Johnston Press PLC - Half-year Report

RNS Number : 0659Z

Johnston Press PLC

29 August 2018

Johnston Press plc

Interim unaudited results for the 26 week period ended 30 June 2018

Johnston Press plc and its subsidiaries ('the Group'), (LSE: JPR), announces its results for the 26 week period ended 30 June 2018.

Operational Highlights¹

· A strong performance from the i newspaper, which saw a 61.0% increase in adjusted EBITDA on H1 2017 to £6.0m², has helped to mitigate a broader decline in revenues.

· The Group has posted a statutory operating profit of £7.4m compared to £4.9m in the same period last year while delivering an adjusted EBITDA of £19m at a margin of 20.4%.

· Consistent with pressures seen across the industry, adjusted advertising revenues from continuing operations have fallen by 15.0% with revenue from classified advertising showing a decline of 28.5% compared to the same period last year.

· Digital audiences grew to a record 27.3m average unique users per month. However, the effects of algorithm and news feed changes by Google and Facebook contributed to total digital advertising revenues declining by 7.4% (down 4.3% excluding classifieds) on H1 2017 to £12.2m.

· Adjusted newspaper sales circulation revenues have proven resilient, falling by 1.7% on H1 2017 to £38.9m, with price rises broadly off-setting the impact of circulation declines.

· The Group's adjusted net debt position³, which excludes mark-to-market gains on our Bonds, is £203.2m - with interest payments consuming £9.5m of cash in the period.

Financial Highlights

Statutory results for the Group:

· Total revenue was £93.0m (H1 2017: £103.3m) down 10.0%

· Operating profit was £7.4m (H1 2017: £4.9m) up 50.1%

· Profit before tax was £6.2m (H1 2017: loss before tax of £10.2m) includes a non-cash impairment of £3.5m (H1 2017: £4.5m) and mark-to-market gain on the Bond of £8.8m (H1 2017: loss of £4.4m)

Adjusted¹ results for the Group:

· Total adjusted revenue was £93.0m (H1 2017: £101.3m) down 8.2%, (down 4.1% excluding classifieds)

· Adjusted operating profit was £16.6m (H1 2017: £16.2m) up 2.4%

· Adjusted Group EBITDA was £19.0m (H1 2017: £19.7m) down 3.7%

· Adjusted EBITDA margin of 20.4% (H1 2017: 19.5%)

· Adjusted net debt³was £203.2m at 30 June 2018 (as at 30 December 2017: £195.9m)

Strategic Review

· The Strategic Review is ongoing, and we will provide an update as soon as possible.

Commenting on the results, Chief Executive Officer David King said:

"There are two sets of issues affecting Johnston Press. The first is the Group's historical debts, including its pension obligations, which continue to weigh on our Balance Sheet. The second is the tough market conditions affecting the performance of our newspapers and websites. However, our resilient performance allowed us to generate an operating profit of £7.4m in the period, up from £4.9m in H1 2017.

"The strong performance of the i demonstrates that it is possible to grow a newspaper brand, despite the prevailing headwinds. The i grew its circulation revenues by 17% and its advertising revenues by 20% compared to H1 2017. The digital audience for inews.com grew to 4.2m in June, up from 1.3m in December last year.

"The market backdrop for regional/local newspapers is extremely difficult, as evidenced by the 15% drop in our adjusted advertising revenues from H1 2017. We have continued to make progress growing digital audiences to a record 27.3m average unique users per month. However, the continued challenges posed by Google and Facebook, seen most recently through algorithm and news feed changes, has contributed to total digital revenue decline, while Balance Sheet constraints has restricted the Group's ability to invest, and counter these effects. We will engage with the Cairncross Review into the future of high quality journalism with a view to helping address the challenges faced by local news organisations in monetising its content.

"As part of the Strategic Review, the Group continues to explore its options for the refinancing or restructuring of the Group's debt but, as yet, no decisions have been made nor agreements reached. We will provide an update as soon as possible."

£'m	Continuing Operations - Statutory			Continuing Operations - Adjusted¹
26 weeks ended:	30 June 2018	1 July 2017	% change⁴	30 June 2018	Re-stated⁶ 1 July 2017	% change⁴
Total revenue (combined print and digital) - Group ⁵	93.0	103.3	(10.0%)	93.0	101.3	(8.2%)
Total advertising revenue (combined print and digital) - Group	43.2	52.7	(17.8%)	43.2	50.8	(15.0%)
Total advertising revenue (combined print and digital) - the i	17.2	14.5	18.3%	17.2	14.5	18.3%
Print advertising (ex classifieds)	21.4	25.3	(15.4%)	21.4	23.8	(10.0%)
Digital advertising^,(ex classifieds)	9.7	10.0	(3.1%)	9.7	10.1	(4.3%)
Circulation revenue	38.9	39.6	(1.9%)	38.9	39.6	(1.7%)
Contract Print revenue	6.6	6.9	(3.2%)	6.6	6.9	(3.2%)
Operating profit	7.4	4.9	50.1%	16.6	16.2	2.4%
EBITDA - Group incl the i				19.0	19.7	(3.7%)
EBITDA - the i²				6.0	3.7	61.0%
EBITDA margin - Group incl the i				20.4%	19.5%	n/a
Profit/(loss) before tax	6.2	(10.2)	-	7.1	6.7	5.7%
Basic earnings/(loss) per share	3.6	(5.4)	-	3.9	5.1	(23.1%)
Net Debt³				203.2	191.7	(6.0%)
1 The results are presented on a continuing adjusted basis which exclude the following items: mark-to-market movement on the Bonds, impairment of intangible and tangible assets, restructuring costs, strategic review costs, items related to the defined benefit pension plan, share based payment costs, trading and write downs relating to the closure and disposal of titles and digital operations, one-off legal and acquisition costs and disposal gains. 2 No corporate costs have been allocated to the i for the purposes of the results presentation. 3 Net debt is a non-statutory term presented to show the Group's borrowings net of cash equivalents and Bonds fair value movements and includes finance leases. Adjusted net debt is stated excluding fair value mark-to-market valuation adjustments on the Bonds. 4 The % change variance has been calculated based on unrounded numbers. 5 Adjusted Classified advertising (print and digital) and other advertising revenue for the period is £12.1m (H1 2017: £16.9m), a decline of 28.5% and represented 13.0% of total adjusted revenue in H1 2018 (H1 2017: 16.7%). 6 Prior period comparative revenue has been restated to adjust out amounts relating to the Yorkshire Metro closed during 2018. This ensures that adjusted results for H1 2018 and both prior periods are presented on a consistent basis, including only the operations of the Group that are continuing from 30 June 2018.

Statutory and adjusted basis

The statutory results are for the Group and include closed titles and businesses, exceptional items, asset impairment and mark-to-market movements on the Group's Bonds. The adjusted measures represent trading results before adjusting items which are defined in the Alternative Performance Measures section. The Directors present this supplemental financial information to provide a consistent view on the underlying trading of the Group.

The adjusted figures are not a financial measure defined or specified in the applicable financial reporting framework, and therefore may not be comparable to similar measures presented by other entities. When reviewing and selecting these adjusting items, the Directors considered the guidelines issued by the European Securities and Markets Authority ('ESMA'). A reconciliation of the statutory to adjusted figures is provided within the Financial Review and within the Adjusted Performance Measures section.

Forward-looking statements

The report contains forward looking statements. Although the Group believes that the expectation reflected in these forward- looking statements are reasonable, it can give no assurance that the expectations will prove to have been correct. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward looking statements. The Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Market abuse regulation

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

For more information, contact:

Johnston Press plc

David King, CEO 020 7612 2600

Panmure Gordon

Dominic Morley

Charles Leigh-Pemberton 020 7886 2500

Liberum

Neil Patel 020 3100 2000

Edelman

Alex Simmons

Ben Fenton 020 3047 2000

Johnston Press will host a conference call for institutional investors and analysts this morning at 9.30am (GMT). The presentation will be available through our partner Arkadin (https://event.on24.com/wcc/r/1823919-1/9D2D293F62993577FD1EFD5473E98289).

To dial in to the conference call, participants should dial:

United Kingdom Toll-Free: No: 08003589473

PIN: 87374769#

United Kingdom Toll: No: +44 3333000804

PIN: 87374769#

Johnston Press Legal Entity Identifier: 213800JFIBCR4LGUA242

About Johnston Press

Johnston Press is a leading multimedia business with a vibrant mix of news brands that reach national, regional and local audiences. We provide news and information services to local and regional communities through our extensive portfolio of hundreds of publications and websites.

Sharing information and opinion remains at the heart of what we do and our titles, which include iconic publications such as the i newspaper, The Scotsman, The Yorkshire Post and News Letter in Northern Ireland are read via traditional print, online platforms and mobile devices by an average of 39.5¹ million people every month.

We are experts in combining national reach with local targeting and are better equipped than ever to help advertisers tell their stories, too, through our trusted platforms.

¹Total average audience consists of 27.3m unique users (H1 2017: 26.5m) and print audience of 12.2m (H1 2017: 13.7m).

FINANCIAL REVIEW

Introduction

This Financial Review provides commentary on the Group's Statutory and Adjusted (Alternative Performance Measures or "APMs") results for the 26 week period ended 30 June 2018 (H1 2017: 26 week period ended 1 July 2017).

Strategic Review

The Group's net debt (excluding mark-to-market) at period end was £203.2m. The Group's £220.0m 8.625% high yield bonds (the 'Bonds'), which become due for repayment on 1 June 2019, have been classified as current in the 2018 interim report. The Group also operates a defined benefit pension scheme, which was closed to future accrual on 30 June 2010. At 30 June 2018 it had a net deficit of £40.7m.

The Strategic Review process continues to be a key focus for the Group. The impact of this matter on the Directors' determination of the appropriateness of preparing the 2018 interim financial statements on a going concern basis, and their review of the Group's viability over the medium term is discussed in the 'Liquidity and going concern' section and the 'Viability Statement' section.

Basis of presentation of results

The statutory results are presented for the continuing Group. The East Anglia and East Midlands titles, disposed of in January 2017 and the Yorkshire Metro title publishing contract terminated on 30 June 2018 are included in the prior year statutory results but removed for comparability with the continuing business in the adjusted figures¹. Continuing statutory results include closed titles and businesses, adjusting items, impairment of asset carrying values and mark-to-market gains/(losses) on the Group's Bonds.

To provide investors and other users of the Group's financial statements with additional clarity and understanding of both the cost of this business change program, and the resulting impact on the Group's underlying trading, the Directors believe that it is appropriate to additionally present the Alternative Performance Measures used by management in running the business and in determining management and executive remuneration.

In preparing commentary on performance, the financial impact of a number of significant accounting and operational items has been adjusted to determine the adjusted results included in this Financial Review. The adjusted results provide supplementary analysis of the 'underlying' trading of the Group.

A reconciliation of statutory to adjusted figures is provided below and in the Alternative Performance Measures section.

1 Prior period comparative adjusted revenue, adjusted cost of sales and adjusted operating costs have been restated to adjust out amounts relating to the Yorkshire Metro closed during 2018. This ensures that adjusted results for H1 2018 and both prior periods are presented on a consistent basis, including only the operations of the Group that are continuing from 30 June 2018.The impact is an increase in cost of sales adjusting item (H1 2017: £0.8m, FY 2017: £1.8m) and operating cost adjusting item (H1 2017: £0.8m, FY 2017: £1.6m). Refer to Adjusted Performance Measures section for details.

Reconciliation of statutory and adjusted results

Adjusted operating profit of £16.6m (H1 2017: £16.2m) has been calculated after adjusting for restructuring, impairment, Strategic Review and other non-trading related costs.

Continuing statutory revenue has been adjusted for disposed titles, closed titles and digital products. During the period the Group terminated its contract to publish the Yorkshire Metro and has treated this publication as closed. As an onerous provision was recorded at 30 December 2017 for the 2018 losses expected from the Yorkshire Metro publishing contract, until termination on 30 June 2018, the adjustment to revenue relating to this closed title is £nil for H1 2018 (H1 2017: £1.5m and £3.2m for the full comparative year). On 17 January 2017, the Group sold its East Anglia and East Midlands titles to Iliffe Media Ltd. Adjustments made in the comparative periods in respect of these titles relate to revenue earned in the two-week period up to the date of disposal of £0.3m. This adjustment is necessary in order to present results for the Group's ongoing business portfolio.

Reconciliations of the statutory to adjusted figures are provided below and explained within the Financial Review and within the Statutory to Adjusted reconciliation in the APM's section.

Reconciliation of adjusted revenue

	Revenue
	2018 26 weeks £m	Restated¹ 2017 26 weeks £m	Restated¹ 2017 52 weeks £m
Statutory Revenue	93.0	103.3	201.6
Adjustments
Disposed and closed titles/digital products	-	(2.0)	(3.6)
Adjusted Revenue	93.0	101.3	198.0

1 The prior year comparative figures have been restated to exclude revenue for the titles and products closed during H1 2018, in order to present results for the Group's ongoing business portfolio. Prior year total revenue of £1.5m for H1 2017 and £3.2m for FY 2017 has been adjusted on a like-for-like basis. The revenue on these related products has been adjusted so as to present the Group's underlying performance on a comparable basis as they do not earn revenue once closed.

Reconciliation of adjusted operating profit and adjusted EBITDA

	Operating profit/(loss)
	2018 26 weeks £m	2017 26 weeks £m	2017 52 weeks £m
Statutory operating profit/(loss)	7.4	4.9	(51.2)
Restructuring costs	2.0	3.7	13.7
Strategic review costs	3.2	1.4	3.4
Impairment of publishing titles, print presses and assets held for sale	3.5	4.5	64.4
Pensions	0.6	0.6	1.9
Disposals/acquisitions	(0.1)	(0.3)	(1.3)
Long-term incentive plan (LTIP) costs	-	1.2	1.4
Accelerated depreciation	-	0.2	0.9
Disposed and closed titles/digital products	-	-	(0.1)
Adjusted operating profit	16.6	16.2	33.2
Adjusted depreciation and amortisation	2.4	3.5	7.0
Adjusted EBITDA	19.0	19.7	40.2

Reconciliation of net debt to net debt excluding mark-to-market

	2018 26 weeks £m	2017 26 weeks £m	2017 52 weeks £m
Gross bonds debt (at inception)	225.0	225.0	225.0
Bonds repurchase	(5.0)	(5.0)	(5.0)
Finance leases	0.8	0.5	0.9
Cash and cash equivalents	(17.6)	(28.8)	(25.0)
Net debt excluding mark-to-market	203.2	191.7	195.9
Mark-to-market on Bonds (from inception)	(58.6)	(68.2)	(49.8)
Bonds discount (net)	(4.4)	(4.4)	(4.4)
Net debt	140.2	119.1	141.7

	Statutory¹				Adjusted
	26 weeks to 30 June 2018 £m	26 weeks to 1 July 2017 £m	Change £m	Change^² %	26 weeks to 30 June 2018 £m	Re-stated⁵ 26 weeks to 1 July 2017 £m	Change £m	Change^² %
Newspaper sales	38.9	39.6	(0.7)	(1.9%)	38.9	39.6	(0.7)	(1.7%)
Contract printing	6.6	6.9	(0.3)	(3.2%)	6.6	6.9	(0.3)	(3.2%)
Print advertising excluding classified	21.4	25.3	(3.9)	(15.4%)	21.4	23.8	(2.4)	(10.0%)
Digital advertising excluding classified	9.7	10.0	(0.3)	(3.1%)	9.7	10.1	(0.4)	(4.3%)
Print and Digital advertising excluding classified	31.1	35.3	(4.2)	(12.0%)	31.1	33.9	(2.8)	(8.3%)
Classified and other advertising	12.1	17.4	(5.3)	(30.3%)	12.1	16.9	(4.8)	(28.5%)
Total advertising revenue	43.2	52.7	(9.5)	(17.8%)	43.2	50.8	(7.6)	(15.0%)

Leaflet, syndication and other revenue	4.3	4.1	0.2	5.5%	4.3	4.0	0.3	6.2%
Total continuing revenues	93.0	103.3	(10.3)	(10.0%)	93.0	101.3	(8.3)	(8.2%)

Total costs³	(83.2)	(94.6)	11.4	12.1%	(74.0)	(81.6)	7.6	9.3%
EBITDA⁴	n/a	n/a	-	-	19.0	19.7	(0.7)	(3.7%)
EBITDA margin	-	-	-	-	20.4%	19.5%	-	-
Depreciation and amortisation	(2.4)	(3.8)	1.4	35.1%	(2.4)	(3.5)	1.1	31.4%
Operating profit	7.4	4.9	2.5	50.1%	16.6	16.2	0.4	2.4%
Operating profit margin	8.0%	4.7%	-	-	17.9%	16.0%	-	-
Profit/(loss) before tax	6.2	(10.2)	16.4	-	7.1	6.7	0.4	6.0%

1 The statutory results include the trading performance of the Midlands titles (H1 2017: 2 weeks), which were disposed of in January 2017.

