 295 374 1,858

The unfunded pension provision and obligations to industry sponsored pension schemes are assessed by a qualified actuary at each period end. The post retirement health costs represent management’s estimate of the liability concerned.

27. Share Capital

2009 2008 £’000 £’000 Authorised 860,000,000 Ordinary Shares of 10p each (2008: 860,000,000) 86,000 86,000 756,000 13.75% Cumulative Preference Shares of £1 each (2008: 756,000) 756 756 415,000 13.75% “A” Preference Shares of £1 each (2008: 415,000) 415 415

87,171 87,171

Issued 639,739,965 Ordinary Shares of 10p each (2008: 639,739,766) 63,974 63,974 756,000 13.75% Cumulative Preference Shares of £1 each (2008: 756,000) 756 756 349,600 13.75% “A” Preference Shares of £1 each (2008: 349,600) 350 350

65,080 65,080

During the period ended 2 January 2010, the only change in the issued share capital of the Company was an exercise under the terms of the SAYE scheme of 199 Ordinary Shares of 10p for a consideration of £75.

Details of options outstanding are shown in note 30.

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

Johnston Press plc Annual Report and Accounts 2009 73 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

28. Notes to the Cash Flow Statement 2009 2008 £’000 £’000

Operating loss (90,614) (399,676) Adjustments for: Intangible adjustment - non-recurring — 93,893 Impairment of intangibles - non-recurring 126,000 417,522 Other non-cash non-recurring items 2,344 — Depreciation of property, plant and equipment (including write-downs) 41,982 31,828 Currency differences 12 (80) (Credit)/charge from share based payments (108) 1,385 Profit on disposal of property, plant and equipment (259) (730) Movement on pension provision (3,449) (3,645)

Operating cash flows before movements in working capital 75,908 140,497

Decrease/(increase) in inventories 3,167 (2,012) Decrease in receivables 15,703 22,364 Decrease in payables (897) (16,301)

Cash generated from operations 93,881 144,548

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

29. Guarantees and Other Financial Commitments

a) Lease commitments The Group has entered into non-cancellable operating leases in respect of plant and machinery, the payments for which extend over a period of years. The total annual rental for 2009 was £345,000 (2008: £629,000). In addition, the Group leases certain land and buildings on short-term and long-term operating leases. The annual rental on these leases was £5,455,000 (2008: £5,742,000). The rents payable under property leases are subject to renegotiation at various intervals specified in the leases. The Group pays insurance, maintenance and repairs of these properties.

2009 2008 £’000 £’000 The total amounts payable under the foregoing leases are as follows: Plant Within one year 23 277 Between two and five years 11 144

34 421

Land and buildings Within one year 5,089 3,856 Between two and five years 15,443 13,014 After five years 23,081 31,675

43,613 48,545

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

c) Tax assessment As previously reported the Group has recorded a provision for £80.0 million, with an equal and opposite offset in debtors, regarding a tax assessment issued against one of the RIM companies acquired by Johnston Press in 2002 in relation to the prior sale of the RIM companies by United Business Media plc (UBM) in 1998. The debtor was recorded to reflect the terms of the full tax indemnity received by UBM at the time of the acquisition of the RIM Group by Johnston Press.

On 5 March 2010, UBM announced the resolution of this dispute with HMRC and that a payment (including interest) of £36.4 million would be made in March 2010. The Group has agreed with both UBM and HMRC that the payment will be paid direct from UBM to HMRC and so there will be no cash flow through the Johnston Press plc Group.

74 Johnston Press plc Annual Report and Accounts 2009 30. Share-based Payments

Equity-settled share option scheme Options over ordinary shares are granted under the Executive’s Share Option Scheme. Options are exercisable at a price equal to the closing quoted market price of the Company’s shares on the day prior to the date of grant. The vesting period is 3 years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest.

Following the Rights Issue, which concluded on 24 June 2008, all options, awards and prices were amended to reflect the discount element of the Rights Issue. Options and awards increased by a multiple of 1.361446 and option/award prices reduced by 0.734513. The information below reflects these changes.

Details of the share options outstanding during the period:

2009 2008 Number Weighted Number Weighted of share average of share average options exercise options exercise price (in p) price (in p)

Outstanding at the beginning of period 384,926 234 1,065,690 453 Lapsed/forfeited during the period (63,038) 242 (802,204) 473 Adjustment for the Rights Issue — — 121,440 —

Outstanding at the end of the period 321,888 232 384,926 234

Exercisable at the end of the period 321,888 232 384,926 234

No share options were exercised during the period. The options outstanding at the period end had a weighted average exercise price of 232p, and a weighted average remaining contractual life of 2.7 years. No options were granted in 2006, 2007, 2008 or 2009.

Previous grants were valued using the Black-Scholes model. As far as the assumptions were concerned, expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous full year. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The Group recognised a net credit of £328,000 related to equity-settled share-based payment transactions in 2009 for the Executive Share Option Scheme (2008: £nil).

Group Savings - Related Share Option Scheme The Company operates a Group savings-related share option scheme. This has been approved by the Inland Revenue and is based on eligible employees being granted options and their agreeing to save weekly or monthly in a sharesave account with Halifax plc for a period of either 3, 5 or 7 years. The right to exercise is at the discretion of the employee within six months following the end of the period of saving.

Options outstanding under Savings-Related Scheme at the period end:

Option Grant Date Number of Shares Issue price per Share

27.09.02 177,804 204.93p 26.09.03 27,680 253.77p 29.09.04 114,784 304.46p 29.09.05 106,251 291.60p 29.09.06 344,287 224.76p 29.09.06 10,404 228.80p 27.09.07 359,756 226.41p 27.09.07 13,442 220.17p 26.09.08 6,151,199 37.60p 26.09.08 114,141 37.60p 25.09.09 10,249,614 28.60p 25.09.09 152,431 28.60p

The Group recognised net expenses of £1,374,000 and £177,000 related to equity-settled share-based payment transactions in 2009 and 2008 respectively for the Savings-Related Share Option Scheme.

Johnston Press plc Annual Report and Accounts 2009 75 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

30. Share-based Payments (continued)

The above options granted on 29 September 2006 and before were issued to employees at a price equivalent to the average mid-market price for the 30 days prior to 30 August 2002, 29 August 2003, 27 August 2004, 2 September 2005 and 1 September 2006 respectively. The subsequent options were granted at the closing mid-market price on the day prior to the invitation being sent to employees on 3 September 2007, 1 September 2008 and 1 September 2009 respectively. This follows the approval of the revised Sharesave Scheme at the Annual General Meeting in April 2007. A discount of 20% to the average mid-market price was applied to the issues in 2002 and thereafter.

