REG - National World PLC - Results for the 52 weeks ended 1 January 2022
17/03/2022 07:00
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RNS Number : 0571F National World PLC 17 March 2022
National World plc
("National World," "the Group" or "the Company")
Results for the 52 weeks ended 1 January 2022
Significant progress in the strategy to digitise and monetise relevant and
unique content, creating a modern publishing model in both local and national
markets across multiple brands and platforms
Strong start to 2022 with revenue +5.6% in January and February; no change to
full year guidance
National World is pleased to announce its audited results for the 52 weeks
ended 1 January 2022, the first full year since its acquisition of JPIMedia
Publishing Limited and its subsidiaries (the "JPIMedia Group") on 2 January
2021.
Highlights
Adjusted results* Statutory results
2021 2020 2021 2020
£m £m £m £m
Revenue 86.0 - 86.0 -
Operating profit/(loss) 9.3 (0.3) 2.1
Profit/(loss) before tax 8.6 (0.3) 1.2 (1.1)
EBITDA 10.1 (0.3) 5.7 (1.1)
Earnings/(loss) per share (pence) 3.7 (0.6) 2.8 (2.0)
*Adjusted results are before non-recurring items, amortisation of intangible
assets and implementation of IFRS 16. Note 17 provides a reconciliation
between Statutory and Adjusted results.
● Strong performance with revenue of £86.0 million. Adjusted
operating profit of £9.3 million and adjusted EBITDA of £10.1 million.
● Robust revenue with a marginal decline of 2% on a proforma basis
(assuming JPIMedia Group was acquired at the beginning of 2020) with strong
digital revenue growth of 23%, partially offsetting a 6% decline in print
revenue.
● Strong balance sheet with significant financial flexibility, closing
cash balance of £23.0 million at 1 January 2022.
● Digital transformation initiated
○ Increased investment in digital development contributing to
improvements in user experience, in particular for subscribers, consolidation
of smaller sites and launch of new sites and data to track content performance
and user engagement.
○ Successful launch of nationalworld.com (http://nationaworld.com/) ,
an online national newspaper, now our highest audience ranking brand in under
a year, with 16.4 million pages views in February 2022.
○ Further launches of metro world sites in seven cities including
London, creating a truly national content business with a UK wide footprint.
○ Over 110 million average monthly page views and 36 million average
monthly unique users
● National World brand to be adopted as our trading brand which is
more in keeping with our expanded reach.
● Migration to the Google Cloud platform on track for completion in
2022.
● Annualised costs savings of £5.1 million (net of National World
management costs), £1.1 million ahead of target, with a further £2.0 million
of annualised cost savings targeted in 2022.
● Reduced office space resulting in a one-off non-recurring charge of
£1.8 million.
Current trading and outlook
The Board is encouraged by the good start to the year and expects the Company
to make continued progress in delivering its strategy for growth. There is
some uncertainty in the trading environment because of inflationary pressures,
in particular newsprint and printing costs, and the global instability as a
result of the Ukraine war.
Revenue in January and February 2022 was up 5.6% year on year with strong
digital growth of 48%, partially offset by print revenue which is broadly in
line with 2021. We are encouraged by the steady improvement in print and
digital advertising trends as we recover from the pandemic and against weaker
comparatives.
Commenting on the results, Chairman David Montgomery, said
"We have made significant progress in the first year following the acquisition
of JPIMedia Group, achieving a strong performance and initiating a
transformation of the operating model to build a sustainable premium content
and sales business.
As well as pursuing organic growth through new launches and relaunches,
management is actively developing acquisition opportunities primarily
targeting businesses that will enhance its digital capabilities and broaden
its content base. The Company is also open to acquiring heritage assets to
build scale and enhance shareholder value through synergies.
The Board thanks the Group's talented staff for successfully completing the
first stage of reorganisation and establishing a national media presence."
Enquiries
National World plc c/o Montfort Communications
David Montgomery
Vijay Vaghela
Montfort Communications
Nick Miles +44 (0)77 3970 1634
Olly Scott +44 (0)78 1234 5205
Forward looking statements
This announcement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "plans", "projects", "anticipates", "expects",
"intends", "may", "will", or "should" or, in each case, their negative or
other variations or comparable terminology. These forward-looking statements
include matters that are not historical facts. They appear in a number of
places throughout this announcement and include statements regarding the
Directors' current intentions, beliefs or expectations concerning, among other
things, the Company's results of operations, financial condition, liquidity,
prospects, growth, strategies and the Company's markets. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
future events and circumstances. Actual results and developments could differ
materially from those expressed or implied by the forward-looking
statements. Forward-looking statements may and often do differ materially
from actual results. Any forward-looking statements in this announcement are
based on certain factors and assumptions, including the Directors' current
view with respect to future events and are subject to risks relating to future
events and other risks, uncertainties and assumptions relating to the
Company's operations, results of operations, growth strategy and liquidity.
Whilst the Directors consider these assumptions to be reasonable based upon
information currently available, they may prove to be incorrect. Save as
required by applicable law or regulation, the Company undertakes no obligation
to release publicly the results of any revisions to any forward-looking
statements in this announcement that may occur due to any change in the
Directors' expectations or to reflect events or circumstances after the date
of this announcement.
Chairman's statement
I am pleased to present National World's first set of results that include an
acquisition following the Company's launch in late 2019.
The acquisition of JPIMedia Group announced on 31 December 2020, was completed
on 2 January 2021. JPIMedia Group's portfolio of iconic brands provides a
strong base to implement the Company's strategy of creating a modern platform
for news publishing with a transformed operational model that is already
supporting both existing and new products across the entire UK.
The Company is now on a strong financial footing from which we can build a
sustainable, diverse and growing premium content and sales business.
The Group delivered a robust performance in the period with revenue of £86.0
million even though the trading environment remained challenging due to the
COVID-19 pandemic and government-imposed restrictions, including a national
lockdown in the first quarter of 2021 as well as inflationary pressures in
newsprint costs from the second half.
Management of the cost base and restructuring ensured that the Group delivered
adjusted operating profit of £9.3 million and an operating margin of 10.8%.
The Group delivered £5.1 million annualised cost savings (net of National
World management costs) and is targeting further annualised cost savings of
£2.0 million for 2022.
Adjusted EBITDA of £10.1 million reflects an EBITDA margin of 11.7%. The
robust EBITDA with minimal capital expenditure and tight management of working
capital ensured the Group delivered operating cash flow on a statutory basis
of £11.4 million, before the payment of non-recurring restructuring costs of
£3.2 million.
On a proforma basis, assuming the acquisition of JPIMedia Group was completed
at the beginning of 2020, Group revenue fell marginally by 2%, with a 6%
decline in print revenue substantially offset by 23% growth in digital
revenue. Total digital revenue in the year was £12.9 million.
The statutory earnings per share were 2.8 pence per share (2020: loss of 2.0
pence per share) and adjusted earnings per share for the period were 3.7 pence
per share (2020: loss of 0.6 pence per share).
Since completing the acquisition of JPIMedia Group, significant progress has
been made on the strategy to localise, energise, digitise and monetise
relevant and unique content to create a modern operating model for news
publishing across multiple brands and platforms.
Key initiatives implemented in the first phase of transformation have been:
· streamlining the head office function and transformation of the
operating structure with the creation of six regional media divisions covering
commercially homogeneous geographical markets;
· realigning local editorial and commercial resource, with P&L
responsibility vested with local management. The Group now operates with seven
operating units including a new unit created for the new "World" sites. Each
operating unit has commercial and editorial management leadership to drive
operational performance and lead business transformation;
· enhancement and consolidation of existing news websites to
increase focus and reach across local markets. By the end of 2022 we are
expecting to halve the 139 sites that were operated when we acquired the
business;
· the Company has liberated itself from the traditional
geographical restrictions of regional publishing by expanding its footprint
into seven major UK metropolitan centres and nationally with the launch of
eight "World" brand sites;
· the nationalworld.com site provides coverage across the whole of
the UK and is now the second largest website in the Group. The new sites have
been launched by leveraging existing resource with annualised investment of
£2.0 million which has been expensed;
· enhancing the quality and appeal of newspapers and websites with
increased unique local content;
· enhancing the Group's subscriptions offering and user experience
and trialling a new subscription platform to engage on our websites for
premium content on a daily basis;
· training and development of commercial teams in digital marketing
skills;
· increased investment in digital to increase audience reach
through new sites, modernisation of the network through consolidation of
smaller sites and improve the user experience by using data insights and
listening to our loyal customers. We will make further investments in 2022 to
improve our user experience by using our data to ensure our readers are served
more relevant content and more desirable offers (ads and ecommerce); and
· the delayering and flattening of the management structures and
other efficiencies delivering annualised savings of £5.1 million (net of
National World management costs) with restructuring costs of £3.6 million.
The cost savings are before increased investment of £2.0 million for the
launch of the new World sites.
As well as pursuing organic growth through new launches and relaunches,
management is actively developing acquisition opportunities, primarily
targeting businesses that will enhance our digital capabilities and broaden
the content base beyond news.
The Company is also open to acquiring heritage assets, to build scale and
enhance shareholder value through synergies.
The pace of change during 2021 has been swift with a focus on preparing the
business to deliver on the revenue potential of the country emerging from
lockdown in 2022. I am pleased that supporting the Executive team is a growing
base of talented and highly motivated senior executives who are at the cutting
edge of the Company's transformation.
The Board thanks the Group's talented staff for successfully completing the
first stage of reorganisation on the journey to a successful and sustainable
operating model.
Although the Board is encouraged by the good start to the year and expects to
make continued progress in the delivery of its strategy for growth, there
remains some uncertainty in the trading environment exacerbated by
inflationary pressures, in particular newsprint and printing costs, and the
global economic implications of the Ukraine war.
I anticipate further progress in transforming the business and progress with
acquisitions during 2022.
David Montgomery
Executive Chairman
17 March 2022
Financial review
The Group delivered a robust performance in 2021 by implementing the first
phase of its strategy to transform the business's operating structure and
tight management of the cost base. The prior period comparatives reflect that
National World plc had not completed an acquisition after listing on 19
September 2019 and therefore it had no operating business.