2 The % change variance has been calculated based on unrounded numbers.

3 Total costs include cost of sales and are stated before depreciation and amortisation.

4 EBITDA is earnings before interest, tax, depreciation and amortisation. A reconciliation of Adjusted EBITDA is provided in the Alternative Performance Measures section.

5 Prior period comparative revenue, and total costs have been restated to adjust out amounts relating to the Yorkshire Metro closed during 2018. This ensures that adjusted results for H1 2018 and both prior periods are presented on a consistent basis, including only the operations of the Group that are continuing from 30 June 2018.The impact is an increase in total cost adjusting item (H1 2017: £0.8m).

Revenue

Total adjusted revenues of £93.0m were down 8.2% for the period. Revenue declines reflect the continued downward pressure on revenue, with adjusted classified and other advertising down 28.5% period-on-period and a slowdown in digital revenue during the period. Total statutory revenues were down 10.0% for the period.

Newspaper sales

Statutory newspaper sales revenue was £38.9m for the 26 weeks 30 June 2018, compared to £39.6m for the 26 weeks to 1 July 2017. This performance reflected price rises of 10p on the Monday to Friday and 20p on the Saturday editions of the i from September 2017. The strategy of investing in our largest titles has also allowed us to increase prices without a material detrimental impact on circulation numbers, which have seen modest falls during the period.

Contract printing

Statutory contract print revenues were £6.6m in the first half of the year, a 3.2% decline on the prior period. The Group has continued to win new contract work, benefiting from additional revenues of £0.5m generated from new contracts in H1 2018, which has helped mitigate the decline in print volumes from existing contracts and the impact of the change in format of the Guardian and Observer printed by the Group in Northern Ireland. There have been no print contract losses since October 2014.

Advertising Revenue

Total adjusted advertising revenue was down 15.0% period-on-period, reflecting challenging industry conditions.

Print and Digital publishing advertising adjusted revenue analysis

The sharpest fall in advertising continued to be in classified, down 28.5% or £4.8m of the £7.6m decrease in adjusted advertising revenue for H1 2018. Classifieds revenue now represents 13.0% of the total revenue of the Group (H1 2017: 16.7%).

	Adjusted Revenue
	26 weeks to 30 June 2018 £m	26 weeks to 1 July 2017 £m	Change £m	Change %²
Display - local and national	19.0	21.4	(2.4)	(11.3%)
Transaction revenues	9.5	9.8	(0.3)	(2.7%)
Digital marketing services and Partnership¹	2.6	2.7	(0.1)	(4.1%)
Print and digital publishing advertising excluding classified	31.1	33.9	(2.8)	(8.3%)
Classifieds and other advertising	12.1	16.9	(4.8)	(28.5%)
Total advertising revenue	43.2	50.8	(7.6)	(15.0%)

Print publishing advertising excluding classified	21.4	23.8	(2.4)	(10.0%)
Digital publishing advertising excluding classified	9.7	10.1	(0.4)	(4.3%)
Total Print and digital publishing advertising excluding classified	31.1	33.9	(2.8)	(8.3%)

1 Partnership revenues include partnership revenues, reader holidays and other B2B services (formerly described as Enterprise).

2 The % change variance has been calculated based on unrounded numbers.

The table below presents the total print and digital revenues, for the purpose of reconciling to the Group's statutory breakdown in the notes to the financial statements.

	Adjusted revenue & average audience
	26 weeks to 30 June 2018 £m	26 weeks to 1 July 2017 £m	Change £m	Change %¹
Print revenue	31.0	37.7	(6.7)	(17.7%)
Digital revenue²	12.2	13.1	(0.9)	(7.4%)
Total advertising revenue	43.2	50.8	(7.6)	(15.0%)
Total average audience (millions)³	39.5	40.2	(0.7)	(1.7)%

1 The % change variance has been calculated based on unrounded numbers.

2 In addition, digital syndication revenue of £0.6m (H1 2017: £0.5m) are included in Leaflet, syndication and other revenue.

3 Total average audience consists of 27.3m unique users (H1 2017: 26.5m) and print audience of 12.2m (H1 2017: 13.7m).

The continued challenges posed by Google and Facebook, seen most recently through algorithm and news feed changes, has contributed to total digital revenue decline, while Balance Sheet constraints has restricted the Group's ability to invest, and counter these effects.

Leaflets, syndication and other revenues

Leaflets, syndication and other revenues, (which includes Transitional Services Agreement (TSA) income, events, reader offers and waste sales) improved by 6.2% period on period, on an adjusted basis.

Operating profit

The Group achieved adjusted operating profit of £16.6m in the first half (H1 2017: £16.2m), an improvement of 2.6% on the prior period and a strong adjusted EBITDA margin of 20.4% (H1 2017: 19.5%).

Adjusted total costs (excluding depreciation and amortisation) of £74.0m have been achieved, representing a £7.6m cost reduction compared to the prior period. The adjusted depreciation charge of £2.4m compares to £3.5m in the prior period. Cost savings continue to be made across all parts of the business including production, editorial, sales and overheads.

A statutory operating profit of £7.4m (H1 2017: £4.9m profit), is reported after an impairment charge in the period of £3.5m (H1 2017: £4.5m).

i performance

The i's first half adjusted EBITDA performance increased 61.0% to £6.0m on H1 2017 as a result of strong statutory revenue performance - up 18.3% on H1 2017. Within this, statutory newspaper sales revenue grew to £12.9m, an increase of 16.9% on H1 2017, whilst total advertising revenues were £3.6m, an increase of 20.0% from H1 2017. Management has continued its focus on the cost base and margins.

The i newspaper has continued to thrive, following its acquisition in April 2016 for £24.0m. Since acquisition, it has generated £18.6m of adjusted EBITDA for the Group.

In the period total revenue was up 18.3%, with circulation revenue up 16.9% and advertising up 20.0%.

Overall circulation of Monday to Friday maintained a 19.5% share of the quality market.

The i has also seen significant growth in its digital traffic, with unique users hitting 4.2m in June, up from 1.3m in December 2017.

	i performance
	26 weeks to 30 June 2018 £m	26 weeks to 1 July 2017 £m	Change £m	Change %²
Newspaper sales	12.9	11.0	1.9	16.9%
Print advertising	3.2	2.8	0.4	13.2%
Digital advertising	0.4	0.2	0.2	132.8%
Other revenue	0.7	0.5	0.2	40.1%
Total Statutory Revenue	17.2	14.5	2.7	18.3%
Statutory Total costs	(11.3)	(10.8)	(0.5)	(3.7%)
Statutory Operating profit	5.9	3.7	2.2	61.8%
Adjusted EBITDA^1,3	6.0	3.7	2.3	61.0%

1 No corporate costs have been allocated to the i for the purposes of the results presentation.

2 The % change variance has been calculated based on unrounded numbers.

3 EBITDA is not a statutory measure and therefore has been labelled as Adjusted EBITDA. However, there are no adjusting items included in this figure.

Finance income and costs

Adjusted net finance costs were £9.5m in the period, flat period-on-period. In the period, a fair value gain on the Bonds amounted to £8.8m as a result of a drop in market prices in the period (H1 2017: £4.4m gain).

Net financing (expense)/income¹	26 weeks to 30 June 2018 £m	26 weeks to 1 July 2017 £m	Change £m
Interest on Bonds	(9.5)	(9.5)	-
Total adjusted net operating finance expenses	(9.5)	(9.5)	-
Revolving Credit Facility issuance costs	-	(0.4)	0.4
Net finance expense on pension liabilities/assets	(0.5)	(0.9)	0.4
Change in fair value of borrowings	8.8	(4.4)	13.2
Total statutory net financing expense	(1.2)	(15.2)	14.0

1 Adjusted finance costs exclude the Bonds mark-to-market and pension finance costs. A reconciliation and explanation of statutory to adjusted figures is provided in the Alternative Performance Measures section.

Asset impairment

The carrying value of assets is reviewed for impairment at least annually or more frequently if there are indications that they might be impaired. In light of the adverse trading conditions impacting the sector an impairment review was undertaken resulting in a write-down of £3.5m in the first half of 2018 (H1 2017: £4.5m). The impairment is largely a function of the downward pressure on revenue. The write-down reduces the asset carrying value of publishing units to £82.3m and the carrying value of print presses to £18.3m at period-end. Refer to Note 8 and 9 in the financial statements.

Taxation

Corporation tax for the interim period is charged at 39.4% (H1 2017: credited at 45.0%), including deferred tax. The tax charge of £2.4m in the period includes a deferred tax charge of £2.5m, of which £2.2m arises on the Bonds due to different accounting treatment adopted at Group and subsidiary levels due to statutory requirements.

The Group expects that, subject to the uncertain outcome of the Strategic Review, the effective tax rate will remain relatively consistent with the current and prior year and reflect the reduction of UK corporate tax rates over the next few years.

In November 2017, the UK government introduced new rules with effect from 1 April 2017 which would restrict the deductibility of net interest costs. In the current year the £2.0m tax impact of these new restrictions is included in the calculation of the current year tax charge. Due to uncertainty regarding the Group's ability to recover the disallowed interest which can be carried forward under these rules, no deferred tax asset has been recognised in relation to the disallowed amount.

The Group published its tax strategy on the Group's website on 14 December 2017, and is available at http://www.johnstonpress.co.uk/tax-strategy.

Earnings per share and dividends

	Statutory Basic EPS		Adjusted Basic EPS
Earnings/(loss) per share for continuing operations	26 weeks to 30 June 2018	26 weeks to 1 July 2017	26 weeks to 30 June 2018	26 weeks to 1 July 2017
Earnings/(loss) (£m)	3.7	(5.7)	4.1	5.4
Number of ordinary shares (m)	105.3	105.3	105.3	105.3
EPS (pence)¹	3.6	(5.4)	3.9	5.1

1 Rounded to the nearest million. Refer to Note 7 for further disclosure on Statutory to Adjusted EPS.

No ordinary or preference share dividends were declared or paid in the period, due to restrictions in the Bonds terms and the Group having insufficient distributable reserves. The provisions of the Group's Bonds restrict the Company's ability to pay dividends on the Company's ordinary shares until certain conditions, including that net leverage is below 2.25x EBITDA, are met.

Disposal

On 17 January 2017, the Group completed the disposal of the entire issued capital of Johnston Publishing East Anglia Limited, which owned 13 publishing titles and associated websites in East Anglia and East Midlands (Midlands titles), to Iliffe Media Limited for cash consideration of £17.0m.

Cash flow/Net debt

The Group's net debt position was £203.2m on 30 June 2018 excluding Bonds mark-to-market and Bonds discounts totalling £63.0m. In the period, a £8.8m fair value movement gain has been recognised (H1 2017 £4.4m loss) (Note 5b). The net debt after mark-to-market adjustments was £140.2m (Note 12).

Cash generated from operations of £3.9m is after pension contributions of £5.3m.

Cash held at 30 June 2018 was £17.6m. The decrease from 30 December 2017 was due to the costs incurred in relation to the Strategic Review of £3.2m and the reduction in trade creditors of £3.0m during the period. The Group continues to maintain tight control of capital expenditure with £2.1m having been spent on asset purchases (H1 2017: £1.6m).

Cash interest paid in the first half was £9.5m (H1 2017: £9.5m).

Reconciliation of net debt to net debt excluding mark-to-market

	2018 26 weeks £m	2017 26 weeks £m	2017 52 weeks £m
Gross bonds debt (at inception)	225.0	225.0	225.0
Bonds repurchase	(5.0)	(5.0)	(5.0)
Finance leases	0.8	0.5	0.9
Cash and cash equivalents	(17.6)	(28.8)	(25.0)
Net debt excluding mark-to-market	203.2	191.7	195.9
Mark-to-market on Bonds (from inception)	(58.6)	(68.2)	(49.8)
Bonds discount (net)	(4.4)	(4.4)	(4.4)
Net debt	140.2	119.1	141.7

Net liabilities position

At the period end, the Group had net liabilities of £88.3m, an improvement of £5.2m since 30 December 2017 due to the reduction in the pension deficit in the period of £6.4m, movements in the market value of the Bonds (£8.8m) and a reduction in trade creditors of £2.7m, offset by reduction in the cash balance of £7.4m following the payment of Bonds interest, impairment charges to assets of £3.5m and increases to deferred tax liabilities of £2.8m during the period.

Pensions

The Group's defined benefit pension plan deficit has reduced by £6.4m to £40.7m since 31 December 2017 reflecting contributions in the period of £5.3m and the benefit of a higher discount rate due to corporate bond yields rising during the period. This has enabled us to increase the discount rate by 0.20% to 2.70% at 30 June 2018. Applying the updated CMI 2017 model increased the life expectancy of males and females currently aged 65 years, and females currently aged 50 years by 0.1 years to 19.8, 21.5 and 22.4 respectively.

All other assumptions are materially consistent with the year-end.

The Pension Framework Agreement and the required level of contributions are subject to review as part of the 31 December 2015 triennial valuation which will be settled as part of the Strategic Review conclusion (Note 13).

Events after the balance sheet date

Refer to Note 18 for details of significant post balance sheet events.

Related party transactions

During the period the Group paid £0.5m in retention bonuses to retain key employees as part of the Strategic Review. No Directors received retention bonuses. Refer to Note 17 and the Alternative Performance Measures section for further details.

Principal risks and uncertainties

There are a number of potential risks and uncertainties which have been identified by the Company that could have a material impact on the Group's long-term performance.

The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report for the 52 week period ended 30 December 2017. A detailed explanation of the risks summarised below, and information about how the Group seeks to mitigate the risks can be found on pages 20 to 21 of the Annual Report, available at http://www.johnstonpress.co.uk/investors/reports-results-presentations. The most significant risks are summarised below:

Refinancing June 2019

Failure to repay, refinance, satisfy or otherwise retire the Bonds at their maturity would give rise to a default under the indenture and could have a material impact on the Group's operations and its ability to continue as a going concern. Media speculation around the Strategic Review could have a negative impact on employees, customers and suppliers.

Print-based revenues

Print advertising and circulation revenues continue to decline at current levels, or accelerate further.

New revenue streams

Digital revenues decline, or do not grow at the rate needed to offset print decline over the short to medium term.

Pension scheme

The Company is engaged in negotiations with the trustees of its final salary pension scheme as part of the scheme's triennial review. The Company agreed with Trustees to put its triennial negotiations on hold, while it carried out its strategic review. An affordable revised schedule of contributions dealing effectively with the scheme's deficit is to be agreed.

Liquidity

The Group is expected to have full year interest costs of £19.0m and pension contributions of £10.6m. Further downward pressure on revenues could reduce operating cash flow below the level required to service interest and pension commitments.

Cost reduction

The Group is required to invest in cost reduction and is constrained in its ability to invest in development.

Data security

The Company's systems and data integrity could be vulnerable to disruption and/or loss of, or loss of access to, data. Poor quality data or data which the Company cannot lawfully process could limit the realisation of marketing and business opportunities.

The Group is required to comply with the new General Data Protection Regulation (GDPR) requirements which came into effect in May 2018.

Economy

The impact of changes in the economy and United Kingdom economic performance, including from Brexit, may have an impact on the Group's operations.

Investment in growth

The Company's ability to invest in new digital product development and technology is limited. This hinders its ability to stay competitive and invest in the digital products necessary in a rapidly changing environment.

Liquidity and going concern

As at 30 June 2018, the Group had net debt of £203.2m (excluding mark-to-market accounting adjustment), comprising cash of £17.6m and borrowings of £220.0m. The borrowings comprise £220.0m of high yield bonds ('the Bonds'), which are repayable on 1 June 2019 and are not subject to any financial maintenance covenants.

On 29 March 2017, the Group announced it had commenced a Strategic Review, working with its advisers NM Rothschild & Sons and Ashurst LLP, to assess the financing options open to the Group in relation to the Bonds. As a key part of this Strategic Review process, the Board has engaged with its major stakeholders, including shareholders, holders of the Bonds, the Pension Trustees and the Pensions Regulator.

On 10 October 2017, the Group announced that it was approaching its largest bondholders regarding the formation of an ad hoc committee of bondholders ('the Bondholder Committee') to consider in greater detail certain potential amendments to the Group's capital structure, combined with certain proposed amendments to the Group's pension scheme. On 2 November 2017, the Group confirmed that the Bondholder Committee had been formed.