Awards outstanding under Share Matching Plan at the period end:

Date Matching Awards Market Price on Award Vesting Dates

30.03.07 86,721 331.63p 30.03.10 to 29.03.17

The Group recognised total expenses of £nil related to equity-settled share-based payment transactions in both 2009 and 2008 respectively for the Share Matching Plan. The awards granted in 2006 lapsed during the period due to the performance conditions not being met.

Awards outstanding under Performance Share Plan at the period end:

Date PSP Awards Market Price on Award Vesting Dates

05.06.07 1,242,945 326.31p 05.06.10 25.09.08 7,843,790 37.50p 25.09.11 30.06.09 12,674,539 16.50p 30.06.12

The Group recognised a net credit of £1,154,000 and a net cost of £1,208,000 related to equity-settled share-based payment transactions in 2009 and 2008 respectively for the Performance Share Plan.

31. Related Party Transactions

The Group undertook transactions, all of which were on an arms’ length basis, and had balances outstanding at the period end with related parties as shown below.

Purchases Creditors Sales Debtors 2009 2008 2009 2008 2009 2008 2009 2008 Related party £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Classified Periodicals Ltd 50 54 9 10 — 42 — 10 Free Admart Ltd 7 115 — 15 — — — —

Classified Periodicals Ltd is an associated undertaking of Johnston Press plc, which re-publishes in a separate publication classified advertisements which appear in the Group’s titles and those of certain other publishers. The Group provides certain administrative, distribution and production services to Classified Periodicals Ltd.

The investment in Free Admart Ltd was disposed of in February 2009.

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

The remuneration of the Directors, who are the key management personnel of the Group, is set out in the audited section of the Directors’ Remuneration Report.

32. Financial Instruments

(a) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 22, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in note 27 and in the Group Reconciliation of Shareholders’ Equity.

76 Johnston Press plc Annual Report and Accounts 2009 32. Financial Instruments (continued)

(b) Gearing ratio The Board of Directors formally reviews the capital structure of the Group twice each year and also when considering any major corporate transactions. As part of these reviews, the Board considers the cost of capital and the risks associated with each class of capital. Based on the recommendations of the Board, the Group will balance its overall capital structure when appropriate through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

In 2009, the capital structure of the Group was considered when reviewing the conditions of the new financing arrangements and the issue of warrants. In addition, the decision in 2008 not to pay any dividends was extended to 2009, to ensure that the capital structure of the Group was protected.

The gearing ratio at the period end is as follows:

2009 2008 £’000 £’000

Debt 429,555 518,175 Cash and cash equivalents (12,279) (20,135)

Net debt (excluding the impact of cross-currency hedges) 417,276 498,040 Equity 370,024 513,820 Gearing ratio 53.0% 49.2%

Debt is defined as long and short-term borrowings as detailed in note 22. Equity includes all capital and reserves of the Group attributable to equity holders of the parent.

(c) Externally imposed capital requirements The Group is not subject to externally imposed capital requirements.

(d) Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements.

(e) Categories of financial instruments

2009 2008 £’000 £’000

Financial assets (current and non-current) Derivative instruments 15,794 36,791 Trade receivables 41,466 56,633 Cash and cash equivalents 12,279 20,135 Available for sale financial assets 970 2,712

Financial liabilities (current and non-current) Derivative instruments (6,851) (7,615) Trade payables (14,142) (11,546) Borrowings (429,555) (518,175)

From the start of the period, the Group ceased hedge accounting, and as such the derivative instruments which were previously in designated hedge accounting relationships were de-designated.

(f) Financial risk management objectives The Group’s Corporate Treasury function provides services to the business and monitors and manages the financial risks relating to the operations of the Group through assessment of the exposures by degree and magnitude of risk. These risks include market risk (including currency risk and interest rate risk), credit risk, liquidity risk and cash flow interest rate risk.

The Group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the Board and requirements of the bank loan and private placement funding agreements, which provide guidelines which must be operated within. The Group does not enter into or trade in financial instruments, including derivative financial instruments, for speculative purposes.

The Corporate Treasury function reports regularly to the Executive Directors and the Board.

Johnston Press plc Annual Report and Accounts 2009 77 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

32. Financial Instruments (continued)

(g) Market risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (refer to section (h)) and interest rates (refer to section (i)). The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including:

• Currency swaps to manage the foreign currency risk associated with foreign currency denominated borrowings, namely the US dollar denominated private placement loan notes; • Borrowings in euros to manage the foreign currency risk associated with the Group’s net investment in its foreign operations; and • Interest rate swaps to mitigate the risk of rising interest rates.

At a Group and Company level, market risk exposures are assessed using sensitivity analyses.

During 2009, the Group reduced its risk to fluctuations in the euro by repaying a substantial amount of the euro borrowings. The level of debt in euros was historically driven by the purchase price of the businesses. With the impairment charges in 2008 and 2009 and the ongoing recession, the Group considered that the exposure to the euro was too substantial and reduced the level of debt early in 2009 when rates were most favourable.

There have been no further changes to the Group’s exposure to market risks or the manner in which it manages and measures risk.

(h) Foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. The Group utilises currency derivatives to hedge significant future transactions and cash flows. The Group is a party to a number of cross currency interest rate swaps at the year end in the management of its exchange rate exposures. The instruments purchased are primarily denominated in US dollars in order to hedge the risks associated with the US dollar denominated private placement loan notes. There were no open foreign currency forward contracts at the year end (2008: nil).

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

Liabilities Assets 2009 2008 2009 2008 £’000 £’000 £’000 £’000

Euro Trade receivables — — 6,466 11,302 Cash and cash equivalents — — 1,836 3,240 Trade payables (3,143) (5,033) — — Borrowings (43,193) (169,003) — —

US Dollar Borrowings (117,466) (129,222) — —

Foreign currency sensitivity As noted above, the Group is mainly exposed to movements in euros and US dollars rates. The following table details the Group’s sensitivity to a 5% change in pounds sterling against the euro and a 5% change in pounds sterling against the US dollar. These percentages are the rates used by management when assessing sensitivities internally and represent management’s assessment of the possible change in foreign currency rates.

