Johnston Press Annual Report and Accounts 2004
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Johnston Press plc Annual Report and Accounts 2004 As life is local, Johnston Press is focused on local publishing in print and online Our aim is to serve our local communities by publishing quality newspapers, related print publications and websites that attract users, providing an effective platform for advertisers to reach their target audience. 243 10.8 182 newspaper titles million readers local websites Contents Why do we focus on local publishing? page 4 What opportunities does our strategy provide for growth? page 6 How do we maximise efficiency across the business? page 8 02 Highlights 52 Directors’ Report 04 Why do we focus on 55 Independent Auditors’ Report local publishing? 56 Group Profit and Loss Account 06 What opportunities does our 57 Group Statement of Total strategy provide for growth? Recognised Gains and Losses 08 How do we maximise efficiency 57 Group Reconciliation of Movements across the business? in Shareholders’ Funds 10 Chairman’s Statement 57 Group Note of Historical 14 Chief Executive Officer’s Review Cost Profits and Losses 26 Financial Review 58 Group Balance Sheet 31 Management Committee 59 Group Cash Flow Statement 32 Board of Directors 60 Company Balance Sheet 34 Group’s Newspaper Titles 61 Notes to the Accounts 36 Websites by Division 88 Group Profit and Loss Account 37 Corporate Governance Half Year Summary 41 Corporate Social Responsibility 89 Five Year Summary 46 Directors’ Remuneration Report 90 Notice of Meeting Johnston Press plc Annual Report and Accounts 2004 01 Highlights Strong performance Financial Highlights Operational Highlights ✽ Pre Tax Profit up 17.7% ✽ Better than expected ✽ Earnings Per Share up 19.1% advertising revenue growth ✽ Headline Earnings Per Share ✽ Launch of new publications up 17.3% and supplements ✽ Dividend Per Share up 20.0% ✽ Good organic growth in ✽ Turnover up 5.5% other revenues ✽ Operating Profit up 10.4% ✽ Excellent cost control ✽ Operating Profit pre Exceptionals ✽ Continued investment (underlying growth) up 9.2%* for efficiency ✽ Like-for-like Advertising ✽ Long term printing contracts Revenues up 5.5%* with News International ✽ Operating Cash Flow up 15.0% ✽ Significant investment in ✽ Interest Cover up to 6.8x market research ✽ Internet Revenues up 17.0% ✽ Website page impressions increased by over a third * see Financial Review for definitions Johnston Press plc 02 Annual Report and Accounts 2004 Turnover £m Operating Profit £m Operating Profit Margin £518.8 m £177.2 m up to 34.0% 518.8 177.2 34.0 up 5% 491.8 up 10% 32.6 160.6 29.8 30.2 28.7 428.4 129.5 292.2 300.6 89.5 83.9 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 Headline EPS p Dividends p Internet Revenues 37.96 p 7.2 p £6.3 m up 17% 37.96 up 20% 7.2 up 17% 6.3 32.36 5.4 6.0 5.4 26.75 4.9 4.4 23.65 4.5 20.97 2.6 1.2 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 Johnston Press plc Annual Report and Accounts 2004 03 Johnston Press plc 04 Annual Report and Accounts 2004 By publishing quality newspapers for local communities we attract readers and provide an effective platform for advertisers. A sense of community Research carried out on behalf of that “life is local” and the Johnston the Newspaper Society has indicated Press strategy of serving the needs that the vast majority of people of local communities in many parts * regard a sense of belonging and of the UK. The focus on local markets 86 % attachment to their local area as enables the Group to offer news of people “feel part of an important source of identity in coverage that is highly targeted to their lives. Indeed 56%* of those the needs of these communities and their local community” interviewed felt that their region was it is this focus which differentiates central to defining who they are. Johnston Press from many other This research supports the concept competing media channels. * Source: myuk. Redefining Regions The Future Foundation (2003) Advertising revenue The relevance and strong affinity to The successful delivery of this UK Media Advertising the communities we serve ensure that efficient and flexible advertiser Revenue Share+ Johnston Press is able to provide an platform is confirmed by the fact advertising platform with high levels of that in 2004 Johnston Press I J local market penetration. In addition to increased total advertising revenues H G this local focus, we are able to offer by 5.5% on a like-for-like basis. A our customers the opportunity to More generally, however, the F advertise in a packaged range of titles, effectiveness of the regional press or online, and this in turn enables them as an advertising medium is further E to target specific demographic groups endorsed by the fact that in value or the