TIDMTNI
RNS Number : 6459G
Trinity Mirror PLC
05 March 2018
5 March 2018
Trinity Mirror plc
Annual Results Announcement
For the 52 weeks ended 31 December 2017
Results Adjusted results Statutory results
(1)
2017 2016 2017 2016
52 Weeks 53 Weeks 52 Weeks 53 Weeks
GBPm GBPm GBPm GBPm
Revenue 623.2 713.0 623.2 713.0
Operating profit 124.7 137.5 97.9 93.5
Profit before tax 122.5 133.2 81.9 76.5
Earnings per share 36.1p 38.1p 23.0p 24.9p
Dividends per share - - 5.80p 5.45p
Key Highlights
-- Resilient performance in a difficult trading environment
Group revenue fell by 12.6% to GBP623.2 million. On a like for
like (2) basis revenue fell by 8.8% impacted by the weak print
trading environment. Strong management of the cost base enabled
adjusted operating margin to increase by 0.7 percentage points to
20.0% delivering an adjusted operating profit of GBP124.7 million.
Statutory operating profit increased by 4.7% to GBP97.9
million.
-- Continued growth in digital revenue
Like for like publishing digital revenue grew by 7.0% to GBP83.9
million with digital display and transactional revenue growing by
18.2% partially offset by digital classified revenue, which is
substantially upsold from print, falling by 25.1%.
-- Structural cost savings of GBP20 million
We delivered structural cost savings of GBP20 million in the
year, GBP5 million ahead of the initial GBP15 million target set
for the year. For 2018, we have targeted a further GBP15 million of
structural cost savings.
-- Pension deficit fell by GBP88.4 million
The IAS19 pension deficit fell by GBP88.4 million to GBP377.6
million (GBP311.4 million net of deferred tax). The Group paid
GBP38.7 million into the defined benefit pension schemes in the
year (including GBP2.5 million in relation to the share buyback
programme).
-- Continued financial flexibility with net debt of only GBP9.0 million
The Group maintained financial flexibility with net debt (3) of
only GBP9.0 million at the end of the year and adjusted EBITDA (4)
for the year of GBP145.1 million. During the year, the Group fully
repaid the outstanding GBP68.3 million on the private placement
loan notes.
-- Historical legal issues
The provision for dealing with historical legal issues was
increased by GBP10.5 million during the year. GBP10.7 million of
the provision remains outstanding at the year end.
-- 6.0% increase in final dividend to 3.55 pence per share
A proposed final dividend of 3.55 pence per share for 2017, an
increase of 6.0% per share, bringing the total dividend for 2017 to
5.80 pence per share, an increase of 6.4% per share. During
November 2017, the Group completed the GBP10 million share
repurchase programme announced in August 2016.
-- Strategy and outlook
We have made continued progress with our strategic initiatives
to grow digital display and transactional revenue whilst tightly
managing our cost base to support profits and cash flows. The
acquisition of Northern & Shell's publishing assets (excluding
Republic of Ireland which is expected to complete later this year)
was completed on 28 February 2018. The Board remains confident that
our strategy will meet our objective to deliver sustainable growth
in revenue, profit and cash flow over the medium term.
Commenting on the annual results for 2017, Simon Fox, Chief
Executive, Trinity Mirror plc, said:
"We once again delivered a strong financial performance in what
remains a difficult trading environment for the industry. I am
pleased with the acquisition of the publishing assets of Northern
& Shell in line with our strategic focus on consolidation and I
believe this presents significant opportunities to realise real
value. Having made good progress with our strategy in 2017 we will
build on this in the year ahead."
Strategic Highlights
-- Grow
- Average monthly page views grew by 7% to 682 million with two
thirds of these page views now on mobile
- With 33.4 million unique UK browsers in December 2017, Trinity
Mirror had more monthly unique browsers in the UK than any other
commercial news brand
- We delivered marginally under 600 million video streams in the year, up 27% year on year
- Like for like digital display and transactional revenue growth of 18.2% year on year
-- Build
- Belfast Live, Dublin Live and Glasgow Live delivered 3.6
million monthly browsers and 16.5 million page views in December
2017
- Leeds Live launched in November 2017 with hundreds of
thousands of people having visited the site already for the very
latest in news from Leeds
- football.london was launched in January 2017 and achieved 2.0
million monthly browsers and 5.1 million page views in December
2017
- Insider.co.uk and InYourArea.co.uk launched in the year and we
anticipate good traction on audience during 2018
- Since the investment in Brand Events in October 2016, the
business has launched four new events, bringing the total to six in
2017
-- Protect
- Secured a five year print and distribution contract for the Guardian and Observer newspapers
- Renewed a five year print and distribution contract for the Racing Post
- Extended the print and distribution contract for the i as well
as the Scotsman and Scotland on Sunday for a further three
years
- Sport Media secured match day programme and tournament
magazine publishing contract for FIFA 2018
- Structural cost savings (including synergy savings from the
integration of Local World) of GBP20 million
- For 2018, we have targeted a further GBP15 million of structural cost savings
-- Consolidate
- The acquisition of Northern & Shell's publishing assets
was approved by shareholders at the General Meeting held on 27
February 2018 and the acquisition of the UK publishing assets
completed on 28 February 2018 (further details are set out on page
5)
- We continue to evaluate a number of ongoing opportunities that
drive value and see ourselves as a consolidator in the newspaper
industry
Our progress on delivering the strategy is measured through five
KPIs. In the year we achieved three out of the five KPI targets and
anticipate an improved performance in 2018 (further details are set
out on page 5).
Board Changes
David Grigson will step down from the Board of Directors at the
Annual General Meeting. Nick Prettejohn will join as a non
executive director on 6 March 2018 and will become Chairman at the
Annual General Meeting on 3 May 2018.
Name Change
A resolution proposing that the Group changes its name to Reach
plc to reflect the larger business will be put forward at the
Annual General Meeting on 3 May 2018.
Enquiries
Trinity Mirror Brunswick
020 7293 3553 020 7404 5959
Simon Fox, Chief Executive Nick Cosgrove, Partner
Vijay Vaghela, Group Finance Will Medvei, Director
Director
Notes
(1) Set out in note 17 is the reconciliation between the statutory and adjusted results.
(2) Set out in note 18 is the reconciliation between the statutory and like for like revenue.
(3) Borrowings (GBP25.0 million) less cash and cash equivalents (GBP16.0 million).
(4) Adjusted operating profit (GBP124.7 million) plus depreciation (GBP20.4 million).
Investor presentation
A call for analysts and shareholders will be held today at 9.00
am (telephone number: 0800 358 6377 or 0330 336 9105; confirmation
code: 1163905). The web-ex, which will display our presentation,
can be accessed at the URL:
https://edge.media-server.com/m6/p/53pz3uez. The presentation will
also be live on our website: www.trinitymirror.com at 9.00 am and a
playback will be available from 2.00 pm.
Annual Report
The Annual Report for the 52 weeks ended 31 December 2017 is
available on the Company's website at www.trinitymirror.com and at
the Company's registered office at One Canada Square, Canary Wharf,
London E14 5AP and will be sent to shareholders who have elected to
receive a hard copy by the end of March 2018.
Alternative Performance Measures
The Company presents the results on a statutory and adjusted
basis and revenue trends on a statutory and like for like basis.
The Company believes that the adjusted results and like for like
trends will provide investors with useful supplemental information
about the financial performance of the Group, enable comparison of
financial results between periods where certain items may vary
independent of business performance, and allow for greater
transparency with respect to key performance indicators used by
management in operating the Group and making decisions. Although
management believes the adjusted basis is important in evaluating
the Group, they are not intended to be considered in isolation or
as a substitute for, or as superior to, financial information on a
statutory basis. The alternative performance measures are not
recognised measures under IFRS and do not have standardised
meanings prescribed by IFRS and may be different to those used by
other companies, limiting the usefulness for comparison purposes.
Note 17 and note 18 respectively sets out the reconciliation
between the statutory and adjusted results and the reconciliation
between the statutory and like for like revenue.
Forward looking statements
Statements contained in this Annual Results Announcement are
based on the knowledge and information available to the Company's
directors at the date it was prepared and therefore the facts
stated and views expressed may change after that date. By their
nature, the statements concerning the risks and uncertainties
facing the Company in this Annual Results Announcement involve
uncertainty since future events and circumstances can cause results
and developments to differ materially from those anticipated. To
the extent that this Annual Results Announcement contains any
statement dealing with any time after the date of its preparation
such statement is merely predictive and speculative as it relates
to events and circumstances which are yet to occur. The Company
undertakes no obligation to update these forward-looking
statements.
Management Report
Operational Performance
The Group delivered a resilient performance in 2017 despite the
difficult trading environment. We continued to tightly manage the
cost base and delivered good growth in our digital audience and the
associated display and transactional revenue. Strong management of
the cost base enabled adjusted operating margin to increase by 0.7
percentage points to 20.0% delivering an adjusted operating profit
of GBP124.7 million. Statutory operating profit increased by 4.7%
to GBP97.9 million.
Group revenue fell by 12.6% or GBP89.8 million to GBP623.2
million impacted by the weak print trading environment and pressure
on digital classified revenues, which are substantially jointly
sold with print. The fall in revenue includes the impact of an
additional week of trading in 2016, the cessation of the
Independent print and distribution contract in April 2016, the sale
of Rippleffect in August 2016 and the impact of handing back four
Metros to DMGT in December 2016 and other portfolio changes in 2016
and 2017. Digital revenue continued to grow with strong growth in
like for like display and transactional revenue of 18.2% to GBP68.7
million driven by an increase in audience, engagement, video and
digital marketing services partly offset by weaker classified
revenue, primarily due to recruitment. On a like for like basis,
Group revenue fell by 8.8% or GBP60.2 million.
Like for like Publishing revenue fell by 9.0% to GBP577.8
million. Publishing print revenue fell by 11.3% to GBP493.9 million
and we continued to achieve growth in digital revenue of 7.0% to
GBP83.9 million with digital display and transactional revenue
growing by 18.2% partially offset by digital classified revenue
falling by 25.1%.
Strong cost control limited the fall in Group adjusted operating
profit to 9.3% to GBP124.7 million and Group adjusted EBITDA to
9.1% to GBP145.1 million. The Group delivered structural cost
savings (including an incremental GBP5 million of synergy savings
from the integration of Local World) of GBP20 million. Group
adjusted profit before tax fell by 8.0% to GBP122.5 million and
adjusted earnings per share fell by 5.2% to 36.1 pence reflecting
the impact of the falling revenues partially offset by tight cost
management.
Adjusted items impacting operating profit (note 5) were a charge
of GBP26.8 million (2016: GBP44.0 million).
Statutory operating profit improved by 4.7% or GBP4.4 million to
GBP97.9 million. Statutory financing costs were GBP16.0 million
(2016: GBP17.0 million) and statutory profit before tax increased
by 7.1 % or GBP5.4 million to GBP81.9 million. The statutory tax
charge was GBP19.1 million (2016: GBP7.0 million) with the prior
year benefitting from a GBP9.8 million deferred tax credit as a
result of the future change in the rate of corporation tax.
Statutory earnings per share fell by 7.6% or 1.9 pence reflecting
the increased statutory tax charge more than offsetting the benefit
of increased profit before tax and the share buyback.
Financial Flexibility
The Group maintained financial flexibility with net debt falling
by GBP21.5 million to GBP9.0 million and adjusted EBITDA of
GBP145.1 million. During the year, the Group fully repaid the
outstanding GBP68.3 million on the private placement loan notes.
Only GBP25 million is drawn on the Group's GBP100 million bank
facility. The bank facility is committed until 2021 and the
facility amortises over the term reducing to GBP50 million for the
last year of the term. Following the repayment of the private
placement loan notes net debt is the same on both a contracted and
statutory basis. Net debt of GBP9.0 million at the period end
comprised the GBP25.0 million drawn on the bank facility and cash
balances of GBP16.0 million.
The strong cash flows generated by the Group provide resilience
and financial flexibility to invest in the business, to grow
dividends and over time meet pension obligations.
Historical Legal Issues
The costs associated with the settlement of civil claims in
relation to phone hacking have been higher than expected, in
particular the legal fees of the claimant's lawyers and the general
court process. Therefore, we have increased the provision for
settling these historical claims by GBP10.5 million during the
year. GBP10.7 million of the provision remains outstanding at the
year end.
Although there remains uncertainty as to how these matters will
progress, the Board remains confident that the exposures arising
from these historical events are manageable and do not undermine
the delivery of the Group's strategy.
Pension Schemes
The IAS 19 accounting pension deficit fell by GBP88.4 million to
GBP377.6 million (GBP311.4 million net of deferred tax) driven by
strong asset returns and the benefit of a fall in future mortality
improvements more than offsetting a further reduction in the
discount rate. The fall in the accounting pension deficit does not
have an immediate impact on the agreed funding commitments.
The Group reached agreement with the Trustees on the 2016
triennial valuations in December 2017 whereby annual contributions
to the three pension schemes would be GBP43.8 million per annum for
a period of 10 years commencing 2018. The increase in annual
contributions reflects the increase in deficits since the last
valuation which have been largely driven by the fall in long term
interest rates. Additional contributions of GBP67.0 million over
ten years were
Management Report continued
Dividends and Share Buyback
agreed in connection with the acquisition of Northern &
Shell's UK publishing assets (further details are set out on page
5).
The Board proposes a final dividend of 3.55 pence per share for
2017, an increase of 6.0%, bringing the total dividend for 2017 to
5.80 pence per share, an increase of 6.4%. The final dividend which
is subject to approval by shareholders at the Annual General
Meeting on 3 May 2018 will be paid on 8 June 2018 to shareholders
on the register on 11 May 2018.
The final dividend for 2016 of 3.35 pence per share was paid in
June 2017 and the interim dividend for 2017 of 2.25 pence per share
was paid in September 2017. Total dividend payments in 2017
amounted to GBP15.3 million.
During November 2017, the Group completed the GBP10 million
share repurchase programme announced in August 2016. The Group
acquired a total of 10,017,620 shares.
The Board continues to adopt a progressive dividend policy which
is aligned to the free cash generation of the business. The free
cash generation for the purposes of assessing the dividend is the
net cash flow generated by the Group before the repayment of debt,
dividend payments, other capital returns to shareholders and
additional contributions made to the defined benefit pension
schemes as a result of any substantial increase in dividends and/or
capital returns to shareholders. When setting the level of
dividends the Board will ensure that the Group maintains adequate
headroom for investment and any unexpected cash flow requirements
for historical events or to fund further restructuring. Based on
the Board's expectation of future cash flows, the Board expects
dividends to increase by at least 5% per annum.
