GROUP STRATEGIC REPORT(CONTINUED)

FOR THE PERIOD ENDED 2 JANUARY 2021

The Board of Directors, in line with their duties under s172 of the Companies Act 2006, have acted in a way that they consider, in good faith, promotes the success of the group for the benefit of its members as a whole, and in doing so have regard to a range of matters when making decisions for the long term.

During the year a number of key decisions have been made by the directors which have been reached through engaging with the relevant stakeholders and fully understanding the long-term implications. The directors are fully briefed through the production of detailed board papers which are distributed well in advance of the Board Meetings.

As part of the group strategy to reduce its reliance on newspaper publishing and diversify risk for the shareholders, the directors have continued to develop a pipeline of acquisition targets. These opportunities lie in sectors such as digital marketing, consumer research and brand consultancy and as well as diversifying the group’s portfolio of businesses will also compliment existing operations. The decision to continue to invest in acquisitions is based on the strengthening of the group’s underlying trading position and cash generation, as well as the successful integration and performance of acquisitions made in 2018. Substantial investment that will enhance the long-term strength of the group can be made whilst also maintaining significant cash and facilities headroom in the event of any further downturn in trading due to COVID-19.

In July 2020, the directors reviewed the CLBILS. Following initial discussions with Lloyds Bank, it was confirmed that Claverley would be able to apply for the scheme. Despite, the challenges that COVID-19 had provided the Group’s businesses, the directors were confident the measures put in place across each business and the steady improvement in trading meant that the CLBILS was not required. This decision was further supported by the transparent and robust cash forecasting process across the group, with each business providing a 13 week projected cashflow report which is consolidated on a weekly basis.

During 2020, despite the challenges of COVID-19, the group continued to invest in its existing businesses in order to achieve growth, operating efficiencies and product diversification. At Precision Colour Printing, the directors had previously identified opportunities to enhance the automation of direct mailing with the decision being made to replace the two existing mailing lines, that were over 15 years old, with one new machine. The new machine was delivered and installed in May 2020 and is beginning to deliver the planned operational performance improvements. This decision has also meant that the company will recruit additional employees as the demand loading for the machine is more predictable and therefore previous reliance on flexible third-party contract labour will reduce. These employees will be given greater job security and enhanced employment terms.

The new mailing line includes the ability to wrap customer products in paper wrapping as well as the more traditional poly wrapping, therefore enabling the company to offer its customers a more environmentally friendly solution. The first paper wrapped product was produced in September 2020. Dialogue with customers on utilising Forest Stewardship Council (FSC) sourced paper for wrapping has been positive to date and the company expect a significant uptake.

The Group takes its environmental responsibilities seriously and recognises that business activities inevitably have an impact on the natural environment. In particular, the directors continue to make decisions that ensure Kennedy Enterprises is committed to minimising this environmental impact and uses sustainable Programme for the Endorsement of Forest Certification (PEFC) newsprint and is a member of the On-Pack Recycling Label (OPRL) scheme, ensuring clear guidance is given to consumers on how to dispose of and recycle its magazines responsibly. The company’s blister packaging is already recyclable via household waste or at a recycling facility. A primary objective of the directors is for the magazine and packaging to be 100% kerbside recyclable by 2022 and for secondary packaging to be further reduced throughout 2021.

Turnover at the Midland News Association (MNA) has continued to decrease in 2020 as advertising and circulation revenues have come under increasing pressure, exacerbated by COVID-19. The directors took the decision to suspend publication of its free weekly and monthly titles during the period of national lockdown, but being mindful of the commitment to provide readers with trusted and up to date news, continued printing the daily and paid for weekly titles. Consequently, cost management has been a priority consideration for the directors. The largest ongoing cost within the business is the remuneration of employees and unfortunately 102 members of the team were made redundant in 2020, primarily driven by a restructure of the advertising department. A number of these employees requested to leave voluntarily but regrettably others were compulsory. The majority of changes were made in July, following collective consultation.

The directors acknowledged the distress such decisions have on loyal employees and sought to ensure a consistent and fair process was adopted. In all cases, there had to be a justification to deem a position redundant. Where compulsory redundancies were required, face to face consultations involving affected staff, senior departmental management and representatives from HR took place. The clearly defined process for decision making, and timescales for communication, was used consistently across the business.

These difficult decisions have been made to ensure the business remains sustainable and thus enabling the business to continue to employ hundreds of employees.

This report was approved by the board on 29 April 2021 and signed on its behalf.

G H Williams

Director