Mission Statement

A Community Media Company

Our aim is to serve local communities by meeting their needs for local news, information and advertising services through a range of media including print and digital channels which together achieve unparalleled levels of market reach.


Johnston Press plc

Corporate Governance

The Company is committed to the principles of Corporate Governance contained in the Combined Code on Corporate Governance that was issued in 2006 by the Financial Reporting Council (“The Code”) for which the Board is accountable to shareholders.

Statement of Compliance with The Code of Best Practice
The Company has complied throughout the year with the Provisions of The Code set out in Section 1 of The Code. Due to resignations from the Board in the early part of 2009, the Board temporarily lacks the appropriate balance of independent Non-Executive Directors and a process is already underway to identify and recruit.

Statement of Application of The Principles of Good Governance
The Company has applied the principles set out in Section 1 of The Code as reported above. Further explanation of how the principles have been applied is set out below and, in connection with directors’ remuneration, in the Directors’ Remuneration Report.

Board Effectiveness
The Board considers that it has shown its commitment to leading and controlling the Company by meeting nine times in the year, but can meet when necessary for any matters which may arise. The Remuneration Committee met on seven occasions, the Audit Committee twice and the Nomination Committee five times.

The Board sets the strategic aims and objectives of the Group, ensuring that the Group has sufficient financial and human resources to meet its objectives. The Board also sets the Group’s values and standards and ensures that its obligations to its shareholders and others are understood and met. Management is responsible for the application of the aims and objectives on a day-to-day basis, as well as monitoring the financial achievements of the business. The Board reviews the performance of management in meeting the agreed objectives and goals, plans the succession of key executives, and determines appropriate remuneration levels.

The core values of the Board are integrity, independence and objectivity. All Directors must take decisions in the interests of the Company and all of its shareholders.

At least one Board meeting each year is wholly devoted to strategy and to the consideration of a plan for the long term growth and development of the Group. This is reviewed and discussed as appropriate at the other Board meetings held during the year.

In addition to the normal agenda at Board meetings, which is described below, the Directors consider one operational or special topic at each meeting. During the last twelve months this has included business risks, circulation and audience reach of paid-for newspapers, national sales, digital publishing, the Group’s debt facilities and human resources trends and issues.

Board Meeting Agenda
The Board receives a formal schedule of matters specifically reserved to it for decision, such as future strategy, acquisitions and disposals, dividend policy, approval of the Annual Report and Accounts, capital expenditure, trading and capital budgets and Group borrowing facilities.

The Board considers monthly reports from the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer and Minutes of the Board and Committees are circulated to all Board members. It has also made the Company Secretary responsible to the Board for the timeliness and quality of information.

Board Responsibilities
The Board acknowledges the division of responsibilities for running the Board and managing the Company’s business with, throughout 2008, Mr R G Parry as Non-Executive Chairman, Mr P E B Cawdron as Senior Independent Director (SID) and Mr T J Bowdler as the Company’s Chief Executive Officer. On 5 January 2009, Mr J A Fry replaced Mr T J Bowdler following the previously announced retirement of Mr T J Bowdler, who resigned as a Director on 31 December 2008. Mr I S M Russell will replace Mr R G Parry as Non-Executive Chairman on 12 March 2009, the day after the 2008 Annual Results of the Company are announced, and Mr R G Parry will not be seeking re-election at the Annual General Meeting on
24 April 2009.

Throughout 2008, the Chairmen of the Remuneration, Audit and Nomination Committees were Mr S J Waugh, Mr I S M Russell, who is a chartered accountant, and Mr R G Parry respectively. In addition to the Board changes above, Mr S J Waugh resigned as a Non-Executive Director of the Company on 30 January 2009 following his acceptance of a government post and, following his promotion to Chief Executive of BT Retail, Mr G E Patterson will step down from the Board at the AGM. Mr P E B Cawdron was appointed Chairman of the Remuneration Committee in place of Mr S J Waugh. This is a temporary appointment and it is anticipated that a further change will take place later in the year. When Mr I S M Russell is appointed Non-Executive Chairman of the Company, he will step down as a member of the Audit Committee and he will Chair the Nomination Committee. A new Audit Committee Chairman is being sought as part of the Non-Executive Director recruitment process.