The sensitivity analysis of the Group’s exposure to foreign currency risk at the reporting date has been determined based on the change taking place at the beginning of the financial year and held constant throughout the reporting period. A positive number indicates an increase in profit or loss and other equity where pounds sterling strengthens against the respective currency. For a 5% weakening of the sterling against the relevant currency, there is an equal and opposite impact on profit or loss and other equity, and the balances below reverse signs.

US dollar Euro currency impact currency impact 2009 2008 2009 2008 £’000 £’000 £’000 £’000

Profit or loss 1,776 (410) — — Other equity — 8,033 — —

Of the impact on profit or loss an increase of £2,057,000 (2008: £8,048,000 increase to other equity) relates to the retranslation of the Group’s euro denominated borrowings.

In 2009, the sterling/euro exchange rate improved from the closing 2008 year rate of 1.0272 to 1.1113. This resulted in a foreign translation gain on borrowings of £15.2 million for the financial year, partly offsetting the loss made in 2008.

78 Johnston Press plc Annual Report and Accounts 2009 32. Financial Instruments (continued)

(i) Interest rate risk management The Group is exposed to interest rate risk as the parent company borrows funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align interest rate views, define risk appetite and the requirements of the funding agreements in place, ensuring optimal hedging strategies are applied, by either positioning the balance sheet or interest expense through different interest rate cycles. All hedges were re-evaluated in 2009 and where necessary amended to match the terms of the revised finance arrangements.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in section (k).

Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the period end date. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the period end date was outstanding for the whole year. A 50 basis points decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates.

At the reporting date, if interest rates had been 50 basis points lower and all other variables were held constant, the Group’s:

• net loss would decrease by £722,000 (2008: decrease by £1,163,000). The decrease in the current year is mainly due to the impact of the Group’s fair value hedges; and • net loss would increase by £16,000 (2008: decrease by £1,071,000) as a result of the changes in the fair value of the Group’s cash flow hedges.

For an increase of 50 bps, the numbers shown above would have the opposite effect.

Interest rate swap contracts Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and the cash flow exposures on the issued floating rate debt held.

The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at the reporting date. The average interest rate is based on the outstanding balances at the end of the financial year. In the tables below, positive values in the fair value columns denote financial assets and negative values denote financial liabilities.

Cash flow hedges - outstanding receive floating: pay fixed contracts and receive fixed: pay fixed contracts

Average contract Notional principal fixed interest amount Fair value 2009 2008 2009 2008 2009 2008 % % £’000 £’000 £’000 £’000

Within 1 year 4.48 3.09 55,000 68,146 (1,045) 303 2 to 5 years 5.27 4.54 204,280 200,000 2,653 (7,613) 5+ years — 5.72 — 37,128 — 16,849

5.10 4.36 259,280 305,274 1,608 9,539

Contracts with a nominal value of £75.0 million have fixed interest payments at an average of 4.59% for periods up to 2011, contracts with a nominal value of £55.0 million have fixed interest payments at an average of 4.48% for periods up to 2010, contracts with a nominal value of £70.0 million have fixed interest payments at an average of 3.49% for periods up to 2012 and contracts with a nominal value of $104.3 million have fixed interest payments at an average of 8.23% for periods up to 2012.

The interest rate swaps settle on a quarterly basis with interest being paid weekly or monthly on the underlying principal amount. The floating rate on the interest rate swaps is 3 months LIBOR. The Group settles the difference between the fixed and floating interest rates on a net basis. All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest rate amounts are entered into in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings.

Fair value hedges - outstanding receive fixed: pay floating contracts

Average contract Notional principal fixed interest amount Fair value 2009 2008 2009 2008 2009 2008 % % £’000 £’000 £’000 £’000

2 to 5 years 9.08 5.76 48,703 50,443 7,334 9,478 5+ years — 6.18 — 20,412 — 10,159

9.08 5.88 48,703 70,855 7,334 19,637

Johnston Press plc Annual Report and Accounts 2009 79 financial statements Notes to the Consolidated Financial Statements for the 53 week period ended 2 January 2010 continued

32. Financial Instruments (continued)

(i) Interest rate risk management (continued) The interest rate swaps settle on a quarterly basis. The average floating rate on the interest rate swaps is 3 month LIBOR plus a margin of 4.15%. The Group settles the difference between the fixed and floating interest rates on a net basis.

(j) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a way of mitigating the risk of financial loss from defaults. The Group’s policy on dealing with trade customers is described in notes 3 and 21.

The Group’s exposure and the credit ratings of its counterparties are continuously monitored. As far as possible, the aggregate value of transactions is spread across a number of approved counterparties.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics, the latter being defined as connected entities, other than with some of the larger advertising agencies. In the case of the latter, a close relationship exists between the Group and the agencies and appropriate allowances for doubtful debts are in place. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies, and the funds and financial instruments are held with a number of banks to spread the risk.

The following table shows the total estimated exposure to credit risk for all of the Group’s financial assets, excluding trade receivables which are discussed in note 21:

2009 2008 Carrying Exposure to Carrying Exposure to value credit risk value credit risk £’000 £’000 £’000 £’000

Available for sale investments 970 — 2,712 — Cash and cash equivalents 12,279 — 20,135 — Derivative instruments 15,794 — 36,791 —

29,043 — 59,638 —

(k) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has agreed an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in note 22 is a description of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk.

Liquidity risk is further discussed in the Business Review on pages 12 and 13.

Liquidity and interest risk tables The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

80 Johnston Press plc Annual Report and Accounts 2009 32. Financial Instruments (continued)

(k) Liquidity risk management (continued)

Period ended 2 January 2010

2003 2006 Bank Bank Private Private Finance Trade overdraft loans placement placement leases payables Total £’000 £’000 £’000 £’000 £’000 £’000 £’000

Within 1 year 1,022 30,085 13,647 9,715 — 14,142 68,611 In 1-2 years — 35,989 14,185 10,084 — — 60,258 2-3 years — 252,973 91,089 63,923 — — 407,985

1,022 319,047 118,921 83,722 — 14,142 536,854

Period ended 27 December 2008

2003 2006 Bank Bank Private Private Finance Trade overdraft loans placement placement leases payables Total £’000 £’000 £’000 £’000 £’000 £’000 £’000

Within 1 year 8,254 7,426 6,076 4,632 13 11,546 37,947 In 1-2 years — 341,638 6,076 4,632 — — 352,346 2-3 years — — 6,076 4,632 — — 10,708 3-4 years — — 6,076 4,632 — — 10,708 4-5 years — — 104,283 4,632 — — 108,915 5+ years — — — 82,505 — — 82,505

8,254 349,064 128,587 105,665 13 11,546 603,129

The maturity profile of the Group’s financial derivatives (which include interest rate and foreign currency swaps), using undiscounted cash flows, is as follows:

2009 2008 Payable Receivable Payable Receivable £’000 £’000 £’000 £’000

Within 1 year 14,401 12,296 13,876 14,757 In 1-2 years 11,316 12,839 11,427 12,371 2-3 years 115,029 127,091 6,392 8,510 3-4 years — — 5,615 7,803 4-5 years — — 54,231 61,263 5+ years — — 63,357 82,504

140,746 152,226 154,898 187,208

The Group has access to financial facilities, the total unutilised amount of which is £47.1 million (2008: £295.0 million) at the reporting date. The Group expects to meet its obligations from operating cash flows and proceeds of maturing financial assets.