As announced by the Group on 5 June 2018, no agreement on those potential amendments has been reached. However, the Group is continuing to work with the Bondholder Committee and its other stakeholders on a number of alternative strategic options for the repayment, restructuring, refinancing, satisfaction or other retirement of the Bonds prior to June 2019. As clarified in a further announcement on 5 June 2018, one of the strategic options being explored is a Regulated Apportionment Arrangement in relation to the Group's defined benefit pension scheme, in respect of which the Group has recently commenced discussions with the relevant parties, including the Pension Trustees and the Pension Regulator.

The Board is satisfied with the constructive engagement of the Group's major stakeholders during the Strategic Review process. However, there can be no certainty that any formal proposal will be forthcoming from the Group's continued discussions with these stakeholders, and any formal proposal that may result will remain subject to negotiation and the consent of relevant stakeholders.

In conducting its review of the appropriateness of adopting the going concern basis, the Group has made the assumption that it can secure an appropriate restructuring or refinancing of the Bonds on, or before, 1 June 2019 and that there would be no reduction in interest payments and pension contributions during the twelve month period of the review. The Group has performed the review of its financial resources taking into account, inter alia, the cash currently available to the Group, the absence of financial maintenance covenants in the Bonds, and the Group's cash flow projections for the twelve month period from the date of this report, and, based on these assumptions and this review, and after considering reasonably possible trading downside sensitivities and uncertainties, the Board is of the opinion that, subject to the material uncertainty surrounding the Group's ability to refinance the Bonds at par in the market on commercially acceptable terms (referred to below), the Group has adequate financial resources to meet its operational cash flow requirements for the next twelve months from the date of this report. Subject to that same material uncertainty, the Directors also anticipate that the Group will remain in a position to meet its obligations in respect of the Bonds, including with regard to the payment of interest, in the period prior to their maturity.

However, given the challenges faced by the newspaper and printing industry as a whole, the current trading experience of the Group, and the likely financial position of the Group at the time the Bonds are due for repayment in June 2019, there is material uncertainty surrounding the Group's ability to restructure or refinance the Bonds at par in the market on commercially acceptable terms. Failure to repay, restructure, refinance, satisfy or otherwise retire the Bonds at their maturity would give rise to a default under the indenture governing the Bonds dated 16 May 2014, and this possibility indicates a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern and if the Strategic Review does not deliver a solution for the Group then it may be unable to realise its assets and discharge its liabilities in the normal course of business.

The Group's ability to continue as a going concern is directly dependent on the outcome and timing of the Strategic Review. Taking into account that (i) the Strategic Review is ongoing, (ii) subject to the material uncertainty surrounding the Group's ability to refinance the Bonds at par in the market on commercially acceptable terms (referred to above), the Group has adequate financial resources to meet its operational cash flow requirements for the twelve month period from the date of this report, and (iii) subject to that same material uncertainty the Group is, and is anticipated to remain, in a position to meet its obligations in respect of the Bonds in the period prior to their maturity, the Directors have concluded it is appropriate to prepare the Group financial statements on a going concern basis.

Viability Statement

In the 2017 Annual Report and Accounts dated 16 April 2018, the Directors presented a Viability Statement in accordance with provision C.2.2 of the Corporate Governance Code. A Viability Statement is not formally required to be presented in interim results announcements. The Viability Statement is included on pages 46 and 47 of the 2017 Annual Report and Accounts dated 16 April 2018. The Directors confirm that, subject to the material uncertainty surrounding the Group's ability to refinance the Bonds at par in the market on commercially acceptable terms, the Viability Statement covering the period to1 June 2019 included in the 2017 Annual Report remains valid as at the date of this announcement.

Responsibility statement

The Directors confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 26 weeks and description of principal risks and uncertainties for the remaining 26 weeks of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board,

David King

Chief Executive Officer

28 August 2018

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

Address of Registered office

Johnston Press plc,

Orchard Brae House

30 Queensferry Road

Edinburgh EH4 2HS

Group Income Statement

for the 26 week period ended 30 June 2018


	Notes	26 weeks ended 30 June 2018 £'000	26 weeks ended 1 July 2017 £'000	52 weeks ended 30 December 2017 £'000
Continuing operations
Revenue	4a	92,990	103,302	201,616
Cost of sales		(61,686)	(70,340)	(135,726)
Gross profit		31,304	32,962	65,890
Operating expenses before impairments and write-downs¹		(20,429)	(23,510)	(52,677)
Impairment and write downs	4a,c	(3,462)	(4,513)	(64,426)
Total operating expenses		(23,891)	(28,023)	(117,103)
Operating profit/(loss)	4a	7,413	4,939	(51,213)
Financing
Interest receivable		45	19	45
Net finance expense on pension liabilities/assets	5a,13	(553)	(873)	(1,690)
Change in fair value of borrowings	5b,12	8,833	(4,400)	(22,825)
Finance costs	5c	(9,557)	(9,902)	(19,286)
Total net financing expense		(1,232)	(15,156)	(43,756)
Profit/(loss) before tax		6,181	(10,217)	(94,969)
Tax (charge)/credit	6	(2,434)	4,600	16,389
Profit/(loss) from continuing operations		3,747	(5,617)	(78,580)
Consolidated profit/(loss) for the period		3,747	(5,617)	(78,580)

The accompanying notes are an integral part of these financial statements. The comparative period is for the 26 week period ended 1 July 2017.

	Notes	26 weeks ended 30 June 2018 £'000	26 weeks ended 1 July 2017¹ £'000	52 weeks ended 30 December 2017 £'000
From continuing and discontinued operations
Profit/(loss) per share (p)
Basic (p)¹	7	3.6	(5.4)	(74.6)
Diluted (p)¹	7	3.5	(5.4)	(74.6)
1 Rounded to the nearest million.

Group Statement of Comprehensive Income

for the 26 week period ended 30 June 2018

	Translation reserve		Retained earnings	Total
	£'000		£'000	£'000
Profit for the period	-	3,747		3,747

Items that will not be reclassified subsequently to profit or loss :
Actuarial gain on defined benefit pension schemes	-	1,715		1,715
Deferred tax on pension balances	-	(292)		(292)
Total items that will not be reclassified subsequently to profit or loss	-	1,423		1,423

Items that may be reclassified subsequently to profit or loss :
Exchange differences on translation of foreign operations¹	8	-		8
Total items that may be reclassified subsequently to profit or loss	8	-		8
Total other comprehensive gain for the period	8	1,423		1,431
Total comprehensive gain for the period	8	5,170		5,178

1 Movements in the translation reserve relate to the translation of interests in dormant Irish subsidiaries.

Group Statement of Comprehensive Income

for the 26 week period ended 1 July 2017

	Translation reserve	Retained earnings	Total
	£'000	£'000	£'000
Loss for the period	-	(5,617)	(5,617)

Items that will not be reclassified subsequently to profit or loss :
Actuarial gain on defined benefit pension schemes	-	10,373	10,373
Deferred tax on pension balances	-	(1,763)	(1,763)
Total items that will not be reclassified subsequently to profit or loss	-	8,610	8,610

Items that may be reclassified subsequently to profit or loss :
Exchange differences on translation of foreign operations¹	(18)	-	(18)
Total items that may be reclassified subsequently to profit or loss	(18)	-	(18)
Total other comprehensive (loss)/gain for the period	(18)	8,610	8,592
Total comprehensive (loss)/gain for the period	(18)	2,993	2,975

1 Movements in the translation reserve relate to the translation of interests in dormant Irish subsidiaries.

Group Statement of Comprehensive Income for the 52 week period ended 30 December 2017	Translation reserve	Retained earnings	Total
	£'000	£'000	£'000
Loss for the period	-	(78,580)	(78,580)

Other items of comprehensive income Items that will not be reclassified subsequently to profit or loss :
Actuarial gain on defined benefit pension schemes	-	11,942	11,942
Deferred tax on pension balances	-	(2,030)	(2,030)
Total items that will not be reclassified subsequently to profit or loss	-	9,912	9,912

Items that may be reclassified subsequently to profit or loss :
Exchange differences on translation of foreign operations¹	(26)	-	(26)
Total items that may be reclassified subsequently to profit or loss	(26)	-	(26)
Total other comprehensive (loss)/gain for the period	(26)	9,912	9,886
Total comprehensive loss for the period	(26)	(68,668)	(68,694)

1 Movements in the translation reserve relate to the translation of interests in dormant Irish subsidiaries.

Group Statement of Changes in Equity

for the 26 week period ended 30 June 2018

	Share capital	Share premium	Share-based payments reserve	Revaluation reserve	Own shares	Translation reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Opening balances	116,171	312,702	2,128	1,728	(3,331)	9,232	(532,114)	(93,484)
Profit for the period	-	-	-	-	-	-	3,747	3,747
Other comprehensive profit for the period	-	-	-	-	-	8	1,423	1,431
Total comprehensive profit for the period	-	-	-	-	-	8	5,170	5,178

Recognised directly in equity:
Return of unclaimed dividends	-	-	-	-	-	-	44	44
Share-based payments credit	-	-	(61)	-	-	-	-	(61)
Release of share-based payments reserve	-	-	(919)	-	-	-	919	-
Net change directly in equity	-	-	(980)	-	-	-	963	(17)
Total movements	-	-	(980)	-	-	8	6,133	5,161
Equity/(deficit) at end of the period	116,171	312,702	1,148	1,728	(3,331)	9,240	(525,981)	(88,323)

Group Statement of Changes in Equity

for the 26 week period ended 1 July 2017

	Share capital	Share premium	Share-based payments reserve	Revaluation reserve	Own shares	Translation reserve	Restated¹ Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Opening balances - per published H1 2017 results	116,171	312,702	8,200	1,728	(3,331)	9,258	(469,349)	(24,621)
Restatement - credit note write off¹	-	-	-	-	-	-	(1,459)	(1,459)
Opening balances - restated	116,171	312,702	8,200	1,728	(3,331)	9,258	(470,808)	(26,080)
Loss for the period	-	-	-	-	-	-	(5,617)	(5,617)
Other comprehensive (loss)/profit for the period	-	-	-	-	-	(18)	8,610	8,592
Total comprehensive (loss)/profit for the period	-	-	-	-	-	(18)	2,993	2,975

Recognised directly in equity:
Preference share dividends	-	-	-	-	-	-	(76)	(76)
Share-based payments charge	-	-	933	-	-	-	-	933
Release of share-based payments reserve	-	-	(3,049)	-	-	-	3,049	-
Net change directly in equity	-	-	(2,116)	-	-	-	2,973	857
Total movements	-	-	(2,116)	-	-	(18)	5,966	3,832
Equity/(deficit) at end of the period	116,171	312,702	6,084	1,728	(3,331)	9,240	(464,842)	(22,248)

1 Prior period comparatives have been restated, refer to Note 2.

Group Statement of Changes in Equity

for the 52 week period ended 30 December 2017

	Share capital	Share premium	Share-based payments reserve	Revaluation reserve	Own shares	Translation reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Opening balances	116,171	312,702	8,200	1,728	(3,331)	9,258	(470,808)	(26,080)
Loss for the period	-	-	-	-	-	-	(78,580)	(78,580)
Other comprehensive (loss)/profit for the period	-	-	-	-	-	(26)	9,912	9,886
Total comprehensive loss for the year	-	-	-	-	-	(26)	(68,668)	(68,694)

Recognised directly in equity:
Share-based payments charge	-	-	1,290	-	-	-	-	1,290
Release of share-based payments reserve for expired warrants	-	-	(3,798)	-	-	-	3,798	-
Release of share-based payments reserve	-	-	(3,564)	-	-	-	3,564	-
Net change directly in equity	-	-	(6,072)	-	-	-	7,362	1,290
Total movements	-	-	(6,072)	-	-	(26)	(61,306)	(67,404)
Equity/(deficit) at end of the period	116,171	312,702	2,128	1,728	(3,331)	9,232	(532,114)	(93,484)

Group Statement of Financial Position

As at 30 June 2018

		30 June 2018	Restated¹ and re-presented² 1 July 2017	30 December 2017
	Notes	£'000	£'000	£'000
Non-current assets
Intangible assets	8	87,160	146,741	89,611
Property, plant and equipment	9	27,733	33,408	29,249
Available for sale investments		970	970	970
Trade and other receivables	10	1	1	1
		115,864	181,120	119,831

Current assets
Assets classified as held for sale		165	21	178
Inventories		1,835	2,017	2,490
Trade and other receivables	10	28,864	31,412	27,658
Cash and cash equivalents		17,595	28,823	25,028
		48,459	62,273	55,354
Total assets		164,323	243,393	175,185

Current liabilities
Trade and other payables	11	31,411	36,198	34,146
Current tax liabilities		51	179	113
Borrowings	12	157,178	102	180
Short-term provisions	14	1,406	1,032	1,602
		190,046	37,511	36,041

Non-current liabilities
Borrowings	12	584	147,808	166,505
Retirement benefit obligation	13	40,738	53,092	47,187
Deferred tax liabilities		12,301	20,965	9,509
Trade and other payables	11	3,494	3,487	3,484
Long-term provisions	14	5,483	2,778	5,943
		62,600	228,130	232,628
Total liabilities		252,646	265,641	268,669
Net liabilities		(88,323)	(22,248)	(93,484)

Equity
Share capital		116,171	116,171	116,171
Share premium account		312,702	312,702	312,702
Share-based payment reserve		1,148	6,084	2,128
Revaluation reserve		1,728	1,728	1,728
Own shares		(3,331)	(3,331)	(3,331)
Translation reserve		9,240	9,240	9,232
Retained earnings		(525,981)	(464,842)	(532,114)
Total equity		(88,323)	(22,248)	(93,484)

1 Prior half year comparatives have been restated, refer to Note 2.

2 Prior half year comparatives have been re-presented, refer to Note 12.

Group Statement of Cash Flows

for the 26 week period ended 30 June 2018

		26 weeks to	26 weeks to	52 weeks to
		30 June 2018	1 July 2017¹	30 December 2017
	Notes	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	15	3,890	4,361	12,182
Income tax received		-	217	217
Net cash inflow from operating activities		3,890	4,578	12,399

Investing activities
Interest received		45	19	45
Proceeds on disposal of subsidiary		-	17,000	17,000
Proceeds on disposal of property, plant and equipment		-	7	11
Proceeds on disposal of assets held for sale (excluding sale of subsidiaries)		192	3,973	5,183
Acquisition of publishing titles		-	(2,000)	(2,000)
Expenditure on digital intangible assets		(786)	(799)	(1,680)
Purchases of property, plant and equipment		(1,301)	(802)	(2,961)
Net cash (used in)/from investing activities		(1,850)	17,398	15,599

Financing activities
Interest paid		(9,488)	(9,497)	(18,985)
Interest element of finance lease rental payments		(29)	(19)	(43)
Dividends refunded		44	-	-
Net cash used in financing activities		(9,473)	(9,516)	(19,028)
Net (decrease)/increase in cash and cash equivalents		(7,433)	12,765	8,970
Cash and cash equivalents at beginning of period		25,028	16,058	16,058
Cash and cash equivalents at end of period		17,595	28,823	25,028

1 Prior half year comparatives have been re-presented, refer to Note 12

Notes to the Condensed Financial Statements

for the 26 week period ended 30 June 2018

1. General information

The condensed financial information for the 26 weeks to 30 June 2018 does not constitute statutory accounts for the purposes of Section 434 of the Companies Act 2006 and has not been audited. No statutory accounts for the period have been delivered to the Registrar of Companies. This interim financial report (Interim Report) constitutes a dissemination announcement in accordance with Rule 6.3 of the Disclosure and Transparency Rules of the United Kingdom Listing Authority.

The condensed financial information in respect of the 52 weeks ended 30 December 2017 has been produced using extracts from the statutory accounts for this period. Consequently, this does not constitute the statutory information (as defined in section 434 of the Companies Act 2006) for the 52 weeks ended 30 December 2017, which was audited. The statutory accounts for this period have been filed with the Registrar of Companies. The auditor's report was unqualified with a material uncertainty relating to going concern and did not contain a statement under Sections 498 (2) or 498 (3) of the Companies Act 2006.

The next annual financial statements of the Group for the 52 weeks to 29 December 2018 will be prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"). The condensed set of financial statements included in this Interim Report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'. The financial information in this Interim Report has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules and Disclosure and Transparency Rules. The auditor has reviewed the financial information in this Interim Report and their report is included in this report.

The Interim Report was approved by the Directors on 28 August 2018 and is being made available to shareholders on the same date on the Company's website at www.johnstonpress.co.uk.