Mr P E B Cawdron is available to address any concerns that shareholders may have, which have not been resolved through the normal communication channels of the Chairman or Executive Directors. Previously he had decided to retire from the Board at the AGM in 2009 but, because of the other Board changes noted above, has now agreed to continue for a further twelve months.

Board Attendance
During 2008, every director attended all meetings with the exception that Mr F P M Johnston was unable to attend the January meeting and Mr P E B Cawdron, Mr S J Waugh and Mr G E Patterson all missed the August meeting. In advance of the formal Board meeting in November, led by the Senior Independent Director, the Directors excluding the Chairman met and, as part of the agenda of that meeting, appraised the performance of the Chairman. Also in November, the Board met without the Executive Directors and Company Secretary being present.

The meetings of the Remuneration, Audit and Nomination Committees were attended by all members either personally or by telephone other than Mrs M A King who missed two Remuneration Committee meetings and
Mr S J Waugh who missed one Audit Committee meeting.

Board Balance
Of the Company’s current ten Directors, three are Executive and the remainder Non-Executive, of whom four are regarded as independent, excluding the Chairman. As explained above, this imbalance is temporary due to the very recent resignations of Mr S J Waugh and Mr G E Patterson. With the appointment of Mr I S M Russell as Non-Executive Chairman, effective from 12 March 2009, and Mr R G Parry stepping down from the Board at the AGM, there will also be a need for another independent Non-Executive Director. The process of recruiting three new directors has already commenced.

Mr A R Marshall and Mr G E Patterson were appointed as Non-Executive Directors on 27 June 2008 and 7 July 2008 respectively. Mr A R Marshall is regarded as non-independent because he was appointed to the Board as the nominee Director of Usaha Tegas, which owns 20% of the Company’s issued share capital. Mr G E Patterson is an independent Non-Executive Director.

Mr F P M Johnston is regarded as non-independent because he has a large shareholding in the Company and previously served the Group in an executive role. It is the view of the Board that such circumstances do not lessen the value of the contributions made by Mr F P M Johnston. He plans to step down from the Board at the AGM in 2010.

Mr P E B Cawdron has served on the Board for more than nine years. The unanimous view of the Board is that his experience and professional knowledge is invaluable to the Board, and that he continues to be independent. Given the recent Board changes he has agreed to continue as an independent Non-Executive Director but he plans to retire from the Board at the AGM in 2010.

When Mr R G Parry stands down as Chairman on 12 March 2009, despite serving more than nine years as a Director, the Board will regard him as independent up to the date of the AGM. He is an innovative and independent thinker and has wide experience in the media sector.

All Directors who have served for more than nine years will retire at the Annual General Meeting and, other than
Mr R G Parry, they will be seeking re-election.

Throughout 2008 at least half the Board, excluding the Chairman, comprised Non-Executive Directors determined by the Board to be independent. The recent Board changes have impacted this position but it will be corrected as soon as practicably possible with the appointment of new independent Non-Executive Directors.

Nomination Committee
The Nomination Committee has been chaired by Mr R G Parry. When he steps down as Chairman he will be replaced by Mr I S M Russell. Reporting to the Board, its duty is to seek suitably skilled and experienced candidates, with sufficient time to devote to the role, as Non-Executive Directors and to oversee all Board appointments. Once the skillset and experience of a vacancy has been determined, the Committee considers the appointment of external recruitment consultants to assist with the search. As explained in last year’s Annual Report, given the importance of the recruitment of the new Chief Executive Officer during 2008, it was decided that the Nomination Committee should comprise all the Non-Executive Directors.

The terms of reference of the Committee are displayed on the Company’s website in the Investor Centre section.
 
The Committee’s unanimous choice for the position as Chief Executive Officer, Mr J A Fry, was appointed as a Director and CEO on 5 January 2009, succeeding Mr T J Bowdler. Throughout the efficiently run process the Company was advised by Egon Zehnder, which also assisted in the appointment of Mr G E Patterson. With the subsequent resignation of Mr G E Patterson and the other Board changes, the Committee has commenced the process of recruiting three independent Non-Executive Directors.

It is proposed that one of these will be a chartered accountant who will take over as Chairman of the Audit Committee. The required experience and skill set of the other two independent Non-Executive Director vacancies has been specified. Mr P E B Cawdron and Mr F P M Johnston have intimated that they intend to retire from the Board at the Annual General Meeting in 2010. Taking into account the expertise and experience of the current Directors being recruited, the Committee will then determine the brief required to replace the Directors retiring in 2010.