(l) Fair value of financial instruments The fair values of financial assets and financial liabilities are provided by the counterparty to the instrument.

Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.

Johnston Press plc Annual Report and Accounts 2009 81 financial statements Company Balance Sheet at 2 January 2010

2009 2008 Notes £’000 £’000 Fixed Assets Tangible 35 567 609 Investments 36 631,810 747,112

632,377 747,721

Current assets Stocks 37 162 243 Debtors - due within one year 38 76,310 77,640 - due after more than one year 38 457,577 478,303 Cash at bank and in hand 3,248 401

537,297 556,587 Creditors: amounts falling due within one year 39 (135,866) (105,966)

Net current assets 401,431 450,621

Total assets less current liabilities 1,033,808 1,198,342 Creditors: amounts falling due after more than one year 40 (414,468) (517,926) Provisions for liabilities 42 (1,189) (1,220)

Net assets 618,151 679,196

Capital and reserves Called-up share capital Ordinary 63,974 63,974 Preference 1,106 1,106

65,080 65,080 Reserves 43 553,071 614,116

Shareholders’ funds 618,151 679,196

The comparative numbers are as at 27 December 2008.

The financial statements of Johnston Press plc, registered number 15382, were approved by the Board of Directors on 11 March 2010 and were signed on its behalf by:

J A Fry, Chief Executive Officer S R Paterson, Chief Financial Officer

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

82 Johnston Press plc Annual Report and Accounts 2009 Notes to the Company Financial Statements for the 53 week period ended 2 January 2010

33. Significant Accounting Policies

Basis of accounting and preparation The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards. No profit and loss account is presented as permitted by section 408 of the Companies Act 2006. The Company’s loss for the period, determined in accordance with the Act, was £61,644,000 (2008: loss of £349,286,000). The financial statements have been prepared on the historical cost basis except for the revaluation of certain fixed assets and derivative financial instruments. The principal accounting policies adopted are set out below.

The 2009 period was for the 53 weeks ended 2 January 2010 with the prior year being for the 52 weeks ended 27 December 2008.

Going concern The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the financial statements.

Tangible fixed assets Tangible fixed asset balances are shown at cost or valuation, net of depreciation and any provision for impairment. Depreciation is provided on all property, plant and equipment, excluding land, at varying rates calculated to write-off cost over the useful lives. The principal rates employed are:

Heritable and freehold property (excluding land) 2.5% on written down value Leasehold land and buildings equal annual instalments over lease term Other plant and machinery 6.67%, 10%, 20%, 25% and 33% straight line basis Motor vehicles 25% straight line basis

Investments Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. Unlisted investments are shown at directors’ valuation. Upward revaluations are credited to the revaluation reserve. Downward revaluations in excess of any previous upward revaluations are taken to the Profit and Loss Account.

Stocks Stocks are stated at the lower of cost and net realisable value. Cost incurred in bringing materials to their present location and condition comprises; (a) raw materials and goods for resale at purchase cost on a first-in first-out basis; and (b) work in progress at cost of direct materials, labour and certain overheads. Net realisable value comprises selling price less any further costs expected to be incurred to completion and disposal.

Borrowings Interest-bearing loans and bank overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premia payable on settlement or redemption and direct issue costs, are charged to the Profit and Loss Account using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Fees incurred in negotiating borrowings are held on the balance sheet and amortised to the Profit and Loss Account over the term of the underlying debt.

Taxation Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the period end date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the period end date. Timing differences are differences between the Group’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantively enacted by the period end date.

Share-based payments The Company issues equity settled share-based benefits to certain employees. These share-based payments are measured at their fair value at the date of grant and the fair value of expected shares is expensed to the Profit and Loss Account on a straight-line basis over the vesting period. Fair value is measured by use of the Black Scholes model, as amended to take account of the Directors’ best estimate of probable share vesting and exercise.

Dividends Dividends payable to the Company’s shareholders are recorded as a liability in the period in which the dividends are approved. In the Company’s financial statements, dividends receivable from subsidiaries are recognised as assets in the period in which the dividends are approved.

Johnston Press plc Annual Report and Accounts 2009 83 financial statements Notes to the Company Financial Statements for the 53 week period ended 2 January 2010 continued

33. Significant Accounting Policies (continued)

Financial instruments Financial assets and financial liabilities are recognised on the Balance Sheet when the Company becomes a party to the contractual provisions of that instrument.

The Company’s activities and funding structure give rise to some exposure to the financial risks of changes in interest rates and foreign currency exchange rates. The Company uses interest rate swaps and cross currency interest rate swaps to manage these exposures. The Company does not use derivative financial instruments for speculative purposes.

Changes in the fair value of derivative financial instruments are recognised directly in the Profit and Loss Account.

Full details of the Group policy are summarised on page 54.

Retirement benefit obligations The Company participates in a Group-wide scheme, the Johnston Press Pension Plan, which has a defined benefit section (providing benefits based on final pensionable pay) and a defined contribution section. The assets of the scheme are held separately from those of the Company. The pension costs for the defined contribution section are charged to the profit and loss account on the basis of contributions due in respect of the financial year. In relation to the defined benefit section of the scheme, the Company is unable to identify its share of the underlying assets and liabilities on a consistent and reliable basis and therefore, as required by FRS 17, the Company accounts for this scheme as a defined contribution scheme. As a result, the amount charged to the profit and loss account in respect of the defined benefit section represents the contributions payable to the scheme in respect of the period.