Going Concern

2. Restatements

Sales ledger credit write-offs

In the 52 week prior comparative period ended 30 December 2017, it was noted that there had been historic releases of sales ledger credit balances made up predominantly of overpayments by customers. These should not be released unless six years has passed under the Limitations Act of 1980. The comparative 26 week period ended 1 July 2017 has been restated to reflect this. The impact of the restatement on the comparative figures for the 26 week period to 1 July 2017 has been to:

· decrease opening retained earnings by £1.4m with a corresponding increase to trade and other creditors at 1 January 2017; and

· increase closing trade and other creditors by £1.6m and increase trade and other receivables by £0.2m at 1 July 2017, resulting in a decrease in closing retained earnings of £1.4m. There was no impact on net profit after tax and therefore EPS for the 26 weeks to 1 July 2017.

3. Accounting policies

Basis of preparation

The interim financial information has been prepared on the historical cost basis, except for the revaluation of certain properties, pension balances and financial instruments including borrowings. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.

The Directors are satisfied, subject to the material uncertainty disclosed within the Going Concern section, that it is appropriate to prepare the Group financial statements on a going concern basis. Accordingly, the unaudited condensed consolidated interim financial statements have been prepared on a going concern basis (discussed further in the Financial Review section and under the historical cost basis except for the revaluation of certain properties and financial instruments, share-based payments and defined benefit pension obligations that are measured at revalued amounts or fair value at the end of each reporting period.

Basis of accounting

The accounting policies, significant judgments and key sources of estimation adopted in the preparation of the Condensed set of Consolidated Financial Statements are consistent with those applied by the Group in its Consolidated Financial Statements for the year ended 30 December 2017.

New and amended standards applicable for annual periods beginning in 2018 and beyond

The following new standards, which are applicable to the Group, have been published but are not yet effective and have not yet been adopted by the EU:

Accounting standard	Requirements	Mandatory application date
Annual improvements to IFRS Standards 2014-2016 Cycle*	Minor amendments to a number of standards.	For periods beginning on or after 1 January 2018. No material impact on the Group's net results or net assets.
IFRS 9 - Financial Instruments and Amendments to IFRS 9	Sets out the principles of the recognition, de-recognition, classification and measurement of financial assets and financial liabilities together with requirements relating to the impairment of financial assets and hedge accounting.	For periods beginning on or after 1 January 2018. The Group had previously said it would early adopt for the period beginning on 31 December 2017 however the Directors have chosen to defer the adoption until the period commencing 30 December 2018 being the first period the Group is required comply. Management are in the process of performing a detailed review of the impact of IFRS 9.

IFRS 15 - Revenue from Contracts with Customers and Clarifications to IFRS 15	Establishes when revenue should be recognised, how it should be measured and what disclosures about contracts with customers are needed. The clarifications relate to the application and provide transitional relief regarding first time adoption of the standard.	For periods beginning on or after 1 January 2018. The Group had previously said it would early adopt for the period beginning on 31 December 2017 however the Directors have chosen to defer the adoption until the period commencing 30 December 2018 being the first period the Group is required to comply. Management are in the process of performing a detailed review of the impact of IFRS 15.
Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions*	Clarifies how to account for certain types of share based payment transactions.	For periods beginning on or after 1 January 2018. No material impact on the Group's net results or net assets.
IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration*	Addresses the exchange rate to use in transactions that involve advance consideration paid or received in a foreign currency.	For periods beginning on or after 1 January 2018. Minimal impact anticipated.
IFRIC 23 - Uncertainty over Income Tax Treatments*	Sets out how to determine the accounting tax position when there is uncertainty over income tax treatments.	For periods beginning on or after 1 January 2019. Minimal impact anticipated.
IRFS 16 - Leases*	Establishes principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors.	For periods beginning on or after 1 January 2019. IFRS 16 will require the Group to recognise a lease liability and a right-of-use asset for most of those leases previously treated as operating leases. The Group is currently going through an exercise to evaluate the impact of this standard on our business. Whilst it is too early to conclude what the impact will be, IFRS 16 may have a material impact given the amount of leases entered into by the Group. The Group will be in a better position to report what the expected impact will be in next year's Annual Report once the impact assessment has been finalised.

* Not yet EU endorsed.

4. Operating segments

Information reported to the Chief Executive Officer for the purpose of resource allocation and assessment of segment performance is focused on the two areas of publishing (in print and online) and contract printing. Geographical segments are not presented as the Group operates solely in the UK. The segment analysis has not been adjusted to reflect disposed or closed titles or products.

a) Segment revenues and results

The following is an analysis of the Group's revenue and results by reportable segment:

	Publishing	Contract printing	Eliminations	Group
26 week period ended 30 June 2018	£'000	£'000	£'000	£'000
Revenue
Print advertising	31,020	-	-	31,020
Digital advertising	12,149	-	-	12,149
Newspaper sales	38,871	-	-	38,871
Contract printing	-	6,639	-	6,639
Other	3,815	496	-	4,311
Total external sales	85,855	7,135	-	92,990
Inter-segment sales¹	-	9,784	(9,784)	-
Total revenue²	85,855	16,919	(9,784)	92,990

Impairment and write downs³	(2,825)	(637)	-	(3,462)
Adjustments (excluding impairment and write downs)³	(5,690)	(4)	-	(5,694)
Operating costs^3,4	(60,778)	(15,643)	-	(76,421)
Net segment result	16,562	635	(9,784)	7,413

Interest receivable				45
Net finance expense on pension liabilities/assets				(553)
Change in fair value of borrowings				8,833
Finance costs				(9,557)
Profit before tax				6,181
Taxation charge				2,434
Profit after tax for the period				3,747

1 Inter-segment sales are charged at market rates.

2 Revenue from sale of goods and services for H1 2018 was £93.0m (H1 2017: £103.3m, FY 2017: £201.6m). There was other operating income in the period of £0.4m (H1 2017: £0.4m, FY 2017: £0.8m) relating to rental income on sub-let properties. This means total revenue as defined by IAS 18 is £93.4m (H1 2017: £103.7m, FY 2017: £202.4m).

3 Total adjustments presented in the Alternative Performance Measures section of £9.2m (H1 2017: £11.1m, FY 2017: £83.5m) consists of impairment and write downs of £3.5m (H1 2017: £4.5m, FY 2017: £64.4m) and adjustments (excluding impairment and write downs) of £5.7m (H1 2017: £6.6m, FY 2017: £19.1m). The comparative figures for the 26 week period ended 1 July 2017 have been re-presented to separately present impairment and write downs, adjustments (excluding impairment and write downs) and operating costs. The financial statements for the 26 week period ended 1 July 2017 disclosed total operating costs of £93.9m. In the disclosure below this amount has been split into adjustments (excluding impairment and write downs) of £6.6m and operating costs £87.3m.

4 Includes depreciation and amortisation.

	Re-presented³ Publishing	Re-presented³ Contract printing	Re-presented³ Eliminations	Re-presented³ Group
26 week period ended 1 July 2017	£'000	£'000	£'000	£'000
Revenue
Print advertising	39,435	-	-	39,435
Digital advertising	13,280	-	-	13,280
Newspaper sales	39,643	-	-	39,643
Contract printing	-	6,857	-	6,857
Other	3,620	467	-	4,087
Total external sales	95,978	7,324	-	103,302
Inter-segment sales¹	-	10,665	(10,665)	-
Total revenue²	95,978	17,989	(10,665)	103,302

Impairment and write downs³	(4,513)	-	-	(4,513)
Adjustments (excluding impairment and write downs)³	(6,578)	(14)	-	(6,592)
Operating costs ^3,4	(70,932)	(16,326)	-	(87,258)
Net segment result	13,955	1,649	(10,665)	4,939
Interest receivable				19
Net finance expense on pension liabilities/assets				(873)
Change in fair value of borrowings				(4,400)
Finance costs				(9,902)
Loss before tax				(10,217)
Taxation credit				4,600
Loss after tax for the period				(5,617)

1 Inter-segment sales are charged at market rates.

4 Includes depreciation and amortisation.

	Publishing	Contract printing	Eliminations	Group
52 week period ended 30 December 2017	£'000	£'000	£'000	£'000
Revenue
Print advertising	74,265	-	-	74,265
Digital advertising	25,976	-	-	25,976
Newspaper sales	79,102	-	-	79,102
Contract printing	-	13,321	-	13,321
Other	8,002	950	-	8,952
Total external sales	187,345	14,271	-	201,616
Inter-segment sales¹	-	20,486	(20,486)	-
Total revenue	187,345	34,757	(20,486)	201,616
Impairment and write downs³	(63,668)	(758)	-	(64,426)
Adjustments (excluding impairment and write downs^{) 3}	(18,690)	(295)	-	(19,055)
Operating costs^3,4	(138,230)	(31,187)	-	(169,348)
Net segment result	(33,244)	2,517	(20,486)	(51,213)
Interest receivable				45
Net finance expense on pension liabilities/assets				(1,690)
Change in fair value of borrowings				(22,825)
Finance costs				(19,286)
Loss before tax				(94,969)
Taxation credit				16,389
Loss after tax for the period				(78,580)

1 Inter-segment sales are charged at market rates.

4 Includes depreciation and amortisation.

The accounting policies of the reportable segments are the same as the Group's accounting policies described in the Group's annual consolidated financial statements for the 52 weeks to 30 December 2017. Segment result represents the profit earned by each segment, investment income, finance costs (including in relation to pension assets and liabilities) and income tax expense or credit. This is the measure reported to the Group's Chief Executive Officer for the purpose of resource allocation and assessment of segment performance.

The Group, in common with the rest of the publishing industry, is subject to the main holiday periods of Easter, summer and Christmas as well as school and bank holidays. Since these fall across both half years, the Group's financial results are not usually subject to significant seasonal variations from period-to-period.

b) Segment assets

	30 June 2018	Restated¹ 1 July 2017¹	30 December 2017
	£'000	£'000	£'000
Assets
Publishing	140,503	216,943	149,097
Contract printing	23,820	26,450	26,088
Total segment and consolidated assets	164,323	243,393	175,185

1 Prior period comparatives have been restated, refer to Note 2.

For the purposes of monitoring segment performance and allocating resources between segments, the Group's Chief Executive Officer monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments and unless specifically part of contract printing business, they are allocated to publishing, with the exception of available for sale investments and derivative financial instruments.

c) Other segment information

	26 weeks to 30 June 2018			26 weeks to 1 July 2017			52 weeks to 30 December 2017
	Publishing	Contract printing	Group	Publishing	Contract printing	Group	Publishing	Contract printing	Group
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Additions to property, plant and equipment	1,127	174	1,301	588	214	802	2,114	847	2,961
Depreciation and amortisation expense¹	1,804	611	2,415	3,119	627	3,746	6,614	1,295	7,909
Impairment of property, plant and equipment	412	637	1,049	-	-	-	3,103	758	3,861
Impairment of intangible assets	2,413	-	2,413	4,513	-	4,513	60,453	-	60,453
Impairment of assets held for sale	-	-	-	-	-	-	112	-	112

1 Includes amortisation of digital intangible assets (Note 8) and depreciation charge on property plant and equipment (Note 9).

5. Finance costs

a) Net finance expense on pension (liabilities)/assets

		26 weeks to 30 June 2018	26 weeks to 1 July 2017	52 weeks to 30 December 2017
	Note	£'000	£'000	£'000
Interest on assets		6,928	7,304	14,597
Interest on liabilities		(7,481)	(8,177)	(16,287)
Net finance expense on pension liabilities/assets	13	(553)	(873)	(1,690)

b) Fair value adjustment

The fair value movement on the 8.625% Senior Secured Bonds due 1 June 2019 was as follows:

26 weeks to

30 June

2018

26 weeks to

1 July

2017

52 weeks to

30 December

2017

Note

£'000

Fair value gain/(loss) on the 8.625% Senior Secured Bonds

8,833

(4,400)

(22,825)

c) Finance costs

	26 weeks to 30 June 2018	26 weeks to 1 July 2017	52 weeks to 30 December 2017
	£'000	£'000	£'000
Interest on Bonds	(9,488)	(9,488)	(18,764)
Interest on bank overdrafts and loans	-	(6)	(6)
Amortisation of term debt issue costs	-	(8)	(8)
Finance leases	(29)	(19)	(43)
Financing fees	(40)	-	(85)
Total operational finance costs	(9,557)	(9,521)	(18,906)

Term debt issue costs¹	-	(381)	(380)
Total Exceptional fees	-	(381)	(380)

Total finance costs	(9,557)	(9,902)	(19,286)

1 RCF issuance costs written off as a consequence of termination of the facility in 2017.

6. Tax

The tax charge/(credit) comprises:

	26 weeks to 30 June 2018			26 weeks to 1 July 2017	52 weeks to 30 December 2017
	£'000			£'000	£'000
Current tax
Corporation tax (credit)/charge	-			-	-
Adjustment in respect of prior periods	(64)			(64)	(129)
Total current tax credit	(64)			(64)	(129)

Deferred tax
Total deferred tax charge/(credit)	2,498			(4,536)	(16,260)

Total tax charge/(credit)	2,434			(4,600)	(16,389)

Reconciliation of tax charge/(credit)		%		%	%
Standard rate of corporation tax			19.0	(19.3)	(19.3)
Disposal of publishing title			-	(31.3)	(3.1)
Tax effect of corporate interest reduction			50.9	-	1.9
Tax effect of items that are not deductible or not taxable in determining taxable profit			(2.2)	8.4	(0.2)
Fixed asset related differences			-	-	(0.5)
Unrecognised deferred tax assets			(18.0)	(13.5)	3.3
Prior period adjustment			(6.4)	4.8	(0.5)
Effect of difference between deferred and current tax rate			(3.9)	5.9	1.1
Tax charge/(credit)			39.4	(45.0)	(17.3)

UK corporation tax is calculated at 19.0% (H1 2017: 19.5%, FY 2017: 19.25%) of the estimated assessable profit for the period. The corporation tax rate of 19.0% will apply throughout 2018. The 19.25% basic tax rate applied for the 2017 accounting year was a blended rate, being a mix of 20% up to 31 March 2017 and 19% from 1 April 2017. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdiction.

Corporation tax for the interim period is charged at 39.4% (H1 2017: credited at 45.0%, FY 2017 credited at 17.3%), including deferred tax. This represents the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six month period.

In the period, the effective tax rate was higher than the prevailing UK corporation tax rate of 19.0% largely due to the disallowance of corporate interest restriction amounts, the difference between current and deferred tax rates and the impact of deferred tax not recognised overall increasing the effective tax rate by 29.0%.

The Income Statement includes a tax charge of £2.4m which comprises a current tax credit of £0.1m and deferred tax charge of £2.5m. £2.2m of the deferred tax charge has arisen on the Group's Bonds due to different accounting treatment applied on the Bonds at the Group level in contrast with that applied at the subsidiary entity level due to statutory reporting requirements.

The Group expects that, subject to the uncertain outcome of the strategic review, the effective tax rate will remain relatively consistent with the current and prior year and reflect the reduction of UK corporate tax rates over the next few years.

At the reporting date the Group has recorded £0.1m of uncertain tax positions where tax could become payable in the future.

7. Earnings per Share

The calculation of Earnings per Share is based on the following loss and weighted average number of shares:

Continuing and discontinued operations

	26 weeks too 30 June 2018	26 weeks to 1 July 2017¹	52 weeks to 30 December 2017
	£'000	£'000	£'000
Profit/(loss)
Profit/(loss) for the period	3,747	(5,617)	(78,580)
Preference dividend²	-	(76)	-
Profit/(loss) for the purposes of basic and diluted Earnings per Share	3,747	(5,693)	(78,580)
Profit/(loss) per Share (p)
Basic	3.6	(5.4)	(74.6)
Diluted³	3.5	(5.4)	(74.6)

1 The prior period comparatives have been restated. Refer to Note 2 for details.

2 In line with IAS 33, the preference dividend and the number of preference shares are excluded from the calculation of Earnings per Share.

3 Diluted Earnings per Share are presented when a company could be called upon to issue shares that would decrease net profit or increase profit/loss per Share.