Adjusted results* Statutory results
2021 2020 2021 2020
£m £m £m £m
Revenue 86.0 - 86.0 -
Operating costs (75.9) (0.3) (74.3) (0.3)
Depreciation and amortisation (0.8) - (2.7) -
Operating profit/(loss) pre non-recurring items 9.3 (0.3) 9.0 (0.3)
Non-recurring items - - (6.9) (0.8)
Operating profit/(loss) 9.3 (0.3) 2.1 (1.1)
Net finance expense (0.7) - (0.9) -
Profit/(loss) before tax 8.6 (0.3) 1.2 (1.1)
Tax (charge) / credit (1.6) - 4.1 -
Profit/(loss) after tax 7.0 (0.3) 5.3 (1.1)
EBITDA 10.1 (0.3) 5.7 (1.1)
Earnings/(loss) per share (pence) 3.7 (0.6) 2.8 (2.0)
*Adjusted results are before non-recurring items, amortisation of intangible
assets and implementation of IFRS 16. Note 17 provides a reconciliation
between Statutory and Adjusted results.
The Group delivered revenue of £86.0 million and adjusted operating profit of
£9.3 million reflecting an operating margin of 10.8% and adjusted EBITDA of
£10.1 million, reflecting an EBITDA margin of 12%. Statutory operating profit
was £2.1 million after non-recurring costs of £6.9 million, reversing the
net impact of implementing IFRS 16 (£0.2 million credit) and after
amortisation of publishing rights and titles and digital assets (£0.5
million). A reconciliation from Statutory to Adjusted operating profit is
provided below.
Non-recurring items of £6.9 million comprise £3.6 million restructuring
costs to deliver an annualised £5.1 million of cost savings (net of National
World management cost), £1.8 million property rationalisation costs arising
from vacant space, £0.7 million onerous IT contracts resulting from the
migration to the Google Cloud Platform, and £0.8 million of acquisition costs
relating to the purchase of JPIMedia Group, issue of loan notes and
readmissions.
Adjusted financing costs were £0.7 million (2020 actual: £nil) comprising
£0.1 million interest on the £1 million interest only unsecured loan notes
and £0.6 million interest accrued on the convertible secured loan notes prior
to conversion to equity in May 2021. Statutory financing costs of £0.9
million are £0.2 million higher than adjusted financing costs as this
includes the interest for IFR16 lease liabilities.
Adjusted profit before tax improved by £8.9 million from a loss before tax of
£0.3 million in 2020 to a profit before tax of £8.6 million in 2021
reflecting the acquisition of JPIMedia Group. Statutory profit before tax was
£1.2 million, compared to a prior year Statutory loss before tax of £1.1
million. The Statutory tax credit of £4.1 million reflects the benefit of
brought forward losses which have been recognised as a deferred tax asset in
the period, which is explained in Note 6. The adjusted tax charge of £1.6
million reflects an effective tax rate of 19% and does not benefit from the
brought forward tax losses so as to provide a more meaningful and comparable
financial result.
Earnings per share for the period were 2.8 pence per share (2020: loss of 2.0
pence per share). Adjusted earnings per share for the period were 3.7 pence
per share (2020: loss of 0.6 pence per share).
Trading performance
Proforma revenue
The table below provides a summary of revenue for the period ended 1 January
2022 with comparatives for the 52 weeks ended 2 January 2021 assuming the
acquisition of JPIMedia Group was completed at the beginning of 2020.
Proforma results
2021 2020 Change Change
£m £m £m %
Print Publishing Revenue 71.7 76.2 (4.5) (6%)
Advertising 34.1 35.7 (1.6) (4%)
Circulation 34.9 37.9 (3.0) (8%)
Other 2.7 2.6 0.1 6%
Digital Publishing Revenue 12.9 10.4 2.5 23%
Advertising 8.0 7.4 0.6 7%
Subscriptions 1.5 0.8 0.7 96%
Other 3.4 2.2 1.2 52%
Other Revenue 1.4 1.5 (0.1) (10%)
Total Revenue 86.0 88.1 (2.1) (2%)
The revenue environment has remained volatile, particularly in the first half
of 2021, with the ongoing impact of the COVID-19 pandemic and related lockdown
restrictions imposed by the UK government. The first lockdown restrictions
were imposed during March 2020 which were partially lifted during the summer
in 2020 and the second half of 2020 with a second full lockdown imposed again
at the beginning of 2021 with restrictions starting to ease during April 2021.
Revenue for the full year fell by £2.1 million to £86.0 million, a 2% year
on year decline with print falling by 6% which is partially offset by robust
growth in digital revenue of 23%.
Print revenue
Print revenue comprises all revenue driven by the local newspaper titles,
including all digital revenue package sold with print and COVID-19 related
government spend. Print revenue fell by 6%, with a significant improvement
during the year with a decline of only 2% in the second half compared to a 9%
decline in the first half.
Advertising revenue fell by 4% year on year, remaining broadly flat year on
year in the second half which partially mitigated a more significant decline
of 8% in the first half. The first half was impacted by the national lockdown
restrictions imposed in the first quarter which resulted in advertising
revenue in the first quarter falling by 25%. Performance improved in the
second half, with revenue flat on the prior year due to a more stable trading
environment.
Circulation revenue fell by 8% year on year with a decline of 9% in the first
half and a decline of 7% in the second half. Average monthly circulation
volumes in the period were 2.2 million for the daily newspapers and 1.0
million for the weekly newspapers representing an annual decline of 13% and
14% respectively. The impact of falling volumes was partially mitigated by
cover price increases.
The Group continues to have a strong print subscriber base with print
subscription revenue of £3.3 million, a decline of 8% year on year which is
in line with the overall circulation revenue decline.
Other revenue, which includes syndication, leaflets, waste sales and business
services agreement revenue, grew by 6%.
Digital revenue
Digital revenue comprises all revenue sold programmatically, digital-led
direct sales, subscriptions, syndication and revenue generated from the Google
and Facebook content initiatives.
Digital revenue increased by 23% year on year, with consistent growth across
the first and second half.
Digital advertising revenue grew by 7% year on year, with growth of 8% in the
second half. Advertising revenue is predominantly driven by audience and the
Group had average monthly Unique Users (UUs) and Page Views (PVs) of over 36
million and 110 million respectively. The audience performance has been
volatile during the period due to disruption caused by the sales process run
by the previous vendors, organisational changes implemented during the year,
coupled with system issues which impacted user engagement and access to our
sites which has been fully resolved in the second half of the year. In
December 2021, unique users and page views were 39 million and 106 million
respectively.
Subscription revenue growth of 96% is driven by the annualised impact of the
roll out of subscriptions to all the daily sites in 2020 and 2021. At the end
of 2021, the Group had over 20,000 subscribers to its digital news sites and
apps.
Other digital revenue grew by 52% and includes revenue of £1.2 million from
February 2021 from the Google and Facebook content initiatives.
Other revenue
Other revenue reflects grants from the BBC for local democracy reporters and
from Facebook for the funding of journalists.
Operating costs
Operating costs, before non-recurring items, were only £0.3 million in 2020
reflecting the business operating as a cash shell.
Operating costs during the period are £83.9 million on a statutory basis and
£76.7 million on an adjusted basis. Adjusted operating costs are before:
· the implementation of IFRS 16 (increase in other costs of £1.6
million and a reduction in depreciation of £1.4 million);
· the amortisation of intangible assets of £0.5 million; and
· non-recurring costs of £6.9 million.
Following the acquisition of JPIMedia Group on 2 January 2021, the Group
initiated a restructuring programme to drive efficiencies and tightly manage
all operating costs in line with revenue performance. In addition to the cost
savings from staff redundancies and tight management of vacancies where
savings were initiated from the beginning of 2021, additional savings will be
delivered in 2022 from the rationalisation of office space, and the migration
to the Google Cloud Platform and further cost saving initiatives. Annualised
cost savings of £5.1 million (net of National World management costs) have
been delivered in 2021, £1.0 million ahead of our initial target with £3.9
million achieved in 2021.
Adjusted results Statutory results
2021 2020 2021 2020
£m £m £m £m
Labour 43.5 - 43.5 -
Newsprint and production costs 12.1 - 12.1 -
Depreciation and amortisation 0.8 - 2.7 -
Other 20.3 0.3 18.7 0.3
Total operating costs before non-recurring costs 76.7 0.3 77.0 0.3
Non-recurring items - - 6.9 0.8
Total operating costs 76.7 0.3 83.9 1.1
Labour costs
The Group employed an average of 1,261 employees during the period with 1,216
employees as at 1 January 2022. Labour costs are net of a furlough credit of
£0.5 million received during the first quarter of 2021. As the trading
environment improved, management recalled all staff from furlough on 1 April
2021.
Newsprint and production costs
Newsprint and production costs continue to be tightly managed with price
increases in the year being mitigated by reduced print volumes, lower
pagination and portfolio changes. Newsprint prices increased by c20% in the
second half of the year. 2022 will be impacted by further material price
rises. Continued tight management of the portfolio and returns will
partially mitigate the impact of these unprecedented increases.
Depreciation
Adjusted Depreciation relates to the tangible fixed assets, largely IT and
property related items, with a charge of £0.8 million for the period.
Statutory depreciation and amortisation is £1.9 million higher and includes
amortisation of Intangible assets of £0.4 million, amortisation of Digital
Publishing assets of £0.1 million and depreciation of Right of Use assets
(ROUA) of £1.4 million.
Other
Other costs comprise property, IT, digital product and engineering,
administration and other operating costs. Adjusted costs of £20.3 million
are £1.6 million higher than Statutory other costs as they are before IFRS 16
implementation.
Non-recurring costs
During the period non-recurring costs of £6.9 million (2020: £0.8 million)
have been expensed, comprising:
2021 2020
£m £m
Restructuring and redundancy costs 3.6 -
Onerous IT contracts 0.7 -
Property rationalisation 1.8 -
Acquisition and loan note costs 0.8 0.8
Total Non-recurring costs 6.9 0.8
Non-recurring costs comprise the following:
· £3.6 million restructuring and redundancy costs have delivered
annualised savings of £5.1 million (net of National World management costs).