When Mr R G Parry announced that he planned to resign at the AGM, the recruitment process to select a new Chairman was led by the Nomination Committee chaired by Mr P E B Cawdron. Mr R G Parry had no involvement in the choice of Mr I S M Russell as the new Chairman.

The Board undertook an evaluation of its performance during the year. This included a review of the effectiveness of this Committee considering its composition, chairmanship, whether it fulfilled its role as outlined in the terms of reference, its reporting and overall performance. This evaluation process was undertaken by the Committee itself as well as by all members of the Board. The results of this process were positive and confirmed the effectiveness of the Committee.

Information and Professional Development
The Chairman arranged a detailed induction process for both Mr A R Marshall and Mr G E Patterson, including meetings and discussions with advisers and senior management where appropriate, together with the preparation of a full induction pack and seminars both internally and externally. A more extensive programme was developed for Mr J A Fry which included a full tour of the Group’s operations.

A similar process to that described above for Mr A R Marshall and Mr G E Patterson will be undertaken when any new Non-Executive Director is appointed. A new Chairman of the Remuneration Committee will be appointed later in 2009 and a detailed training programme has already been outlined which will involve internal briefings and the input of Hewitt New Bridge Street, the Committee’s advisers.

All Board members have access to independent advice on any matters relating to their responsibilities as Directors and as members of the various Committees of the Board. The Company Secretary is available to all Directors and he is responsible for ensuring that all Board procedures are complied with.

Board Performance Evaluation
During the last year, the Board has conducted a rigorous evaluation of its own performance. This involved the completion of an assessment questionnaire by all Directors covering the performance of the Board, individual Directors, the Company Secretary and Board Committees. Other topics included the conduct of meetings, the provision of information, relationships, strategy, training, the response to the current economic recession; and the overall effectiveness of the Board. There was a continued emphasis on a scoring system for assessing individual, Committee and Board performance, together with a focus on the future strategy of the Group especially in the area of digital publishing. The completed questionnaires were submitted to the Company Secretary who prepared a summary of the conclusions which was presented to the Board meeting in January 2009. Separately, the Secretary produced a detailed report summarising any individual recommendations for the consideration of the Chairman and the Chairman elect. This was and will be followed up by meetings as appropriate with individual Directors.

Training
Training is undertaken as required during the year. The feedback from the recent questionnaires will assist in the training plan for the forthcoming year. The Board arranges for its Non-Executive Directors to visit the Group’s principal locations at certain intervals to discuss the operations with local management. In addition, at least one Board meeting is held at one of the Group’s centres where the Board receives a presentation from the local Managing Director and a tour of the business. Individual Directors attend a range of seminars presented by professionals throughout the year.

At the annual meeting when the Non-Executive Directors meet on their own, this is one of the standard topics for the Board to consider, both individually and collectively.

Board Re-election
It is the policy of the Board that all Directors are subject to election at the first Annual General Meeting after their appointment and thereafter to re-election every three years. All Directors who have served nine years or more or who are above age 70 are subject to re-election annually.

Mr I S M Russell as Chairman elect has, following the formal evaluation process described above, considered the performance of the Directors subject to election and re-election at the 2009 Annual General Meeting and is satisfied that the individuals’ performance continues to be effective and that they have demonstrated a clear commitment to the role.

Financial Reporting
The Board has shown its commitment to presenting appropriate information about the Group’s financial position by complying with best practice and standards issued by the International and UK Accounting Standards Boards relating to the disclosures which are included in this Annual Report.

Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report, Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. The Directors are required by the IAS Regulation to prepare the Group financial statements under IFRSs as adopted by the European Union. The Group financial statements are also required by law to be properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation.

International Accounting Standard 1 requires that IFRS financial statements present fairly for each financial year the Company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the preparation and presentation of financial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. However, Directors are also required to

 

  • properly select and apply accounting policies;
  • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
  • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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 statements may differ from legislation in other jurisdictions.

Going Concern
After making enquiries, the Directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. However, there are material risks associated with this assessment and these are discussed on page 18.