	26 weeks to 30 June 2018	26 weeks to 1 July 2017	52 weeks to 30 December 2017
Number of shares
Weighted average number of ordinary shares	105,878	105,878	105,878
Less shared held by Employee Share Trust	(552)	(552)	(552)
Number of shares for the purpose of ordinary profit/(loss) per share	105,326	105,326	105,326
Effect of dilutive potential ordinary shares	894	-	-
Number of shares for the purposes of diluted profit/(loss) per share	106,220	105,326	105,326

Adjusted

	26 weeks to 30 June 2018	26 weeks to 1 July 2017	52 weeks to 30 December 2017
	£'000	£'000	£'000
Adjusted profit
Adjusted profit for the period¹	4,146	5,483	7,279
Preference dividend²	-	(76)	-
Adjusted profit for the purposes of basic and diluted Earnings per Share	4,146	5,407	7,279

Adjusted Profit per share (p)

Adjusted Basic

3.9

5.1

6.9

Adjusted Diluted³

3.9

5.1

6.9

1 Prior year adjusted earnings used in the adjusted EPS calculation has been restated so that they are presented on a consistent basis with current year adjusted earnings. For a reconciliation from statutory (loss)/earnings refer to the Alternative Performance Measures section within this financial information.

2 In line with IAS 33, the preference dividend and the number of preference shares are excluded from the calculation of Earnings per Share.

3 Diluted Earnings per Share are presented when a company could be called upon to issue shares that would decrease net profit or increase profit/loss per Share.

8. Intangible assets

	Publishing titles £'000	Digital intangible assets £'000	Total £'000
Cost
At 31 December 2017	1,121,984	12,865	1,134,849
Additions	-	788	788
Disposals	-	(3,531)	(3,531)
At 30 June 2018	1,121,984	10,122	1,132,106

Accumulated impairment losses and amortisation
At 31 December 2017	1,037,613	7,625	1,045,238
Amortisation for the period¹	-	826	826
Disposals	-	(3,531)	(3,531)
Impairment losses for the period	2,036	377	2,413
At 30 June 2018	1,039,649	5,297	1,044,946

Carrying amount
At 30 June 2018	82,335	4,825	87,160

Publishing brands

The carrying amount of publishing brands by cash generating unit (CGU) is as follows:

	31 December 2017 £'000	Impairment £'000	30 June 2018 £'000
Scotland¹	8,223	-	8,223
North²	35,655	(1,432)	34,223
North West³	-	-	-
Midlands	2,903	-	2,903
South⁴	-	-	-
Northern Ireland⁵	13,590	(604)	12,986
The i	24,000	-	24,000
Total carrying amount of publishing titles	84,371	(2,036)	82,335

1 As at 30 June 2018 the recoverable amount of the Scottish CGU is £14.7m. This is its value in use.

2 As at 30 June 2018 the recoverable amount of the North CGU is £39.8m. This is its value in use.

3 As at 30 June 2018 the recoverable amount of the North West CGU is £0.5m. This is its value in use.

4 As at 30 June 2018 the recoverable amount of the South CGU is £2.9m. This is its value in use.

5 As at 30 June 2018 the recoverable amount of the Northern Ireland CGU is £15.2m. This is its value in use.

Impairment assessment

The Group tests the carrying value of publishing brands held within the publishing operating segment for impairment annually or more frequently if there are indications that they might be impaired. 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 impairment reviews of the carrying value of the intangible assets, performed during the period, resulted in impairment charges recorded against publishing title intangible assets of £2.0m, corporate digital intangible assets of £0.4m and corporate tangible assets of £0.4m (refer to Note 9).

The Directors consider that publishing brands have an indefinite economic life. Their economic life will in large part be determined by their ability to adapt over time to market requirements in the changing media landscape. The publishing brands are grouped by CGU, being the lowest levels for which there are separately identifiable cash flows independent of the cash inflows from other groups of assets. The recently acquired i newspaper, which serves a national market, is held in a separate CGU. For the remaining regional brands in the Group it is not practicable to review individual publishing rights and titles due to the interdependencies of revenues and cash inflows within the CGUs.

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 revenues and direct costs during the period;

· corporate and central cost allocations;

· growth rates; and

· the discount rate.

The Group prepares discounted cash flow forecasts using:

· the latest forecast for 2018 and the projections for 2019 and 2020 which reflects management's current experience
and future expectations of the markets the CGUs operate in. Changes in underlying revenue and direct costs are based on past practices and expectations of future changes in the market by reference to the Groups own experience and, where appropriate, publicly available market estimates. These include changes in demand for print and digital, circulation, cover prices, advertising rates as well as movement in newsprint and production costs and inflation;

· capital expenditure cash flows to reflect the cycle of capital investment required;

· net cash inflows for future years are extrapolated beyond 2020 based on the Board's view of the estimated annual long-term performance. A long-term decline rate between 0% and 4% reflecting the Groups experience and best estimate of future trends has been included for all CGUs. The long-term decline rates used are based on the Directors view of the market conditions for the CGU and its titles and brands in their current form; and

· management estimate discount rates using post-tax rates that reflect current market assessments of the time value of money, the risks specific to the CGUs and the risks that the regional media industry is facing. The post-tax discount rate applied to the future cash flows for the period ended 30 June 2018 was 11.0% (H1 2017: 11.0%, FY17: 11.0%).

Some CGUs impacted by the impairment charge in the period have limited or no headroom of value in use over the carrying value of assets. Therefore, the impairment review is highly sensitive to reasonable possible changes in key assumptions used in the value in use calculations. A combination of reasonably possible changes in key assumptions to the CGUs, such as digital growth being slower than forecast or the decline in print revenues, could lead to a further impairment.

The total publishing title impairment charge recognised for the period ended 30 June 2018 was £2.0m (H1 2017: £4.5m, FY17: £59.1m).

The Group has conducted sensitivity analysis on the impairment test of each CGUs carrying value.

A decrease in the long-term decline rate of 1.0% (which has the effect of increasing the decline rate from between 0% and 4% to between 1% and 5%), beyond 2020, would result in a further Group impairment of £2.4m and erosion of £8.0m of headroom in the combined Scotland, Midlands, South and i CGUs. An increase in the long-term decline rate is possible if the advertising market conditions do not improve.

A decrease in the operating profit (after central cost allocation) of 1.0% in each of the three years in the forecast period from 2018-2020, would result in a further Group impairment of £0.6m and erosion of £1.3m of headroom in the combined Scotland, Midlands, South and i CGUs. A decrease in the operating profit after central cost allocation is possible if revenues or costs do not meet forecasted numbers.

An increase in the discount rate of 1.0%, from 11.0% to 12.0% would result in an additional impairment of £3.0m, and erosion of £9.4m of headroom in the combined Scotland, Midlands, South and i CGUs. An increase in the risk-free interest rate or risk premium could result in a higher discount rate being applied to the impairment assessment.

	Decline rate sensitivity £'000	Performance sensitivity £'000	Discount rate sensitivity £'000
Scotland	-	-	-
North	(1,730)	(398)	(2,176)
North West	33	(5)	33
Midlands	-	-	-
South	-	-	-
Northern Ireland	(688)	(152)	(861)
The i	-	-	-
Total potential impairment from sensitivity analysis	(2,385)	(555)	(3,003)

Digital intangible assets

Digital intangible assets primarily relate to the Group's local websites, which form the core platform for the Group's digital revenue activities. These assets are being amortised using the straight-line method over the expected life, of three to five years. Amortisation for the year has been charged through cost of sales. Digital intangible assets are tested for impairment at each reporting date or more frequently where there is an indication that the recoverable amount is less than the carrying amount.

Costs incurred in the development of websites are only capitalised if the criteria specified in IAS38 are met.

9. Property, plant & equipment

	Freehold land and buildings £'000	Leasehold buildings £'000	Plant and machinery £'000	Motor Vehicles £'000	Total £'000
Cost
At 31 December 2017	51,951	5,477	106,052	225	163,705
Additions	-	260	1,041	-	1,301
Disposals	-	(242)	(1,691)	(8)	(1,941)
Transfers to assets held for sale	(98)	(412)	(349)	-	(859)
At 30 June 2018	51,853	5,083	105,053	217	162,206

Depreciation
At 31 December 2017	40,891	1,738	91,602	225	134,456
Disposals	-	(242)	(1,691)	(8)	(1,941)
Charge for the period	124	325	1,140	-	1,589
Impairment	260	86	703	-	1,049
Transfers to assets held for sale	(62)	(292)	(326)	-	(680)
At 30 June 2018	41,213	1,615	91,428	217	134,473

Carrying amount
At 30 June 2018	10,640	3,468	13,625	-	27,733

During the period the Group carried out a review of the recoverable amount of its print manufacturing plant and related equipment, which are used in the Group's print segment. The Group has three print presses in Dinnington, Portsmouth and Carn. Each print site is assessed independently for impairment, as separate CGUs. The recoverable amount of each CGU is determined from value in use calculations. The key assumptions for the value in use calculations are:

· expected changes in underlying revenues and direct costs during the period;

· growth rates; and

· the discount rate.

The Group prepares discounted cash flow forecasts using:

· capital expenditure cash flows to reflect the cycle of capital investment required;

· net cash inflows for future years are extrapolated beyond 2020 based on the Board's view of the estimated annual long-term performance. A long-term decline rate of 0% (H1 2017: 0%; FY 2017: 0%) has been included on presses for all CGUs, reflecting the Groups experience and best estimate of future trends has been included for all CGUs; and

· management estimate discount rates using post-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The post-tax discount rate applied to the future cash flows for the period ended 30 June 2018 was 11.0% (H1 2017: 11.0%, FY17: 11.0%).

Impairment charges totalling of £1.0m have been recognised against property, plant and equipment for the period ended 30 June 2018. This consists of:

· a £0.4m impairment charge allocated against corporate assets arising out of the impairment assessment performed over the publishing title intangible asset CGUs (refer to Note 8 for details); and

· a £0.6m impairment charge arising out of the impairment assessment performed in relation to the Portsmouth print site CGU. As at 30 June 2018 the recoverable amount of the Portsmouth print site CGU is £3.5m. This is its value in use.

10. Trade and other receivables

	30 June 2018 £'000	1 July 2017 £'000	30 December 2017 £'000
Current:
Trade receivables	21,052	23,644	21,755
Allowance for doubtful debts	(840)	(1,133)	(793)
	20,212	22,511	20,962
Prepayments	2,559	3,068	1,392
Other debtors	6,093	5,833	5,304
Total current trade and other receivables	28,864	31,412	27,658
Non-current receivables	1	1	1
Total trade and other receivables	28,865	31,413	27,659

11. Trade and other payables

	30 June 2018 £'000	Restated¹ and re-presented² 1 July 2017 £'000	30 December 2017 £'000
Current:
Trade creditors and accruals¹	23,812	26,482	26,833
Accrual for redundancy costs	507	1,894	1,129
Other creditors²	7,092	7,822	6,184
Total current trade and other payables	31,411	36,198	34,146

Non-current trade and other payables	3,494	3,487	3,484

1 Prior period comparatives have been restated, refer to Note 2.

2 Prior period comparatives have been re-presented, refer to Note 12.

12. Borrowings

The borrowings at 30 June 2018 are recorded at quoted market fair value and classified as Level 1 according to IFRS 13. As the borrowings are shown at fair value the associated issue costs against the 8.625% senior secured notes due 1 June 2019 ('the Bonds') have been charged to the Income Statement. The breakdown of the 8.625% Senior Secured Notes due 1 June 2019 is as follows:

	30 June 2018	Re-presented³ 1 July 2017	30 December 2017
	£'000	£'000	£'000
Principal amount¹	220,000	220,000	220,000
Bonds discount - initial	(4,400)	(4,400)	(4,400)
Fair value gain from inception²	(58,608)	(68,200)	(49,775)
Total borrowings (including mark-to-market) ⁴	156,992	147,400	165,825
Finance leases³	770	510	860
Total borrowings	157,762	147,910	166,685

1 The principal amount remaining is stated after a £5.0m Bonds buy back in August 2015.

2 The fair value gain for the period to 30 June 2018 amounted to £8.8m (H1 2017: £4.4m loss, period to FY 2017: £22.8m loss).

3 In the prior half year period to 1 July 2017, finance lease obligations were reported within other creditors, which were considered immaterial and not separately disclosed. However, following the inception of new finance leases during the 30 December 2017 period, finance leases are now considered material and are disclosed separately. Therefore the finance lease liability has been re-presented in the prior period to borrowings and the associated finance lease disclosure comparatives have been added for comparability with the new current year disclosures. There is no effect on EPS.

4 The Bonds have been reclassified in the balance sheet from non-current to current during the 6 month period ended 30 June 2018.

The borrowings are disclosed in the financial statements as:

	30 June 2018	1 July 2017	30 December 2017
	£'000	£'000	£'000
Current borrowings	157,178	102	180
Non-current borrowings	584	147,808	166,505
Total borrowings	157,762	147,910	166,685

The Group's net debt¹ is:

	30 June 2018	1 July 2017	30 December 2017
	£'000	£'000	£'000
Gross borrowings as above	157,762	147,910	166,685
Cash and cash equivalents	(17,595)	(28,823)	(25,028)
Net debt²	140,167	119,087	141,657

1 The principal amount remaining is stated after a £5.0m Bonds buy back in August 2015.

2 Net debt is a non-statutory term presented to show the Group's borrowings net of cash equivalents and Bonds fair value movements.

Finance leases

The Group leases some of its equipment under finance leases. The average lease term is five years (H1 2017: five years, FY 2017: five years) and the Group, in some cases, has the option to purchase the equipment at the end of the lease term. There is no contingent rent payable or restrictions imposed by these finance lease agreements, such as those concerning dividends, additional debt and further leasing. Future minimum lease payments under finance leases together with the present value of minimum lease payments are as follows:

	30 June 2018 £'000		1 July 2017 £'000		30 December 2017 £'000
	Present value of payments	Minimum payments	Present value of payments	Minimum payments	Present value of payments	Minimum payments
Less than one year	186	226	111	148	180	234
One to five years	584	634	399	471	680	764
Total	770	860	510	619	860	998
Less amounts representing finance charges		(90)		(109)		(138)
Present value of minimum lease payments		770		510		860

13. Retirement benefit obligation

Characteristics of the Group's pension related liabilities

The Johnston Press Retirement Savings Plan

The Johnston Press Retirement Savings Plan is a defined contribution Master Trust arrangement for current employees, operated by Zurich. Contributions by the Group are a percentage of basic salary. Employer contributions range from 1% of qualifying earnings, for employees statutorily enrolled, through to 12% of basic salary for Senior Executives. Employees who were active members of the Money Purchase section of the Johnston Press Pension Plan on 31 August 2013 transferred from the Johnston Press Pension Plan to the Johnston Press Retirement Savings Plan from 1 September 2013.

The Johnston Press Pension Plan ('the Plan')

The Johnston Press Pension Plan is a defined benefit pension plan closed to new members and closed to future accrual. There was a defined contribution section of the Johnston Press Pension Plan which was closed in August 2013 and members' defined contribution benefits were transferred to the Johnston Press Retirement Savings Plan.

The Plan operates under trust law, applying in the relevant parts of the United Kingdom, and the assets of the Plan are held separately from those of the Group. The Plan is managed and administered by independent Trustees on behalf of the members. Trustees have a duty to act in the best interests of the members and must act in accordance with the Plan's Trust Deed and Rules and UK pensions legislation.

There are seven Trustees, four are appointed by the Company (including an independent professional trustee as Chairman) and three are nominated by members of the Plan.

A valuation of the Johnston Press Pension Plan as at 31 December 2012 was commissioned by the Trustees and took account of the 2014 Capital Refinancing Plan.

In conjunction with the 2014 Capital Refinancing Plan, the Plan Trustees and the Group entered into a Pension Framework Agreement, agreeing, inter alia, to the following:

· On implementation of the Capital Refinancing Plan in June 2014, the secured guarantee provided in favour of the Plan Trustees by the Group and certain of its subsidiaries in relation to any default on a payment obligation under the Johnston Press Pension Plan was removed. In return for the removal of this security and the aforementioned guarantee, an unsecured cross-guarantee was provided on implementation of the Capital Refinancing Plan by the Group and certain of its subsidiaries in favour of the Plan Trustees in relation to any default on a payment obligation under the Plan. Each claim made under the unsecured cross-guarantee is capped at an amount equal to the aggregate Section 75 (s.75) debt of the Johnston Press Pension Plan at the date any claim made by the Plan Trustees falls due.

· The deficit as at the 31 December 2012 valuation date will be sought to be addressed by 31 December 2024 by entry into a recovery plan (see below).

· Settlement of previously incurred Pension Protection Fund (PPF) levies and s.75 debts.

· The Plan was entitled to receive 25% of net proceeds from business or asset disposals up to and including 31 August 2015 exceeding £1m in a single transaction or £2.5m over the course of a financial year, subject to certain permitted disposals, conditions in relation to financial leverage and other exceptions set out in the Framework Agreement.