34. Staff Costs 2009 2008 No. No. Average number of employees Sales 1 1 Production 6 6 Administration 27 28

34 35

2009 2008 £’000 £’000 Employee costs Wages and salaries 2,890 3,016 Social security costs 305 322 Other pension costs 514 653

3,709 3,991

84 Johnston Press plc Annual Report and Accounts 2009 35. Tangible Fixed Assets

Freehold Plant and Motor buildings machinery vehicles Total £’000 £’000 £’000 £’000 Cost At 29 December 2007 590 246 72 908 Additions 65 — — 65 Asset reclassification 54 (54) — —

At 27 December 2008 709 192 72 973

Additions — 9 — 9 Disposals — (14) (30) (44)

At 2 January 2010 709 187 42 938

Depreciation At 29 December 2007 132 181 11 324 Charge for the year 20 2 18 40

At 27 December 2008 152 183 29 364

Disposals — (14) (16) (30) Charge for the year 14 6 17 37

At 2 January 2010 166 175 30 371

Carrying amount At 2 January 2010 543 12 12 567

At 27 December 2008 557 9 43 609

Johnston Press plc Annual Report and Accounts 2009 85 financial statements Notes to the Company Financial Statements for the 53 week period ended 2 January 2010 continued

36. Investments Subsidiary Unlisted undertakings investments Total £’000 £’000 £’000

Cost At the start and end of the period 1,105,370 3,526 1,108,896

Provisions for impairment At the start of the year 360,000 1,784 361,784 Provision for impairment 113,560 1,742 115,302

At the end of the period 473,560 3,526 477,086

Net book value At the end of the period 631,810 — 631,810

Net book value At the start of the period 745,370 1,742 747,112

An impairment charge has been reflected in the accounts of the Group. Full details are explained in note 15. Inevitably this affects the value of the investments held by the parent Company and the element of the impairment of intangible assets relating to the investments held by the parent Company has been processed as an impairment of investments.

An additional provision for impairment on the fair value of unlisted investments has been recognised in 2009 of £1,742,000. This reflects the current economic conditions in the UK, and the Directors believe that the investment has no significant market value in the current climate.

The Company’s principal subsidiary undertakings are as follows:

Country of Proportion incorporation of ownership Name of company and operation interest Nature of Business

Johnston Publishing Ltd England 100% Newspaper publishers *Johnston Press Ireland Ltd Republic of Ireland 100% Newspaper publishers Johnston (Falkirk) Ltd Scotland 100% Newspaper publishers Strachan & Livingston Ltd Scotland 100% Newspaper publishers Wilfred Edmunds Ltd England 100% Newspaper publishers Yorkshire Weekly Newspaper Group Ltd England 100% Newspaper publishers Sussex Newspapers Ltd England 100% Newspaper publishers T R Beckett Ltd England 100% Newspaper publishers *Halifax Courier Ltd England 100% Newspaper publishers *Isle of Man Newspapers Ltd Isle of Man 100% Newspaper publishers and printers South Yorkshire Newspapers Ltd England 100% Newspaper publishers Yorkshire Regional Newspapers Ltd England 100% Newspaper publishers *East Midlands Newspapers Ltd England 100% Newspaper publishers Lincolnshire Newspapers Ltd England 100% Newspaper publishers Anglia Newspapers Ltd England 100% Newspaper publishers Northamptonshire Newspapers Ltd England 100% Newspaper publishers Central Counties Newspapers Ltd England 100% Newspaper publishers Premier Newspapers Ltd England 100% Newspaper publishers Peterboro’ Web Ltd England 100% Contract printers *Northampton Web Ltd England 100% Contract printers *Portsmouth Publishing & Printing Ltd England 100% Newspaper publishers and printers *Northeast Press Ltd England 100% Newspaper publishers and printers *The Tweeddale Press Ltd Scotland 100% Newspaper publishers *Yorkshire Post Newspapers Ltd England 100% Newspaper publishers and printers *Ackrill Newspapers Ltd England 100% Newspaper publishers *Sheffield Newspapers Ltd England 100% Newspaper publishers *Lancashire Evening Post Ltd England 100% Newspaper publishers *Lancashire Publications Ltd England 100% Newspaper publishers *Lancaster & Morecambe Newspapers Ltd England 100% Newspaper publishers *Johnston Letterbox Direct Ltd England 100% Newspaper publishers

86 Johnston Press plc Annual Report and Accounts 2009 36. Investments (continued) Country of Proportion incorporation of ownership Name of company and operation interest Nature of Business

*Blackpool Gazette & Herald Ltd England 100% Newspaper publishers *East Lancashire Newspapers Ltd England 100% Newspaper publishers Score Press Ltd Scotland 100% Holding company *Morton Newspapers Ltd Northern Ireland 100% Newspaper publishers and printers *Kilkenny People Publishing Ltd Republic of Ireland 100% Newspaper publishers and printers *Angus County Press Ltd Scotland 100% Newspaper publishers *Galloway Gazette Ltd Scotland 100% Newspaper publishers *Stornoway Gazette Ltd Scotland 100% Newspaper publishers *Longford Leader Ltd Republic of Ireland 100% Newspaper publishers *Leitrim Observer Ltd Republic of Ireland 100% Newspaper publishers *Leinster Leader Ltd Republic of Ireland 100% Newspaper publishers *Leinster Express Newspapers Ltd Republic of Ireland 100% Newspaper publishers *Dundalk Democrat Ltd Republic of Ireland 100% Newspaper publishers *Limerick Leader Ltd Republic of Ireland 100% Newspaper publishers and printers *Derry Journal Ltd Northern Ireland 100% Newspaper publishers *Donegal Democrat Ltd Republic of Ireland 100% Newspaper publishers The Scotsman Publications Ltd Scotland 100% Newspaper publishers *Clonnad Ltd Republic of Ireland 100% Newspaper publishers

*Held through subsidiary.

There is no difference in the proportions of ownership interest shown above and the voting power held. All investments in subsidiary undertakings are held at cost less, where appropriate, provisions for impairment.

37. Stocks

2009 2008 £’000 £’000

Raw materials 13 15 Work-in-progress — 1 Goods for resale 149 227

162 243

38. Debtors

2009 2008 £’000 £’000

Amounts falling due within one year Amounts owed by subsidiary undertakings 65,269 65,269 Corporation tax recoverable 10,411 11,913 Trade and other debtors and prepayments 630 155 Derivative financial instruments (note 23) — 303

76,310 77,640

Amounts falling due after more than one year Amounts owed by subsidiary undertakings 441,401 440,401 Derivative financial instruments (note 23) 15,794 36,488 Deferred tax asset - see below 382 1,414

457,577 478,303

Johnston Press plc Annual Report and Accounts 2009 87 financial statements Notes to the Company Financial Statements for the 53 week period ended 2 January 2010 continued

38. Debtors (continued)

The following are the major deferred tax assets recognised by the Company and movements thereon during the year.