The Company will also continue to consider, if appropriate, the
return of capital to shareholders through a share buyback if it has
generated surplus cash and sees an opportunity to enhance earnings
per share and therefore shareholder value. Prior to initiating a
share buyback programme the Company will carefully consider the
cash generation of the business, investment requirements and the
Group's obligations to the Group's defined benefit pension
schemes.
Acquisition of the publishing assets of Northern & Shell
The Group announced the proposed acquisition of Northern &
Shell's publishing assets on 9 February 2018 which was subsequently
approved at the General Meeting held on 27 February 2018.
On 28 February 2018, the Group completed the acquisition of 100%
of the equity in Northern & Shell Network Limited (renamed
Trinity Mirror Network Limited) and its subsidiaries for a cash
consideration of GBP42.7 million and the issue of 25,826,746 shares
at 77.44 pence per share and with deferred consideration of GBP59.0
million payable as GBP18.9 million, GBP16.0 million, GBP17.1
million and GBP7.0 million on the second, third, fourth and fifth
anniversaries respectively of the acquisition. A new GBP75 million
amortising term loan ('Acquisition Term Loan') was procured to
partially fund the acquisition and GBP70 million has been
drawn.
The acquisition of the 50% equity interest in Independent Star
Limited for GBP4.5 million and 100% of the equity in International
Distribution 2018 Limited for GBP0.5 million is subject to
clearance by the competition authorities in the Republic of
Ireland. The remaining GBP5 million under the Acquisition Term Loan
will be drawn on completion of these acquisitions.
The Group has agreed to make an upfront payment of GBP41.2
million to the defined benefit pension schemes of subsidiaries of
Trinity Mirror Network Limited and has entered into recovery plans
amounting to GBP29.2 million over the period 2018 to 2027 (GBP1.9
million per annum 2018 to 2020, GBP4.1 million per annum 2021 to
2023, GBP3.3 million per annum 2024 to 2026 and GBP1.3 million in
2027). The Group also revised the schedule of contributions for the
Group's existing defined benefit pension schemes amounting to an
increase of GBP67.0 million over the period 2018 to 2027 (GBP3.2
million per annum 2018 to 2020 and GBP8.2 million per annum 2021 to
2027). In addition, the Group agreed to increase from 50% to 75%,
the additional contributions that would be paid to the defined
benefit pension schemes if dividends increased by more than 10% in
2018, 2019 and 2020.
On 1 March 2018, the Competition and Markets Authority launched
a merger investigation and made an initial enforcement order (a
"hold separate" order) under the Enterprise Act 2002, in relation
to the acquisition. The Board continues to believe that there will
be no reduction in media plurality as a result of the acquisition,
as each newspaper brand will continue with its current editorial
positioning, and that there will not be any detrimental impact on
competition as a result of the acquisition.
Management Report continued
Current Trading and Outlook
Revenue in the first two months of 2018 fell by 9% on a like for
like basis (excluding from the 2017 comparative the handing back of
two Metros in December 2017 and other portfolio changes in
2017).
The acquisition of the publishing assets of Northern & Shell
is expected to be earnings enhancing in 2018.At this early stage we
anticipate performance for the year to be in line with our
expectations.
Strategic Update
Our vision is "to be an essential part of people's daily lives
by delivering quality content and services that inform, enlighten
and enrich". To deliver this vision it is clear that quality
content is and will remain at the heart of our business.
Our strategic objective remains to deliver sustainable growth in
revenue, profit and cash flow over the medium term.
This will be delivered through four key areas of strategic
focus:
-- Grow: Grow digital audience and revenue through deepening
relationships with readers and optimising response for
advertisers;
-- Build: Build a diversified product portfolio and sustainable mix of new revenue;
-- Protect: Protect our print brands by efficiently delivering quality products; and
-- Consolidate: Seek out strategic opportunities that drive value.
Growth from digital and new revenue streams will begin to
outstrip print declines on an aggregate basis, leading to a
stabilisation of Group revenue and then a return to top line
growth. This, combined with our inbuilt and relentless focus on
efficiencies, makes the Board confident that the delivery of
sustainable growth in revenue, profit and cash flow is achievable
in the future, for the benefit of all stakeholders.
Key highlights of progress on each area of strategic focus
during 2017 are set out below:
Grow
Publishing digital display and transactional revenue, which is
primarily driven by audience, grew on a like for like basis by
18.2% to GBP68.7 million, benefitting from the higher page views
and an increase in higher yielding revenue categories such as
video. Video streams in the year were marginally under 600 million,
up 27% year on year. Digital classified revenue which is
predominantly upsold from print fell on a like for like basis by
25.1% with the largest category, recruitment, falling by 35.8%.
Digital audience growth continues with average monthly page
views in the year growing by 7% year on year to 682 million. Mobile
page views were some two thirds of the page views and grew by 19%
while desktop pages views fell by 15%. Three quarters of page views
were UK page views which grew by 11% while non UK page views fell
by 3%. Page view growth rates have been impacted by the removal of
Streamo and Live Event page views as this functionality reduced the
viewability of ads served due to the speed at which the pages were
viewed by users. It is estimated to have reduced the reported
growth in page views by over 8%.
We continue to simplify our digital portfolio to focus on brands
which can deliver scale and significant daily local audience reach
in their market places.
We completed the migration of the former Local World digital
brands onto our Escenic content publishing platform and onto the
fully responsive new Chameleon site. The brands are benefiting from
the new look design, cleaner template and more powerful digital
storytelling tools. The new sites provide greater emphasis on video
and a much improved live blogging experience.
Build
We continue to explore new product ideas to leverage our
portfolio of print and digital brands whilst seeking to diversify
the revenue streams beyond advertising.
The three "Live" sites (Belfast, Glasgow and Dublin) delivered
3.6 million monthly browsers and 16.5 million page views in
December 2017, up on the 3.0 million monthly browsers and 8.7
million page views in December 2016. The 'Live' sites are a digital
one-stop shop for all things relating to the city featuring live
breaking news, local sport, entertainment, events, local interest,
traffic and travel and What's On.
Leeds Live launched in November 2017 promising to be a new voice
in a growing and modern city. The site uses the latest digital
storytelling techniques to bring the latest developments and
incidents to those living and working in Leeds city centre. Across
the live news channels readers are kept in the know about what's
happening in Leeds bringing readers all the news they would expect,
as well as challenging readers to see it, and Leeds, in a different
way.
Management Report continued
Strategic Update continued
Build continued
We launched InYourArea, a hyperlocal news, information and local
community product that aggregates in realtime the latest hyperlocal
news, events, crime data, local issues, council updates, social
media content and more, all using a postcode. It offers an easy to
use self-service advertising tool to local advertisers.
We launched football.london in January 2017 which is a 24/7,
fan-led, standalone digital site covering London football clubs
with a focus on issues fans really care about, behind-the-scene,
podcasts, interactive quizzes and games. The site has positive
advocates on social media as a result of developing a particular
tone of voice and authority. The site achieved 2.0 million monthly
browsers and 5.1 million page views in December 2017.
We launched Insider.co.uk, a dynamic daily business news site,
which operates alongside the market leading Business Insider
magazine. The site provides Scottish businesses with a rich mix of
live breaking city news, expert analysis and original economic
data.
The Group acquired a 50% stake in Brand Events in October 2016.
Brand Events is one of the UK's leading creators and operators of
consumer event formats. The focus of the joint venture is to expand
and create events in three main sectors: Sports, Crafts and Food.
The target audience of the events are in line with our core
audience and we are able to leverage our inhouse marketing
expertise across print and digital to help promote events and our
regional footprint allows the efficient marketing of a rollout of
existing shows. Events will be centred on the main metropolitan
cities which complements our regional and Scottish portfolios.
Since the investment, Brand Events has continued to launch new
events, holding six during 2017 and adding a further four to the
schedule for 2018.
Protect
Protecting our print brands through understanding our print
readers and delivering a quality product, whilst leveraging our
brands, communities and advertisers to maximise our financial
performance remains a key area of strategic focus.
Print markets remained challenging, particularly advertising,
with display and other declining on a like for like basis by 14.8%
and classified declining on a like for like basis by 23.5%.
Circulation, the largest revenue category, performed better,
falling on a like for like basis by 6.5% with cover price increases
reducing the impact of volume declines.
In light of the challenging trading conditions across the
regional titles, a number of changes to the commercial management
structure were made during the year. There is now more clarity and
accountability to roles and decision making is faster. The change
aims to improve the regional commercial performance during the
current and future years.
We also reorganised the senior editorial teams and further
reorganised the regional newsrooms across the UK. The restructure
followed a review of growth opportunities in each of the markets we
operate, and a review of our editorial print production practices.
The review identified opportunities for greater investment,
particularly around digital and content creation, as we look to
increase engagement and connect with digital audiences on a larger
scale. The review of editorial print production identified examples
of best practice that is increasingly being standardised across the
regions.
We continue to rationalise the portfolio and handed back a
further two Metro franchises at the end of 2017 and have announced
the closure of a small number of regional titles.
Sport Media continues to consolidate its position as the UK's
leading sports publishing business working with the best in the
Premier League and World football, from clubs to international
organisations and some of the top individuals in sport. It has been
awarded the 2018 FIFA World Cup matchday programme and tournament
magazine contract and this builds on the Rugby World Cup matchday
programme in 2015. Sport Media helped Tottenham Hotspur deliver a
hugely successful souvenir programme and record-breaking sales
operation for the historic last game at White Hart Lane.
Internationally, in addition to the Confederations Cup in Russia
last Summer, it also produced official tournament programmes for
the 2017 Women's Euros in the Netherlands working with UEFA, and
for the International Champions Cup tournament in USA featuring the
'El Clasico' contest between Real Madrid and Barcelona in Miami,
and, in Texas, the first ever Manchester United and Manchester City
derby played away from British soil. It also had 2017 successes in
the book market delivering the second-highest selling football
autobiography in the UK in 2017 (Peter Reid) and the top-selling
football autobiography in Ireland (Shay Given).
During the year, the Group secured a five year print and
distribution contract for the Guardian and Observer newspapers from
early 2018, renewed a five year print and distribution contract for
the Racing Post and secured an extension to our print and
distribution contract with Johnston Press, to continue printing the
i newspaper as well as the Scotsman and Scotland on Sunday for a
further three years.
The Group delivered structural cost savings (including synergy
savings from the integration of Local World) of GBP20 million in
the year, GBP5 million ahead of the initial GBP15 million target
set for the year. Restructuring charges in respect of cost
reduction measures were GBP12.6 million. For 2018, we have targeted
a further GBP15 million of structural cost savings.
Management Report continued
Strategic Update continued
Consolidate
We continue to seek out strategic opportunities that drive
value. We will continue to exercise rigorous discipline in
considering any acquisition opportunities that enhance our strategy
or brings new diversified revenue streams. We see ourselves as a
consolidator in the newspaper industry and will continue to do so
subject to tight financial returns.
The acquisition of Northern & Shell's publishing assets was
approved by shareholders at the General Meeting held on 27 February
2018 and the acquisition of the UK publishing assets completed on
28 February 2018 (further details are on page 5).
Key Performance Indicators
To track delivery of our strategy, the following KPIs are
reported on at each reporting date:
FINANCIAL MEASURE GROUP KPIs PERFORMANCE IN THE PERIOD
Publishing digital revenue growth At least 15% pa û
Circulation revenue Single digit declines ü
Print advertising revenue At least in line with national market trends û
Operating margin Grow operating margin to support profits ü
Dividend growth At least 5% pa ü
---------------------------------- --------------------------------------------- -------------------------
Publishing digital revenue like for like growth of 7.0% for the
period is below the target due to the material decline of 25.1% in
classified advertising revenue with the audience related display
and transactional revenue continuing to grow strongly by 18.2%.
Circulation revenue like for like decline of 6.5% is in line
with the target with cover price increases partially mitigating
volume declines.
Print advertising revenue is being impacted by volume declines
which have been worse than the national market trends.
Continued focus on costs has resulted in adjusted operating
margin increasing by 0.7 percentage points from 19.3% to 20.0%.
The total dividend for the year of 5.8 pence per share is an
increase of 6.4% on the 2016 total dividend.
2018 Targets
For 2018, the publishing digital revenue target will relate to
digital display and transactional revenue with a target of at least
20% growth which compares to growth of 18.2% in 2017. All other
targets remain the same as those set for 2017.
People
Management changes
In January 2017, the Group appointed Andy Atkinson as the Chief
Revenue Officer for Trinity Mirror Solutions. Andy joined the Group
in 2014 as Sales Director of Trinity Mirror Solutions, with
responsibility for leading the sales teams in London and
Manchester. Prior to joining the Group, Andy was Head of Trading at
Google, and has also held senior roles at IDS and Channel 5.
In July 2017, Mike Pennington was appointed as Regionals Revenue
Director being promoted from his role as Regional Managing Director
for the North East Region. Mike joined the Group in September 2011
as Publisher for the Hull Daily Mail, he soon became Managing
Director and took on the responsibility for several more regions
within the UK prior to his promotion, including Grimsby,
Scunthorpe, Lincoln and Newcastle.
We would like to thank all our colleagues for their contribution
to the full year performance.
Board changes
On 1 June 2017, David Kelly was appointed Chairman of the
Remuneration Committee, replacing Helen Stevenson, who continues as
Senior Independent Director. Both Helen and David joined the Board
in 2014 as independent non-executive directors and will remain as
members of the Audit & Risk, Remuneration and Nomination
Committees.
David Grigson will step down from the Board of Directors at the
Annual General Meeting. Nick Prettejohn will join as a non
executive director on 6 March 2018 and will become Chairman at the
Annual General Meeting on 3 May 2018.
Management Report continued
Group Review
Income statement Statutory results Adjusted results
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
-------------------- --------------- -------------- -------------- --------------
Publishing 578.5 660.0 578.5 660.0
-------------------- --------------- -------------- -------------- --------------
Print 494.6 581.0 494.6 581.0
Digital 83.9 79.0 83.9 79.0
-------------------- --------------- -------------- -------------- --------------
Printing 31.6 36.2 31.6 36.2
Specialist Digital 9.6 12.9 9.6 12.9
Central 3.5 3.9 3.5 3.9
-------------------- --------------- -------------- -------------- --------------
Revenue 623.2 713.0 623.2 713.0
Costs (525.7) (620.2) (499.3) (576.6)
Associates 0.4 0.7 0.8 1.1
-------------------- --------------- -------------- -------------- --------------
Operating profit 97.9 93.5 124.7 137.5
Financing (16.0) (17.0) (2.2) (4.3)
-------------------- --------------- -------------- -------------- --------------
Profit before tax 81.9 76.5 122.5 133.2
Tax (19.1) (7.0) (24.0) (27.0)
-------------------- --------------- -------------- -------------- --------------
Profit after tax 62.8 69.5 98.5 106.2
-------------------- --------------- -------------- -------------- --------------
Earnings per share 23.0p 24.9p 36.1p 38.1p
-------------------- --------------- -------------- -------------- --------------
The results have been prepared for the 52 weeks ended 31
December 2017 (2017) and the comparative period has been prepared
for the 53 weeks ended 1 January 2017 (2016). The results are
presented on a statutory and adjusted basis and revenue trends are
presented on a statutory and like for like basis. Note 17 sets out
the reconciliation between the statutory and adjusted results and
note 18 sets out the reconciliation between the statutory and like
for like revenue.