· The Group would also pay additional contributions to the Plan in the event that the 2014/2015 PPF levy and/or the 2015/2016 PPF levy was less than £3.2m, equal to the amount the levy falls below £3.2m, up to a maximum of £2.5m.

· Additional contributions would also be payable to the Johnston Press Pension Plan in the event that the Group satisfies certain conditions in relation to financial leverage.

As part of the 31 December 2012 triennial valuation, this Pension Framework Agreement was reflected in the valuation documentation of the Plan, and subsequently it was submitted to The Pensions Regulator.

The Pension Framework Agreement and the required level of contributions are subject to review as part of the triennial valuation as at 31 December 2015.

Discussions are currently ongoing between the Trustees and the Company. The statutory deadline for sign off of the valuation was 31 March 2017 and the Trustees have informed the Pensions Regulator (tPR) that the valuation has not been signed off due to ongoing discussions with the Company. The Trustees and the Plan's advisers have met with tPR and had regular conference call updates over the course of the year to keep tPR updated on the progress of the discussions.

In the meantime, the Schedule of Contributions and Recovery Plan dated 29 July 2014 remain in force. Under these, the Group will pay the following annual contributions to the Plan: £10.6m in the year to 31 December 2018 increasing by 3% per annum with a final payment of £12.7m in the year to 31 December 2024.

Difference between funding valuation and IAS19 valuation

A funding valuation is carried out every three years by a qualified actuary on behalf of the Board of Trustees, the purpose of which is to determine the money that needs to be put into the Plan.

IAS19 is an accounting rule covering employee benefits under which the deficit shown on the balance sheet of the financial statements is determined.

The purpose of the funding valuation is therefore different to the IAS19 valuation. And the approach to each of these valuations
is different too, meaning the funding and IAS19 deficits are different:

· The IAS19 accounting standard requires all companies to assess their liabilities by assuming that future investment returns will be in line with yields on high-quality corporate bonds.

· The Plan invests in a range of assets which are expected to deliver higher returns than the yields currently available on corporate bonds. The Trustees can take account of these higher expected returns in setting the liabilities under the funding valuation.

· Other assumptions used differ between the IAS19 and funding valuations. The Trustees are required to use prudent assumptions for funding whereas IAS19 requires best estimate assumptions.

Whilst discussions with the Trustees on the latest triennial funding valuation as at 31 December 2015 are ongoing, the latest estimate of the funding deficit is £45.9m at 30 June 2017. This compares with the IAS19 deficit at the same date of £53.1m.

Maturity profile

The weighted average term of the liabilities (known as 'the duration') is 16 years.

The table below shows the split of the Defined Benefit Obligation by member type:

Defined benefit obligation	30 June 2018 £'000	1 July 2017 £'000	30 December 2017 £'000
Deferred pensioners	285,897	292,292	300,416
Pensioners	294,779	308,563	308,196
Total	580,676	600,855	608,612

Risks

The Plan exposes the Group to a number of risks, the most significant of which are described below:


Interest rate risk	The IAS19 liabilities are calculated using a discount rate based on the yields available on AA corporate bonds. A reduction in bond yields (and hence the discount rate) will increase the Plan's liabilities. The Plan invests in Liability Driven Investment (LDI) assets to hedge the majority of this risk - see Investment Strategy below.
Inflation risk	Pension increases in payment and revaluation of deferred members' benefits before retirement are linked to inflation. Higher levels of inflation will lead to higher liabilities. The Plan's LDI investments provide a hedge against the majority of this risk - see Investment Strategy below. Pension increases in payment and deferred revaluation are both subject to caps which limit the inflation risk to an extent. And the Plan offers members the option of a Pension Increase Exchange at retirement, where members can give up future increases on some of their pension for an immediate, one-off uplift to the initial pension. This further reduces the level of inflation risk.
Investment risk	Whilst the IAS19 liabilities are calculated by reference to AA corporate bond yields, the Plan invests in a range of different asset classes with the aim of balancing the objectives of targeting investment growth and managing risk. The Plan's assets include some growth assets that are expected to perform better than corporate bonds in the long-term, but the value of these assets will fluctuate due to changes in market prices. To limit this risk, the Trustees invest in a diverse portfolio of instruments across various markets. The mismatch between assets and liabilities does mean there will be some short-term volatility between asset and liability values. The Plan's LDI investments limit the extent of this volatility - see Investment Strategy below. All else being equal, if the returns are less than the discount rate then the deficit will increase. The Trustees will monitor and review the investment strategy with respect to the liabilities in conjunction with each actuarial valuation. The investment strategy will be set with consideration to the appropriate level of risk required for the funding strategy as set out in the Plan's Statement of Funding Principles.
Longevity risk	Increases in life expectancy will lead to higher liabilities. The Company will keep the life expectancy assumptions under review, taking into account the results of the medically underwritten health study, information from the Trustee's actuary on the Plan's actual mortality experience and mortality trends in the wider population.

IFRIC 14

Under the Rules of the Plan the Group has an unconditional right to any surplus assuming the gradual settlement of liabilities over time until all members have left the Plan.

Therefore under IFRIC 14 the Group is neither required to reflect any additional liabilities in relation to deficit funding commitments nor restrict any Plan surplus that arises.

IFRIC 14 is currently in the process of being amended and the Company will review its IFRIC 14 position when the amendment is published.

Amounts arising from pensions related liabilities in the Group's financial statements

The following tables identify the amounts in the Group's financial statements arising from its pension related liabilities.

Income statement - pensions and other pension related liabilities costs	30 June 2018 £'000	1 July 2017 £'000	30 December 2017 £'000
Employment costs:
Defined contribution scheme	(1,921)	(1,842)	(3,732)
Defined benefit scheme:
Plan expenses (IAS19)¹	(446)	(374)	(1,289)
Pension Protection Fund Levy	(203)	(144)	(270)
Net finance cost on Johnston Press Pension Plan (IAS19)	(553)	(873)	(1,690)
Total defined benefit scheme	(1,202)	(1,391)	(3,249)

Total pension costs	(3,123)	(3,233)	(6,981)

1 Relates to administrative expenses incurred in managing the pension fund.

Other comprehensive income - (loss)/gain on pension	30 June 2018 £'000	1 July 2017 £'000	30 December 2017 £'000
(Losses)/gains on plan assets in excess of interest	(20,872)	(894)	13,587
Gains/(losses) from changes to financial assumptions	23,289	-	(13,071)
(Losses)/gains from changes to demographic assumptions	(702)	11,267	11,420
Actuarial gain recognised in the statement of comprehensive income	1,715	10,373	11,936
Deferred tax²	(292) -	(1,763)	(2,029)
Actuarial gain recognised in the statement of comprehensive income net of tax	1,423	8,610	9,907

2 Deferred tax adjustment in the period arises due to the reduction in corporate tax rate and increase in pension deficit. A 17% deferred tax rate has been applied to the deferred tax movement in respect of the defined benefit scheme.

During 2015 a medically underwritten study was carried out by KPMG to identify the current health of a sample group of existing Plan members, assessed via telephone interviews targeted towards members with the most significant liabilities in the Plan. The results of the study continue to be used to inform the mortality assumptions for use in calculating the IAS19 scheme liabilities.

Group statement of financial position - net defined benefit pension deficit and other pension related liabilities	30 June 2018 £'000	1 July 2017 £'000	30 December 2017 £'000
Amounts included in the Group Statement of Financial Position :
Fair value of scheme assets	539,938	547,763	561,425
Present value of defined benefit obligations	(580,676)	(600,855)	(608,612)
Amount included in non-current liabilities	(40,738)	(53,092)	(47,187)

There was a change in accounting policy in the 52 week period ended 30 December 2017 to present all of the net defined benefit obligation as a non-current liability, which is in line with common practice. The impact on the retirement benefit obligation as at 1 July 2017 has been to move £10.3m from current liabilities to non-current liabilities. This has resulted in no change in the total retirement benefit obligation as at 1 July 2017.

Analysis of amounts recognised of the net defined benefit pension deficit

	Note	30 June 2018 £'000	1 July 2017 £'000	30 December 2017 £'000
Net defined benefit pension deficit at beginning of period		(47,187)	(67,725)	(67,725)

Defined benefit obligation at beginning of period		(608,612)	(615,610)	(615,610)
Income statement:
Interest cost		(7,481)	(8,177)	(16,287)
Re-measurement of defined benefit obligation:
Arising from changes in demographic assumptions		(702)	11,267	11,420
Arising from changes in financial assumptions		23,289	-	(13,071)
Cash flows:
Benefits paid (by fund and Group)		12,830	11,665	24,936
Defined benefit obligation at end of the period		(580,676)	(600,855)	(608,612)

Fair value of plan assets at beginning of period		561,425	547,885	547,885
Income statement:
Interest income on plan assets		6,928	7,304	14,597
Other comprehensive income:
Return on plan assets less interest		(20,872)	(894)	13,587

Cash flows:
Company contributions¹	15	5,287	5,133	10,292
Benefits paid (by fund and Group)		(12,830)	(11,665)	(24,936)
Fair value of plan assets at end of period		539,938	547,763	561,425
Net defined benefit pension deficit at end of period		(40,738)	(53,092)	(47,187)

1 Comprises employer contributions of £5.3m (H1 2017: £5.1m).

Analysis of fair value of plan assets

	30 June 2018 £'000	1 July 2017 £'000	30 December 2017 £'000
Equities	-	92,962	-
Volatility Controlled Synthetic Equity	22,579	-	22,294
Multi-asset credit	167,339	113,783	169,718
Diversified Growth Funds	186,843	201,557	204,977
Liability Driven Investments	122,566	115,527	122,645
Cash and cash equivalents	39,301	22,566	40,419
Insured benefits	1,310	1,368	1,372
Total fair value of plan assets	539,938	547,763	561,425

The Volatility Controlled Synthetic Equity is a structure that has been set up to provide volatility controlled exposure to global equity markets. The volatility target is 10% and the underlying allocation is split between equity and cash to target this. The fair value of this mandate has been determined by the investment manager based on relevant guidance and represents the Net Asset Value of the underlying cash and derivatives providing equity exposure.

Insured Benefits are annuities held in the name of the Trustees with various providers. These annuities have been valued using
the IAS19 assumptions.

Multi Asset Credit represents holdings in pooled investment vehicles investing in a range of credit assets such as loans, high-yield bonds and asset backed securities. The investment managers have full discretion in the selection of the underlying assets.

Diversified Growth Funds represent holdings in pooled investment vehicles investing in a range of growth assets such as equities, property, commodities, bonds and cash with managers having full discretion in the selection of the underlying assets.

Liability Driven Investment (LDI) consists of investments in the Aberdeen Standard Investments ILPS and State Street LDI funds,
which use swap-based and gilt-based derivatives to hedge movements in the Plan's liabilities (discussed in more detail below).

The fair values of the investments in the Multi Asset Credit, Diversified Growth and LDI funds are provided by the investment managers, based on the values of the assets underlying these funds. The manager's use quoted prices where available and determine the fair value of the unquoted investments based on relevant guidance.

The Plan does not directly invest in any of the Company's own transferable financial instruments or any property occupied by, or other assets used by, the Company. The Plan does invest into funds that do have the discretion to purchase Company financial instruments (these are pooled funds with large numbers of investors), but the level from time to time would be expected to make up a very small proportion of overall Plan assets - significantly below the 5% self-investment threshold for UK pension schemes as set out in the Section 40 of the Pensions Act 1995.

Investment strategy

Investment managers are appointed by the Trustees to manage the Plan's assets. The Trustees agree the strategic investment strategy after taking appropriate advice. Subject to the investment strategy laid down by the Trustees, day-to-day management of the Plan's portfolio, which includes full discretion over stock selection, is the responsibility of the investment managers.

Over the course of 2017, the Trustees took a series of decisions regarding the investment strategy, with three main aims: to increase
the level of interest rate and inflation hedging, to improve the cash flow generation of the Plan's assets and to manage the equity downside risk.

· Between June 2014 and July 2016, the Plan's liability matching assets were solely invested in a range of leveraged (fixed interest and inflation-linked) single gilt funds managed by State Street Global Advisors (SSGA).

· Between August 2016 and February 2017, the Plan's investment in liability matching assets was increased by introducing an allocation in the Aberdeen Standard Investments ILPS fund range alongside the SSGA LDI portfolio. The ILPS fund range provides leveraged interest rate and inflation exposure using a mixture of gilt-based and swap-based derivatives. The leverage in the ILPS holdings is also used to provide diversified growth exposure on top of the hedging.

· Since February 2017, the SSGA LDI portfolio and the Aberdeen Standard Investments ILPS allocation have broadly hedged the Plan's funded liabilities (as measured on a gilts + 0.5% pa basis).

· The other assets of the Plan are designed to provide growth and income over time, to meet the benefit payments as they fall due. Over the course of 2017, the Plan has added more income-focused assets (including investing £56m into the TwentyFour Strategic Income Fund) and has added protection to the equity portfolio (replacing the Fidelity actively-managed physical equity funds, with a synthetic equity mandate with downside protection and volatility control).

· Overall, the changes to the investment strategy (both LDI and growth changes) should reduce the level of volatility in the Plan's funding level.

Liability Driven Investments (LDI)

The Johnston Press Pension Plan invests in leveraged Liability Driven Investment (LDI) funds which use swap-based and gilt-based derivatives in order to match a proportion of the interest rate and inflation sensitivity of the Plan's liabilities. The current leverage on the LDI mandates is around 2x-3x. This means that every £1 invested in LDI funds hedges £2-£3 of liabilities.

Under these strategies, if interest rates fall the value of the investments will rise to help match the increase in actuarial liabilities arising from the fall in the discount rate. Similarly, if interest rates rise, the investments will fall in value, as will the actuarial liabilities because of an increase in the discount rate.

If inflation rates rise the value of the investments will rise to help match the increase in actuarial liabilities arising from the rise in the inflation rate. Similarly, if inflation rates fall, the investments will fall in value, as will the actuarial liabilities because of a decrease in the inflation rate.

The LDI mandate targets 100% interest rate and inflation hedging of the funded liabilities calculated using a discount rate of 0.5% pa above gilt yields. This means that changes in interest rates and inflation will leave the funding level (calculated on a gilts + 0.5% basis) broadly unchanged.

At the year end, the total allocation to Liability Driven Investment strategies represented 39.3% of the total investment portfolio. This excludes a 7% allocation to a cash fund which sits alongside the leveraged LDI funds with State Street.

The Plan hedges its interest rate risk on a gilts basis whereas the IAS19 discount rate is based on AA corporate bond yields. There is therefore some mismatching risk should the yields on gilts and corporate bonds diverge. As a result of this mismatch, the funding level under IAS19 remains volatile to changes in corporate bond credit spreads that have not been hedged.

	Valuation at	Valuation at	Valuation at
Analysis of financial assumptions	30 June 2018	1 July 2017	30 December 2017
Discount rate	2.70%	2.70%	2.50%
Future pension increases
Deferred revaluations (where linked to inflation (CPI))	2.20%	2.40%	2.30%
Pensions in payment (where linked to inflation (RPI))	3.20%	3.40%	3.30%
LPI 2.5% pension increases (RPI)	2.05%	2.15%	2.10%
LPI 5% pension increases (RPI)	3.05%	3.20%	3.15%
Future life expectancy
Male currently aged 50 (years)	20.7	20.7	20.7
Female currently aged 50 (years)	22.4	22.3	22.3
Male currently aged 65 (years)	19.8	19.7	19.7
Female currently aged 65 (years)	21.5	21.4	21.4
Mortality assumption	100% of S2PxA tables, rated up by two years with allowance for the CMI 2017 projections (smoothing parameter 6.5) and long-term rate of improvement of 1.25% pa for males and 1.0% pa for females	100% of S2PxA tables, rated up by two years with allowance for the CMI 2016 projections (smoothing parameter 6.5) and long-term rate of improvement of 1.25% pa for males and 1.0% pa for females	100% of S2PxA tables, rated up by two years with allowance for the CMI 2016 projections (smoothing parameter 6.5) and long-term rate of improvement of 1.25% pa for males and 1.0% pa for females

Pension increase exchange at retirement

Allowance for 45% of members to exchange their non-statutory pension increases for a higher level pension at retirement for those sections where this is automatically offered at retirement.

Sensitivity analysis of significant assumptions

The following tables present a sensitivity analysis for each significant actuarial assumption showing how the defined benefit obligation would have been affected, by changes in the relevant actuarial assumptions that were reasonably possible at the reporting date:

	Decrease / (increase) in defined benefit obligation £'000
Discount rate
+0.10% discount rate	9,329
Inflation rate
+0.10% inflation rate	(4,687)
Mortality
+10.0% to base table mortality rates	20,689
Pension increase exchange
Allowance for 25% take up for sections where automatically offered	138

The sensitivities above show the impact on the defined benefit obligation only, and not any offsetting impact on the value of Plan assets from the interest rate and inflation hedging strategies.