Internal Control
The Board has applied principle C.2 of the Combined Code by establishing a continuous process for identifying, evaluating and managing the significant risks the Group faces. The Board regularly reviews the process, which has been in place from the start of the year to the date of approval of this report and which is in accordance with the revised guidance on internal control published in October 2005 (the Turnbull Guidance). The Board is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

In compliance with Provision C.2.1 of the Combined Code, the Board regularly reviews the effectiveness of the Group’s system of internal control. The Board’s monitoring covers all controls, including financial, operational and compliance controls and risk management. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate a need for more extensive monitoring. The Board has also performed a specific assessment for the purpose of this Annual Report. This assessment considers all significant aspects of internal control arising during the period covered by the report including work of the Internal Financial Control Committee (IFCC). The Audit Committee assists the Board in discharging its review responsibilities.

During the course of its review of the system of internal control, the Board has not identified nor been advised of any failings or weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions has not been considered appropriate. The key elements of the ongoing continuous process during the period under review have been:
  • Formal Board reporting on a monthly basis by the Chief Executive Officer, Chief Financial Officer and
  • Chief Operating Officer on the Group’s performance and on any emerging risks and issues. The monthly management accounts break down the results of the Group’s operations by individual business performance and all significant variations against budget and the previous year are fully examined. The day-to-day responsibility for managing each of the Group’s operations rests with local experienced Senior Executives and the Group has a clear organisational structure which includes appropriate delegation of authority. The Executive Directors ensure that regular contact is maintained with all Senior Executives. The Group Management Board, comprising the Executive Directors, the Company Secretary, the Director of Human Resources, the Digital Strategy Director and the Business Development Manager, meets every month to review financial and operational issues as well as the risks facing the Group.
  • Formal Board approval for capital expenditure over £250,000 and for other investment decisions. Approval was granted for all acquisitions and disposals submitted after due enquiry.
  • Formal Board approval of the annual budget for the forthcoming financial year. This includes detailed and comprehensive budgets covering each operating business.
  • Formal Board reporting of the key functional department’s future strategy as part of the operational topics considered at Board meetings during the year.
  • Review by the Audit Committee on a six-monthly basis of the work performed by the IFCC based on a programme of work agreed in advance. The IFCC is chaired by the Company Secretary who is responsible for the conduct of control reviews in selected locations by members of the Committee who are independent of the location visited. The IFCC is also responsible for the review of detailed financial control checklists submitted by each operation to head office monthly. This work is strongly supported by the Group’s financial accounting centre which ensures a consistent and compliant approach to the processing of transactions and ensures a uniform control process across the Group’s operations.
  • Review by the Audit Committee of the conclusions of the Group’s external auditors in their annual audit and review of the half-year results. These reviews include discussion of any control weaknesses or issues identified by the auditors.
  • The conduct of risk assessment involving all senior managers of the Group’s businesses in addition to the Executive Directors. A risk matrix is reviewed on a regular basis both in the local operations and by the Group Management Board. One risk is discussed at every monthly executive meeting both locally and at Group level. The results of these assessments are summarised and reported to the entire Board. These risk assessment sessions are held at each operation and will evaluate and address the risks identified. During 2008, the Group Management Board has focused particularly on customer care metrics; impairment testing of the Group’s publishing titles; disaster recovery plans in fewer but larger prepress and press centres; national advertising sales; a whistle blowing incident; management succession planning; digital strategy; bad debts in the economic slowdown; management stretch; daily newspaper sales; and corporate strategy.

On an ongoing basis, steps are taken to embed best practice into all the operations of the business and to deal with areas of improvement which come to Management’s and the Board’s attention.

In addition, the Group Management Board has the ongoing responsibility to set policies, procedures and standards as detailed in the Group’s policy guidelines. These are reviewed and revised on an annual basis and a tailored version has been released for all the businesses in the Republic of Ireland. The guidelines include policies on:

  • Finance
  • Cash/treasury controls
  • Authorisation levels
  • Trading
  • Customer service
  • Commercial and competition
  • Technology
  • Property management
  • Human resources including pension administration, disability and health and safety
  • Environmental issues and energy management
  • Legal and regulatory compliance
  • Business continuity.

The Directors at the Board meeting on 30 January 2009 reviewed the need for an internal audit department and concluded that they did not believe it necessary for the Group to maintain such a department given the very effective role played by the IFCC and the current independent review and monitoring procedures in operation.