Group revenue fell by 12.6% or GBP89.8 million to GBP623.2
million. The fall in revenue includes the impact of an additional
week of trading in 2016, the cessation of the Independent print and
distribution contract in April 2016, the sale of Rippleffect in
August 2016 and the impact of handing back four Metros to DMGT in
December 2016 and other portfolio changes in 2016 and 2017. On a
like for like basis, Group revenue fell by 8.8% or GBP60.2
million.
Further details on the revenue trends for each division are
shown in the Divisional Review.
Statutory
results Adjusted results
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
-------------------------- ----------- ----------- -------------- --------------
Labour (217.6) (239.4) (217.6) (239.4)
Newsprint (56.5) (67.4) (56.5) (67.4)
Depreciation (20.4) (22.2) (20.4) (22.2)
Other (231.2) (291.2) (204.8) (247.6)
----------- ----------- -------------- --------------
Operating adjusted items (26.4) (43.6) - -
Other (204.8) (247.6) (204.8) (247.6)
-------------------------- ----------- ----------- -------------- --------------
Costs (525.7) (620.2) (499.3) (576.6)
-------------------------- ----------- ----------- -------------- --------------
Statutory operating costs fell by GBP94.5 million or 15.2% to
GBP525.7 million reflecting reduced adjusted operating costs and
the benefit of a lower charge in respect of adjusted items compared
to 2016 which together more than mitigated the challenging revenue
environment.
Adjusted items included in 2017 operating costs related to
restructuring charges in respect of cost reduction measures of
GBP12.6 million (2016: GBP15.1 million), a GBP10.5 million increase
in the provision for dealing with and resolving civil claims
arising from phone hacking (2016: GBP11.5 million), pension
administrative expenses of GBP1.0 million (2016: GBP2.2 million),
amortisation of intangible assets of GBP0.3 million (2016: GBP0.3
million) and transaction costs relating to the acquisition of
Northern & Shell's publishing assets of GBP2.2 million (2016:
nil) partially offset by a gain on the sale of a property in
Teesside of GBP0.2 million (2016: GBP0.2 million gain on sale of
properties in Cardiff and Coventry). In 2016, adjusted items
included in operating costs also included a GBP2.0 million charge
against the carrying value of goodwill in our Specialist Digital
division, a break fee of GBP2.0 million paid to Iliffe Print
Cambridge Limited and GBP10.7 million of costs associated with
closure of the printing site in Cardiff and a press line in
Scotland (Cardonald) including the write off of fixed assets of
GBP9.1 million.
Management Report continued
Group Review continued
Adjusted operating costs fell by GBP77.3 million or 13.4% to
GBP499.3 million reflecting the benefit of the impact of an
additional week of trading in 2016, the cessation of the
Independent print and distribution contract in April 2016, the sale
of Rippleffect in August 2016 and the impact of handing back four
Metros to DMGT in December 2016 and other portfolio changes in 2016
and 2017 together with the benefit of structural cost savings and
ongoing cost mitigation.
Statutory
results Adjusted results
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
--------------------------------- ------------ ----------- --------------- --------------
Operating profit pre associates 97.5 92.8 123.9 136.4
Associates 0.4 0.7 0.8 1.1
--------------------------------- ------------ ----------- --------------- --------------
Operating profit 97.9 93.5 124.7 137.5
--------------------------------- ------------ ----------- --------------- --------------
Statutory operating profit pre associates increased by GBP4.7
million or 5.1% to GBP97.5 million while adjusted operating profit
pre associates fell by GBP12.5 million or 9.2% to GBP123.9
million.
Statutory operating profit increased by GBP4.4 million or 4.7%
to GBP97.9 million while adjusted operating profit fell by GBP12.8
million or 9.3% to GBP124.7 million.
Statutory operating margin increased by 2.6 percentage points
from 13.1% to 15.7% while adjusted operating margin increased by
0.7 percentage points from 19.3% to 20.0%.
The Group has a 21.53% investment in PA Group Limited and a 50%
investment in Brand Events TM Limited, accounted for as associated
undertakings.
Statutory
results Adjusted results
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
---------------------------------- ------------ ----------- --------------- --------------
Result before operating adjusted
items 0.8 1.1 0.8 1.1
Operating adjusted items (0.4) (0.4) - -
----------------------------------
Share of results of associates 0.4 0.7 0.8 1.1
---------------------------------- ------------ ----------- --------------- --------------
The statutory and adjusted result for associates both fell by
GBP0.3 million due to investment costs in Brand Events.
Financing costs include investment revenues, the pension finance
charge, interest on bank overdrafts and borrowings, the change in
derivative financial instruments and the changes on retranslation
of foreign currency borrowings.
Statutory
results Adjusted results
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
----------------------------------- ----------- ----------- --------------- ---------------
Investment revenues 0.1 0.6 0.1 0.6
Pension finance charge (11.9) (10.4) - -
Finance costs (4.2) (7.2) (2.3) (4.9)
Interest on bank overdrafts
and borrowings (2.3) (4.9) (2.3) (4.9)
Fair value (loss)/gain on
derivative financial instruments (3.8) 11.3 - -
Foreign exchange gain/(loss)
on retranslation of borrowings 1.9 (13.6) - -
----------------------------------- ----------- ----------- --------------- ---------------
Financing costs (16.0) (17.0) (2.2) (4.3)
----------------------------------- ----------- ----------- --------------- ---------------
Statutory financing costs fell by GBP1.0 million to GBP16.0
million reflecting a fall in adjusted financing costs and a lower
cost in relation to the derivative financial instruments and the
foreign exchange changes on retranslation of foreign currency
borrowings partially offset by a higher pension finance charge. In
June 2017, the Group fully repaid the outstanding GBP68.3 million
on the private placement loan notes and the associated
cross-currency interest rate swaps matured. The Group's only
outstanding borrowings are the drawings on the bank facility and
the Group has no derivative financial instruments. Adjusted
financing costs fell by GBP2.1 million to GBP2.2 million reflecting
the benefit of the repayment of borrowings in 2017 and 2016.
The statutory tax charge of GBP19.1 million (2016: GBP7.0
million) comprises a current tax charge of GBP17.8 million (2016:
GBP19.2 million) and a deferred tax charge of GBP1.3 million (2016:
GBP12.2 million credit).
Management Report continued
Group Review continued
The statutory effective tax rate is higher (2016: lower) than
the standard rate of corporation tax for the reasons set out in the
reconciliation below:
Reconciliation of tax charge 2017 2016
% %
------------------------------------------------- ------- -------
Standard rate of corporation tax (19.3) (20.0)
Items not deductible in determining taxable
profit (non qualifying depreciation/costs) (3.6) (5.4)
Tax effect of items that are not taxable
in determining taxable profit (property
disposal/utilised losses) - 1.1
Prior period adjustment (current and deferred
tax) (0.5) 2.3
Deferred tax rate change (from future reduction
in corporation tax rate) - 12.6
Tax effect of share of results of associates
(brought in post tax) 0.1 0.2
Tax charge rate (23.3) (9.2)
------------------------------------------------- ------- -------
The adjusted tax charge of GBP24.0 million (2016: GBP27.0
million) represents 19.6% (2016: 20.3%) of adjusted profit before
tax. The rate is less than the statutory effective tax rate as the
main items not deductible in determining taxable profit relate to
certain adjusted items. In 2016, the rate was higher than the
statutory effective tax rate due to the impact of the rate
change.
Statutory
results Adjusted results
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
---------------------------- ------------ ----------- -------------- --------------
Profit after tax 62.8 69.5 98.5 106.2
------------ ----------- -------------- --------------
Weighted average number of
shares (000's) 272,730 278,895 272,730 278,895
---------------------------- ------------ ----------- -------------- --------------
Earnings per share 23.0p 24.9p 36.1p 38.1p
---------------------------- ------------ ----------- -------------- --------------
Statutory profit after tax fell by GBP6.7 million or 9.6% to
GBP62.8 million due to the higher statutory tax charge while
adjusted profit after tax fell by GBP7.7 million or 7.3% to GBP98.5
million.
The fall in the weighted average number of shares year on year
reflects the shares bought back as part of the share buyback
programme.
Statutory earnings per share fell by 1.9 pence or 7.6% to 23.0
pence reflecting the increased statutory tax charge more than
offsetting the benefit of the share buyback. Adjusted earnings per
share fell by 2.0 pence or 5.2% to 36.1 pence reflecting the impact
of the falling revenues partially offset by tight cost
management.
Divisional Review
The Group has four operating segments, each of which is a
division, that are regularly reviewed for the purposes of
allocating resources and assessing performance. The divisional
review that follows is presented on an adjusted basis and there is
no difference between the operating profit by division and the
segment result of each operating segment that is shown in note
3.
The operating segments are: Publishing which includes all of our
newspapers and associated digital publishing; Printing which
provides printing services to the Publishing segment and to third
parties; Specialist Digital which includes our acquired digital
classified recruitment and digital marketing services businesses;
and Central which includes revenue and costs not allocated to the
operational divisions and our share of results of associates.
The revenue and adjusted operating profit by operating segment
is presented below:
2017 2016 Variance Variance
GBPm GBPm GBPm %
--------------------------- ------- ------- --------- ---------
Publishing 578.5 660.0 (81.5) (12.3%)
Printing 31.6 36.2 (4.6) (12.7%)
Specialist Digital 9.6 12.9 (3.3) (25.6%)
Central 3.5 3.9 (0.4) (10.3%)
Revenue 623.2 713.0 (89.8) (12.6%)
--------------------------- ------- ------- --------- ---------
Publishing 133.2 148.4 (15.2) (10.2%)
Printing - - - -
Specialist Digital 2.7 2.4 0.3 12.5%
Central (11.2) (13.3) 2.1 15.8%
Adjusted operating profit 124.7 137.5 (12.8) (9.3%)
--------------------------- ------- ------- --------- ---------
Management Report continued
Divisional Review continued
Revenue trends are impacted by a number of items in 2016 and
2017. In the divisional analysis revenue trends are presented on
actual and a like for like basis. Operating profit is only
marginally impacted by the like for like items.
The like for like revenue trends for 2017 exclude from 2017 the
portfolio changes made in the year and excludes from the 2016
comparative: the extra week of trading in 2016, the Independent
print and distribution contract which ceased in April 2016,
Rippleffect which was sold in August 2016, the four Metros handed
back to DMGT in December 2016 and other portfolio changes in 2016
and 2017. Note 18 sets out the reconciliation between the statutory
and like for like revenue.
Publishing
The revenue and adjusted operating profit for the Publishing
division is as follows:
2017 2016 Variance Variance
GBPm GBPm GBPm %
----------------------------- -------- -------- --------- ---------
Print 494.6 581.0 (86.4) (14.9%)
Circulation 284.7 310.6 (25.9) (8.3%)
Advertising 177.6 236.6 (59.0) (24.9%)
Other 32.3 33.8 (1.5) (4.4%)
----------------------------- -------- -------- --------- ---------
Digital 83.9 79.0 4.9 6.2%
Display and transactional 68.7 58.4 10.3 17.6%
Classified 15.2 20.6 (5.4) (26.2%)
----------------------------- -------- -------- --------- ---------
Revenue 578.5 660.0 (81.5) (12.3%)
----------------------------- -------- -------- --------- ---------
Costs (445.3) (511.6) 66.3 13.0%
----------------------------- -------- -------- --------- ---------
Adjusted operating profit 133.2 148.4 (15.2) (10.2%)
----------------------------- -------- -------- --------- ---------
Adjusted operating margin 23.0% 22.5% - 0.5%
----------------------------- -------- -------- --------- ---------
Revenue fell by 12.3% or GBP81.5 million to GBP578.5 million
with print revenue falling by 14.9% and digital revenue growing by
6.2%. On a like for like basis revenue fell by 9.0% with print
revenue declining by 11.3% and digital revenue growing by 7.0%.
Costs fell by 13.0% or GBP66.3 million to GBP445.3 million. This
includes the benefit of the impact of an additional week of trading
in 2016, the cessation of the Independent distribution contract in
April 2016 and the impact of handing back four Metros to DMGT in
December 2016 and other portfolio changes in 2016 and 2017 together
with the benefit of structural cost savings and ongoing cost
mitigation actions.
Operating profit fell by GBP15.2 million or 10.2% to GBP133.2
million with operating margin increasing by 0.5 percentage points
from 22.5% to 23.0%.
Print revenue
Print revenue fell by 14.9%. On a like for like basis print
revenue fell by 11.3%.
Circulation revenue fell by 8.3%. On a like for like basis
circulation revenues fell by 6.5% with volume declines partially
mitigated by cover price increases. The circulation revenue decline
has also been impacted by a change to how Spanish sales are made.
In July 2017, these changed from a net sales basis to a royalty
basis. This reduced circulation revenue by GBP1.1 million with a
greater reduction achieved in costs. The circulation volume trends
in the market have been impacted by cover price differentials,
cover price discounting and increased sampling.
Excluding the impact of sampling, the Daily Mirror volume fell
by 12.9% compared to a 9.7% fall for the UK national daily tabloid
market and the Daily Record fell by 10.8% against an overall
Scottish daily tabloid market decline of 10.0%. The Sunday Mirror
and Sunday People volumes declined by 16.4% and 17.2% respectively
in a UK national Sunday tabloid market that fell by 11.5% and the
Sunday Mail declined by 13.3% against an overall Scottish Sunday
tabloid market decline of 11.1%. The market for our regional titles
remained challenging with declines of 12.9% for paid for dailies,
14.7% for paid for weeklies and 14.6% for paid for Sundays.
Print advertising revenue fell by 24.9% with display and other
down by 23.6% and classified down by 26.2%. Like for like print
advertising revenues fell by 19.3% with display and other down
14.8% and classified down 23.5%. Increased challenges in print
advertising markets saw declines in display advertising across a
number of sectors. The year on year trends have also been adversely
impact by the strong advertising performance during June 2016 from
the European Football Championship and in December from a stronger
finish to 2016 than experienced in 2017. Most classified
advertising categories also came under pressure, in particular
recruitment and property, which experienced like for like declines
of 38.4% and 33.1% respectively.