£3.2 million of the restructuring costs have been paid in the period with
the remaining £0.4 million payable in 2022;
· £0.7 million onerous IT contracts provision for remaining cost
obligations over the unexpired contract term associated with moving technology
infrastructure to the Google Cloud platform;
· £1.8 million property rationalisation cost comprises £0.9
million ROUA impairment due to the early exit from leased properties as the
business has adopted a flexible working policy, and £0.9 million onerous
property provision for the property costs (rates, service charges) related to
these leases; and
· £1.3 million of acquisition and loan note costs were incurred in
the period (of which £0.8 million has been expensed to non-recurring items
and £0.5 million directly attributed to the new share issue has been charged
to share premium). The £0.8 million reported in 2020 was also incurred in
relation to the acquisition of JPIMedia Group. Of the total £2.1 million cost
incurred, £1.9 million was paid in the period.
Reconciliation of statutory to adjusted operating profits
To ensure that the financial statements provide appropriate insight into the
underlying performance of the Group, additional disclosure has been made on
the financial impact of a number of significant accounting and operational
items and therefore adjusted results are presented.
The adjustments include the cost of restructuring and organisational change,
acquisition and capital raise costs, amortisation of intangible assets and the
impact of implementing IFRS 16. Management believe that it is appropriate to
additionally present the Alternative Performance Measures used by management
in operating the business, as this presents a more meaningful and comparable
financial result.
The adjusted results provide supplementary analysis of the 'underlying'
trading of the Group. The table below presents a reconciliation between
statutory and adjusted results:
2021 2020
£m £m
Statutory operating profit/(loss) 2.1 (1.1)
Operating cost charge for IFRS 16 leases (1.6) -
Depreciation on right of use assets 1.4 -
Amortisation of intangible assets 0.5 -
Non-recurring items 6.9 0.8
Adjusted operating profit/(loss) 9.3 (0.3)
The reconciling items are:
· the implementation of IFRS 16 resulted in a lower charge for
other overheads for leasing costs, increase in depreciation of ROUA and a
finance charge for the IFRS 16 lease liabilities. To ensure there is no
distortion to underlying EBITDA, the IFRS 16 entries have been reversed so the
full cost of IFRS 16 leases is included in other costs. Without this change
EBITDA would be enhanced by £1.6 million;
· the amortisation of intangible assets relates to publishing
rights and titles (£0.4 million) and digital assets (£0.1 million); and
· £6.9 million of non-recurring items as explained on page 8.
Statutory results
Statutory profit before tax of £1.2 million, is after £6.9 million
non-recurring costs.
Adjusted results
Adjusted profit before tax of £8.6 million is before non-recurring items, the
implementation of IFRS 16 and amortisation of intangible assets.
Financing charges
Financing charges on a statutory and adjusted basis are:
Adjusted results Statutory results
2021 2020 2021 2020
£m £m £m £m
Interest expense from leasing arrangements - - 0.2 -
Interest on loan notes 0.7 - 0.7 -
Total financing cost 0.7 - 0.9 -
The financing costs of £0.9 million comprise £0.2 million interest charge on
IFRS 16 lease liabilities, £0.6 million interest on the £20.0 million
convertible secured loan notes until conversion on 7 May 2021, and £0.1
million interest on the £1.0 million interest only unsecured loan notes. The
£20.0 million convertible secured loan notes and accrued interest of £0.6
million converted to equity on 7 May 2021 and no further interest is due on
these loan notes. The £1.0 million interest only loan notes will continue to
accrue interest at 15% per annum.
Statutory tax credit and effective tax rate
The statutory tax rate for the period is 19%. A statutory tax credit of
£4.1 million (355% effective rate) is recognised in the period, which
primarily relates to the recognition of brought forward losses.
The net deferred tax asset of £4.1 million, includes £4.6 million of tax
losses of which £4.1 million were recognised in the period and £0.5 million
were acquired on 2 January 2021. Gross brought forward losses of £19.7
million are recognised as a deferred tax asset at the period-end, calculated
using a blended corporate tax rate of 23%, as the Group expects the losses
will be utilised over the next three years and the tax losses can no longer be
called upon by JPIMedia Limited following its liquidation on 17 May 2021.
The adjusted profit before tax is £8.6 million, and the adjusted tax rate is
19% with a £1.6 million tax charge in the period. The adjusted tax charge
does not benefit from the brought forward tax losses so as to provide a more
meaningful and comparable financial result.
EBITDA
Statutory EBITDA for 2021 is £5.7 million (2020: £1.1 million loss), while
adjusted EBITDA is £10.1 million for the period (2020: £0.3 million loss).
The higher adjusted EBITDA reflects the benefit of the restructuring,
commercial and editorial initiatives and cost savings (net of National World
management costs) of £3.9 million in the period.
Earnings per share
Statutory earnings per share for the period were 2.8 pence per share (2020:
loss of 2.0 pence per share). Adjusted earnings per share for the period were
3.7 pence per share (2020: loss of 0.6 pence per share).
Cash flow
Adjusted Statutory
FY 2021 FY 2021
£m £m
Operating profit for the period 9.3 2.1
Amortisation of intangible assets - 0.5
ROUA and tangible assets depreciation expense 0.8 2.2
ROUA Impairment - 0.9
Acquisition, loan note issue and share re-listing costs - 0.8
Restructuring costs paid (3.2) -
Net increase in provisions - 1.6
Changes in working capital:
Decrease in receivables 0.2 0.2
Decrease in payables (0.7) (0.1)
Net cash inflow from operating activities 6.4 8.2
Investing activities
Acquisition of subsidiaries (2.2) (2.2)
Cash acquired with subsidiaries 0.5 0.5
Subsidiary acquisition costs (0.5) (0.5)
Purchases of tangible assets (0.2) (0.2)
Repayment of funds owed to JPIMedia Limited (4.7) (4.7)
Net cash outflow from investing activities (7.1) (7.1)
Financing activities
Interest paid (0.1) (0.3)
Principal repayment of leases - (1.6)
Issue of convertible secured loan notes 11.6 11.6
Issue of interest only unsecured loan notes 1.0 1.0
Capital raise and share issue costs (1.5) (1.5)
Net cash generated from financing activities 11.0 9.2
Net increase in cash and cash equivalents 10.3 10.3
Cash and cash equivalents at the beginning of the period 12.7 12.7
Cash and cash equivalents at the end of the period 23.0 23.0
The conversion of adjusted operating profit of £9.3 million into cash is 102%
(£9.4 million comprising cash inflow from operating activities before
restructuring costs, and after purchases of tangible assets).
Robust operating cash generation, the benefit of restructuring and low capital
expenditure ensured the Group maintains a substantial cash balance and retains
financial flexibility. As at 1 January 2022, the Company held £23.0 million
(2020: £12.7 million) of cash.
From the total cash generated by the issue of loan notes of £21.0 million
(£12.6 million in the period and £8.4 million in December 2020) £8.8
million was utilised to pay costs in relation to the acquisition of JPIMedia
Group, capital raise and share issue (£2.2 million acquisition, £1.9 million
capital raise and share issue costs and £4.7 million repayment of loan to
JPIMedia Limited).
During the period adjusted operating cash flow of £6.4 million, proceeds from
the issue of the loan notes (£12.6 million in the period) and £0.5 million
cash left in the JPIMedia Group on completion was utilised to settle costs in
relation to the acquisition, capital raise and share issue of £8.8 million
and capital expenditure of £0.2 million with the remaining £10.3 million
increasing cash balances from £12.7 million to £23.0 million.
Acquisition of JPIMedia Group
On 2 January 2021 National World plc acquired 100% of the issued share capital
of JPIMedia Group, one of the largest regional and local multimedia publishers
in the United Kingdom, providing information services to communities through a
portfolio of 139 publications and websites. The acquisition of JPIMedia Group
provides a platform for National World to implement its strategy of creating a
sustainable local online news publishing model.
2021
£m
Cash paid on Completion for the equity 0.5
Deferred consideration 5.0
Inter-company loan payable to JPIMedia Limited 4.7
Initial consideration 10.2
Additional consideration representing cash left in the business on completion 1.7
and for working capital being higher than normalised level
Total consideration 11.9
Comprising:
Equity 7.2
Inter-company loan payable to JPIMedia Limited 4.7
Total consideration 11.9
On completion, £0.5 million was paid for equity and £4.7 million was paid to
JPIMedia Limited in full settlement of the outstanding inter-company balance
payable on completion.
In March 2021, £1.7 million was paid as equity consideration for cash left in
the business at completion (£0.5 million) and the working capital at
completion being in excess of normalised working capital (£1.2 million).
The £5.0 million deferred equity consideration is payable in two equal
tranches, £2.5 million on 31 March 2022 and £2.5 million on 31 March 2023.
Capital raise and financing
Loan notes totalling £21.0 million (£20.0 million convertible secured and
£1.0 million interest only unsecured) were issued to fund the acquisition of
the JPIMedia Group, future investment and ongoing working capital
requirements. The 10% convertible secured loan notes were issued in three
tranches; £8.4 million in December 2020, £5.5 million on 21 January 2021 and
£6.1 million on 8 February 2021. The £1.0 million 15% interest only
unsecured loan notes were issued on 12 February 2021.
On 7 May 2021 the £20.0 million 10% convertible secured loan notes, including
accrued interest and 10% premium on conversion were converted to 205.4 million
ordinary shares at £0.11 per share.
£8.8 million of the funds raised were utilised during the period to fund the
acquisition of JPIMedia Group and related capital raise costs:
· £0.5 million initial cash consideration for the equity;
· £4.7 million outstanding inter-company balance payable to the
previous vendor (JPIMedia Limited);
· £1.9 million acquisition and costs relating to the capital
raise. £0.2 million remains outstanding at the period end; and
· £1.7 million payment to JPIMedia Limited for completion working
capital being higher than target. This included £0.5 million cash left in the
business at completion.
The balance of net proceeds from the loan notes and cash held prior to the
acquisition will be used to fund the future investment and development of the
enlarged Group; and to the extent not covered by future cash flows, £5.0
million deferred consideration for the acquisition.
Strategy
The Group's strategy is:
"To create a premium content and sales business through implementation of a
modern operating model across multiple brands and platforms. This will be
executed by driving organic growth of both new and existing portfolio brands
and by making acquisitions, all of which will continually enhance our digital
capability and expand our content inventory."