The sensitivity analysis is based on a change in one assumption while holding all other assumptions constant, therefore interdependencies between assumptions are excluded. In line with previous periods, the methodology applied is consistent to that used to determine the recognised pension liability.

The inflation assumption sensitivity above factors in the impact of a change in inflation on increases to deferred benefits
and pensions in payment.

Other pension-related obligations

The Group has agreed to pay the expenses of the Plan and the PPF levy as they fall due.

News Media Association Pension Scheme

The Group is a member of the News Media Association (NMA), it was formerly a member of the Newspaper Society (an unincorporated body representing the interests of local newspaper publishers). During 2014 the Newspaper Society incorporated itself as a company limited by guarantee and entered into a merger with the Newspaper Publishers' Association (a body representing the interests of publishers of national newspapers). As part of the merger, existing members entered into a deed of covenant in respect of the deficit to the Society's defined benefit pension scheme. The members agreed to make contributions over a period of 25 years to 2038 or until such time as the deficit has been addressed, if earlier. The provision has been made on the former since we have no reliable estimate about the likelihood of the deficit being addressed before 2038 or, if it was, when this might happen. Applying a discount rate of 12.0%, the Group's best estimate of this at present value is £0.7m.

News Media Association Pension Scheme liabilities have been included within provisions (refer to Note 14).

Other pension-related liabilities

The closing provision relating to unfunded pensions for senior employees was £0.5m (H1 2017: £0.5m, FY 2017: £0.5m). The unfunded pension provision is assessed by a qualified actuary at each year end.

Post-retirement medical benefit pension-related liabilities for former Portsmouth and Sunderland members of £0.1m (H1 2017: £0.1m, FY 2017: £0.1m). The post-retirement medical benefits represent management's best estimate of the liability concerned.

Other pension-related liabilities have been included within provisions (refer to Note 14).

14. Provisions

As at 30 June 2018	Onerous leases and dilapidations £'000	News Media Association Pension Scheme¹ £'000	Other pension related - liabilities¹ £'000	Total £'000
Current provisions	1,316	90	-	1,406
Non-current provisions	4,268	621	594	5,483
Total provisions	5,584	711	594	6,889

As at 1 July 2017
Current provisions	942	90	-	1,032
Non-current provisions	1,634	520	624	2,778
Total provisions	2,576	610	624	3,810

As at 30 December 2017
Current provisions	1,512	90	-	1,602
Non-current provisions	4,655	671	617	5,943
Total provisions	6,167	761	617	7,545

1 For details of other pension related liabilities see Note 13.

Onerous leases and dilapidations

Where the Group exits a rented property, an estimate of the anticipated total future cost payable under the terms of the operating lease, including rentals, rates and other related expenses is provided for at the point of exit as an onerous lease. Where exited properties are sublet to a third party, an estimate of the expected future rental income is deducted from the provision balance.

Under the terms of a number of property leases, the Group is required to return the property to its original condition at the lease expiry date. The Group has estimated the expected costs of leases expiring or expected to be terminated and has also assessed the entire portfolio and made provisions depending on the state of the property and the duration of the lease and likely rectification requirements.

In the prior year there was a change in the estimate for the anticipated total future cost payable for onerous leases and dilapidations, arising from a change in the Group's property strategy. This resulted in an additional provision of £4.4m being charged in the 52 week period ended 30 December 2017.

15. Notes to the Cash flow statement

		30 June 2018	Restated¹ and re-presented² 1 July 2017	30 December 2017
	Notes	£'000	£'000	£'000
Operating profit/(loss)		7,413	4,939	(51,213)

Adjustments for non-cash items:
Impairment of intangible assets	8	2,413	4,513	60,453
Impairment of property, plant and equipment	9	1,049	-	3,861
Impairment of assets held for sale		-	-	112
		10,875	9,452	13.213
Amortisation of intangible assets		824	1,595	3,666
Depreciation charges		1,589	2,151	4,243
(Credit)/charge for share-based payments		(59)	933	1,290
Profit on disposal of assets held for sale		-	(1,790)	(2,952)
Loss on disposal of Midlands titles		-	538	611
Profit on disposal of property, plant and equipment		-	(6)	(11)
Currency differences		10	(66)	(24)
		13,239	12,807	20,036
Operating items before working capital changes:
Net pension funding contributions - cash	13	(5,287)	(5,133)	(10,292)
Movement in provisions		(698)	(767)	2,891
Cash generated from operations before working capital changes		7,254	6,907	12,635
Working capital changes :
Decrease/(increase) in inventories		656	245	(229)
(Decrease)/increase in receivables		(1,206)	(1,621)	2,720
Decrease in trade creditors		(3,033)	(194)	(1,152)
Increase/(decrease) in other payables		219	(976)	(1,792)
Cash generated from operations		3,890	4,361	12,182

1 Prior half year comparatives have been restated, refer to Note 2.

2 Prior half year comparatives have been re-presented, refer to Note 12.

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

16. Commitments, guarantees and contingent liabilities

Bond accounting treatment

The Group is currently in discussions with HMRC with regard to the accounting and tax treatment of the Bonds under FRS 102 Section 11.9, which could result in an additional UK Corporation tax liability for the Group, arising from a potential unrealised accounting gain in the company only financial statements for Johnston Press Bond plc. The Group has engaged its advisers to assist in responding formally to HMRC on this matter having recently met HMRC in July 2018 to further discuss the judgements applied and conclusion reached.

In the consolidated accounts a deferred tax liability related to the Bonds is already recorded. However, to the extent HMRC's challenge is sustained the deferred tax liability would be released, resulting in a potential cash tax outflow. The best estimate of the cash tax outflow which could arise in regards to this matter at 30 June 2018 has been determined, and the exposure has been estimated to be £8.3m (excluding potential penalties and interest) covering all accounting periods subsequent to the issuance of the Bonds in 2014.

Iliffe Media

On 17 January 2017, the Group entered into a sale agreement to dispose of certain publishing titles to Iliffe Media. As a condition of the sale, Johnston Press plc will incur costs associated with the refurbishment of property included within assets disposed of to Iliffe Media Ltd. The maximum obligation that the Group can possibly incur is £0.2m, expiring in 2024, and no provision has been included in the Group Statement of Financial Position.

Assets pledged as security

Under the capital refinancing agreement completed on 23 June 2014, the Group and all its material subsidiaries entered into new security arrangements in connection with the Bonds issued and the revolving credit facility. The security provided includes fixed and floating charges over all or substantially all of the assets of certain members of the Group and share security over shares of certain members of the Group. Whilst the Bonds remain outstanding, the revolving credit facility was cancelled on completion of the sale of the East Anglia and the East Midlands titles to Iliffe Media Limited.

17. Related party transactions

During the period the Group paid £0.5m in retention bonuses to retain key employees (no Directors received retention bonuses) as part of the Strategic Review. Refer to the Alternative Performance Measures section for further details.

Other than the transaction above there have been no other related party transactions that have occurred during the first 26 weeks of the financial year that have materially affected the financial position or performance of the Group during that period and there have been no other changes in the related party transactions described in the 2017 Annual Report and Accounts that could do so.

18. Post balance sheet events

There were no material post balance sheet events requiring disclosure

Alternative Performance (Non-GAAP) Measures

The Directors assess the performance of the Group using both statutory accounting measures and a variety of alternative performance measures (APMs). The key APMs monitored by the Group are:

· adjusted revenue;

· adjusted EBITDA;

· adjusted EBITDA margin %;

· adjusted operating profit;

· adjusted operating profit margin %; and

· cash and net debt (excluding mark-to-market). Refer to Financial Review section for calculation of net debt (excluding mark-to-market).

The business has been through a period of enormous change over an extended period. This has resulted from structural change in the sector. Audiences have increased their use of online and mobile platforms to access information and news, resulting in accelerated newspaper circulation volume decline. Advertisers have also increasingly sought to use digital services to reach their target audiences. Most recently we have also seen further significant change in algorithms used by social media platforms and search engine tools. Together, this structural shift has resulted in year-on-year declines in the Group's income.

The Group has initiated a series of restructuring programs to remove cost from the business with the objective of designing a sustainable print publishing business model, while at the same time investing in building a digital income stream.

The resulting restructuring projects have seen a substantial redesign of each area of the business, including management layers and structures, products and services, content creation and our sales routes to market. In streamlining the organisation, a significant investment in redundancy has seen numerous posts closed over the last four and a half years. The Group has also sought to reflect its change in shape and scale in support areas including making substantial reductions in its property portfolio, technology licences and fleet. The speed of its action, both in anticipating and responding to recent changes in the sector has meant that some existing contracts no longer reflect the current needs of the business.

In 2017, the Group initiated new changes to its business model, including how it allocated resources to different brands, its mix of field and call centre based sales staff, while also adopting a clear policy of downsizing its property portfolio, taking advantage of natural lease breaks, typically moving to smaller short-term serviced offices in local towns and cities, while maintaining larger hubs in Preston, Leeds, Edinburgh, Peterborough, Sheffield and Portsmouth. In 2018 the costs of the Strategic Review have grown as options relating to funding the maturity of the Bonds on 1 June 2019 are being considered in conjunction with the Group's advisers.

To provide investors and other users of the Group's financial statements with additional clarity and understanding of both the cost of this business change programme, and the resulting impact on the Group's underlying trading, the Directors believe that it is appropriate to additionally present the alternative performance measures used by management in running the business and in determining management and executive remuneration.

Although management believes the alternative performance measures are important in considering the performance of the Group, they are not intended to be considered in isolation, or as a substitute for, or superior to financial information on a statutory basis. The adjusted figures are not a financial measure defined or specified in the applicable financial reporting framework, and therefore may not be comparable to similar measures presented by other entities. When reviewing and selecting these adjusting items, the Directors considered the guidelines issued by the European Securities and Markets Authority (ESMA).

A reconciliation between the statutory and the adjusted results is provided under Alternative Performance Measures within the financial information. The reconciliation includes explanations each 'adjusting item' and why they been adjusted for. An adjusting item is one that is judged to require separate presentation to enable a better understanding of the trading performance of the business in the period. Items are adjusted if they are significant in value and/or do not form part of ongoing underlying trading. They will in many cases be 'one-off', and include items that span more than one financial period.

Prior year comparatives have been restated so that the adjusted results are presented on a consistent basis between periods. Restated figures have been disclosed in footnotes below. In the opinion of the Directors, disclosing the adjusting items provides supplementary information to aid understanding of the Group's trading performance and also provides a basis of comparison between periods.

Consolidated Income Statement - Reconciliation of Statutory and Adjusted Results
		26 weeks ended 30 June 2018			26 weeks ended 1 July 2017			52 weeks ended 30 December 2017
Notes		Statutory £'000	Adjusting items £'000	Adjusted £'000	Restated¹ Statutory £'000	Restated² Adjusting items £'000	Restated^1,2 Adjusted £'000	Statutory £'000	Restated² Adjusting items £'000	Restated² Adjusted £'000
Print advertising	A	31,020	-	31,020	39,435	(1,721)	37,714	74,265	(3,345)	70,920
Digital advertising	A	12,149	-	12,149	13,815	(156)	13,659	27,119	(156)	26,963
Total advertising revenue		43,169	-	43,169	53,250	(1,877)	51,373	100,241	(3,501)	96,740
Newspaper sales	A	38,871	-	38,871	39,643	(92)	39,551	79,102	(92)	79,010
Contract printing	A	6,639	-	6,639	6,857	-	6,857	13,321	-	13,321
Other	A	4,311	-	4,311	3,552	(6)	3,546	7,808	(6)	7,802
Non advertising revenue		49,821	-	49,821	50,052	(98)	49,954	101,375	(98)	101,277
Total continuing revenue		92,990	-	92,990	103,302	(1,975)	101,327	201, 616	(3,599)	198,017
Cost of sales	B	(59,271)	-	(59,271)	(66,594)	1,000	(65,594)	(127,817)	1,965	(125,852)
Operating costs	B	(23,891)	-	(23,891)	(28,023)	903	(27,120)	(117,103)	1,707	(115,396)
Restructuring	C	-	1,955	1,955	-	3,719	3,719	-	13,745	13,745
Acquisitions/(disposals)	D	-	(100)	(100)	-	(327)	(327)	-	(1,314)	(1,314)
Impairment of assets	E	-	3,462	3,462	-	4,513	4,513	-	64,426	64,426
Strategic review	F	-	3,190	3,190	-	1,377	1,377	-	3,365	3,365
Pensions	G	-	649	649	-	607	607	-	1,898	1,898
Long-term incentive plan (LTIP) costs	H	-	-	-	-	1,216	1,216	-	1,361	1,361
Total adjustments		-	9,156	9,156	-	11,105	11,105	-	83,481	83,481
Total operating costs		(23,891)	9,156	(14,735)	(28,023)	12,008	(16,015)	(117,103)	85,188	(31,915)
Total costs		(83,162)	9,156	(74,006)	(94,617)	13,008	(81,609)	(244,920)	87,153	(157,767)
EBITDA		N/A	N/A	18,984	N/A	N/A	19,718	N/A	N/A	40,251
EBITDA Margin%		N/A	N/A	20.4%	N/A	N/A	19.5%	N/A	N/A	20.3%
Depreciation and amortisation	I	(2,415)	-	(2,415)	(3,746)	207	(3,539)	(7,909)	872	(7,037)
Operating profit/(loss)		7,413	9,156	16,569	4,939	11,240	16,179	(51,213)	84,427	33,214
Operating profit/(loss) margin%		N/A	N/A	17.8%	N/A	N/A	16.0%	N/A	N/A	16.8%
Finance (costs) / income	J	(1,232)	(8,280)	(9,512)	(15,156)	5,654	(9,502)	(43,756)	24,896	(18,860)
Profit/(loss) before tax		6,181	876	7,057	(10,217)	16,894	6,677	(94,969)	109,323	14,354
Tax credit/(expense)²	K	(2,434)	(477)	(2,911)	4,600	(5,794)	(1,194)	16,389	(23,302)	(6,913)
Consolidated profit/(loss) for the period		3,747	399	4,146	(5,617)	11,100	5,483	(78,580)	86,021	7,441

1 Prior period comparatives have been restated, refer to Note 2.

2 Prior period comparative revenue, cost of sales and operating costs have been restated to adjust out amounts relating to the Yorkshire Metro closed during 2018. This ensures that adjusted results for H1 2018 and both prior periods are presented on a consistent basis, including only the operations of the Group that are continuing from 30 June 2018.The impact is an increase in cost of sales adjusting item (H1 2017: £0.8m, FY 2017: £1.8m) and operating cost adjusting item (H1 2017: £0.8m, FY 2017: £1.6m).

A Total continuing revenues

As part of the ongoing review of the Group's business portfolio titles, digital products and other items considered to be underperforming or not in line with the Group's strategic objectives have been closed. Other titles have also been disposed. Revenue relating to the closed titles and products has been adjusted out to provide users with a view of the results of the Group's continuing business portfolio. The cost of sales and operating costs associated with the adjusted disposed titles revenue has also been adjusted. Refer to Note B below for details.

The two categories of adjustments to revenue are:

Closed titles, digital products and other

As part of the ongoing review of the Group's portfolio, the Yorkshire Metro publishing contract was closed during the first half of the year (H1 2017: 4 titles. FY 2017: 4 titles). As an onerous provision was recorded at 30 December 2017 for the 2018 losses expected from the Yorkshire Metro publishing contract until termination on 30 June 2018, no adjustment has been recorded in H1 2018 (H1 2017: £1.5m, FY 2017: £3.1m).

Prior year total revenue of £1.5m for H1 2017 and £3.2m for FY 2017 has been adjusted on a like-for-like basis. The revenue on these related products has been adjusted so as to present the Group's underlying performance on a comparable basis as they do not earn revenue once closed. The prior year comparative figures have been restated to exclude revenue for the titles and products closed during H1 2018, in order to present results for the Group's ongoing business portfolio.

On 17 January 2017, the Group sold its East Anglia and East Midlands titles to Iliffe Media Ltd. Adjustments made in the comparative periods in respect of these titles relate to revenue earned in the two-week period up to the date of disposal of £0.3m. This adjustment is necessary in order to present results for the Group's ongoing business portfolio.