Management Report continued
Divisional Review continued
Publishing continued
The Daily Mirror print advertising volume market share in the UK
national daily tabloid market fell from 17.4% to 16.2%. The Sunday
Mirror share fell from 16.2% to 14.8% and the Sunday People share
fell from 10.9% to 10.0%. The Daily Record share improved from
16.8% to 19.5% and the Sunday Mail share fell from 30.5% to
28.4%.
Our regional titles continue to experience difficult advertising
markets, particularly display advertising in our metropolitan
titles and classified across all titles.
Other print revenue fell by 4.4%. Like for like other revenue
fell by 1.8% with declines in rental income and business enterprise
revenue offset by improvements in Sport Media and syndication.
Digital revenue
Digital revenue grew by 6.2% with display and transactional
revenue growing by 17.6% and classified revenue declining by 26.2%.
Like for like digital revenue grew by 7.0% with strong growth from
display and transactional revenue of 18.2% driven by an increase in
audience, engagement, video and digital marketing services partly
offset by classified revenue, which is predominantly upsold from
print, which declined by 25.1%, primarily due to recruitment which
fell by 35.8%.
Digital audience growth continues with average monthly page
views in the period growing by 7% year on year to 682 million.
Mobile page views were some two thirds of the page views and grew
by 19% while desktop pages views fell by 15%. Three quarters of
page views were UK page views which grew by 11% while non UK page
views fell by 3%. Page view growth rates have been impacted by the
removal of Streamo and Live Event page views as this functionality
reduced the viewability of ads served due to the speed at which the
pages were viewed by users. It is estimated to have impacted the
reported growth in page views by over 8%.
Printing
The revenue and adjusted operating result of the Printing
division is as follows:
2017 2016 Variance Variance
GBPm GBPm GBPm %
------------------------------ -------- -------- --------- ---------
Contract printing 21.3 25.4 (4.1) (16.1%)
Newsprint supply 7.6 8.5 (0.9) (10.6%)
Other revenue 2.7 2.3 0.4 17.4%
Revenue 31.6 36.2 (4.6) (12.7%)
------------------------------ -------- -------- --------- ---------
External costs (131.2) (147.9) 16.7 11.3%
Publishing division recharge 99.6 111.7 (12.1) (10.8%)
------------------------------ -------- -------- --------- ---------
Adjusted operating result - - -
------------------------------ -------- -------- --------- ---------
Revenue fell by GBP4.6 million or 12.7% to GBP31.6 million. The
fall in revenue includes the GBP1.3 million impact of the cessation
of the Independent print contract in April 2016 and the GBP0.6
million impact of one week less of trading. On a like for like
basis revenue fell by GBP2.7 million or 7.9% reflecting the impact
of lower third party volumes and newsprint supply partially offset
by an increase in newsprint and plate waste sales due to increased
prices. External costs fell by GBP16.7 million or 11.3% to GBP131.2
million with the benefit of one week less of trading, cost
reduction initiatives and the reduction in costs associated with
falling volumes. The net cost recharged to the Publishing division
was GBP99.6 million compared to GBP111.7 million in the prior year
due to cost reductions exceeding the revenue decline.
Specialist Digital
The revenue and adjusted operating profit of the Specialist
Digital division is as follows:
2017 2016 Variance Variance
GBPm GBPm GBPm %
--------------------------- ------ ------- --------- ---------
Advertising 4.7 4.8 (0.1) (2.1%)
Other 4.9 8.1 (3.2) (39.5%)
Revenue 9.6 12.9 (3.3) (25.6%)
--------------------------- ------ ------- --------- ---------
Costs (6.9) (10.5) 3.6 34.3%
--------------------------- ------ ------- --------- ---------
Adjusted operating profit 2.7 2.4 0.3 12.5%
--------------------------- ------ ------- --------- ---------
The Specialist Digital division includes Trinity Mirror Digital
Recruitment, our digital classified recruitment business and
Communicator Corp, our digital marketing services business.
Rippleffect which was sold in August 2016 had revenues of GBP3.4
million and an operating loss of GBP0.1 million up to the date of
disposal. Excluding the disposal, revenue grew by GBP0.1 million
and operating profit grew by GBP0.2 million.
Management Report continued
Divisional Review continued
Specialist Digital continued
Trinity Mirror Digital Recruitment advertising revenue fell by
GBP0.1 million and operating profit fell by GBP0.1 million while
Communicator Corp revenue increased by GBP0.2 million and operating
profit improved by GBP0.3 million.
Central
The revenue and adjusted operating loss of the Central division
is as follows:
2017 2016 Variance Variance
GBPm GBPm GBPm %
------------------------- ------- ------- --------- ---------
Revenue 3.5 3.9 (0.4) (10.3%)
------------------------- ------- ------- --------- ---------
Costs (15.5) (18.3) 2.8 15.3%
Associates 0.8 1.1 (0.3) (27.3%)
Adjusted operating loss (11.2) (13.3) 2.1 15.8%
------------------------- ------- ------- --------- ---------
The Central division includes revenue and costs not allocated to
the operational divisions and the share of results of associates.
The result for the year was a loss of GBP11.2 million compared to a
loss of GBP13.3 million in the prior year.
Revenue primarily relates to rental income from surplus office
space at the Group's main office at Canary Wharf. Costs fell by
GBP2.8 million from GBP18.3 million to GBP15.5 million reflecting
the ongoing tight management of costs. Share of results from
associates fell by GBP0.3 million from GBP1.1 million to GBP0.8
million.
Other Items
Principal risks and uncertainties
There is an ongoing robust process for the identification,
evaluation and management of the principal risks and uncertainties
faced by the Group. Appropriate management actions are in place to
minimise the impact of the risks and uncertainties which are
identified as part of the risk process.
The Strategy and Revenue Loss risks have been merged into a
single Strategy risk due to our strategy being the key risk
management action we are taking to deal with the structural
challenges, including revenue loss, our business continues to face
meaning its successful implementation is essential. Pensions and
Historical legal issues are the same as last year. The principal
risks and uncertainties are:
-- Strategy - The overall strategy or elements of the strategy
are inappropriate and the delivery of the strategy is badly
executed. This results in accelerated revenue loss for existing
products (print advertising/newspaper sales) and a failure to
attract new revenues quickly enough;
-- Pensions - pension deficits grow at such a rate so as to
affect the viability of the Group itself or so that the annual
funding costs consume a disproportionate level of cash flow;
and
-- Historical legal issues - damage to our reputation arising
from historical events, direct financial impact from legal claims
and distraction of senior management time from delivering the
strategy.
There continues to be macroeconomic uncertainty created by the
process of Britain exiting the European Union and political
uncertainty following the General Election. The Group's pension
deficit continues to be impacted by the reduction in gilt and bond
yields and the weakening of sterling has increased newsprint costs.
Considerations in relation to the uncertainty and these immediate
impacts are included in the principal risks above. Whilst the
impact of the uncertainty is hard to assess there is a risk that
our revenues could be lower than expectations.
These principal risks and uncertainties, the risk appetite in
relation to these and the progress made during the year are set out
in the Trinity Mirror plc 2017 Annual Report.
Assessment of the Group's prospects
The directors have assessed the Group's prospects, both as a
going concern and its longer term viability.
Going concern statement
The directors consider it appropriate to adopt the going concern
basis of accounting in the preparation of the Group's annual
consolidated financial statements.
In accordance with LR 9.8.6(3) of the Listing Rules, and in
determining whether the Group's annual consolidated financial
statements can be prepared on a going concern basis, the directors
considered all factors likely to affect its future development,
performance and its financial position, including cash flows,
liquidity position and borrowing facilities and the principal risks
and uncertainties relating to its business activities.
Management Report continued
Other Items continued
Assessment of the Group's prospects continued
Having considered all the factors impacting the Group's
businesses, including downside sensitivities (relating to trading
and cash flows), the directors are satisfied that the Group will be
able to operate within the terms and conditions of the Group's
financing facilities for the foreseeable future.
Going concern statement (continued)
The directors have reasonable expectations that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the Group's annual
consolidated financial statements.
Viability statement
The directors have a reasonable expectation that the Company and
the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment.
The directors assessed the prospects of the Group over a three
year period which reflects the budget and planning cycle adopted by
the Group. A three year period is adopted as it enables the
directors to consider the impact of declining print revenues, the
investment required to drive growth in digital and to identify the
extent to which costs need to be minimised to support profits and
cash flows. The assessment takes into account the Group's current
position and the principal risks and uncertainties facing the Group
including those that would threaten the business model, future
performance, solvency or liquidity.
Sensitivity analysis is applied to the projections to model the
potential effects should principal risks and uncertainties actually
occur, individually or in combination. The Board also assessed the
likely effectiveness of any proposed mitigating actions.
It is understood that such future assessments are subject to a
level of uncertainty that increases with time and, therefore,
future outcomes cannot be guaranteed or predicted with certainty.
Also, this assessment was made recognising the principal risks and
uncertainties that could have an impact on the future performance
of the Group and also the financial risks described in the notes to
the Group's annual consolidated financial statements.
Further information concerning the review of going concern and
viability are set out in the Trinity Mirror plc 2017 Annual
Report.
Related party transactions
There were no material non trading transactions during the
year.
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Results
Announcement in accordance with applicable laws and regulations.
The responsibility statement below has been prepared in connection
with the Company's full Annual Report for the 52 weeks ended 31
December 2017. Certain points thereof are not included within this
Annual Results Announcement.
The directors confirm to the best of their knowledge:
a) the consolidated financial statements, prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Company
and the undertakings included in the consolidation taken as a
whole; and
b) the Management Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties they face.
By order of the Board of directors
Simon Fox Vijay Vaghela
Chief Executive Group Finance Director
Consolidated income statement
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
2017 2016
notes GBPm GBPm
------------------------------------ -------- -------- --------
Revenue 3,4 623.2 713.0
Cost of sales (308.2) (342.1)
------------------------------------- -------- -------- --------
Gross profit 315.0 370.9
Distribution costs (63.7) (76.0)
Administrative expenses:
Operating adjusted items 5 (26.4) (43.6)
Other administrative expenses (127.4) (158.5)
Share of results of associates:
Results before operating adjusted
items 0.8 1.1
Operating adjusted items 5 (0.4) (0.4)
Operating profit 3 97.9 93.5
Investment revenues 6 0.1 0.6
Pension finance charge 14 (11.9) (10.4)
Finance costs 7 (4.2) (7.2)
------------------------------------- -------- -------- --------
Profit before tax 81.9 76.5
Tax charge 8 (19.1) (7.0)
------------------------------------- -------- -------- --------
Profit for the period attributable
to equity holders of the parent 62.8 69.5
2017 2016
Statutory earnings per share Pence Pence
------------------------------------ -------- -------- --------
Earnings per share - basic 10 23.0 24.9
Earnings per share - diluted 10 22.9 24.8
------------------------------------- -------- -------- --------
2017 2016
Adjusted* earnings per share Pence Pence
------------------------------------ -------- -------- --------
Earnings per share - basic 10 36.1 38.1
Earnings per share - diluted 10 35.9 37.8
------------------------------------- -------- -------- --------
* Set out in note 17 is the reconciliation between the statutory
and adjusted results.
Consolidated statement of comprehensive income
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
2017 2016
notes GBPm GBPm
------------------------------------- -------- ------- --------
Profit for the period 62.8 69.5
-------------------------------------- -------- ------- --------
Items that will not be reclassified
to profit and loss:
Actuarial gain/(losses) on defined
benefit pension schemes 14 62.6 (188.9)
Tax on actuarial gain/(losses)
on defined benefit pension schemes 8 (10.5) 32.1
Deferred tax credit/(charge)
including the future change
in tax rate 8 0.4 (0.6)
Share of items recognised by
associates (5.4) 1.1
-------------------------------------- -------- ------- --------
Other comprehensive income/(costs)
for the period 47.1 (156.3)
Total comprehensive income/(costs)
for the period 109.9 (86.8)
-------------------------------------- -------- ------- --------
Consolidated cash flow statement
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
2017 2016
notes GBPm GBPm
------------------------------------------- -------- ------- --------
Cash flows from operating activities
Cash generated from operations 11 68.1 91.5
Income tax paid (13.9) (12.2)
------------------------------------------- -------- ------- --------
Net cash inflow from operating
activities 54.2 79.3
------------------------------------------- -------- ------- --------
Investing activities
Interest received 0.1 0.6
Proceeds on disposal of property,
plant and equipment 1.2 10.6
Purchases of property, plant and
equipment (8.9) (4.3)
Proceeds on disposal of subsidiary
undertaking - 1.8
Acquisition of associate undertaking - (0.8)
Net cash (used in)/received from
investing activities (7.6) 7.9
Financing activities
Dividends paid (15.3) (14.6)
Interest paid on borrowings (2.1) (5.9)
Repayment of borrowings (68.3) (80.0)
Purchase of own shares (7.7) (2.3)
Purchase of shares for LTIP - (2.0)
Draw down on bank facility 25.0 -
Net cash used in financing activities (68.4) (104.8)
------------------------------------------- -------- ------- --------
Net decrease in cash and cash equivalents (21.8) (17.6)
------------------------------------------- -------- ------- --------
Cash and cash equivalents at the
beginning of the period 13 37.8 55.4
------------------------------------------- -------- ------- --------
Cash and cash equivalents at the
end of the period 13 16.0 37.8
------------------------------------------- -------- ------- --------
Consolidated statement of changes in equity
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
Retained
Share Capital earnings
Share premium Merger redemption and
capital account reserve reserve other Total
GBPm GBPm GBPm GBPm reserves GBPm
GBPm
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
At 27 December 2015 (28.3) (606.7) (37.9) (4.4) (6.3) (683.6)
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
Profit for the period - - - - (69.5) (69.5)
Other comprehensive
costs for the period - - - - 156.3 156.3
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
Total comprehensive
costs for the period - - - - 86.8 86.8
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
Credit to equity for
equity-settled share-based
payments - - - - (1.5) (1.5)
Purchase of shares for
LTIP - - - - 2.0 2.0
Purchase of own shares - - - - 2.3 2.3
Dividends paid - - - - 14.6 14.6
At 1 January 2017 (28.3) (606.7) (37.9) (4.4) 97.9 (579.4)
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
Profit for the period - - - - (62.8) (62.8)
Other comprehensive
income for the period - - - - (47.1) (47.1)
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
Total comprehensive
income for the period - - - - (109.9) (109.9)
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
Credit to equity for
equity-settled share-based
payments - - - - (0.5) (0.5)
Purchase of own shares - - - - 7.7 7.7
Dividends paid - - - - 15.3 15.3
--------
At 31 December 2017 (28.3) (606.7) (37.9) (4.4) 10.5 (666.8)
----------------------------- ---------- ---------- ---------- ------------- ---------- --------
Consolidated balance sheet
at 31 December 2017 (at 1 January 2017)
2017 2016
notes GBPm GBPm
-------------------------------------- -------- -------- --------
Non-current assets
Goodwill 12 102.0 102.0
Other intangible assets 12 799.2 799.5
Property, plant and equipment 247.7 262.1
Investment in associates 16.8 21.8
Deferred tax assets 66.4 81.5
1,232.1 1,266.9
-------------------------------------- -------- -------- --------
Current assets
Inventories 4.9 5.8
Trade and other receivables 89.9 89.8
Derivative financial instruments 13 - 14.8
Cash and cash equivalents 13 16.0 37.8
--------------------------------------- -------- -------- --------
110.8 148.2
-------------------------------------- -------- -------- --------
Total assets 1,342.9 1,415.1
--------------------------------------- -------- -------- --------
Non-current liabilities
Retirement benefit obligations 14 (377.6) (466.0)
Deferred tax liabilities (165.4) (164.1)
Provisions 15 (3.7) (3.6)
(546.7) (633.7)
-------------------------------------- -------- -------- --------
Current liabilities
Trade and other payables (80.1) (83.1)
Borrowings 13 (25.0) (81.2)
Current tax liabilities (7.7) (9.8)
Provisions 15 (16.6) (27.9)
(129.4) (202.0)
-------------------------------------- -------- -------- --------
Total liabilities (676.1) (835.7)
--------------------------------------- -------- -------- --------
Net assets 666.8 579.4
--------------------------------------- -------- -------- --------
Equity
Share capital 16 (28.3) (28.3)
Share premium account 16 (606.7) (606.7)
Merger reserve 16 (37.9) (37.9)
Capital redemption reserve 16 (4.4) (4.4)
Retained earnings and other reserves 16 10.5 97.9
--------------------------------------- -------- -------- --------
Total equity attributable to
equity holders of the parent (666.8) (579.4)
--------------------------------------- -------- -------- --------
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
1. General information
The financial information in the Annual Results Announcement is
derived from but does not represent the full statutory accounts of
Trinity Mirror plc. The statutory accounts for the 53 weeks ended 1
January 2017 have been filed with the Registrar of Companies and
those for the 52 weeks ended 31 December 2017 will be filed
following the Annual General Meeting on 3 May 2018. The auditors'
reports on the statutory accounts for the 53 weeks ended 1 January
2017 and for the 52 weeks ended 31 December 2017 were unqualified,
do not include reference to any matters to which the auditors drew
attention by way of emphasis of matter without qualifying the
reports and do not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006.