geographic areas that are most terms, it remains the largest print relevant to their needs or businesses, advertising medium in the UK. D with high market penetration. B C A TV 25.7% F Direct Mail 7.0% B Regional Press 20.6% G Posters 6.2% C National Press 13.1% H Radio 3.6% D Magazines 12.7% I Internet 2.6% E Directories 7.1% J Cinema 1.2% + Source: Advertising Association’s Advertising Statistics Yearbook 2004 Johnston Press plc Annual Report and Accounts 2004 05 As well as using editorial excellence to increase circulation of our existing publications, we are proactive in using our deep understanding of our communities’ needs to develop new platforms. Investment in market research Johnston Press is committed to confirming the high degree of understanding the needs of readers relevance that our titles currently and in 2004 the Group commissioned have to the local communities they million extensive market research for 65 of serve as well as demonstrating £1 our titles, including 10 of 15 daily unrivalled household penetration spent this year on papers. The results of this project and readership levels. market research have been positive in terms of New titles in 2005 Ongoing market research also fulfils another crucial function as it enables Johnston Press to develop a deep understanding of reader attitudes and specifically how local needs and tastes are changing over time. This knowledge is invaluable in ensuring that the Group’s portfolio of existing titles is developed appropriately and also in identifying market opportunities for a range of new publications. Accordingly, this understanding has resulted in the development of plans for the launch of new specialist and lifestyle publications in 2005. As well as satisfying the demands of local communities and specialist groups, these development plans will ensure that our local markets are appropriately layered with a range of publications that enables Johnston Press to offer advertisers effective and targeted platforms through which to promote their services. Johnston Press plc Annual Report and Accounts 2004 07 Our 243 titles are printed in 13 regional print centres. Along with our centralised management support services and continued investment in technology, this allows us to benefit from significant economies of scale. Regional printing centres The vast majority of Johnston Press appropriate centre thereby maximising 1 titles are now printed in house at one colour revenue potential and the 2 of 13 regional centres that are utilisation of the Group’s total printing 3 managed centrally by the Group’s capacity. In addition, the operation 5 4 8 Printing Division. This centralised of a relatively small number of larger 6 7 9 management control increases the scale printing centres provides the 10 efficiency of the Group’s printing basis for tight cost control and 12 operations as it ensures that specific excellent operational efficiency. 11 titles are produced at the most 13 1 Falkirk 8 Scarborough 2 Sunderland 9 Wakefield 3 Hartlepool 10 Sheffield 4 Leeds 11 Northampton 5 Isle of Man 12 Peterborough 6 Preston (external) 13 Portsmouth 7 Halifax Improved efficiency, capacity and value Johnston Press continues to invest Johnston Press also continues to Other Capital Projects heavily in further enhancing its printing invest significantly in the development capability and in part this investment of Group-wide IT systems in order to £’m has focused on the deployment of consolidate what was once a disparate 2004 greater revenue generating colour range of company-specific systems. Colour towers at Leeds capacity. The £60 million investment As well as improving levels of and Sunderland 6.7 in the development of a brand new customer care, this investment also Computer-to-plate facility near Sheffield and the proposal helps drive business efficiency and technology 1.8 Computer systems 5.1 to spend more than £45 million on productivity. In addition, the a similar plant in Portsmouth will introduction of common systems Planned 2005 improve the overall efficiency of the facilitates the offer of extended title Replacement mailrooms Group’s printing operations. packages to advertisers and this at Leeds and Peterborough 11.8 in turn will drive revenue growth in Computer systems 6.2 the future. Johnston Press plc Annual Report and Accounts 2004 09 Johnston Press plc 10 Annual Report and Accounts 2004 Chairman’s Statement Continued progress Roger Parry Chairman 2004 was a year of organic growth and continued Dividend progress for Johnston Press. The Group achieved The Board proposes a final dividend of 4.8p per share, record results in terms of sales, margins, profits, making a total of 7.2p per share for the year compared to earnings per share, dividends and cash generation. 6p per share last year.