Key pillars of transformation:
In a world of media commoditisation and increasing domination by a handful of
large tech, National World's strategy is to create a new publishing business
model that enables us to "localise, energise, digitise and monetise" relevant
and unique content:
· Localise - Our publishing assets provide compelling content for
local communities; both consumers and businesses. A greater sense of community
awareness has also been generated during the COVID-19 pandemic as more
consumers have lived their lives in a smaller locale. With this new spirit of
localism, we will ensure our journalists and commercial teams are more
connected with the local communities they serve.
· Energise - Enhance users' experience of our products and services
to increase engagement and provide a strong platform to leverage our unique
quality content to launch new products and services across multiple platforms.
While our print news-brands will be managed creatively and profitably, our
strategic focus is on growing local, regional and national online audiences
who are deeply engaged with our content.
· Digitise - Enhance our digital infrastructure to improve
responsiveness, engagement, data analytics, AI content generation and user
insights.
· Monetise - Adopting a first party data led approach, where data
is not just collected but it is turned into insights that improve our customer
experience increasing our engagement and hence revenue and yields. We will use
new technology to ensure we use our data to match content to audience groups
and that pages are optimised for multiple revenue streams, ecommerce, video,
display advertising and subscriptions.
National World will retain, recruit and develop talented people, appropriately
incentivised and motivated, and provide them with the prerequisite digital
skills that will aid the execution of its strategy.
The Company's strategy will involve consolidation and change by combining
acquired digital technology innovation and traditional print assets in a new
industry model designed to grow revenue by aggregation of audiences and
maximising efficiencies.
As the operating model can be applied to many territories, the Company will
not be limited to particular geographic regions. However, the initial focus
will be to invest in the UK.
Current trading and outlook
The Board are encouraged by the good start to the year and expects the Company
to make continued progress in delivering its strategy for growth. There
remains some uncertainty in the trading environment because of inflationary
pressures, in particular newsprint and printing costs, and global instability
as a result of the Ukraine war.
Revenue in January and February was up 5.6% year on year with strong digital
growth of 48%, partially offset by print revenue which is broadly in line with
2021. We are encouraged by the steady improvement in print and digital
advertising trends as we recover from the pandemic and against weaker
comparatives.
Dividends
The Board is committed to provide strong returns to shareholders through a
combination of share price growth and income. In the short to medium term, the
Group will deliver shareholder value through a combination of acquisitions and
investments to build on the successful acquisition of JPIMedia Group which was
completed on 2 January 2021. To ensure the Group maintains financial
flexibility and an appropriate level of financial headroom for investment and
working capital, the Board is not proposing a dividend in respect of the 52
weeks ended 1 January 2022 and does not envisage paying dividends during 2022.
The Board will review its dividend policy annually.
When dividends are declared, the Board expects to adopt a dividend policy
which is aligned to the free cash generation of the business. The free cash
generation for the purposes of assessing the dividend will be the net cash
flow generated by the Group before the repayment of debt, dividend payments
and other capital returns to shareholders. When setting the level of dividends
the Board will ensure that the Group maintains adequate headroom for
investment and working capital.
The Company will also consider the return of capital to shareholders through a
share buyback if it has generated surplus cash and sees an opportunity to
enhance earnings per share and therefore shareholder value. Prior to
initiating a share buyback programme the Company will carefully consider the
cash generation of the business and investment requirements.
Group prospects and going concern
The Directors have assessed the Group's prospects, both as a going concern and
its long-term viability, at the time of the approval of National World plc's
Annual Report for the 52 weeks ended 1 January 2022. The Directors consider it
appropriate to adopt the going concern basis of accounting in the preparation
of the Group's annual consolidated financial accounts. The assessment was
based on review of the three year projections for the business which are
considered by the Board when approving the budget for 2022. Management believe
that a longer term assessment is not appropriate given the ongoing structural
challenges facing print media and changing landscape for digital. Key
considerations in the assessment were:
· decline in print revenue;
· the ongoing impact of COVID-19 on revenue;
· management's ongoing mitigating actions in place to manage costs
and cash flow;
· capital expenditure requirements, including the impact of the
rationalisation of office space, migration of IT infrastructure to the Google
Cloud Platform and ongoing maintenance capital expenditure requirements; and
· investment in digital resource and development.
Sensitivity analysis was applied to the projections to determine the potential
impact should the principal risks and uncertainties occur, individually or in
combination. The Board also assessed the likely effectiveness of any proposed
mitigating actions.
Whilst the Group strategy is to grow through acquisition and organic
development, no acquisitions have been assumed in the projections as there is
no certainty that acquisitions will be concluded. Prior to proceeding with any
acquisition, the three-year projections will be updated to ensure there is no
adverse impact on the Group prospects or going concern resulting from an
acquisition.
The review concluded that the Group maintained significant financial
flexibility with cash of £23.0 million as at 1 January 2022 and the Directors
are satisfied that the Group will be able to operate with sufficient financial
flexibility and headroom for the foreseeable future.
The Directors have a reasonable expectation that the Company and the Group
will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment.
Related party transactions
Mediaforce (Holdings) Limited has a 24% interest in the equity of National
World plc and is therefore deemed to be a related party. Transactions with
Mediaforce (Holdings) Limited and its subsidiaries are undertaken at arm's
length and during the period the Group earned revenue of £8.5 million and
incurred charges for services received of £2.1 million. The net amount owing
to the Group at 1 January 2022, reflecting a stronger trading period in
December 2021 and timing of the period end, is £2.1 million (comprising £2.5
million owed to the Group partially offset by £0.4 million owed by the
Group).
The Group traded during the period with Local TV Limited, in which David
Montgomery, Executive Chairman, is a significant shareholder and Director.
The Group incurred charges for services received of £0.1 million (2020:
£nil). There is £nil owed by the Group to Local TV Limited at 1 January 2022
(2020: £nil).
Principal Risks and Uncertainties
The principal risks and uncertainties are set out in note 19.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Preliminary Audited Results
announcement alongside the financial statements in accordance with applicable
law and regulations. This responsibility statement has been prepared in
connection with the Company's full Annual Report for the 52 weeks ended 1
January 2022, and certain disclosures are not included within this Preliminary
Audited Results announcement.
The Directors confirm to the best of their knowledge:
● the consolidated financial statements, which have been prepared in
accordance with United Kingdom adopted international accounting standards and
the applicable legal requirements of the Companies Act 2006, give a true and
fair view of the assets, liabilities, financial position and profit and loss
of the Group; and
● the Preliminary Audited Results announcement includes a fair review
of the development and performance of the business and the position of the
Group together with a description of the principal risks and uncertainties
that it faces.
The report of the Directors was approved by the Board on 17 March 2022 and
signed on its behalf by:
Vijay Vaghela
Chief Operating Officer
Consolidated Income Statement
For the 52 weeks ended 1 January 2022
52 weeks ended 52 weeks ended
1 January 2022
31 December 2020
Note £m £m
Continuing operations
Revenue 3 86.0 -
Cost of sales (64.1) -
Gross profit 21.9 -
Operating expenses before non-recurring items (12.9) (0.3)
Non-recurring items: 4
Restructuring and redundancy (3.6) -
Onerous IT contracts (0.7) -
ROUA impairment (0.9) -
Property rationalisation (0.9) -
Acquisition, loan note issue and share re-listing (0.8) (0.8)
Total operating expenses (19.8) (1.1)
Operating profit / (loss) 2.1 (1.1)
Financing
Finance costs 5 (0.9) -
Net finance expense (0.9) -
Profit / (loss) before tax 1.2 (1.1)
Tax credit 6 4.1 -
Profit / (loss) after tax from continuing operations 5.3 (1.1)
Earnings / (loss) per share 7
Earnings / (loss) per share - basic 2.8p (2.0)p
Earnings / (loss) per share - diluted 2.6p (2.0)p
Note 7 includes the calculation of adjusted earnings per share and Note 17
presents the reconciliation between the statutory and adjusted results.
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 1 January 2022
52 weeks ended 52 weeks ended
1 January 2022
31 December 2020
£m £m
Profit / (loss) for the period 5.3 (1.1)
Total other comprehensive profit / (loss) for the period - -
Total comprehensive profit / (loss) for the period 5.3 (1.1)
Consolidated Statement of Financial Position
As at 1 January 2022
As at As at
1 January
31 December
2022 2020
Note £m £m
Non-current assets
Goodwill 8 5.2 -
Intangible assets 9 5.3 -
Tangible assets 10 0.8 -
Right of use assets 11 1.1 -
Deferred tax 4.1
16.5 -
Current assets
Inventory 0.1 -
Trade and other receivables 12.9 -
Cash and cash equivalents 23.0 12.7
36.0 12.7
Total assets 52.5 12.7
Current liabilities
Trade and other payables (13.7) (0.9)
Lease liabilities 11 (1.2) -
Deferred consideration 15 (2.5) -
Provisions 13 (1.3) -
(18.7) (0.9)
Non-current liabilities
Borrowings (1.0) (8.4)
Lease liabilities 11 (0.7) -
Deferred consideration 15 (2.5) -
Provisions 13 (0.8) -
(5.0) (8.4)
Total liabilities (23.7) (9.3)
Net assets 28.8 3.4
Equity
Share capital 14 0.3 0.1
Share premium 14 24.6 4.7
Retained earnings / (accumulated losses) 14 3.9 (1.4)
Total equity 28.8 3.4
Consolidated Statement of Changes in Equity
For the 52 weeks ended 1 January 2022
Share capital Share premium Retained earnings/ Total equity
(accumulated losses)
Note £m £m £m £m
As at 1 January 2020 0.1 4.7 (0.3) 4.5
Loss for the period (1.1) (1.1)
Total comprehensive loss for the period - - (1.1) (1.1)
As at 31 December 2020 0.1 4.7 (1.4) 3.4
As at 1 January 2021 0.1 4.7 (1.4) 3.4
Issue of shares 7 May 2021 14 0.2 20.4 - 20.6
Costs directly attributable to issuing new shares 14 - (0.5) - (0.5)
Profit for the period 14 5.3 5.3
Total comprehensive profit for the period - - 5.3 5.3
As at 1 January 2022 0.3 24.6 3.9 28.8
Consolidated Cash Flow Statement
For the 52 weeks ended 1 January 2022
52 weeks ended 52 weeks ended
1 January 2022
31 December 2020
Note £m £m
Cash flow from operating activities
Cash generated from / (used in) operations 16 8.2 (0.1)
Net cash inflow / (outflow) from operating activities 8.2 (0.1)
Investing activities
Acquisition of subsidiaries 15 (2.2) -
Cash acquired in subsidiaries 15 0.5 -
Repayment of outstanding inter-company balance payable to JPIMedia Limited 15 (4.7) -
Subsidiary acquisition costs 15 (0.5) -
Purchase of Tangible assets 14 (0.2) -
Net cash outflow from investing activities (7.1) -
Financing activities
Interest paid 5 (0.1) -
Capital repayments of lease payments 11 (1.6) -
Interest element of lease rental payments 5,11 (0.2) -
Debt, prospectus and share issue costs (1.5) -
Issue of debt 12.6 8.4
Issue of shares - -
Net cash generated from financing activities 9.2 8.4
Net increase in cash and cash equivalents 10.3 8.3
Cash and cash equivalents at the beginning of the period 12.7 4.4
Cash and cash equivalents at the end of the period 23.0 12.7
Notes to the Consolidated Financial Statements
For the 52 weeks ended 1 January 2022
1. General Information
The financial information in the Annual Results Announcement, which comprises
the Consolidated income statement, the Consolidated statement of comprehensive
income, the Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity and the related notes ('Consolidated Financial
Information') in the Preliminary announcement is derived from but does not
represent the full statutory accounts of National World plc.