Whilst the financial information included in this Annual Results
Announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS), this announcement does not itself contain
sufficient information to comply with IFRS. This Annual Results
Announcement constitutes a dissemination announcement in accordance
with Section 6.3 of the Disclosure and Transparency Rules (DTR).
The Annual Report for the 52 weeks ended 31 December 2017 is
available on the Company's website at www.trinitymirror.com and at
the Company's registered office at One Canada Square, Canary Wharf,
London E14 5AP and will be sent to shareholders who have elected to
receive a hard copy with the documents for the Annual General
Meeting to be held on 3 May 2018.
The financial information has been prepared for the 52 weeks
ended 31 December 2017 and the comparative period has been prepared
for the 53 weeks ended 1 January 2017. Throughout this report, the
financial information for the 52 weeks ended 31 December 2017 is
referred to and headed 2017 and for the 53 weeks ended 1 January
2017 is referred to and headed 2016. The Company presents the
results on a statutory and adjusted basis and revenue trends on a
statutory and like for like basis as described on page 3.
2. Accounting polices
Basis of preparation
The financial information has been prepared in accordance with
IFRS as adopted by the European Union. These are subject to ongoing
amendment by the International Accounting Standards Board and by
the European Union and are therefore subject to change. As a
result, the financial information contained herein will need to be
updated for any subsequent amendment to IFRS or any new standards
that are issued. The financial information has been prepared under
the historical cost convention as modified by the revaluation of
freehold properties which on transition to IFRS were deemed to be
the cost of the asset and for derivative financial instruments and
shared-based payments that have been measured at fair value.
The accounting policies used in the preparation of the
consolidated financial statements for the 52 weeks ended 31
December 2017 have been consistently applied to all the periods
presented except for the changes in accounting policy noted below
and are set out in the Trinity Mirror plc 2017 Annual Report. These
consolidated financial statements have been prepared on a going
concern basis as set out in the Management Report in this Annual
Results Announcement.
Changes in accounting policy
The same accounting policies, presentation and methods of
computation are followed in the condensed consolidated financial
statements as applied in the Group's latest annual consolidated
financial statements.
The Group has adopted the following standards during the current
financial period which have had no material impact on the
Group:
-- IAS 7 (Amended) 'Statement of Cash Flows'
-- IAS 12 (Amended) 'Income taxes'
-- Annual improvements 2012 - 2014 cycle
The following standards and interpretations (*denotes not yet
endorsed for use in the EU), which have not been applied and when
adopted are not expected to have a material impact on the Group,
were in issue and will be effective for periods beginning on or
after 1 January 2018 unless stated below:
-- IFRS 4 (Amended) 'Applying Insurance Contracts'
-- IFRS 17 'Insurance contracts'
-- IFRS 10 and IAS 28 (Amended) 'Investments in associates and joint ventures'
-- IFRS 2 (Amended) 'Share-based Payment'*
-- IAS 40 (Amended) 'Investment Property'*
-- IFRIC 22 (New) 'Foreign Currency Transaction and Advance Consideration'*
-- IFRIC 23 (New) 'Uncertainty over Income Tax Treatments' -
effective for periods beginning on or after 1 January 2019*
The assessment of the impact of IFRS 9 (Amended) 'Financial
Instruments' and IFRS 15 (Issued) 'Revenue from Contracts with
Customers' (both effective for periods beginning on or after 1
January 2018) revealed that, when adopted, these standards will
have no material impact on the Group. The initial assessment of the
impact of IFRS 16 (Issued) 'Leases' (effective for periods
beginning on or after 1 January 2019) revealed that, when adopted
based on the operating leases at the reporting date, fixed assets
and lease obligations of around GBP20 million would be recognised
on the consolidated balance sheet with no material impact on
operating profit as operating lease costs would be replaced with an
equivalent depreciation charge in the income statement.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
2. Accounting polices (continued)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed
below:
Provisions (notes 8, 15 and 19)
There is uncertainty as to liabilities arising from the outcome
or resolution of the ongoing historical legal issues and in
addition there is uncertainty as to the amount of expenditure that
may be tax deductible and additional tax liabilities may fall due
in relation to earlier years. Provisions are measured at the best
estimate of the expenditure required to settle the obligation based
on the assessment of the related facts and circumstances at each
reporting date.
Retirement benefits (note 14)
Actuarial assumptions adopted and external factors can
significantly impact the surplus or deficit of defined benefit
pension schemes. Valuations for funding and accounting purposes are
based on assumptions about future economic and demographic
variables. This results in risk of a volatile valuation deficit and
the risk that the ultimate cost of paying benefits is higher than
the current assessed liability value. Advice is sourced from
independent and qualified actuaries in selecting suitable
assumptions at each reporting date.
Impairment of goodwill and other intangible assets (note 12)
There is uncertainty in the value in use calculation. The most
significant area of uncertainty relates to expected future cash
flows for each cash-generating unit. Determining whether goodwill
and other intangible assets are impaired requires an estimation of
the value in use of the cash-generating unit to which these have
been allocated. It also requires assessment of the appropriateness
of the cash-generating unit at each reporting date. The value in
use calculation requires the Group to estimate the future cash
flows expected to arise from the cash-generating unit and a
suitable discount rate in order to calculate present value.
Projections are based on both internal and external market
information and reflect past experience. The discount rate reflects
a long-term equity and debt mix based on the period end enterprise
value assuming a long-term debt to EBITDA ratio of 2.5 times.
3. Operating segments
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the Board and chief operating decision maker (Executive
directors) to allocate resources to the segments and to assess
their performance. The accounting policies used in the preparation
of each segment's revenue and results are the same as the Group's
accounting policies. The Board and chief operating decision maker
are not provided with an amount for total assets by segment. The
Group's operations are primarily located in the UK and the Group is
not subject to significant seasonality during the year.
The Group has four operating segments that are regularly
reviewed by the Board and chief operating decision maker. The
operating segments are: Publishing which includes all of our
newspapers and associated digital publishing; Printing which
provides printing services to the Publishing segment and to third
parties; Specialist Digital which includes our acquired digital
classified recruitment and our digital marketing services
businesses; and Central which includes revenue and costs not
allocated to the operational divisions and our share of results of
associates.
Segment revenue and results
52 weeks ended 31 December Publishing
2017 2017 Specialist
GBPm Printing Digital Central Total
2017 2017 2017 2017
GBPm GBPm GBPm GBPm
---------------------------- ------------ ----------- ------------- ---------- --------
Revenue
Segment sales 578.5 131.2 10.0 3.5 723.2
Inter-segment sales - (99.6) (0.4) - (100.0)
---------------------------- ------------ ----------- ------------- ---------- --------
Total revenue 578.5 31.6 9.6 3.5 623.2
---------------------------- ------------ ----------- ------------- ---------- --------
Segment result 133.2 - 2.7 (11.2) 124.7
------------ ----------- ------------- ----------
Operating adjusted items (26.8)
Operating profit 97.9
Investment revenues 0.1
Pension finance charge (11.9)
Finance costs (4.2)
---------------------------- ------------ ----------- ------------- ---------- --------
Profit before tax 81.9
Tax charge (19.1)
---------------------------- ------------ ----------- ------------- ---------- --------
Profit for the period 62.8
---------------------------- ------------ ----------- ------------- ---------- --------
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
3. Operating segments (continued)
Segment revenue and results (continued)
53 weeks ended 1 January Publishing Specialist
2017 2016 Printing Digital Central Total
GBPm 2016 2016 2016 2016
GBPm GBPm GBPm GBPm
-------------------------- ------------ ----------- ----------- ---------- --------
Revenue
Segment sales 660.0 147.9 13.3 3.9 825.1
Inter-segment sales - (111.7) (0.4) - (112.1)
-------------------------- ------------ ----------- ----------- ---------- --------
Total revenue 660.0 36.2 12.9 3.9 713.0
-------------------------- ------------ ----------- ----------- ---------- --------
Segment result 148.4 - 2.4 (13.3) 137.5
------------ ----------- ----------- ----------
Operating adjusted items (44.0)
Operating profit 93.5
Investment revenues 0.6
Pension finance charge (10.4)
Finance costs (7.2)
-------------------------- ------------ ----------- ----------- ---------- --------
Profit before tax 76.5
Tax charge (7.0)
-------------------------- ------------ ----------- ----------- ---------- --------
Profit for the period 69.5
-------------------------- ------------ ----------- ----------- ---------- --------
4. Revenue
2017 2016
GBPm GBPm
----------------------------- ------ ------
Publishing Print 494.6 581.0
----------------------------- ------ ------
Circulation 284.7 310.6
Advertising 177.6 236.6
Other 32.3 33.8
----------------------------- ------ ------
Publishing Digital 83.9 79.0
----------------------------- ------ ------
Display and transactional 68.7 58.4
Classified 15.2 20.6
----------------------------- ------ ------
Printing 31.6 36.2
Specialist Digital 9.6 12.9
Central 3.5 3.9
Total revenue 623.2 713.0
----------------------------- ------ ------
The Group's operations are located primarily in the UK. The
Group's revenue by location of customers is set out below:
2017 2016
GBPm GBPm
---------------------------- ------ ------
UK and Republic of Ireland 621.5 709.9
Continental Europe 1.6 2.8
Rest of World 0.1 0.3
----------------------------- ------ ------
Total revenue 623.2 713.0
----------------------------- ------ ------
5. Operating adjusted items
2017 2016
GBPm GBPm
------------------------------------------ ------- -------
Restructuring charges in respect
of cost reduction measures (note
15) (12.6) (15.1)
Provision for historical legal issues
(note 15) (10.5) (11.5)
Pension administrative expenses
(note 14) (1.0) (2.2)
Amortisation of intangible assets
(note 12) (0.3) (0.3)
Profit on disposal of land and buildings
(a) 0.2 0.2
Transaction costs (b) (2.2) -
Impairment of goodwill (c) - (2.0)
Contract termination fee (d) - (2.0)
Closure of print sites and press
line (e) - (10.7)
Operating adjusted items included
in administrative expenses (26.4) (43.6)
Operating adjusted items included
in share of results of associates
(f) (0.4) (0.4)
Total operating adjusted items (26.8) (44.0)
------------------------------------------- ------- -------
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
5. Operating adjusted items (continued)
(a) Profit on disposal of Teesside property with net proceeds of
GBP1.2 million less carrying value of GBP1.0 million (2016: profit
on disposal of Cardiff and Coventry properties with net proceeds of
GBP10.6 million less carrying value of GBP10.4 million).
(b) Transaction costs incurred in the year relating to the
acquisition of Northern & Shell's publishing assets.
(c) In 2016, a GBP2.0 million charge against the carrying value
of goodwill in our Specialist Digital division was required.
(d) In 2016, a break fee of GBP2.0 million was paid to Iliffe Print Cambridge Limited.
(e) In 2016, costs associated with closure of the printing site
in Cardiff and a press line in Scotland (Cardonald) of GBP10.7
million including the write off of fixed assets of GBP9.1
million.
(f) Group's share of restructuring costs and amortisation incurred by PA Group.