Accelerated tax Pension Other timing depreciation balances differences Total £’000 £’000 £’000 £’000

At the start of the period 32 342 1,040 1,414 (Charge)/credit to profit and loss account (2) (9) (1,021) (1,032)

At the end of the period 30 333 19 382

39. Creditors: amounts falling due within one year

2009 2008 £’000 £’000

Borrowings (note 41) 21,735 10,202 Amounts owed to subsidiary undertakings 107,818 87,483 Other taxes and social security costs 175 186 Accruals and deferred income 5,077 8,067 Other creditors 16 28 Derivative financial instruments (note 23) 1,045 —

135,866 105,966

40. Creditors: amounts falling due after more than one year

2009 2008 £’000 £’000

Borrowings (note 41) 408,662 510,311 Derivative financial instruments (note 23) 5,806 7,615

414,468 517,926

41. Borrowings

2009 2008 The Company’s bank overdrafts and loans comprise: £’000 £’000

Bank overdrafts 1,864 10,592 Bank loans - sterling 233,746 166,000 Bank loans - euro denominated 43,193 169,003 2003 Private placement loan notes 96,238 101,245 2006 Private placement loan notes 67,428 74,177 Payment-in-kind interest accrual 2,193 — Term debt issue costs (14,265) (504)

430,397 520,513

88 Johnston Press plc Annual Report and Accounts 2009 41. Borrowings (continued)

2009 2008 The borrowings are repayable as follows: £’000 £’000

On demand or within one year 27,021 10,592 Within one to two years 30,187 335,003 Within two to five years 387,454 101,245 After more than five years — 74,177

444,662 521,017

Less amount due for settlement within one year (27,021) (10,592)

Amount due for settlement after more than one year 417,641 510,425

The borrowings are shown in the Balance Sheet net of term debt issue costs of £14,265,000 of which £5,286,000 is deducted from current liabilities (2008: £504,000 of which £390,000 is deducted from current liabilities).

Other details relating to the bank overdrafts and loans are set out in note 22.

42. Provisions for liabilities

Unfunded pensions £’000

At the start of the period 1,220 Paid during the period (31)

At the end of the period 1,189

The unfunded pension provision is assessed by a qualified actuary at each period end.

43. Reserves

Share-based Hedging and Share Payments Revaluation Translation Retained Other Own Premium Reserve Reserve Reserve Earnings Reserves Shares Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening balance 502,818 10,064 48 7,939 78,149 19,510 (4,412) 614,116 Loss for the period — — — — (61,644) — — (61,644) Reclassification on de-designation of hedge relationships — — — (7,939) — — — (7,939) Revaluation adjustment — — (1) — 1 — — — Dividends — — — — (152) — — (152) Warrants issued — 9,390 — — — — — 9,390 Own shares purchased — — — — — — (592) (592) Provision for share based payments — (108) — — — — — (108)

At the end of the year 502,818 19,346 47 — 16,354 19,510 (5,004) 553,071

Further details of share-based payments are shown in note 30.

Johnston Press plc Annual Report and Accounts 2009 89 financial statements Group Five Year Summary

2005 2006 2007 2008 2009 £’000 £’000 £’000 £’000 £’000 Income Statement Revenue 520,154 602,221 607,504 531,899 427,996

Operating profit on ordinary activities+ 180,210 186,773 178,142 128,414 71,784 Share of associates’ operating profit 81 60 76 85 22 Non-recurring items (2,614) (15,143) (12,703) (528,090) (162,398)

Profit/(loss) before interest and taxation 177,677 171,690 165,515 (399,591) (90,592) Net finance costs (26,314) (40,136) (40,801) (29,667) (28,465) Non-recurring finance costs and IAS 21/39 items — — — — 5,282

Profit/(loss) before taxation 151,363 131,554 124,714 (429,258) (113,775) Taxation (43,572) (35,899) (11,159) 63,788 26,517

Profit/(loss) for the year 107,791 95,655 113,555 (365,470) (87,258)

Statistics Basic earnings per share* 27.67p 24.42p 28.91p (67.99p) (13.66p) Underlying earnings per share* 28.44p 26.93p 25.08p 13.41p 5.53p Operating profit+ to turnover 34.6% 31.0% 29.3% 24.1% 16.8%

Balance Sheet Intangible assets 1,300,443 1,483,733 1,503,624 1,057,886 923,377 Property, plant and equipment 222,178 268,342 273,381 260,498 219,608 Investments 2,760 2,745 2,751 2,772 1,000 Derivative financial instruments — 6,598 4,192 36,488 15,794

1,525,381 1,761,418 1,783,948 1,357,644 1,159,779 Net current (liabilities)/assets (41,147) 24,526 (2,378) 8,400 (41,473)

Total assets less current liabilities 1,484,234 1,785,944 1,781,570 1,366,044 1,118,306 Non-current liabilities (600,888) (769,321) (691,010) (519,728) (405,973) Long term provisions (400,876) (442,810) (406,785) (332,496) (342,309)

Net Assets 482,470 573,813 683,775 513,820 370,024

Shareholders’ Funds Ordinary Shares 28,666 28,787 28,838 63,974 63,974 Preference Shares 1,106 1,106 1,106 1,106 1,106 Reserves 452,698 543,920 653,831 448,740 304,944

Capital Employed 482,470 573,813 683,775 513,820 370,024

All periods related to 52 trading weeks with the exception of 2009 which is a 53 week period.

* The earnings per share for the periods ended 2005 to 2007 inclusive have been restated to reflect the dilution factor of the Rights Issue completed in June 2008.

+ before non-recurring and IAS21/39 items.