The statutory accounts for the 52 weeks ended 31 December 2020 have been filed
with Companies House and those for the 52 weeks ended 1 January 2022 will be
filed following the Annual General Meeting on 26 May 2022.
The auditors' reports on the statutory accounts for the 52 weeks ended 31
December 2020 and for the 52 weeks ended 1 January 2022 were unqualified, do
not include reference to any matters to which the auditors drew attention by
way of emphasis of matter without qualifying the reports and do not contain a
statement under Section 498 (2) or (3) of the Companies Act 2006.
Whilst the financial information included in this Annual Results Announcement
has been prepared in accordance with the recognition and measurement criteria
of International Financial Reporting Standards (IFRS), this announcement does
not itself contain sufficient information to comply with IFRS. This Annual
Results Announcement constitutes a dissemination announcement in accordance
with Section 6.3 of the Disclosure and Transparency Rules (DTR). The Annual
Report for the 52 weeks ended 1 January 2022 will be available on the
Company's website at www.nationalworldplc.com
(http://www.nationalworldplc.com) .
JPIMedia Publishing Limited and its subsidiaries ('JPIMedia Group') were
acquired on 2 January 2021 by the Company from JPIMedia Limited, a subsidiary
of JPIMedia Holdings Limited. Following the acquisition of JPIMedia Group,
the Company has realigned its reporting period to 1 January 2022 consistent
with JPIMedia Group. The period to 1 January 2022 and the balances at that
date are referred to as 2021 in these financial statements and include the
consolidated Group results. The comparative period, the year ended 31 December
2020 and the balances at that date, are referred to as 2020 in these financial
statements, and relate to the Company only. Adjustments have been made to the
statutory results to enable the commentary on the comparable results in the
Financial Review, as described in Note 2.
2. Accounting policies
Basis of preparation
These consolidated financial statements have been prepared in accordance with
United Kingdom adopted international accounting standards and the applicable
legal requirements of the Companies Act 2006. The consolidated Financial
Statements were authorised for issue by the Board of Directors on 17 March
2022.
These Financial Statements are presented in British pounds, which is the
functional currency of all entities in the Group. All financial information
has been rounded to the nearest million except when otherwise indicated.
These Financial Statements have been prepared under the historical cost basis.
The consolidated financial statements have been prepared on a going concern
basis.
Going concern basis
The Directors have assessed the Group's prospects, both as a going concern and
its long-term viability, at the time of the approval of National World plc's
Annual Report for the 52 weeks ended 1 January 2022. The Directors consider it
appropriate to adopt the going concern basis of accounting in the preparation
of the Group's annual consolidated financial accounts. The assessment was
based on review of the three year projections for the business which were
considered by the Board when approving the budget for 2022. Management believe
that a longer term assessment is not appropriate given the ongoing structural
challenges facing print media and the changing landscape for digital. Key
considerations in the assessment were:
· decline in print revenue;
· the ongoing impact of COVID-19 on revenue;
· management's ongoing mitigating actions in place to manage costs
and cash flow;
· Capital expenditure requirements, including the impact of the
rationalisation of office space, migration of IT infrastructure to the Google
Cloud Platform and ongoing maintenance capital expenditure requirements; and
· investment in digital resource and development.
Sensitivity analysis was applied to the projections to determine the potential
impact should the principal risks and uncertainties occur, individually or in
combination. The Board also assessed the likely effectiveness of any proposed
mitigating actions.
Whilst the Group strategy is to grow through acquisition and organic
development, no acquisitions have been assumed in the projections as there is
no certainty that acquisitions will be concluded. Prior to proceeding with any
acquisition, the three-year projections will be updated to ensure there is no
adverse impact on the Group prospects or going concern resulting from an
acquisition.
The review concluded that the Group maintained significant financial
flexibility with cash of £23.0 million as at 1 January 2022 and the Directors
are satisfied that the Group will be able to operate with sufficient financial
flexibility and headroom for the foreseeable future. The Directors have a
reasonable expectation that the Company and the Group will be able to continue
in operation and meet its liabilities as they fall due over the period of
their assessment.
Changes in accounting policies and disclosures
The standards that became applicable for the year did not materially impact
the Group's accounting policies and did not require retrospective adjustments.
Segments
The performance of the Group is presented as a single reporting segment as
this is the basis of internal reports regularly reviewed by the Board and
chief operating decision makers (Executive directors) to allocate resources
and to assess performance. The Group's operations are located in the UK and
the Group is not subject to significant seasonality.
Alternative performance measures
The Company presents the results on a statutory and adjusted basis and revenue
trends on a statutory and proforma basis. The Company believes that the
adjusted basis and proforma trends will provide investors with useful
supplemental information about the financial performance of the Group, enable
comparison of financial results between periods where certain items may vary
independent of business performance, and allow for greater transparency with
respect to key performance indicators used by management in operating the
Group and making decisions. Although management believes the adjusted basis is
important in evaluating the Group, they are not intended to be considered in
isolation or as a substitute for, or as superior to, financial information on
a statutory basis. The alternative performance measures are not recognised
measures under IFRS and do not have standardised meanings prescribed by IFRS
and may be different to those used by other companies, limiting the usefulness
for comparison purposes. Note 17 sets out the reconciliation between the
statutory and adjusted results. An adjusted cash flow and reconciliation to
statutory cash flow is presented in Note 18.
Key sources of estimation uncertainty
Impairment of publishing titles
The Group is required to test, whether intangible and tangible assets have
suffered any impairment based on the recoverable amount of its CGUs, when
there are indicators for impairment. Determining whether the regional
business is impaired requires an estimation of the value in use of the CGU to
which these assets are allocated. Key sources of estimation uncertainty in
the value in use calculation include the estimation of future cash flows of
the CGU affected by expected changes in underlying revenues and direct costs
as well as corporate and central cost allocations through the forecast period,
the long-term growth rates and a suitable discount rate to apply to the
aforementioned cash flows in order to calculate the net present value. The
discount rate selected for the regional business CGU was 15.0%, using the
Capital Asset Pricing Method ("CAPM") with a long-term decline rate in
perpetuity of 1.0%.
Critical valuation judgements
Acquisition of JPIMedia Group
On 2 January 2021 the Company acquired JPIMedia Group. The acquisition has
been treated as a business combination under IFRS 3, refer to Note 15.
Intangible Assets
The acquisition of JPIMedia Group by National World was completed at the
beginning of the period, and the intangible assets are recognised at the
acquired fair value. The value in use calculation prepared for the JPIMedia
Group at 2 January 2021, determined the fair value of the CGU using an income
approach based valuation method. The income approach is suitable for assets
which generate the majority of their value from their income-generating
capacity. It operates under the premise that the value of that asset can be
accurately derived from the value of the future net cash flows which will be
generated by it over time, discounted back to their present value at an
appropriate discount rate.
3. Revenue
The analysis of the Group's contracted revenue from continuing operations is
as follows:
2021 2020
£m £m
Print publishing 71.9 -
Digital publishing 12.7 -
Other 1.4 -
Total revenue 86.0 -
Other revenue includes Local Democracy Reporting Service funding from the BBC
and Facebook to support news coverage of top-tier local authorities and other
public service organisations.
4. Profit / (loss) for the period
Profit / (loss) for the period includes the following items:
2021 2020
Note £m £m
Operating profit / (loss) for continuing operations is shown after
charging/(crediting):
Depreciation of tangible fixed assets 10 0.8 -
Amortisation of intangible assets 9 0.5 -
Depreciation of right of use assets 11 1.4 -
Staff costs 43.5 -
Cost of inventory recognised as expense 3.4 -
Non-recurring costs:
Acquisition, loan note issue and share re-listing a 0.8 0.8
Restructuring b 3.6 -
Property rationalisation c 1.8 -
Onerous contracts d 0.7 -
a) Acquisition, loan note issue and share re-listing costs
Total acquisition, loan note and share re-listing costs of £1.3 million were
incurred in the period (2020: £0.8 million). £0.5 million of the costs
incurred were directly attributed to the new share issue and have been charged
to share premium in the period (Note 14). The remaining £0.8 million cost
in the current period has been expensed as non-recurring costs, and relates
to:
· the issue of loan notes; and
· the acquisition of JPIMedia Group which was completed on 2
January 2021 (Note 15).
The £0.8 million cost incurred in 2020 was also incurred in relation to the
acquisition of JPIMedia Group (£0.5 million) and loan note issue costs (£0.3
million).
b) Restructuring costs
Restructuring costs of £3.6 million have been incurred in 2022 for the
delivery of annualised cost savings of £5.1 million (net of National World
management costs).
c) Property rationalisation
A number of office locations have been vacated as the business has adopted a
flexible working policy. At the year-end, the ROU assets (£0.9 million) at
these locations were written off in full together with a provision for onerous
occupation costs related to this vacant space (£0.9 million) until the end of
the lease term (Note 13). There is no assumed increase in the dilapidation
provisions for these offices.
d) Onerous contracts
A provision of £0.7 million was created in the period for the remaining cost
obligations over the unexpired contract term of an existing contract
associated with moving technology infrastructure to the Cloud (Note 13).