6. Investment revenues
2017 2016
GBPm GBPm
---------------------------------- ------ ------
Interest income on bank deposits
and other interest receipts 0.1 0.6
----------------------------------- ------ ------
7. Finance costs
2017 2016
GBPm GBPm
-------------------------------------- ------ -------
Interest on bank overdrafts and
borrowings (2.3) (4.9)
--------------------------------------- ------ -------
Total interest expense (2.3) (4.9)
Fair value (loss)/gain on derivative
financial instruments (3.8) 11.3
Foreign exchange gain/(loss) on
retranslation of borrowings 1.9 (13.6)
--------------------------------------- ------ -------
Finance costs (4.2) (7.2)
--------------------------------------- ------ -------
8. Tax
2017 2016
GBPm GBPm
---------------------------------------- ------- -------
Corporation tax charge for the period (17.4) (20.4)
Prior period adjustment (0.4) 1.2
----------------------------------------- ------- -------
Current tax charge (17.8) (19.2)
----------------------------------------- ------- -------
Deferred tax (charge)/credit for
the period (1.2) 1.8
Prior period adjustment (0.1) 0.6
Deferred tax rate change - 9.8
----------------------------------------- ------- -------
Deferred tax (charge)/credit (1.3) 12.2
----------------------------------------- ------- -------
Tax charge (19.1) (7.0)
----------------------------------------- ------- -------
Reconciliation of tax charge % %
Standard rate of corporation tax (19.3) (20.0)
Tax effect of items that are not
deductible in determining taxable
profit (3.6) (5.4)
Tax effect of items that are not
taxable in determining taxable profit - 1.1
Prior period adjustment (0.5) 2.3
Deferred tax rate change - 12.6
Tax effect of share of results of
associates 0.1 0.2
Tax charge rate (23.3) (9.2)
----------------------------------------- ------- -------
The standard rate of corporation tax reduced from 20% to 19% on
1 April 2017. The blended rate for the accounting year is 19.25%
being a mix of 20% up to 31 March 2017 and 19% from 1 April 2017
(2016: 20%). The tax effect of items that are not deductible in
determining taxable profit includes certain costs where there is
uncertainty as to their deductibility. The current tax liabilities
amounted to GBP7.7 million (2016: GBP9.8 million) at the reporting
date and include net provisions of GBP3.2 million (2016: GBP3.4
million). At the reporting date the maximum tax exposure relating
to uncertain tax items is some GBP7 million.
The opening deferred tax position is recalculated in the period
in which a change in the standard rate of corporation tax has been
enacted or substantively enacted by parliament. The change in rate
from 18% to 17% in 2020 was accounted for in the prior year
resulting in GBP9.8 million credit in the consolidated income
statement and a GBP4.4 million charge in the consolidated statement
of comprehensive income.
The tax on actuarial gains/(losses) on defined benefit pension
schemes taken to the consolidated statement of comprehensive income
is a charge of GBP10.5 million comprising a deferred tax charge of
GBP15.5 million and a current tax credit of GBP5.0 million (2016:
credit of GBP32.1 million comprising a deferred tax credit of
GBP26.5 million and a current tax credit of GBP5.6 million). The
deferred tax credit resulting from the future change in tax rate of
GBP0.4 million (2016: charge of GBP0.6 million) comprised a credit
of GBP0.4 million (2016: GBP3.8 million) from a change in the
expected reversal of timing differences and nil (2016: charge of
GBP4.4 million) from the change in future tax rates.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
9. Dividends
2017 2016
Pence Pence
per share per share
------------------------------------------ ----------- -----------
Dividends paid per share and recognised
as distributions to equity holders
in the period 5.60 5.25
------------------------------------------- ----------- -----------
Dividend proposed per share but
not paid nor included in the accounting
records 3.55 3.35
------------------------------------------- ----------- -----------
The Board proposes a final dividend for 2017 of 3.55 pence per
share. An interim dividend for 2017 of 2.25 pence per share was
paid on 29 September 2017 bringing the total dividend in respect of
2017 to 5.80 pence per share. The 2017 final dividend payment is
expected to amount to GBP10.5 million. The 2017 interim dividend
payment amounted to GBP6.1 million.
On 4 May 2017 the final dividend proposed for 2016 of 3.35 pence
per share was approved by shareholders at the Annual General
Meeting and was paid on 9 June 2017. The 2016 final dividend
payment amounted to GBP9.2 million.
10. Earnings per share
Basic earnings per share is calculated by dividing profit for
the period attributable to equity holders of the parent by the
weighted average number of ordinary shares during the period and
diluted earnings per share is calculated by adjusting the weighted
average number of ordinary shares in issue on the assumption of
conversion of all potentially dilutive ordinary shares.
2017 2016
Thousand Thousand
--------------------------------------- ---------- ----------
Weighted average number of ordinary
shares for basic earnings per share 272,730 278,895
Effect of potential dilutive ordinary
shares in respect of share awards 1,481 1,864
Weighted average number of ordinary
shares for diluted earnings per
share 274,211 280,759
---------------------------------------- ---------- ----------
The weighted average number of potentially dilutive ordinary
shares not currently dilutive was 3,201,611 (2016: 2,805,385).
2017 2016
Statutory earnings per share Pence Pence
Earnings per share - basic 23.0 24.9
Earnings per share - diluted 22.9 24.8
--------------------------------- ------- -------
2017 2016
Adjusted* earnings per share Pence Pence
-------------------------------- ------- -------
Earnings per share - basic 36.1 38.1
Earnings per share - diluted 35.9 37.8
--------------------------------- ------- -------
* Set out in note 17 is the reconciliation between the statutory
and adjusted results.
On 28 February 2018, the Company issued 25,826,746 ordinary
shares in connection with the acquisition of Northern & Shell's
UK publishing assets (note 20).
11. Notes to the consolidated cash flow statement
2017 2016
GBPm GBPm
------------------------------------------- ------ ------
Operating profit 97.9 93.5
Depreciation of property, plant and
equipment 20.4 22.2
Amortisation of intangible assets 0.3 0.3
Impairment of goodwill - 2.0
Share of results of associates (0.4) (0.7)
Charge for share-based payments 0.5 1.5
Profit on disposal of land and buildings (0.2) (0.2)
Research and development tax credit (1.0) -
Write-off of fixed assets 1.9 9.6
Pension administrative expenses 1.0 2.2
Pension deficit funding payments (38.7) (40.7)
-------------------------------------------- ------ ------
Operating cash flows before movements
in working capital 81.7 89.7
Decrease in inventories 0.9 0.4
Decrease in receivables - 29.7
Decrease in payables (14.5) (28.3)
-------------------------------------------- ------ ------
Cash flows from operating activities 68.1 91.5
-------------------------------------------- ------ ------
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
12. Intangible assets
The Group has four cash-generating units (Nationals and
Regionals in Publishing and TMDR and Communicator in Specialist
Digital). Goodwill of GBP102.0 million comprises Regionals GBP92.5
million, TMDR GBP6.1 million and Communicator GBP3.4 million. Other
intangible assets comprises publishing rights and titles (Nationals
GBP544.3 million and Regionals GBP254.6 million) and customer
relationships and domain names (Communicator GBP0.3 million). The
movement in the year relates to amortisation of GBP0.3 million
(2016: GBP0.3 million) of the customer relationships and domain
names.
The impairment review of the carrying value of intangible assets
performed at the reporting date resulted in no impairment (2016:
GBP2.0 million).
The directors consider publishing rights and titles have
indefinite economic lives due to the longevity of the brands and
the ability to evolve the brands in an ever changing media
landscape. It is not practicable to review individual publishing
rights and titles due to the interdependencies of revenues and cash
inflow within the cash-generating units. The customer relationships
and domain names have estimated useful lives of between four and
ten years.
The Group tests the carrying value of assets at the
cash-generating unit level for impairment at each reporting date or
more frequently if there are indications that assets might be
impaired. The review is undertaken by assessing whether the
carrying value of assets is supported by their value in use which
is calculated as the net present value of future cash flows derived
from those assets, using cash flow projections. If an impairment
charge is required this is allocated first to reduce the carrying
amount of any goodwill allocated to the cash-generating unit and
then to the other assets of the cash-generating unit but subject to
not reducing any asset below its recoverable amount.
The Group prepared cash flow projections for a cash-generating
unit using the Board approved budget for 2018 and the projections
for 2019 and 2020. The growth rates for the three-year period are
internal projections based on both internal and external market
information and reflect past experience of and the risk associated
with each asset. Cash flow projections beyond 2020 are extrapolated
based on estimated growth rates which do not exceed the average
long-term growth rates for the relevant markets. The growth rates
for Publishing are Nationals 0% (2016: 0%) and Regionals -1% (2016:
0%) and for Specialist Digital are TMDR 0% (2016: 0%) and
Communicator 0% (2016: 0%). These are based on the Board's view of
the cash-generating unit's market position and maturity of the
relevant market. The post-tax discount rate used at the period end
reporting date in respect of all cash-generating units was 10.5%
(2016: 10.0%) reflecting a long-term equity and debt mix based on
the period end enterprise value assuming a long-term debt to EBITDA
ratio of 2.5 times. The equivalent pre-tax discount rate is 12.8%
(2016: 12.2%).
In the impairment review of the carrying value of assets
performed at the reporting date relating to the Publishing
cash-generating units, there has been a reduction in the headroom
of value in use over the carrying value of assets from the
impairment review performed at the prior year reporting date. This
reflects the 2017 performance and latest projections together with
the current assessment of the medium to long-term forecasts and the
discount rate. The headroom of value in use over the carrying value
of assets is GBP11.7 million or 4% for the Regionals
cash-generating unit and GBP60.2 million or 9% for the Nationals
cash-generating unit.
The impairment review is therefore highly sensitive to
reasonably possible changes in key assumptions used in the value in
use calculations:
-- In the short-term, assuming that revenue declines are
materially in line with our projections, the key assumption driving
the value in use calculated is the ability to deliver cost savings
targets to protect profitability. The Group has a strong track
record in delivering these savings. Notwithstanding this, if EBITDA
in 2020 (being the final year before the perpetuity factor) was
GBP2 million lower in the Regionals cash-generating unit and GBP9
million lower in the Nationals cash-generating unit, this would
eliminate the headroom in these cash-generating units.
-- In the medium to long-term, the key assumption that drives
value in use is the ability to generate digital revenue growth as
the structural change in the industry continues. If digital revenue
in 2020 (being the final year before the perpetuity factor) was to
be GBP2 million or 2% below forecast in the Regionals
cash-generating unit and GBP9 million or 22% below forecast in the
Nationals cash-generating unit, this would eliminate the headroom
in these cash-generating units.
-- The structural challenges faced are currently more acute in
the Regionals business than the Nationals business. The Regionals
business is more reliant on classified revenue which continues to
decline at significant rates across both print and digital and on
digital revenue upsold from print which is impacted by declining
print revenues. With the uncertainty in the pace of decline of
print advertising and of growth in digital revenue, we have applied
a long-term decline of 1% per annum in the Regionals
cash-generating unit. An increase in the long-term decline to 1.4%
would eradicate the headroom of value in use over the carrying
value of assets. In the Nationals cash-generating unit, we have
continued to apply a long-term rate of 0% per annum. A change in
this long-term rate to a decline of 1.2% would eradicate the
headroom of value in use over the carrying value of assets.
-- An increase of 0.5 percentage points in the discount rate
would remove the headroom in the Regionals cash-generating unit and
an increase of 1.1 percentage points in the discount rate would
remove the headroom in the Nationals cash-generating unit.
A combination of reasonably possible changes in key assumptions
relating to the Publishing cash-generating units, such as print
revenue declining at a faster rate than projected, digital revenue
growth being significantly lower than projected, or the scale of
cost saving initiatives being delivered in the short-term being
lower than forecast, could lead to a future impairment.
For the Specialist Digital cash-generating units the change to
remove the headroom is an increase of 25 percentage points in the
discount rate or a decrease of 25 percentage points in the growth
rate.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
13. Net debt
The Group repaid the final private placement loan notes in June
2017. The associated cross-currency interest rate swap matured on
the same date.
The statutory net debt for the Group is as follows:
Derivative
1 January Cash financial Foreign Loan Loan 31 December
2017 flow instruments* exchange* repaid drawn 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------------ ------- --------------- ------------ --------- -------- --------------
Current liabilities
Loan notes (81.2) - - 1.9 79.3 - -
Bank facility - - - - - (25.0) (25.0)
------------------------ ------------ ------- --------------- ------------ --------- -------- --------------
(81.2) - - 1.9 79.3 (25.0) (25.0)
Current assets
Derivative
financial instruments 14.8 - (3.8) - (11.0) - -
Cash and cash
equivalents 37.8 21.5 - - (68.3) 25.0 16.0
------------------------ ------------ ------- --------------- ------------ --------- -------- --------------
52.6 21.5 (3.8) - (79.3) 25.0 16.0
------------------------ ------------ ------- --------------- ------------ --------- -------- --------------
Net debt (28.6) 21.5 (3.8) 1.9 - - (9.0)
------------------------ ------------ ------- --------------- ------------ --------- -------- --------------
* The impact on the loan notes of translation into sterling at
the settlement date and the impact on the derivative financial
instruments of being stated at fair value at the settlement date
are included in the consolidated income statement within finance
costs as set out in note 7.
The Group had a cross-currency interest rate swap to manage its
exposure to foreign exchange movements and interest rate movements
on the private placement loan notes. Fair value was calculated
using discounted cash flows based upon forward rates available to
the Group. The cross-currency interest rate swap was classed in
level two of the financial instruments hierarchy. Level two fair
value measurements are those derived from inputs other than quoted
prices that are observable for the asset or liability, either
directly or indirectly.
The contracted net debt for the Group, assuming at 1 January
2017 that the private placement loan notes and the cross-currency
interest rate swaps were not terminated prior to maturity, is as
follows:
1 January Cash Loan Loan 31 December
2017 flow repaid drawn 2017
GBPm GBPm GBPm GBPm GBPm
--------------------------- ---------- ------ -------- ------- ------------
Current liabilities
Loan notes (68.3) - 68.3 - -
Bank facility - - - (25.0) (25.0)
--------------------------- ---------- ------ -------- ------- ------------
(68.3) - 68.3 (25.0) (25.0)
--------------------------- ---------- ------ -------- ------- ------------
Current assets
Cash and cash equivalents 37.8 21.5 (68.3) 25.0 16.0
--------------------------- ---------- ------ -------- ------- ------------
37.8 21.5 (68.3) 25.0 16.0
--------------------------- ---------- ------ -------- ------- ------------
Net debt (30.5) 21.5 - - (9.0)
--------------------------- ---------- ------ -------- ------- ------------
The statutory net debt reconciles to the contracted net debt as
follows:
2017 2016
GBPm GBPm
---------------------------------------- ------ -------
Statutory net debt (9.0) (28.6)
Loan notes at period end exchange rate - 81.2
Loan notes at swapped exchange rate - (68.3)
Cross-currency interest rate swap - (14.8)
Contracted net debt (9.0) (30.5)
---------------------------------------- ------ -------
Following repayment of the private placement loan notes and
maturity of the associated cross-currency interest rate swaps on 20
June 2017, net debt is the same on a statutory and contracted
basis.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
14. Retirement benefit schemes
Defined contribution pension schemes
The Group operates the Trinity Mirror Pension Plan (the 'TMPP
Scheme'), which is a defined contribution pension scheme for
qualifying employees. The assets of the TMPP Scheme are held
separately from those of the Group in funds under the control of
Trustees. The Local World Group Personal Pension Plan (the 'LW
Plan'), which was a defined contribution pension scheme for
qualifying employees where employees held a personal pension policy
directly with Scottish Widows, was closed to future contribution
from 30 June 2017.