90 Johnston Press plc Annual Report and Accounts 2009 Notice of Meeting

Notice is hereby given that the eighty-first Annual General Meeting of Johnston Press plc (“the Company”) will be held in The Boardroom, The Caledonian Hilton Hotel, Princes Street, Edinburgh on 30 April 2010 at 12.00 noon to transact the following business of the Company: 1. To receive the Accounts for the 53 week period ended 2 January 2010 and the reports of the Directors and Auditors thereon. 2. To receive the Directors’ Remuneration Report for the 53 week period ended 2 January 2010. 3. To re-elect Mr I S M Russell as a Director of the Company. 4. To re-elect Mr S R Paterson as a Director of the Company. 5. To elect Mr M A Pain as a Director of the Company. 6. To elect Ms C A Rhodes as a Director of the Company. 7. To elect Mr G M Iddison as a Director of the Company. 8. To re appoint Deloitte LLP, Chartered Accountants and Registered Auditors, as auditors of the Company. 9. To authorise the Directors to fix the remuneration of the auditors. As special business to consider and, if thought fit, pass the following Resolutions of which number 10 will be proposed as an Ordinary Resolution and numbers 11 to 14 will be proposed as Special Resolutions:- Ordinary Resolution 10. (i) That the Directors be and are hereby generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006 (“the Act”) to exercise all powers of the Company to allot shares in the Company and to grant rights to subscribe for or convert any security into shares in the Company up to a maximum nominal amount of £21,322,533 provided that this authority shall expire on the date of the next Annual General Meeting of the Company, save that the Company may, before this authority expires, make an offer or agreement which would or might require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after it expires and the Directors may allot shares or grant rights to subscribe for or convert securities into shares in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. and further, (ii) That the Directors be and they are hereby generally and unconditionally authorised to exercise all powers of the Company to allot equity securities (within the meaning of Section 560 of the Act) in connection with a rights issue in favour of Ordinary shareholders where the equity securities respectively attributable to the interests of all Ordinary shareholders are proportionate (as nearly as may be) to the respective numbers of Ordinary shares held by them up to an aggregate nominal amount of £21,322,533 provided that this authority shall expire on the date of the next Annual General Meeting of the Company after the passing of this resolution save that the Company may before this authority expires make an offer or agreement which would or might require shares to be allotted after it expires and the Directors may allot equity securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired. All previous authorities under Section 80 of the Companies Act 1985 shall cease to have effect. Special Resolutions 11. That, subject to the passing of Resolution 10 set out in the notice of this meeting, the Directors be and are hereby empowered pursuant to the provisions of Section 570 of the Companies Act 2006 (“the Act”) to allot equity securities (within the meaning of Section 560 of the Act) pursuant to the authority granted by that Resolution for cash, as if sub-section (1) of Section 561 of the Act did not apply to any such allotment provided that this power shall be limited: (i) to the allotment of such equity securities in connection with a rights issue in favour of Ordinary Shareholders where the equity securities respectively attributable to the interests of all Ordinary Shareholders are proportionate (as nearly as may be) to the respective numbers of Ordinary Shares held by them subject only to such exclusions or other arrangements as the Directors may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of, or the requirements of any recognised regulatory body in, any territory; and (ii) to the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity securities up to an aggregate nominal value of £3,198,699 This power shall expire, unless previously revoked or varied, on the date of the Annual General Meeting of the Company held in 2011 save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. 12. That the Company be and is hereby generally and unconditionally authorised to make market purchases (within the meaning of Section 693(4) of the Companies Act 2006 of ordinary shares of 10p each in the Company (“Ordinary Shares”) PROVIDED THAT: (i) the maximum number of Ordinary Shares hereby authorised to be acquired is 63,000,000; (ii) the maximum price which may be paid for any such Ordinary Share is an amount equal to 105% of the average of the middle market quotations for an Ordinary Share as derived from The London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the share is contracted to be purchased and the minimum price which may be paid for any such share is 10p (in each case exclusive of associated expenses); and (iii) the authority hereby conferred shall expire at the conclusion of the next Annual General Meeting of the Company or 12 months from the date of the passing of this resolution, whichever is the earlier; but a contract of purchase may be made before such expiry which will or may be completed wholly or partly thereafter, and a purchase of Ordinary Shares may be made in pursuance of any such contract. 13. That:- (i) the Articles of Association of the Company be and are hereby amended by the deletion of all the provisions of the Memorandum of Association of the Company which, by virtue of section 28 of the Companies Act 2006, are to be treated as provisions of the Articles of Association of the Company; and (ii) the Articles of Association, contained in the document produced to this Meeting and signed by the Chairman for the purposes of identification, be and are hereby approved and adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association, with effect from the conclusion of the 2010 Annual General Meeting. 14. That a General Meeting other than an Annual General Meeting may be called on not less than 14 clear days’ notice.

By Order of the Board P M McCall Secretary 108 Holyrood Road Edinburgh EH8 8AS 11 March 2010

Johnston Press plc Annual Report and Accounts 2009 91 financial statements Notice of Meeting continued