5. Finance costs
2021 2020
Note £m £m
Interest on convertible secured loan notes 0.6 -
Interest on interest only unsecured loan notes 0.1 -
Interest on lease liabilities 11 0.2 -
Total finance costs 0.9 -
Interest was incurred at 10% per annum on the £20.0 million of convertible
secured loan notes up until 7 May 2021 at which time loan notes and accrued
interest were converted to ordinary shares. Interest is being accrued and paid
at 15% on the £1.0 million of interest only unsecured loan notes.
6. Tax
The difference between the total tax credit shown above and the amount
calculated by applying the standard rate of UK corporation tax of 19% to the
loss before tax is as follows:
2021 2020
£m £m
Profit / (Loss) 1.2 (1.1)
Tax at the UK corporation tax rate of 19% 0.2 (0.2)
Effects of:
Expenses not allowable 0.1 0.2
Deferred tax asset recognised for tax losses (4.4) -
Effect of increase in deferred tax rate to 25% 0.1 -
Adjustment relating to acquired balance (0.1) -
Total tax credit for the period (4.1) -
Effective tax rate - credit 355% 0%
The Group has tax losses carried forward of £26.1 million (2020: £0.4
million), of which £19.7 million have been recognised in the period.
Gross brought forward losses of £19.7 million are recognised as a deferred
tax asset at the period-end, calculated using a blended corporate tax rate of
23%, as the Group expects the losses will be utilised over the next three
years and the tax losses can no longer be called upon by JPIMedia Limited
following its liquidation on 17 May 2021.
The remaining tax losses of £6.4 million have not been recognised as a
deferred tax asset due to uncertainty over the timing of future profits and
gains.
7. Earnings / (loss) per share
Basic earnings / (loss) per share is calculated by dividing profit for the
period attributable to equity holders of the parent by the weighted average
number of ordinary shares during the period and diluted earnings / (loss) per
share is calculated by adjusting the weighted average number of ordinary
shares in issue on the assumption of conversion of all potentially dilutive
ordinary shares.
On 7 May 2021, the Company issued 205.4 million ordinary shares (Note 14).
2021 2020
£m £m
Weighted average number of ordinary shares for basic earnings per share 189 54
Effect of dilutive ordinary shares in respect of potential share awards under 16 -
the value creation plan(1)
Weighted average number of ordinary shares for diluted earnings per share 205 54
Pence Pence
Statutory earnings / (loss) per share
Earnings / (loss) per share - basic 2.8 (2.0)
Earnings / (loss) per share - diluted(1) 2.6 (2.0)
Adjusted earnings / (loss) per share
Earnings / (loss) per share - basic 3.7 (0.6)
Earnings / (loss) per share - diluted 3.4 (0.6)
(1)The effect of the potential dilutive shares on the statutory earnings /
(loss) per share would have been anti-dilutive in 2020 and therefore were not
included in the calculation of diluted statutory loss per share.
8. Goodwill
2021 2020
Note £m £m
Opening balance -
Acquisition of subsidiaries 15 5.2 -
Carrying value at the end of the period 5.2 -
During the period the Group acquired JPIMedia Publishing Limited and its
subsidiaries (JPIMedia Group) which created goodwill of £5.2 million (Note
15).
9. Intangible assets
Publishing titles - Regional Digital intangible assets
Total
Note £m £m £m
Opening balance - - -
Acquisition of subsidiaries 15 5.3 0.5 5.8
Amortisation charge for the period 4 (0.4) (0.1) (0.5)
Carrying value at the end of the period 4.9 0.4 5.3
Intangible assets acquired on the acquisition of JPIMedia Group consist of
regional publishing titles with a value of £5.3 million and software and
digital development assets of £0.5 million. Intangible assets are amortised
over their useful economic life and the carrying value of the titles is
reviewed when there are indicators that an impairment has occurred.
Impairment assessment
The impairment review in respect of the regional publishing business
cash-generating unit (CGU) concluded that no impairment charge was required.
The Group tests the carrying value of the CGU held within the Group for
impairment annually or more frequently if there are indications that the
carrying value is less than the recoverable amount. If an impairment charge is
required, this is allocated first to reduce the carrying amount of any
goodwill allocated to the CGU and then to the other assets of the CGU but
subject to not reducing any asset below its recoverable amount.
The Group has one identifiable CGU, the regional publishing business, which
includes intangible publishing titles, digital intangible assets, goodwill,
property, plant and equipment, trade and other receivables and trade and other
payables. Within the single CGU there is an interdependency of revenue and
costs within a matrix management structure, single wholesale and distribution
agreements, substantial packaged advertising sales across all titles and
websites and dependence on central support infrastructure.
The intangible assets acquired on the acquisition of JPIMedia Group are
recognised at fair value. The value in use calculation at 1 January 2022 was
prepared using consistent methodologies to that applied for the fair value on
acquisition at 1 January 2021. With regard to the methodologies applied in the
valuation, the intangible assets of the Group were assessed using an income
approach based method. The income approach is suitable for assets which
generate the majority of their value from their income-generating capacity. It
operates under the premise that the value of that asset can be accurately
derived from the value of the future net cashflows which will be generated by
it over time, discounted back to their present value at an appropriate
discount rate.
The Directors consider that the publishing titles, with a carrying value as at
1 January 2022, have finite lives of 3 to 13 years.
The recoverable amounts of the CGUs are determined from value in use
calculations. The key assumptions for the value in use calculations are:
- expected changes in underlying revenue and direct costs during the period;
- growth / decline rates; and
- discount rate.
The key assumptions underpinning the Value in Use model are:
2021
Discount rate (pre-tax WACC) 15%
Long-term decline rate 1%
The Group prepares discounted cash flow forecasts using:
- the Board-approved budget for 2022, and projections to 2024 which
reflects management's current experience and future expectations of the
markets in which the CGU operates and is based on information known at the
balance sheet date. This is then forecast into perpetuity from 2024. Changes
in underlying revenue and direct costs are based on past practices and
expectations of future changes in the market by reference to the Group's own
experience and, where appropriate, publicly available market estimates. These
include changes in demand for newspapers, cover prices, digital subscriptions,
print and digital advertising rates as well as movements in newsprint and
production costs and inflation;
- capital expenditure cash flows to reflect the cycle of capital
expenditure;
- net cash inflows for future years are extrapolated beyond 2024 based on
the Board's view of the estimated annual long-term performance. A long-term
decline rate of 1% reflecting the market's view of the long-term decline of
the newspaper industry; and
- management estimates of discount rates that reflect current market
assessments of the time value of money, the risks specific to the CGU and the
risks that the regional media industry is facing.
The discount rate reflects the weighted average cost of capital of the Group.
The current post-tax and equivalent pre-tax discount rate used is 12.2% and
15.0% respectively (Fair value on acquisition: pre-tax WACC 17.05% and
post-tax WACC of 13.8%).
The impairment review is highly sensitive to reasonably possible changes in
key assumptions used in the value in use calculations. A combination of
reasonably possible changes in key assumptions, such as digital growth being
slower than forecast or the decline in print revenue being greater, could lead
to a further impairment. Based on the existing modelling:
· an increase in the long-term decline rate of 1.0% (which has the
effect of increasing the decline from 1% to 2% beyond 2024), would reduce the
headroom by £3.2 million. No impairment would be triggered from this
sensitivity; and
· an increase in the discount rate of 1% from 15.0% to 16.0% would
reduce the headroom by £3.5 million. No impairment would be triggered from
this sensitivity.
10. Tangible assets
Office Equipment Total
Note £m £m
Cost
Opening balance - -
Acquired on 2 January 2021 15 1.4 1.4
Additions 0.2 0.2
Disposals (0.3) (0.3)
At 1 January 2022 1.3 1.3
Accumulated impairment losses and depreciation
Opening balance - -
Depreciation for the period 4 (0.8) (0.8)
Disposals 0.3 0.3
At 1 January 2022 (0.5) (0.5)
Carrying value at 1 January 2022 0.8 0.8
£1.4 million office equipment assets with accumulated depreciation of £0.8
million were recognised on acquisition of JPIMedia Group and there were
additions of £0.2 million during 2021. The assets are depreciated over
their useful lives.
11. Leases
Right of use assets and their associated lease liabilities arose on the
acquisition of JPIMedia Group. The Group leases office buildings and motor
vehicles for use in its business operations. Leases of offices generally have
terms between 2 and 10 years, with longer period leases having a break clause
after year 5. Motor vehicles generally have a term of 4 years and are
principally utilised by the sales, editorial and IT departments. With the
exception of short term leases and leases of low value underlying assets, each
lease is reflected on the balance sheet as a right of use asset and a
corresponding lease liability.
Carrying value of right of use assets
The carrying amounts of right of use assets recognised and the movement during
the period are set out below:
Property Motor Vehicles Total
Note £m £m £m
Carrying amount at 1 January 2021 - - -
Acquisition of subsidiaries 15 2.6 0.6 3.2
Additions - 0.2 0.2
Impairment 4 (0.9) - (0.9)
Depreciation charge for the period (1.1) (0.3) (1.4)
Carrying amount at 1 January 2022 0.6 0.5 1.1
The impairment charge of £0.9 million in the period is for office locations
vacated at the end of 2021 before the lease termination date (Note 4).
Carrying value of lease liabilities
The carrying amounts of lease liabilities and the movements during the period
are set out below:
Property Motor Vehicles Total
Note £m £m £m
Carrying amount at 1 January 2021 - - -
Acquisition of subsidiaries 15 2.7 0.6 3.3
New leases - 0.2 0.2
Interest charge 5 0.2 - 0.2
Lease payments (1.4) (0.4) (1.8)
Carrying amount at 1 January 2022 1.5 0.4 1.9
2021 2020
£m £m
Current liabilities 1.2 -
Non-current liabilities 0.7 -
Total 1.9 -
Amounts recognised in Income statement
The following amounts are recognised in the income statement for the period:
2021 2020
Note £m £m
Depreciation of right of use assets 4 1.4 -
Interest expense 5 0.2 -
Total 1.6 -
In addition to the above, the Group occupies serviced office accommodation and
other short-term rental arrangements that do not meet the criteria for
reporting under IFRS 16, with a total cost of £0.7 million incurred in the
period.