The TMPP Scheme has five sections. Three of the sections are
closed to new members: one for members who elected to join prior to
1 May 2013, one for members who elect to join from 1 May 2013 to 30
June 2017 and one for members who were previously members of the LW
Plan. Two of the sections are open to new members: one for members
who elect to join from 1 July 2017 and one for members who from 1
July 2013 are auto enrolled. The Group first implemented the Auto
Enrolment legislation from 1 July 2013 and from 1 July 2017 this
now includes Local World.
The current service cost charged to the consolidated income
statement of GBP13.6 million (2016: GBP13.6 million) represents
contributions of GBP13.0 million (2016: GBP12.3 million) paid to
the TMPP Scheme by the Group at rates specified in the scheme rules
and contributions of GBP0.6 million (2016: GBP1.3 million) paid
into the LW Plan by the Group at rates specified in the scheme
rules. All amounts that were due have been paid over to the schemes
at all reporting dates.
Defined benefit pension schemes
Background
The defined benefit pension schemes operated by the Group were
closed to future accrual in 2010. The Group has three defined
benefit pension schemes: the MGN Pension Scheme (the 'MGN Scheme'),
the Trinity Retirement Benefit Scheme (the 'Trinity Scheme') and
the Midland Independent Newspapers Pension Scheme (the 'MIN
Scheme'). On 30 December 2016, the Mirror Group Pension Scheme and
the MGN Past Service Pension Scheme were merged into the MGN
Pension Scheme (collectively referred to as the Mirror Schemes).
Following the merger the bulk annuity policy held by the Mirror
Group Pension Scheme was shattered with individual policies issued
to members and both the Mirror Group Pension Scheme and the MGN
Past Service Pension Scheme were wound up.
Characteristics
The defined benefit pension schemes provide pensions to members,
which are based on the final salary pension payable, normally from
age 65 plus surviving spouses or dependents benefits following a
member's death. Benefits increase both before and after retirement
either in line with statutory requirements or in accordance with
the scheme rules. Such increases are either at fixed rates or in
line with retail or consumer prices but subject to upper and lower
limits. All of the schemes are independent of the Group with assets
held independently of the Group. They are governed by Trustees who
administer benefits in accordance with the scheme rules and
appropriate UK legislation. The schemes each have a professional
independent trustee as their chairman with generally half of the
remaining Trustees nominated by the members and half by the
Group.
Maturity profile and cash flow
Across the schemes the invested assets are expected to be
sufficient to pay the uninsured benefits due up to 2048, based on
the reporting data assumptions. The remaining uninsured benefit
payments, payable from 2049, are due to be funded by a combination
of asset outperformance and the deficit contributions currently
scheduled to be paid by 2027. The liabilities related 55% to
current pensioners and their spouses or dependants and 45% related
to deferred pensioners. The average term from the period end to
payment of the remaining uninsured benefits is expected to be
around 20 years. Uninsured pension payments in 2017, excluding lump
sums and transfer value payments, were GBP43 million and these are
projected to rise to an annual peak in 2039 of GBP73 million and
reducing thereafter.
Funding arrangements
The funding of the Group's schemes is subject to UK pension
legislation as well as the guidance and codes of practice issued by
the Pensions Regulator. Funding targets are agreed between the
Trustees and the Group and are reviewed and revised usually every
three years. The funding targets must include a margin for prudence
above the expected cost of paying the benefits and so are different
to the liability value for IAS 19 purposes. The funding deficits
revealed by these triennial valuations are removed over time in
accordance with an agreed recovery plan and schedule of
contributions for each scheme.
The valuations of the schemes as at 31 December 2016 were agreed
in December 2017 and finalised in January 2018. The valuations
showed deficits of GBP476.0 million for the MGN Scheme, GBP78.0
million for the Trinity Scheme and GBP68.2 million for the MIN
Scheme.
As part of the agreement of the valuations, deficit funding
contributions were agreed at GBP43.8 million for 2018 to 2027 after
which contributions are due to cease. The deficits are expected to
be eradicated by 2027 by a combination of the contributions and
asset returns. In addition, the Group agreed that in respect of
dividend payments in 2018, 2019 and 2020 that additional
contributions would be paid at 50% of the excess if dividends in
2018 are above 6.16 pence per share. For 2019 and 2020 the
threshold increases in line with the increase in dividends capped
at 10% per annum. As set out in note 20, in connection with the
acquisition of Northern & Shell's UK publishing assets, the
schedule of contributions and the dividend sharing arrangements
have been revised.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
14. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Funding arrangements (continued)
Payments in the year were GBP38.7 million (2016: GBP40.7
million) comprising GBP36.2 million (2016: GBP35.7 million) of
deficit funding and GBP2.5 million (2016: GBP5.0 million) in
connection with the share buyback. Payments were GBP27.8 million
(2016: GBP29.6 million) to the Mirror Schemes, GBP6.6 million
(2016: GBP7.0 million) to the Trinity Scheme and GBP4.3 million
(2016: GBP4.1 million) to the MIN Scheme.
The future deficit funding commitments are linked to the
three-yearly actuarial valuations. There is no link to the IAS 19
valuations which use different actuarial assumptions and are
updated at each reporting date. The next funding valuation of the
schemes has an effective date of 31 December 2019 and these
valuations are required to be completed by 31 March 2021.
Although the funding commitments do not generally impact the IAS
19 position, IFRIC 14 guides companies to consider for IAS 19
disclosures whether any surplus can be recognised as a balance
sheet asset and whether any future funding commitments in excess of
the IAS 19 liability should be provisioned for. Based on the
interpretation of the rules for each of the defined benefit pension
schemes, the Group considers that it has an unconditional right to
any potential surplus on the ultimate wind-up of each scheme after
all benefits to members have been paid. Under IFRIC 14 it is
therefore appropriate to recognise any IAS 19 surpluses which may
emerge in future, and not to recognise any potential additional
liabilities in respect of future funding commitments. This
conclusion was reconsidered and reconfirmed during 2016 following
the issuance of an Exposure Draft of changes to IFRIC14 which
provided more detailed guidance on this area.
Risks
Valuations for funding and accounting purposes are based on
assumptions about future economic and demographic variables. This
results in risk of a volatile valuation deficit and the risk that
the ultimate cost of paying benefits is higher than the current
assessed liability value.
The main sources of risk are:
-- Investment risk: a reduction in asset returns (or assumed future asset returns);
-- Inflation risk: an increase in benefit increases (or assumed future increases); and
-- Longevity risk: an increase in average life spans (or assumed life expectancy).
These risks are managed by:
-- Investing in insured annuity policies: the income from these
policies exactly matches the benefit payments for the members
covered, removing all of the above risks. At the reporting date the
insured annuity policies covered around 10% of total
liabilities;
-- Investing a proportion of assets in government and corporate
bonds and in liability driven investments: changes in the values of
the assets aim to broadly match changes in the values of the
uninsured liabilities, reducing the investment risk, however some
risk remains as the durations of the bonds are typically shorter
than that of the liabilities and so the values may still move
differently. At the reporting date this amounted to around 40% of
assets excluding the insured annuity policies;
-- Investing a proportion in equities: with the aim of achieving
outperformance and so reducing the deficits over the long term. At
the reporting date this amounted to around 40% of assets excluding
the insured annuity policies; and
-- The gradual sale of equities over time to purchase additional
annuity policies or liability matching investments: to further
reduce risk as the schemes, which are closed to future accrual,
mature.
Pension scheme accounting deficits are snapshots at moments in
time and are not used by either the Group or Trustees to frame
funding policy. The Group and Trustees are aligned in focusing on
the long-term sustainability of the funding policy which aims to
balance the interests of the Group's shareholders and members of
the schemes. The Group and Trustees are also aligned in reducing
pensions risk over the long term and at a pace which is affordable
to the Group.
The Group is not exposed to any unusual, entity specific or
scheme specific risks. There were no plan amendments, settlements
or curtailments in 2017 or 2016 which resulted in a pension cost.
The annuity policy held by the Mirror Group Pension Scheme was
shattered on 30 March 2017 which led to an equal reduction to the
assets and liabilities of GBP173.3 million.
Actuarial projections at the reporting date show removal of the
accounting deficit by 2024 due to scheduled contributions and asset
returns at the current target rate based on the schemes' current
expected asset allocations.
Results
For the purposes of the Group's consolidated financial
statements, valuations have been performed in accordance with the
requirements of IAS 19 with scheme liabilities calculated using a
consistent projected unit valuation method and compared to the
estimated value of the scheme assets at 31 December 2017.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
14. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Results (continued)
The assets and liabilities of the schemes as at the reporting
date are:
Trinity
MGN Scheme Scheme MIN Scheme Total
GBPm GBPm GBPm GBPm
------------------------------ ---------- ------- ---------- ---------
Present value of uninsured
scheme liabilities (1,236.7) (378.4) (132.0) (1,747.1)
Present value of insured
scheme liabilities - (76.7) (105.4) (182.1)
------------------------------ ---------- ------- ---------- ---------
Total present value
of scheme liabilities (1,236.7) (455.1) (237.4) (1,929.2)
------------------------------ ---------- ------- ---------- ---------
Invested and cash assets
at fair value 914.1 370.9 84.5 1,369.5
Value of liability matching
insurance contracts - 76.7 105.4 182.1
------------------------------ ---------- ------- ---------- ---------
Total fair value of
scheme assets 914.1 447.6 189.9 1,551.6
------------------------------ ---------- ------- ---------- ---------
Net scheme deficit (322.6) (7.5) (47.5) (377.6)
------------------------------ ---------- ------- ---------- ---------
Based on actuarial advice, the assumptions used in calculating
the scheme liabilities and the actuarial value of those liabilities
are:
2017 2016
----------------------------------------- ----- -----
Financial assumptions (nominal % pa)
Discount rate 2.50 2.65
Retail price inflation rate 3.15 3.20
Consumer price inflation rate 1.95 2.00
Rate of pension increase in deferment 1.95 2.00
Rate of pension increases in payment
(weighted average across the scheme's) 3.70 3.85
----------------------------------------- ----- -----
Mortality assumptions - future life
expectancies from age 65 (years)
Male currently aged 65 21.7 21.8
Female currently aged 65 23.6 23.9
Male currently aged 55 22.4 22.7
Female currently aged 55 24.4 24.8
----------------------------------------- ----- -----
The estimated impact on the IAS 19 liabilities and on the IAS 19
deficit at the reporting date, due to a reasonably possible change
in key assumptions over the next year, are set out in the table
below:
Effect on Effect
liabilities on
GBPm deficit
GBPm
------------------------------------------ ------------ ---------
Discount rate +/- 0.5% pa -170/+188 -160/+177
Retail price inflation rate +/- 0.5%
pa +32/-30 +24/-23
Consumer price inflation rate +/- 0.5%
pa +45/-43 +45/-43
Life expectancy at age 65 +/- 1 year +78/-76 +75/-73
------------------------------------------ ------------ ---------
The RPI sensitivity impacts the rate of increases in payment for
the Trinity Scheme and the MIN Scheme. The CPI sensitivity impacts
the rate of increases in deferment for all three schemes and the
rate of increases in payment for post-1997 benefits in the MGN
Scheme.
The effect on the deficit is usually lower than the effect on
the liabilities due to the matching impact on the value of the
insurance contracts held in respect of some of the liabilities.
Each assumption variation represents a reasonably possible change
in the assumption over the next year but might not represent the
actual effect because assumption changes are unlikely to happen in
isolation.
The estimated impact of the assumption variations make no
allowance for changes in the values of invested assets that would
arise if market conditions were to change in order to give rise to
the assumption variation. If allowance were made, the estimated
impact would likely be lower as the values of invested assets would
normally change in the same directions as the liability values.
The amount included in the consolidated income statement,
consolidated statement of comprehensive income and consolidated
balance sheet arising from the Group's obligations in respect of
its defined benefit pension schemes is as follows:
2017 2016
Consolidated income statement GBPm GBPm
--------------------------------- ------- -------
Pension administrative expenses (1.0) (2.2)
Pension finance charge (11.9) (10.4)
---------------------------------- ------- -------
Defined benefit cost recognised
in income statement (12.9) (12.6)
---------------------------------- ------- -------
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
14. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Results (continued)
Consolidated statement of comprehensive 2017 2016
income GBPm GBPm
Actuarial (loss)/gain due to
liability experience (6.0) 14.0
Actuarial loss due to liability
assumption changes (12.6) (340.7)
------------------------------------------ ------ -------
Total liability actuarial loss (18.6) (326.7)
Returns on scheme assets greater
than discount rate 81.2 137.8
------------------------------------------ ------ -------
Total gain/(loss) recognised
in statement of comprehensive
income 62.6 (188.9)
------------------------------------------ ------ -------
Consolidated balance sheet 2017 2016
GBPm GBPm
--------------------------------------- ---------- ----------
Present value of uninsured scheme
liabilities (1,747.1) (1,764.3)
Present value of insured scheme
liabilities (182.1) (363.3)
---------------------------------------- ---------- ----------
Total present value of scheme
liabilities (1,929.2) (2,127.6)
---------------------------------------- ---------- ----------
Invested and cash assets at fair
value 1,369.5 1,298.3
Value of liability matching insurance
contracts 182.1 363.3
---------------------------------------- ---------- ----------
Total fair value of scheme assets 1,551.6 1,661.6
---------------------------------------- ---------- ----------
Net scheme deficit (377.6) (466.0)
---------------------------------------- ---------- ----------
Non-current assets - retirement
benefit assets - -
Non-current liabilities - retirement
benefit obligations (377.6) (466.0)
---------------------------------------- ---------- ----------
Net scheme deficit (377.6) (466.0)
---------------------------------------- ---------- ----------
Net scheme deficit included in
consolidated balance sheet (377.6) (466.0)
Deferred tax included in consolidated
balance sheet 66.2 80.9
---------------------------------------- ---------- ----------
Net scheme deficit after deferred
tax (311.4) (385.1)
---------------------------------------- ---------- ----------
Movement in net scheme deficit 2017 2016
GBPm GBPm
----------------------------------------- -------- --------
Opening net scheme deficit (466.0) (305.2)
Contributions 38.7 40.7
Consolidated income statement (12.9) (12.6)
Consolidated statement of comprehensive
income 62.6 (188.9)
------------------------------------------ -------- --------
Closing net scheme deficit (377.6) (466.0)
------------------------------------------ -------- --------
Changes in the present value of 2017 2016
scheme liabilities GBPm GBPm
----------------------------------------- --------- ---------
Opening present value of scheme
liabilities (2,127.6) (1,833.6)
Interest cost (51.8) (65.3)
Actuarial (loss)/gain - experience (6.0) 14.0
Actuarial gain - change to demographic
assumptions 26.7 30.0
Actuarial loss - change to financial
assumptions (39.3) (370.7)
Benefits paid 95.5 98.0
Bulk transfer due to buyout 173.3 -
Closing present value of scheme
liabilities (1,929.2) (2,127.6)
------------------------------------------ --------- ---------
Changes in the fair value of scheme 2017 2016
assets GBPm GBPm
-------------------------------------- ------- -------
Opening fair value of scheme assets 1,661.6 1,528.4
Interest income 39.9 54.9
Actual return on assets greater
than discount rate 81.2 137.8
Contributions by employer 38.7 40.7
Benefits paid (95.5) (98.0)
Administrative expenses (1.0) (2.2)
Bulk transfer due to buyout (173.3) -
--------------------------------------- ------- -------
Closing fair value of scheme assets 1,551.6 1,661.6
--------------------------------------- ------- -------
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
14. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Results (continued)
Fair value of scheme assets 2017 2016
GBPm GBPm
----------------------------------- ------- -------
UK equities 66.1 208.2
US equities 218.3 217.2
Other overseas equities 279.1 235.7
Property 24.6 26.9
Corporate bonds 240.5 220.0
Fixed interest gilts 60.0 77.5
Index linked gilts 24.8 30.2
Liability driven investment 148.9 71.2
Cash and other 307.2 211.4
------------------------------------ ------- -------
Invested and cash assets at fair
value 1,369.5 1,298.3
Value of insurance contracts 182.1 363.3
------------------------------------ ------- -------
Fair value of scheme assets 1,551.6 1,661.6
------------------------------------ ------- -------
On 30 March 2017, the Trustees of the Mirror Schemes converted
the insurance policy held by the Mirror Group Pension Scheme to a
buyout policy. This reduced assets and liabilities by GBP173.3
million on that date. As there was an equal reduction to the assets
and liabilities there was no effect on the deficit.