The table below provides a breakdown of adjusting items across revenue categories:

	26 weeks to 30 June 2018 £'000	Restated¹ 26 weeks to 1 July 2017 £'000	Restated¹ 52 weeks to 30 December 2017 £'000	Explanation
Print advertising	-	(1,721)	(3,345)	Print advertising revenue adjusting items comprise: Yorkshire Metro and other closed titles, digital products and other of £nil (H1 2017: £1.6m, FY 2017: £3.1m) and disposed East Anglia and Midlands titles of £nil (H1 2017: £0.2m, FY 2017: £0.2m).
Digital advertising	-	(156)	(156)	Digital advertising adjusting items comprise: adjustments to transfer digital credits into the correct period of £nil (H1 2017: £0.1m debit, FY 2017: £0.0m debit) and disposed East Anglia and Midlands titles of £nil (H1 2017: £0.1m, FY 2017: £0.0m).
Newspaper sales	-	(92)	(92)	Newspaper sales revenue adjusting items comprise: closed titles, digital products and other of £nil (H1 2017: £nil, FY 2017: £0.1m) and disposed East Anglia and Midlands titles of £nil (H1 2017: £0.1m, FY 2017: £0.1m).
Other	-	(6)	(6)	Other revenue adjusting items comprise: closed titles, digital products and other of £nil (H1 2017: £0.0m, FY 2017: £0.0m) and disposed East Anglia and Midlands titles of £nil (H1 2017: £0.0m, FY 2017: £0.0m).
Total adjusting items	-	(1,975)	(3,599)

B Cost of sales and operating costs

The cost of sales and operating costs associated with the adjusted closed titles and products revenue detailed above in note A has also been adjusted as follows:

	Cost of sales			Operating costs
Adjusting items	26 weeks to 30 June 2018 £'000	Restated¹ 26 weeks to 1 July 2017 £'000	Restated¹ 52 weeks to 30 December 2017 £'000	26 weeks to 30 June 2018 £'000	Restated¹ 26 weeks to 1 July 2017 £'000	Restated¹ 52 weeks to 30 December 2017 £'000
Closed titles, digital products and other	-	865	1,830	-	844	1,648
Disposed titles	-	135	135	-	59	59
Total adjusting items	-	1,000	1,965	-	903	1,707

1 Prior period comparative revenue, cost of sales and operating costs have been restated to adjust out amounts relating to the Yorkshire Metro closed during 2018. This ensures that adjusted results for H1 2018 and both prior periods are presented on a consistent basis, including only the operations of the Group that are continuing from 30 June 2018.The impact is an increase in cost of sales adjusting item (H1 2017: £0.8m, FY 2017: £1.8m) and operating cost adjusting item (H1 2017: £0.8m, FY 2017: £1.6m).

C Restructuring costs

Business transformation, restructuring and redundancy-related costs that are incurred in order to streamline individual components of the Group's business, reduce cost and support long-term strategy are recorded as adjusting items. In treating these costs as adjusting items, management assesses whether the redundancies relate to a fundamental restructure of individual components of the business. The Group adjusts for and reports the cost of each years' restructuring program to assist the users of the financial statements in understanding both the cost of the restructuring programme, and the resulting trading performance in the year. A breakdown
of the adjustments for restructuring costs is provided in the table below:

	26 weeks to 30 June 2018 £'000	26 weeks to 1 July 2017 £'000	52 weeks to 30 December 2017 £'000	Explanation
Redundancy costs	857	2,035	6,357	These costs are material and incurred to transform and restructure the business cost base resulting in a reduction in headcount. Redundancy costs include the employee costs from the point the individual notified that their role is at risk, together with the final termination payment for the individual made redundant. The Group has consistently applied this policy historically. This reflects its impact of the disruption caused to the individual involved and the impact on short-term productivity within affected business units. Adjustments for redundancy costs do not include those incurred in the ordinary course of business, which are treated as operating costs, or that may lead to a direct replacement being appointed.
Business and sales transformation	1,098	1,140	1,974	These costs are material, and are incurred in engaging specialist consultants to advise on the strategic restructuring of the publishing portfolio, as part of the redesign of the business to create a sustainable publishing model. Management considers carefully that these costs do not represent costs that support the underlying running of the business which would not be adjusted items. This item also includes costs incurred to permanently restructure and streamline the Group's field sales operation and move activity into the media sales centre (MSC).
Property-related restructuring	-	291	4,369	The Group has incurred property costs as a result of decisions taken to reduce head count and streamline its operating locations. During the period to 30 June 2018 the Group exited leases of 9 properties (H1 2017: 16 properties, FY 2017: 25 properties) covering 15 thousand square feet (H1 2017: 199 thousand square feet, FY 2017: 228 thousand square feet). In the FY 2017 comparative period an empty property provision of £3.2m was charged, which included an additional £1.3m charge in the period following a reassessment of the Irish property provision. The Group no longer occupies these properties following the disposal of the Irish operations in 2014 but retains the head leases, and sublets properties to Iconic. A £1.2m dilapidations provision was charged in the FY 2017 comparative period following a reassessment of estimates used in determining the provision requirements. Of these charges £0.3m was charged during H1 2017.
Onerous contracts	-	253	1,045	As a result of the Group's restructuring activities, aimed at cutting the cost base of the Group, certain IT licences, phones and vehicles have become surplus to operational requirements following reductions in staff numbers. The £nil (H1 2017: £0.3m, FY 2017: £1.0m) profit and loss impact of these onerous costs has been adjusted for.
Total adjusting items	1,955	3,719	13,745

D Acquisitions/(disposals)

Acquisition costs and gains and losses on disposal of subsidiaries and properties can be significant in size, irregular in nature and fluctuate from period-to-period. Subsidiary and large property disposals and acquisitions are not ordinary trading activities as they relate to structural changes to the Group's business. As a result the gains realised and losses and costs incurred on these items have been treated as adjusting items. This is done to provide results that are reflective of the Group's continuing trading operations. The adjusting items are detailed in the table below:

	26 weeks to 30 June 2018 £'000	26 weeks to 1 July 2017 £'000	52 weeks to 30 December 2017 £'000	Explanation
(Gain)/loss on disposals	(100)	(1,372)	(2,433)	This gain adjusted for in the current period consists of a £0.1m cash receipt arising from a change in control of the Newark Advertiser's share capital - this entity was previously disposed of by the Group. This item has been adjusted for, as it does not relate to the trading operations of the Group and relates to a historic contingent receivable dating back to 2000. Gains adjusted in the FY 2017 comparative period were realised on sales of two properties in Sheffield £1.9m and one property in Peterborough £0.5m. One of the Sheffield properties was disposed in H1 2017 for £1.4m and represents the amount adjusted for in that period.
i acquisition	-	508	508	The prior period adjusting item represents acquisition costs incurred to purchase the i newspaper on 10 April 2016 and a further one-off contractual payment to ESI in April 2017 and are adjusted so as not to distort the Group's trading results. The payment was disclosed in Part V, clause 9 of the 'Proposed acquisition of the business and certain assets of I Circular to Shareholders' document.
Loss on disposal of subsidiary	-	538	611	Represents the loss on sale of Johnston Publishing East Anglia Ltd in the prior period, which included the East Anglia and East Midlands titles, to Iliffe Media Ltd on 17 January 2017. The loss has been classified as an adjusting item as it is individually significant, relates to divestment of titles and is not reflective of the Group's ongoing trading results. The loss represents the differences between book value and net proceeds. The revenue, cost of sales and other costs in relation to the disposed titles have also been treated as adjusting items for the two weeks of trading in 2017 and the prior period comparative. Refer to Notes A2 and B for details.
Total adjusting items	(100)	(327)	(1,314)

E Impairment of assets

Impairment charges relating to non-current assets are non-cash items and can be significant in amount. The Group treats impairment charges as adjusting items as they relate to the difference between the remaining carrying value of historic investment costs, and estimated future value, and are not part of underlying trading. The valuation is calculated based on judgement of estimated future cash flows, discounted using a post-tax discount rate of 11.0% (H1 2017: 11.0%, FY 2017: 11.0%), which is a market determined discount rate, not the Group's cost of capital.

	26 weeks to 30 June 2018 £'000	26 weeks to 1 July 2017 £'000	52 weeks to 30 December 2017 £'000	Explanation
Intangible assets	2,413	4,513	60,453	Impairment charges of £2.0m (H1 2017: £4.5m, FY 2017: £59.2m) against publishing titles and £0.4m (H1 2017: £nil, FY 2017: £1.3m) against digital intangible assets have been recognised during the period.
Property, plant and equipment	1,049	-	3,861	An impairment charge has been recognised against print presses of £0.4m (H1 2017: £nil, FY 2017: £0.4m), property (print sites) of £0.2m (H1 2017: £nil, FY 2017: £0.4m) and corporate assets £0.4m (H1 2017: £nil, FY 2017: £0.4m).
Assets held for sale	-	-	112	An impairment charge of £nil (H1 2017: £nil, FY 2017: £0.1m) has been recognised against properties classified as held for sale prior to disposal during the period.
Total adjusting items	3,462	4,513	64,426

F Strategic review

The costs reported in our accounts in relation to the Strategic Review, include financial adviser fees, fees for legal and pensions advice to the company, legal and actuarial and financial advice to the pension trustees borne by the company, and legal and financial advice for the ad hoc bondholder committee, also borne by the company. The adjusting items are detailed in the table below:

	26 weeks to 30 June 2018 £'000	26 weeks to 1 July 2017 £'000	52 weeks to 30 December 2017 £'000	Explanation
Legal and advisory costs	2,683	1,377	3,365	Legal and advisory costs of £2.7m (H1 2017: £1.4m, FY 2017: £3.4m) in relation to the Strategic Review disclosed in the Liquidity and going concern and Viability Statement sections of the Interim management report, have been adjusted for. This includes costs incurred on advisers to the Group, and advisers to the ad hoc committees and pension Trustees, which the Group is obliged to fund including financial, pension, tax, legal and other specific advice.
Retention bonus	507	-	-	As a result of the potential uncertainty created by the Strategic Review process, a one off retention bonus scheme was put in place for a small number of staff members. The bonuses were put in place by the Board based on the employee staying in the organisation and is not related to ongoing trading. The bonus is payable in two instalments, 42% in April and 58% in December 2018. This scheme does not include executive and non-executive Directors of the Group. These amounts have been removed from underlying trading due to them being one off in nature and paid in relation to of the Strategic Review process.
Total adjusting items	3,190	1,377	3,365

G Pensions

The Johnston Press Pension Plan ('the Plan') is a defined benefit pension plan that closed to new members and future accrual in June 2010 (for details refer to Note 13). At 30 June 2018, the membership base was as follows:

	30 June 2018
	Deferred members	Pension members	Total
Plan members employed by the Group	230	25	255
Total Plan members	2,570	2,310	4,880
% of total Plan members employed by the Group	8.9%	1.1%	5.2%

94.8% of the Plan members are no longer employed by the Group. The number of staff working in the business, who are members of the Plan has reduced over time, both as the result of restructuring activity, but also resignation and retirement. Costs associated with operating the Plan are treated as adjusting items because they are not incurred in running the business, nor in generating its revenue, and do not form part of underlying trading. In contrast, contributions made by the Group to the defined contribution schemes nominated by the Group's employees, in respect of their employment by the Group are not treated as adjusting items. This is because they are deemed to be part of the cost of employing the Group's continuing workforce.

The nature of the pension costs that have been adjusted are detailed in the table below:

	26 weeks to 30 June 2018 £'000	26 weeks to 1 July 2017 £'000	52 weeks to 30 December 2017 £'000	Explanation
Defined benefit pension scheme costs	446	468	1,289	The Group is required to pay the costs incurred by its trustees in administrating the pension plan, which was closed to new members and future accrual in June 2010. Given that the vast majority of the members of the Plan are no longer employed by the Group, costs associated with operating the Plan are treated as adjusting items. The costs include £0.3m (H1 2017: £0.4m, FY 2017: £0.6m) of ongoing Plan operational costs.
Pension Protection Fund (PPF) levy	203	144	270	The levy is a charge by the PPF who become responsible for scheme members' pensions if the Group becomes unable to meet its pension obligations. This cost is significant and can fluctuate from period to period and is material, with historic PPF levy costs being as high as £3.2m in 2013/2014. The Group has limited ability to influence this cost, which is determined by PPF by reference to the balance sheet of Johnston Publishing Limited.
Pension equalisation	-	(5)	339	The FY 2017 adjustment is the impact of the Scottish pension equalisation litigation of £0.3m, which was concluded and cash settled during 2017.
Total adjusting items	649	607	1,898

In 2014, the Group agreed to a schedule of contributions to the scheme. In the first half of 2018, the Group paid £5.3m (H1 2017: £5.1m, FY 2017: £10.3m) to the Plan as part of the deficit reduction program. These payments are not charged to the Group income statement, in line with IAS19 Employee Benefits, and so are not adjusting items, and so are not shown here.

H Long-term incentive plan (LTIP) costs

The items listed in the table below have been adjusted as they are significant, and do not form part of underlying trading:

26 weeks to

30 June

2018

£'000

26 weeks to

1 July

2017

£'000

52 weeks to

30 December

2017

£'000

Explanation

Long-term incentive plan (LTIP) (credit)/cost

1,216

1,361

LTIP expenses are material and have been classified as an adjusting item from the point at which it was clear that the performance conditions would not be met. A credit to the profit and loss account of £nil in H1 2018 (H1 2017: £1.2m charge, FY 2017: £1.4m charge) relating to share based payment credits / charges and associated National Insurance accruals have been adjusted for.

Total adjusting items

1,216

1,361

I Depreciation and amortisation

The current period operating profit adjusting items includes accelerated depreciation and amortisation of £nil. The FY 2017 adjusted depreciation and amortisation arose from the results of a review of the carrying value of the consumer database (FY2017: £0.6m) and on properties (FY 2017: £0.3m). Of this amounts £0.2m occurred in H1 2017.

J Finance cost

Finance costs adjusted for comprise:

	26 weeks to 30 June 2018 £'000	26 weeks to 1 July 2017 £'000	52 weeks to 30 December 2017 £'000	Explanation
Net finance expense on pension assets/liabilities	553	873	1,690	Net pension interest expense required under IAS 19 relating to the net interest on the pension scheme liabilities less assets has been adjusted as it does not relate to underlying trading activities. It is a non-cash item under IAS19 Employee Benefits. This treatment is consistent with cash pension costs incurred in respect of the closed defined benefit pension scheme (refer to section G Pensions).
Fair value movement of borrowings	(8,833)	4,400	22,825	The fair value movement on the Group's Bonds required under IAS 39 is volatile. It does not reflect the gross debt outstanding and it is treated as an adjusting item to provide the user with clarity of the gross Bonds liability. Therefore, the fair value gain of £8.8m, resulting from an increase in the Bonds market value, (FY 2017: loss of £22.8m) has been treated as an adjusting item.
Finance costs	-	381	381	The H1 2017 and FY 2017 of £0.4m relates to the write-off of revolving credit facility issuance costs in 2014 required as a result of the termination of the facility in January 2017, following the disposal of the East Anglia and East Midlands titles. The cost related to the period after termination was treated as an adjusting item as it did not relate to the operating performance of the Group in 2017. There have not been any similar adjusting items in H1 2018.
Total adjusting items	(8,280)	5,654	24,896

K Tax (charge)/credit

The taxation impact of the adjusting items of £0.5m (H1 2017: of £5.8m, FY 2017: of £23.3m) has been adjusted for. The de-recognition of £nil (H1 2017: £nil, FY 2017: £2.2m) worth of deferred tax assets due to the Directors no longer deeming them to be recoverable has been treated as an adjusting item.

Adjusted cash flow analysis

The table below sets out the way in which management reviews its cash flows:

	26 weeks to 30 June 2018 £'000	26 weeks to 1 July 2017 £'000	52 weeks to 30 December 2017 £'000
Movements in cash and cash equivalents during the period:
Cash and cash equivalents generated before adjusting items	19.4	18.9	34.4
Cash cost of adjusting items	(6.2)	(6.1)	(14.3)
Cash and cash equivalents generated after adjusting items	13.2	12.8	20.0
Movements in working capital	(3.2)	(2.8)	1.5
Long-term provisions	(0.7)	(0.8)	2.9
Total	9.3	9.2	24.4
Defined benefit plan pension contributions	(5.3)	(5.1)	(10.3)
Taxation refunded	-	0.2	0.2
Acquisition costs - the i	-	-	(2.5)
Net impact of other investing activities	(1.9)	2.4	0.6
Financing costs	(9.5)	(9.5)	(19.0)
Net proceeds on disposal of the East Midlands titles	-	15.6	15.6
Total movements in cash and cash equivalents during the period:	(7.4)	12.8	9.0

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