The Group has elected not to recognise a lease liability for short term leases
(leases with an expected term of 12 months or less) or for leases of low value
assets (less than £4,000). Payments made under such leases are expensed on
a straight-line basis. In addition, certain variable lease payments are not
recognised as lease liabilities and are expensed as incurred.
12. Retirement benefit obligations
The Group contributes to two defined contribution schemes: the JPIMedia
Publishing Limited Retirement Savings Plan, a defined contribution master
trust; and The Scotsman Stakeholder Pension plan. Both plans are administered
by Scottish Widows. In the period employer contributions range from 3% of
qualifying earnings for employees statutorily enrolled, through to 8% of basic
salary for the majority of members on salary up to £125,000. Certain senior
managers have company contributions up to 12% as these were contracted ahead
of the rules for all new members were agreed at a maximum of 8%. The amount
due to be paid into these schemes at the balance sheet date is £0.3 million
(31 December 2020: £nil) and was paid to Scottish Widows on 21 January 2022.
The Executive directors received a cash allowance in lieu of pension
contribution of 10% of base salary, capped at £120,000 salary in 2021. From 1
April 2022, the Executive directors will receive a cash allowance in lieu of
pension contribution of 8% of base salary, capped at £125,000 salary, to
align their pension benefit to the wider workforce.
13. Provisions
Note Onerous IT contracts Property rationalisation Dilapidations Total
£m £m £m £m
At 31 December 2020 - - - -
Acquisition of subsidiaries 15 - - 0.5 0.5
Charged in 2021 4 0.7 0.9 - 1.6
At 1 January 2022 0.7 0.9 0.5 2.1
Current provision 0.5 0.5 0.3 1.3
Non-current provision 0.2 0.4 0.2 0.8
Total provision 0.7 0.9 0.5 2.1
Onerous IT contracts
A provision of £0.7 million was created in the period for the remaining
obligations over the unexpired term of remaining contract obligations on IT
Infrastructure which overlap with the transition to Cloud computing (Note 4).
Property rationalisation
Certain office locations have been vacated as the business has adopted a
flexible working policy. At the period-end, the ROU assets (£0.9 million)
for vacated office space has been written off in full together with a
provision for onerous occupation costs related to this vacant space (£0.9
million) until the end of the lease term (Note 4). There is no increase in the
dilapidation provisions for these offices.
Leasehold property dilapidations provision
The provision for leasehold dilapidations relates to the contractual
obligations to reinstate leasehold properties to their original state at the
lease expiry date. The Group has assessed the entire portfolio and made
provisions depending on the state of the property and the duration of the
lease and likely rectification requirements. £0.3 million of the provision
has been classified as current at the period-end as these leases expire in
2022.
14. Share capital and reserves
As at As at
1 January
31 December
2022 2020
£m £m
Share capital 0.3 0.1
Share premium 24.6 4.7
Retained earnings / (Accumulated losses) 3.9 (1.4)
Total equity 28.8 3.4
At the period end, the Company had 259,432,801 shares in issue.
The 10% convertible secured loan notes were converted into 205,432,801
ordinary shares with a nominal value of 0.1 pence each on 7 May 2021. All
259,432,801 shares in issue rank equally for voting purposes, on any dividend
declared and distributions made on winding up of the Company.
The 205.4 million ordinary shares issued on 7 May 2021 at a price of £0.11
per share (including the 10% conversion premium on the £20.0 million secured
convertible loan notes) giving rise to a share premium of £20.4 million.
£0.5 million of costs incurred in the period were directly attributed to the
new share issue and have been charged to share premium.
The Value creation plan (VCP) was put in place on Admission in September 2019.
The overall effect of the VCP is that the three Executive director
participants together will be able to earn Ordinary Shares equivalent in value
to 10% of any equity value created above an 8% compound annual growth rate
based on the measurement of absolute total shareholder return generated over
the VCP performance period, refer to the Remuneration report for further
information.
15. Business combinations
On 2 January 2021, the Company acquired 100% of the issued shares in JPIMedia
Group. The acquisition is classified as a reverse takeover, under Chapter 14
of the listing rules published by the FCA. The acquisition meets the
definition of a business combination and has been accounted for using the
acquisition accounting method in accordance with the Company's accounting
policies.
Details of the purchase consideration are as follows:
£m
Cash paid on completion for the equity 0.5
Additional consideration representing cash left in the business on completion 1.7
and the normalised level of working capital
Deferred consideration 5.0
Total equity consideration 7.2
Inter-company loan payable to JPIMedia Limited 4.7
Total consideration 11.9
Cash paid on Completion comprised of two parts - £0.5 million for the issued
share capital of the JPIMedia Group and £4.7 million due to JPIMedia Limited
by JPIMedia Group.
In March 2021, £1.7 million was paid as additional equity consideration for
cash left in the business at completion (£0.5 million) and the working
capital at completion being in excess of normalised working capital (£1.2
million).
Deferred consideration
The £5.0 million deferred equity consideration is payable to the former
owners, JPIMedia Limited, in two equal tranches of £2.5 million payable on 31
March 2022 and 31 March 2023. The deferred consideration has not been
discounted as we do not believe that the impact of such discounting is
material. The fair value of the assets and liabilities recognised as a result
of the acquisition and goodwill are as follows:
Note Fair values
£m
Publishing and Digital intangible assets 9 5.8
Property, plant and equipment 10 1.4
Right of use assets 11 3.2
Trade and other receivables 13.3
Cash 0.5
Trade and other payables (13.7)
Provisions 13 (0.5)
Lease obligations 11 (3.3)
Outstanding inter-company balance payable to JPIMedia Limited (4.7)
Net assets 2.0
Goodwill 8 5.2
Total equity consideration 7.2
Inter-company loan payable to JPIMedia Limited 4.7
Total consideration 11.9
The fair value of the Publishing and Digital Intangible assets reported in the
2020 annual report were provisionally estimated to be £11.0 million and this
has been revised to £5.8 million. This revision increases the goodwill on
acquisition to £5.2 million. The revision to the provisional fair value, is
based on new information arising since the acquisition, driven by operational
issues with the digital infrastructure and formal termination of the digital
acceleration programme that had been initiated by previous management for
which significant costs had been capitalised.
The goodwill represents the potential growth opportunities and synergy effects
from the acquisition. The goodwill is not deductible for tax purposes.
Acquisition related costs
Acquisition related costs of £nil (2020: £0.5 million) are included in
operating expenses in the income statement (Note 4).
Acquired receivables
The fair value of trade and other receivables is £13.3 million and includes
trade receivables with a fair value of £8.1 million. The gross contractual
amount for trade receivables due is £8.6 million, of which £0.5 million is
expected to be uncollectible.
Revenue and profit contribution
The acquired business contributed revenue of £86.0 million and profit before
tax of £3.5 million to the Group for the 52 weeks ended 1 January 2022. This
is after non-recurring costs of £6.1 million. The non-recurring comprises
£6.9 million costs (Note 4) reported for the Group less the £0.8 million
acquisition and loan note issue reported in the Company (Note 4).
16. Notes to the Cash Flow Statement
2021 2020
Note £m £m
Operating Profit / (Loss) 2.1 (1.1)
Adjustments for non-cash/non-operating items:
Amortisation of intangible assets 4 0.5 -
ROUA and tangible assets depreciation expense 4 2.2 -
ROUA Impairment 4 0.9 -
Acquisition, loan note issue and share re-listing costs 4 0.8 0.8
Operating cash flow before working capital changes 6.5 (0.3)
Net increase in provisions 1.6 -
8.1 (0.3)
Changes in working capital:
Decrease in receivables 0.2 0.1
(Decrease)/increase in payables (0.1) 0.1
Cash generated from / (used in) operations 8.2 (0.1)
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.
Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows are, or
future cash flows will be, classified in the Group's Consolidated Cash Flow
Statement as cash flows from financial activities.
Cash outflow on repayment of debt
31 Acquisition of subsidiaries Cash inflow from issue of debt 1
December Non-cash movements January
Note 2020 2022
£m £m £m £m £m £m
Leases 18 - 3.3 - (1.8) 0.4 1.9
Borrowings 22 8.4 - 12.6 - (20.0) 1.0
Total liabilities from financing activities
8.4 3.3 12.6 (1.8) (19.6) 2.9
The £20.0 million secured convertible loan notes issued to fund the
acquisition of JPIMedia Group together with accrued interest and conversion
premium was converted to ordinary shares on 7 May 2021. The £1.0 million
unsecured interest only loan notes raised to fund working capital remain
outstanding at 1 January 2022 and are repayable on 31 December 2023.
17. Alternative performance measures
To provide clarity of the underlying trading performance of the Group, the
operating results are presented on an adjusted basis. Adjusted results are
before non-recurring restructuring and organisational charges, IFRS 16
adoption, transaction costs, amortisation of intangible assets and impairment
charges. The Directors believe that it is appropriate to additionally present
the alternative performance measures used by management in running the
business, and that it will present a more meaningful and comparable financial
result.
The adjusted results provide supplementary analysis of the 'underlying'
trading of the Group.
Adjusted results* Statutory results
2021 2020 2021 2020
£m £m £m £m
Revenue 86.0 - 86.0 -
Operating costs (75.9) (0.3) (74.3) (0.3)
Depreciation and amortisation (0.8) - (2.7) -
Operating profit / (loss) pre non-recurring items 9.3 (0.3) 9.0 (0.3)
Non-recurring items - - (6.9) (0.8)
Operating profit / (loss) 9.3 (0.3) 2.1 (1.1)
Net finance expense (0.7) - (0.9) -
Profit / (loss) before tax 8.6 (0.3) 1.2 (1.1)
Tax (charge) / credit (1.6) - 4.1 -
Profit / (loss) after tax 7.0 (0.3) 5.3 (1.1)
The adjusted profit before tax is £8.6 million, and the adjusted tax rate is
19% with a £1.6 million tax charge in the period. The adjusted tax charge
does not benefit from the brought forward tax losses so as to provide a more
meaningful and comparable financial result.