All of the scheme assets have quoted prices in active markets.
Scheme assets include neither direct investments in the Company's
ordinary shares nor any property assets occupied nor other assets
used by the Group.
Pension schemes relating to Northern & Shell's UK publishing
assets
The acquired entities operate two defined contribution pension
schemes where employees hold a personal pension policy directly
with Legal and General.
The entities have three defined benefit pension schemes where
the assets of the schemes are held separately from those of the
entities in funds under the control of Trustees, which were closed
to future accrual in 2008 (two schemes) and 2010 (one scheme). The
net deficit of the schemes at the last valuations was GBP63.6
million and the latest available IAS19 deficit at 31 December 2016
was GBP31.3 million. Set out in note 20 are the agreed future
payments and dividend sharing arrangements in relation to these
defined benefit pension schemes and to the Group's existing defined
benefit pension schemes.
15. Provisions
Share-based
payments Property Restructuring Other Total
GBPm GBPm GBPm GBPm GBPm
------------------- ------------ ----------- ---------------- -------- --------
At 1 January 2017 (0.3) (8.1) (3.4) (19.7) (31.5)
Charged to income
statement - (1.0) (12.6) (11.6) (25.2)
Utilisation of
provision 0.1 2.9 13.6 19.8 36.4
At 31 December
2017 (0.2) (6.2) (2.4) (11.5) (20.3)
------------------- ------------ ----------- ---------------- -------- --------
The provisions have been analysed between current and
non-current as follows:
2017 2016
GBPm GBPm
------------- ------- -------
Current (16.6) (27.9)
Non-current (3.7) (3.6)
-------------- ------- -------
(20.3) (31.5)
------------- ------- -------
The share-based payments provision relates to National Insurance
obligations attached to the future crystallisation of awards. This
provision will be utilised over the next three years.
The property provision relates to onerous property leases and
future committed costs related to occupied, let and vacant
properties. This provision will be utilised over the remaining term
of the leases or expected period of vacancy.
The restructuring provision relates to restructuring charges
incurred in the delivery of cost reduction measures. This provision
is expected to be utilised within the next year.
The other provision relates to legal and other costs relating to
historical litigation and is expected to be utilised within the
next year. The costs associated with the settlement of civil claims
in relation to phone hacking have been higher than expected, in
particular the legal fees of the claimant's lawyers and the general
court process. Therefore, the provision for settling these
historical claims was increased by GBP10.5 million during the year.
GBP10.7 million of the provision remains outstanding at the year
end. It remains uncertain as to how these matters will progress,
whether further allegations or claims will be made, and their
financial impact. Due to this uncertainty a contingent liability
has been highlighted in note 19.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
16. Share capital and reserves
The share capital comprises 283,459,571 allotted, called-up and
fully paid ordinary shares of 10p each. The share premium account
reflects the premium on issued ordinary shares. The merger reserve
comprises the premium on the shares allotted in relation to the
acquisition of Local World net of GBP0.8 million of issue costs.
The capital redemption reserve represents the nominal value of the
shares purchased and subsequently cancelled under share buy-back
programmes.
Cumulative goodwill written off to retained earnings and other
reserves in respect of continuing businesses acquired prior to 1998
is GBP25.9 million (2016: GBP25.9 million). On transition to IFRS,
the revalued amounts of freehold properties were deemed to be the
cost of the asset and the revaluation reserve has been transferred
to retained earnings and other reserves.
Shares purchased by the Trinity Mirror Employee Benefit Trust
(the 'Trust') are included in retained earnings and other reserves
at GBP4.9 million (2016: GBP5.5 million). During the period,
447,096 shares were released relating to grants made in prior years
(2016: 138,634). During the prior year, the Trust purchased
1,600,000 shares for a cash consideration of GBP2.0 million and
received a payment of GBP2.0 million from the Company to purchase
these shares.
During the period, 1,219,327 awards were granted to Executive
Directors on a discretionary basis under the Long Term Incentive
Plan (2016: 859,794). The exercise price of the granted awards is
GBP1 for each block of awards granted. The awards vest after three
years, subject to the continued employment of the participant and
satisfaction of certain performance conditions and are required to
be held for a further two years.
During the period, 1,242,316 awards were granted to senior
managers on a discretionary basis under the Senior Management
Incentive Plan (2016: 1,494,019). The exercise price of the granted
awards is GBP1 for each block of awards granted. The awards vest
after three years, subject to the continued employment of the
participant and satisfaction of certain performance conditions.
During the period, 111,792 awards were granted to Executive
Directors under the Restricted Share Plan (2016: 82,699). The
awards vest after three years.
The Board approved a share buyback programme of up to GBP10
million which commenced in August 2016. The share buyback was
completed in November 2017. At the year end, the Company had
acquired 10,017,620 shares (2016: 2,505,366) for GBP10.0 million
(2016: GBP2.3 million). The shares are held as Treasury shares.
On 28 February 2018, the Company issued 25,826,746 ordinary
shares in connection with the acquisition of Northern & Shell's
UK publishing assets (note 20).
17. Reconciliation of statutory to adjusted results
52 weeks ended 31 December 2017
Operating Pension
adjusted Finance finance Tax
Statutory items costs charge items Adjusted
results (a) (b) (c) (d) results
GBPm GBPm GBPm GBPm GBPm GBPm
------------ -------------- -------------- ---------- ------------ -------- -------------
Revenue 623.2 - - - - 623.2
Operating
profit 97.9 26.8 - - - 124.7
Profit
before
tax 81.9 26.8 1.9 11.9 - 122.5
Profit
after tax 62.8 24.1 1.5 9.6 0.5 98.5
Basic EPS
(p) 23.0 8.9 0.5 3.5 0.2 36.1
------------ -------------- -------------- ---------- ------------ -------- -------------
53 weeks ended 1 January 2017
Operating Pension
adjusted Finance finance Tax
Statutory items costs charge items Adjusted
results (a) (b) (c) (d) results
GBPm GBPm GBPm GBPm GBPm GBPm
------------ -------------- -------------- ---------- ------------ --------- -------------
Revenue 713.0 - - - - 713.0
Operating
profit 93.5 44.0 - - - 137.5
Profit
before
tax 76.5 44.0 2.3 10.4 - 133.2
Profit
after tax 69.5 38.2 1.8 8.3 (11.6) 106.2
Basic EPS
(p) 24.9 13.8 0.6 3.0 (4.2) 38.1
------------ -------------- -------------- ---------- ------------ --------- -------------
(a) Operating adjusted items relate to the items charged or
credited to operating profit as set out in note 5.
(b) Impact of the translation of foreign currency borrowings and
fair value changes on derivative financial instruments as set out
in note 7.
(c) Pension finance charge relating to the defined benefit
pension schemes as set out in note 14.Tax items relate to the
impact of tax legislation changes due to the change in the future
corporation tax rate on the opening deferred tax position and prior
year tax adjustments included in the taxation credit or charge as
set out in note 8.
Notes to the consolidated financial statements
for the 52 weeks ended 31 December 2017 (53 weeks ended 1
January 2017)
18. Reconciliation of statutory to like for like revenue
52 weeks 52 weeks
52 weeks ended 53 weeks ended
ended 31 December ended 1 January
31 December 2017 1 January 2017
2017 (a) (like 2017 (c) (a) (b) (like
GBPm GBPm for like) GBPm GBPm GBPm GBPm for like)
GBPm GBPm
---------------------- -------------- ------- ------------- ------------ ------- ------- ------- -----------
Publishing
Print 494.6 (0.7) 493.9 581.0 (15.4) (8.9) (0.1) 556.6
---------------------- -------------- ------- ------------- ------------ ------- ------- ------- -----------
Circulation 284.7 - 284.7 310.6 (0.4) (5.8) - 304.4
Advertising 177.6 (0.7) 176.9 236.6 (14.7) (2.6) - 219.3
Other 32.3 - 32.3 33.8 (0.3) (0.5) (0.1) 32.9
---------------------- -------------- ------- ------------- ------------ ------- ------- ------- -----------
Publishing
Digital 83.9 - 83.9 79.0 - (0.6) - 78.4
---------------------- -------------- ------- ------------- ------------ ------- ------- ------- -----------
Display
and transactional 68.7 - 68.7 58.4 - (0.3) - 58.1
Classified 15.2 - 15.2 20.6 - (0.3) - 20.3
---------------------- -------------- ------- ------------- ------------ ------- ------- ------- -----------
Printing 31.6 - 31.6 36.2 - (0.6) (1.3) 34.3
Specialist
Digital 9.6 - 9.6 12.9 - - (3.4) 9.5
Central 3.5 - 3.5 3.9 - - - 3.9
Total revenue 623.2 (0.7) 622.5 713.0 (15.4) (10.1) (4.8) 682.7
---------------------- -------------- ------- ------------- ------------ ------- ------- ------- -----------
(a) Metros handed back to DMGT in December 2016 and other
portfolio changes in 2016 and 2017.
(b) Extra week of trading in 2016.
(c) Independent print and distribution contract which ceased in
April 2016 and Rippleffect which was sold in August 2016.
19. Contingent liabilities
There is potential for further liabilities to arise from the
outcome or resolution of the ongoing historical legal issues. Due
to the present uncertainty in respect of the nature, timing or
measurement of any such liabilities it is too soon to be able to
reliably estimate how these matters will proceed and their
financial impact.
20. Subsequent events
The Group announced the proposed acquisition of Northern &
Shell's publishing assets on 9 February 2018 which was subsequently
approved at the General Meeting held on 27 February 2018.
On 28 February 2018, the Group completed the acquisition of 100%
of the equity in Northern & Shell Network Limited (renamed
Trinity Mirror Network Limited) and its subsidiaries for a cash
consideration of GBP42.7 million and the issue of 25,826,746 shares
at 77.44 pence per share and with deferred consideration of GBP59.0
million payable as GBP18.9 million, GBP16.0 million, GBP17.1
million and GBP7.0 million on the second, third, fourth and fifth
anniversaries respectively of the acquisition. A new GBP75 million
amortising term loan ('Acquisition Term Loan') was procured to
partially fund the acquisition and GBP70 million has been
drawn.
The acquisition of the 50% equity interest in Independent Star
Limited for GBP4.5 million and 100% of the equity in International
Distribution 2018 Limited for GBP0.5 million is subject to
clearance by the competition authorities in the Republic of
Ireland. The remaining GBP5 million under the Acquisition Term Loan
will be drawn on completion of these acquisitions.
The Group has agreed to make an upfront payment of GBP41.2
million to the defined benefit pension schemes of subsidiaries of
Trinity Mirror Network Limited and has entered into recovery plans
amounting to GBP29.2 million over the period 2018 to 2027 (GBP1.9
million per annum 2018 to 2020, GBP4.1 million per annum 2021 to
2023, GBP3.3 million per annum 2024 to 2026 and GBP1.3 million in
2027). The Group also revised the schedule of contributions for the
Group's existing defined benefit pension schemes amounting to an
increase of GBP67.0 million over the period 2018 to 2027 (GBP3.2
million per annum 2018 to 2020 and GBP8.2 million per annum 2021 to
2027). In addition, the Group agreed to increase from 50% to 75%,
the additional contributions that would be paid to the defined
benefit pension schemes if dividends increased by more than 10% in
2018, 2019 and 2020.
Northern & Shell's publishing assets comprise national
newspapers and magazines together with associated websites and a
print plant in Luton. The acquisition is consistent with the
Group's fourth area of strategic focus: "Consolidate - seek out
strategic opportunities that drive value". As well as driving value
for shareholders the increased scale of the enlarged Group is
anticipated to provide increased financial flexibility in the
medium term for investment and meeting the enlarged Group's pension
obligations.
The initial accounting for the acquisition which completed on 28
February 2018 is incomplete at the date of approval of the
consolidated financial statements as the acquisition only completed
on 28 February 2018 and the completion accounts as at the date of
acquisition have yet to be prepared. The fair value of the
consideration is estimated to be GBP121.7 million. Estimated
transactions costs are GBP7 million of which GBP2.2 million has
been recognised in the consolidated income statement at the
reporting date. The acquired balance sheet will contain fixed
assets, working capital and defined benefit pension scheme
obligations and the acquisition is on a debt free and cash free
basis. The fair value of assets acquired and liabilities assumed
will be calculated at the same time as the preparation of the
completion balance sheet. This exercise will also identify any
goodwill or bargain purchase and any intangible assets that do not
qualify for separate recognition. No contingent liabilities are
expected to be identified.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUGWWUPRUQA
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