Notes: 1. In accordance with the Articles of Association of the Company, only holders of ordinary shares are entitled to attend and vote at the meeting convened by the above Notice. 2. A member entitled to attend and vote at the meeting convened by the above Notice is also entitled to appoint one or more proxies to exercise all or any of the rights of the member to attend, speak and vote instead of him/her. A proxy need not be a member of the Company. If a member appoints more than one proxy to attend the meeting, each proxy must be appointed to exercise the rights attached to a different share or shares held by the member. 3. To appoint a proxy you may use the form of proxy enclosed with this annual report. To be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed or notarially certified copy of the same, must be completed and returned to the office of the Company’s registrar in accordance with the instructions printed thereon as soon as possible and in any event by not later than 12.00 noon on 28 April 2010. Alternatively you can vote or appoint a proxy electronically by visiting www.eproxyappointment.com. You will be asked to enter the Control Number, the Shareholder Reference Number and PIN which are printed on the form of proxy. The latest time for the submission of proxy votes electronically is 12.00 noon on 28 April 2010. 4. Completion and return of the form of proxy or other instrument appointing a proxy or any instruction given pursuant to note 11 below will not prevent a member from attending the meeting and voting in person. 5. Any person receiving a copy of this Notice as a person nominated by a member to enjoy information rights under section 146 of the Companies Act 2006 (a “Nominated Person”) should note that the provisions in Notes 2 and 3 above concerning the appointment of a proxy or proxies to attend the meeting in place of a member, do not apply to a Nominated Person as only ordinary shareholders have the right to appoint a proxy. However, a Nominated Person may have a right under an agreement between the Nominated Person and the member by whom he or she was nominated to be appointed, or to have someone else appointed, as proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may have a right under such agreement to give instructions to the member as to the exercise of voting rights at the meeting. 6. Nominated persons should also remember that their main point of contact in terms of their investment in the Company remains the member who nominated the Nominated Person to enjoy the information rights (or alternatively the custodian or broker who administers the investment on their behalf). Nominated Persons should continue to contact that member, custodian or broker (and not the Company) regarding any changes or queries relating to the Nominated Person’s personal details and interest in the Company (including any administrative matter). The only exception to this is where the Company expressly requests a response from the Nominated Person. 7. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, only ordinary shareholders registered in the register of members of the Company by not later than 6.00 pm on Wednesday 28 April 2010 shall be entitled to attend and vote at the meeting in respect of the number of the ordinary shares registered in their name at such time. If the meeting is adjourned, the time by which a person must be entered on the register of members of the Company in order to have the right to attend and vote at the adjourned meeting is 6.00 pm two days prior to the time of adjournment. Changes to the register of members after the relevant times shall be disregarded in determining the rights of any person to attend and vote at the meeting. 8. In the case of joint holders, the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the relevant joint holding. 9. Holders of ordinary shares through the Company’s savings schemes are entitled to attend and vote at the meeting if the voting instruction form, which is enclosed with this document, is correctly completed and returned in accordance with the instructions printed thereon. 10. Shareholders who hold their ordinary shares electronically may submit their votes through CREST, by submitting the appropriate and authenticated CREST message so as to be received by the Company’s registrar not later than 48 hours before the start of the meeting. Instructions on how to vote through CREST can be found by accessing the following website: www.euroclear.com/CREST. Shareholders are advised that CREST and the internet are the only methods by which completed proxies can be submitted electronically. 11. If you are a CREST system user (including a CREST personal member) you can appoint one or more proxies or give an instruction to a proxy by having an appropriate CREST message transmitted. To appoint one or more proxies or to give an instruction to a proxy (whether previously appointed or otherwise) via the CREST system, CREST messages must be received by Computershare (ID number 3RA50) not later than 48 hours before the time appointed for holding the meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp generated by the CREST system) from which Computershare is able to retrieve the message. CREST personal members or other CREST sponsored members should contact their CREST sponsor for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings please refer to the CREST manual. The Company may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 12. If the Chairman, as a result of proxy appointments, is given discretion as to how the votes which are the subject of those proxies are cast and voting rights in respect of those discretionary proxies, when added to the interest in the Company’s securities already held by the Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation under the Disclosure and Transparency Rules, the Chairman will make the necessary notifications to the Company and the Financial Services Authority. As a result, any member holding 3% or more of the voting rights in the Company, who grants the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification obligation under the Disclosure and Transparency Rules, need not make a separate notification to the Company and Financial Services Authority. 13. Any questions relevant to the business of the meeting may be asked at the meeting by anyone permitted to speak at the meeting. A shareholder may alternatively submit a question in advance by a letter addressed to the Company Secretary at the Company’s registered office. Under Section 319A of the Companies Act 2006, the Company must answer any question a shareholder asks relating to the business being dealt with at the meeting, unless (i) answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information; (ii) the answer had already been given on a website in the form of an answer to a question; or (iii) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. 14. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that, if it is appointing more than one corporate representative, it does not do so in relation to the same shares. It is therefore no longer necessary to nominate a designated corporate representative. 15. Under section 527 Companies Act 2006, members meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the meeting; or (ii) any circumstance connected with an Auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with section 437 Companies Act 2006. The Company may not require the members requesting any such website publication to pay its expenses in complying with sections 527 or 528 Companies Act 2006. Where the Company is required to place a statement on a website under section 527 Companies Act 2006, it must forward the statement to the Company’s Auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the meeting includes any statement that the Company has been required under section 527 Companies Act 2006 to publish on a website. 16. As at the date of this report, the Company’s issue share capital consisted of 639,739,965 ordinary shares. Each ordinary share carries the right to one vote and therefore the total voting rights in the Company as at the date of this report are 639,739,965. 17. Further information regarding the meeting which the Company is required by section 311A of the Companies Act 2006 to publish on a website in advance of the meeting, can be accessed at www.johnstonpress.co.uk/jpplc/investorcentre. 18. Service contracts and letters of appointment between the Company and the Directors will be on display and available for inspection at the Annual General Meeting.

92 Johnston Press plc Annual Report and Accounts 2009 advisers

Johnston Press plc is one of the top 3 largest local Solicitors Principal Bankers newspaper publishers in the UK and a major force on MacRoberts Barclays Bank plc 152 Bath Street 2nd Floor, Quay 2 the Internet. Glasgow Fountainbridge G2 4TB Edinburgh EH3 9QG Our aim is to serve local communities across a variety of Ashurst Broadwalk House Lloyds TSB Scotland plc channels, providing access to local information. We have 5 Appold Street Henry Duncan House London 120 George Street unique local content created by teams of local experts EC2A 2HA Edinburgh who believe that “Content is King”. Our coverage of local EH2 4LH Auditors stories and events is unrivalled across all media. Deloitte LLP National Australia Bank Chartered Accountants The Plaza and Statutory Auditors 50 Lothian Road Saltire Court Edinburgh 20 Castle Terrace EH3 9BY Edinburgh EH1 2DB The Royal Bank of Scotland plc 36 St Andrew Square Investment Bankers Edinburgh Citigroup EH2 2YB Citigroup Centre 33 Canada Square Registrars Canary Wharf Computershare Investor Services PLC London PO Box 82 E14 5LB The Pavilions Bridgewater Road Stockbrokers Bristol Deutsche Bank AG London BS99 7NH Winchester House 1 Great Winchester Street London EC2N 2DB

11.4 297 18.3 million million readers local websites total audience

Print titles Extending audience reach to 61.0 We provide a wide variety of Daily - 18 million page impressions per month, complementary publications to Weekly - 156 up 16.0% on 2008o layer the market, give consumer choice and increase advertising Weekly free - 97 6.9 million unique users per month, reach: Printing from up 15.0% on 2008o • Lifestyle magazines 8 regional print centres • Community newsletters • Commuter newspapers • Niche publications • Local events and exhibitions

This report has been printed on Edixion which is FSC certified and both mill and printer achieved ISO 14001 certification.

Designed and produced by corporateprm, Edinburgh and London. www.corporateprm.co.uk * see pages 10 and 45 o These web statistics are based on Webtrends 8. The prior period numbers and percentage increases have been restated on this basis. Annual Report and Accounts 2009 Accounts and Report Annual plc Press Johnston

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Johnston Press plc

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Tel: 0131 - 225 3361 Fax: 0131 - 225 4580 email: [email protected] Web Site: http://www.johnstonpress.co.uk Johnston Press plc Registration number 15382 Annual Report and Accounts 2009