Operating profit / (loss) as determined under IFRS to adjusted operating
profit / (loss):
Note 2021 2020
£m £m
Operating profit / (loss) as determined under IFRS 2.1 (1.1)
Adjustments:
Lease costs (1.6) -
Depreciation on right of use assets 4 1.4 -
Amortisation of intangible assets 4 0.5 -
Restructuring costs 4 3.6 -
Onerous IT contracts 4 0.7 -
ROUA Impairment 4 0.9 -
Property Rationalisation 4 0.9 -
Acquisition, loan note issue and share re-listing costs 4 0.8 0.8
Adjusted operating profit / (loss) 9.3 (0.3)
EBITDA and adjusted EBITDA are:
2021 2020
£m £m
Operating profit / (loss) as determined under IFRS 2.1 (1.1)
Depreciation and amortisation 4 2.7 -
ROUA Impairment 4 0.9 -
EBITDA 5.7 (1.1)
Adjusted operating profit / (loss) 9.3 (0.3)
Depreciation 10 0.8 -
Adjusted EBITDA 10.1 (0.3)
Reconciliation of revenue to proforma revenue
52 weeks ended 52 weeks ended
1 January 2022
31 December 2020
£m £m
Revenue 86.0 -
JPIMedia Group revenue pre-acquisition - 88.2
Proforma revenue 86.0 88.2
The proforma revenue trend presents the prior period revenues on a like for
like basis for the prior periods assuming JPIMedia Group was owned from the
beginning of 2020.
18. Reconciliation of statutory to adjusted cash flow
IFRS Adjustments Adjusted
2021 2021
£m £m £m
Cash flow from operating activities
Operating profit 2.1 7.2 9.3
Impairment on ROUA 0.9 (0.9) -
Depreciation and amortisation 2.7 (1.9) 0.8
Adjusted EBITDA 5.7 4.4 10.1
Restructuring costs paid - (3.2) (3.2)
Acquisition, loan note issue and share re-listing costs 0.8 (0.8) -
Provisions 1.6 (1.6) -
Working capital and other 0.1 (0.6) (0.5)
Net cash flow generated from operations 8.2 (1.8) 6.4
Investing activities
Acquisition of subsidiaries (2.2) - (2.2)
Cash acquired in subsidiaries 0.5 - 0.5
Subsidiary acquisition costs (0.5) - (0.5)
Purchases of tangible assets (0.2) - (0.2)
Repayment of outstanding inter-company balance payable to JPIMedia Limited (4.7) - (4.7)
Net cash outflow from investing activities (7.1) - (7.1)
Financing activities
Interest paid (0.3) 0.2 (0.1)
Principal repayment of leases (1.6) 1.6 -
Proceeds from issue of convertible secured loan notes 11.6 - 11.6
Proceeds from issue of interest only unsecured loan notes 1.0 - 1.0
Capital raise and share issue costs (1.5) - (1.5)
Net cash generated from financing activities 9.2 1.8 11.0
Net increase in cash and cash equivalents 10.3 - 10.3
The adjustments for 2021 are:
· £7.2 million increase in operating profit reflects £1.4 million
depreciation of IFRS 16 leased assets, £0.9 million impairment of ROUA, £0.5
million amortisation of intangible assets, £0.8 million of acquisition, loan
note issue and share re-listing costs, £1.6 million provisions (comprising
£0.7 million onerous IT contracts and £0.9 million property rationalisation)
and £3.6 million restructuring costs partially offset by a lease costs charge
of £1.6 million;
· £1.9 million reduction in depreciation and amortisation reflects
the £1.4 million depreciation of IFRS 16 lease assets and £0.5 million
amortisation of intangible assets which has been added back to operating
profit;
· The £3.2 million reduction for restructuring costs and £0.6
million negative working capital adjustment reflects the £3.6 million
restructuring costs of which £3.2 million has been paid in the period and
£0.4 million remains outstanding, and £0.2 million of acquisition, capital
raise and share issue costs remains outstanding;
· £0.8 million acquisition, loan note issue and share re-listing
costs reduction as these were added back to operating profit; and
· £0.2 million interest and £1.6 million principal payments on
IFRS 16 leases are added back as they have already been charged to operating
profit.
Statutory Adjustments Adjusted
2020 2020
£m £m £m
Cash flow from operating activities
Operating (loss)/profit (1.1) 0.8 (0.3)
Depreciation and amortisation - - -
Adjusted EBITDA (1.1) 0.8 (0.3)
Restructuring costs paid - - -
Acquisition, loan note issue and share re-listing costs 0.8 (0.8) -
Working capital and other (0.8) - (0.8)
Net cash flow generated from operations (1.1) - (1.1)
The adjustments for 2020 is the £0.8 million of acquisition, loan note issue
and share re-listing costs was all outstanding at 31 December 2020. £0.6
million of these costs were paid in 2021.
19. Principal Risks and Uncertainties
The Company operates in an uncertain environment and is subject to a number of
principal risks. As the Company completed the acquisition of the JPIMedia
Group on 2 January 2021, the principal risks have been revised with a few
combined into Strategy, and a number no longer applicable as these related to
the Company's ability to raise capital and execute an acquisition. The
principal risks in 2020 and 2021 are summarised in the table below:
2020 2021
Strategy Retained with a broader coverage of risks
Raising funding - The Company has proven its ability to raise capital to fund Not applicable as the Company proven its ability to raise capital to fund the
the acquisition of the JPIMedia Group acquisition of the JPIMedia Group
COVID-19 Retained as a key risk due to ongoing implications and longer term impact on
the economic outlook
Cyber security and data migration Retained as a key risk and includes data migration programme due to move to
Google Cloud platform
Loss of key senior management Retained as a risk but no longer viewed as a key risk
Re-admission of the ordinary shares to a Standard Listing and to trading on Not applicable as re-admission was achieved in May 2021
the Main Market of the London Stock Exchange
Acquisition of JPIMedia Publishing Limited and its subsidiaries Not applicable as acquisition now complete
Not applicable Infrastructure and operations
Not applicable Data protection
Raising funding, the readmission of National World plc to the London Stock
Exchange (completed in May 2021) and the acquisition of JPIMedia Group have
been removed from the risk register.
The Directors consider the following principal risks to the Company's
activities although it should be noted that this list is not exhaustive and
that other risk factors not presently known or currently deemed immaterial may
apply.
Issue Risk/Uncertainty Mitigation
Strategy The news publishing sector continues to face ongoing challenges with newspaper The Board has a strategy and a very experienced management team that is highly
circulation volume and print advertising in structural decline. In addition, motivated to deliver against the strategy.
increased competition in local markets with the launch of new online news
sites and the dominance of Google and Facebook is impacting the monetisation
of digital websites through advertising and the multiple sources of news
online impacting the growth of subscription and e-commerce revenue. The Executive Directors are fully engaged on the operating performance of the
business and regular updates are provided to the Board on strategic
initiatives.
COVID-19 COVID-19 continues to impact the UK economy and the Group's trading post The Directors are closely monitoring the commercial impact of the COVID-19
acquisition. pandemic on the Group, the wider news publishing sector and the implications
for the UK economy.
The Company maintains significant financial flexibility considering the
uncertain trading outlook and management are already taking steps to mitigate
future implications on revenues and profits.
Cyber security and data migration The Group is at risk of a cyber attack on systems and websites In-line with industry best-practice, multiple layers of security systems are
in-place. These include managed firewalls, managed DDoS protection, anti-virus
software, Single-Sign-On, ransomware protection and a managed email platform
that has a number of sophisticated security configurations built-in.
The principal news websites are hosted independently of the main IT
infrastructure on Amazon Web Services under the management of a third-party
vendor. An insurance policy is in-place that provides cover for cyber
security-related issues only until March 2022. Due to additional requirements
for multi-factor authentication ('MFA') cyber insurance is not available from
1 April 2022. The Group is in the process of implementing MFA in the second
quarter of 2022 with cyber insurance cover resuming from the second half of
2022.
A strategic programme to migrate all existing IT infrastructure to Google's
Cloud Platform is underway. As well as providing increased physical security
and resilience, this migration will provide an opportunity for a review of the
cyber security risks for each workload being migrated and a reduction in the
total number of systems in operation.
The change advisory board regularly review the internal risk register and
update accordingly in response to any identified issues.
Infrastructure and operations The Group is reliant on an effective and efficient infrastructure to support The Group has established a risk management framework which is overseen by the
its operations. This includes a robust: IT Infrastructure, regulatory Risk Management Committee and chaired by the Chief Operating Officer and
compliance framework, financial control environment and contracts with includes senior management representing all operations across the Group. The
suppliers, in particular for our websites and printing and distribution of our first meeting of the Risk Management Committee was held during March 2021.
newspapers.
A strategic programme to migrate all existing IT infrastructure to Google's
The operations of the Group will be adversely impacted by the loss of key Cloud Platform is underway. As well as providing increased physical security
infrastructure, weaknesses in the control environment and loss of key and resilience, this migration will provide an opportunity for a review of the
suppliers. cyber security risks for each workload being migrated and a reduction in the
total number of systems in operation.
Data protection - GDPR Legal Counsel conducts assessments of data quality. Use of data is overseen by A Quality Manager within the Commercial team is responsible for ensuring all
Legal Counsel and advice is sought by sales and marketing teams as and when systems are GDPR & PCI compliant and that agents are updating the customer
data is being sourced. Implementation of GDPR is subject to ongoing monitoring records in the CRM to ensure we are compliant and to ensure data is captured
and this includes mandatory company training, and working with IT and any and managed within the ICO guidelines and GDPR requirements.
other relevant departments, as required.
All new supplier contracts are reviewed by Legal Counsel to ensure all
required data protection provisions are included and signed up to by the
supplier. All contracts are reviewed by the Legal team prior to signing.
Intra-group data sharing agreement now complete. GDPR compliance across the
Group is the subject of an ongoing improvement programme. Our newly appointed
Legal Counsel will conduct a review of all policies and processes in the
coming year.
Training provided to all commercial new starters by Legal Counsel and L&D.
20. Post balance sheet events
With the exception of the uncertainty in the trading environment because of
inflationary pressures, in particular newsprint and printing costs, and the
global instability as a result of the Ukraine war there are no post balance
sheet events requiring disclosure.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
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