Audit Committee
The Audit Committee is chaired by Mr I S M Russell, a chartered accountant, and includes Mrs M A King and Mr S J Waugh up to the date of his resignation from the Board on 30 January 2009. Mr P E B Cawdron, a chartered accountant, was appointed to the Committee from that date. All are independent Non-Executive Directors. Mr I S M Russell ensured that all matters relating to the Annual Report and Accounts were complete before standing down as Chairman of the Audit Committee on 12 March 2009. The Company is actively recruiting a new independent Non-Executive Director to chair the Committee going forward.

The Committee has written terms of reference that outline its authority and duties. These are displayed on the Company’s website in the Investor Centre section. The terms include a review of the arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other areas.

The Committee normally meets three times each year. It meets once during the year with the Company’s external auditors to discuss and agree the audit programme for the forthcoming year, together with any proposed non-audit work. In 2008 this meeting was combined with the Interim Financial Review.

The two other meetings follow the Interim Financial Review and the year-end audit. They cover a comprehensive report from the external auditors on their work and their conclusions. The Committee focuses in particular on the areas of financial judgement by the Group. As part of the main Board it also reviews the summary of the Group’s key business risks and discusses any revisions. The Committee is actively involved in the ongoing review of internal controls by the main Board.

In addition, these two meetings consider a report on the work of the IFCC. Its work is described in the Internal Control section and, given the detail and comfort included in the report, the Committee regards this approach as the most effective way to review the financial controls in the business rather than establish an internal audit function.

The Audit Committee meetings to consider the financial results of the Group are attended by the Chief Financial Officer and the Company Secretary, who acts as Secretary to the Committee, with minutes being circulated to all Board members. The Chairman, Chief Executive Officer and Chief Operating Officer are also invited to attend if required to do so by the Committee. Towards the close of both meetings, all Executives leave in order for the Committee to have a private discussion with the auditors. The Chairman also has a private meeting with the audit partner during the course of the year to discuss any relevant issues.

At the meeting to review the Annual Report and Accounts, the Committee formally considers the non-audit services provided by the Group’s external auditors and the effectiveness of the audit process. These are fully explored and discussed and the Committee is satisfied that the objectivity and independence of the external audit is safeguarded. During 2008 the Company has used several professional firms for different projects and the Republic of Ireland taxation compliance and advisory work is undertaken by a professional firm other than the Group’s auditors.

As explained on page 34, the Board undertook an evaluation of its performance during the year. This included a review of the effectiveness of this Committee considering its composition, chairmanship, whether it fulfilled its role as outlined in the terms of reference, its reporting and overall performance. This evaluation process was undertaken by the Committee itself as well as by all members of the Board. The results of this process were positive and confirmed the effectiveness of the Committee.

Any significant non-audit work by the auditors is approved by the Committee in advance of any engagement letter being signed. The Committee will only approve such work where they are satisfied the scope of work and level of fees will not impact on the independence of the auditors.

The Committee oversaw the appointment of Deloitte LLP in 2002 and have a primary responsibility for the appointment, re-appointment and removal of auditors. The Audit Partner at Deloitte rotated at the commencement of the 2007 Interim Review.

Dialogue with Institutional Shareholders
The Board encourages and seeks to build a mutual understanding of objectives between the Company and its institutional shareholders. As part of this process, the Chief Executive Officer and Chief Financial Officer make twice yearly presentations to institutional shareholders and meet with shareholders to discuss any issues of concern and to obtain feedback. In addition, they communicate regularly throughout the year with those shareholders who request a meeting.

The Chairman and the Senior Independent Director personally contact the leading shareholders in the Company on a yearly basis to address any concerns and discuss any issues. The Board receives a report on any discussion with shareholders and the written feedback that follows the half yearly presentations is circulated to the Board. Brokers’ reports and analysts’ briefings are included in the Board papers sent to the Directors every month.

The Board receives a quarterly update on the shareholder register with a summary of the main movements in shareholdings since the previous report.

Members of the Board have met with institutional shareholders during the year to consider Corporate Governance matters. All the Non-Executive Directors are prepared to meet with shareholders to more fully understand their views.


Annual General Meeting
The Board seeks to encourage shareholders to attend its Annual General Meeting. Directors are present to answer any questions from shareholders. It is the policy of the Board that all Directors should attend the Annual General Meeting. It uses the Annual General Meeting to communicate with private investors and encourages their participation.

All Directors attended the AGM in 2008.