2nd Aug 2007 07:02
Trinity Mirror PLC02 August 2007 Trinity Mirror plc announces the Group's Interim Results for the 26 weeks ended 1 July 2007. Financial highlights Adjusted results* Statutory results 2007 2006 % 2007 2006 % 26 weeks 26 weeks Change 26 weeks 26 weeks Change £m £m £m £m Continuing Continuing operations operations Revenue 526.3 528.2 (0.4)% 500.5 521.7 (4.1)%Operating profit/(loss) 109.4 103.3 5.9% (55.6) (159.7) 65.2%Profit/(loss) before tax 98.2 91.4 7.4% (70.4) (186.5) 62.3% Earnings/(loss) per share 23.5p 21.9p 7.3% (1.6)p (44.9)p 96.4%Dividend per share 6.4p 6.4p - Highlights • Operating profit* increased by 5.9%, reflecting the benefit of a more stable advertising environment and tight cost management• Group operating margin* up 1.2% to 20.8%• Earnings per share* increased by 7.3% to 23.5 pence• Revenue* broadly flat, reflecting improving market conditions, with underlying** digital revenues growing by 23.7%• Delivered net cost savings of £6 million and remain on target to achieve at least £10 million in the full year• Acquired totallylegal.com and totallyfinancial.com in May 2007 for £11.8 million thereby further expanding our portfolio of online recruitment sites• Interim dividend maintained at 6.4 pence per share• Impairment of the carrying value of Regional newspaper titles in the Midlands and London and the South East of £150 million before tax and £90 million after tax• Progress continues to be made on the disposals with completion anticipated by the end of the third quarter Commenting on the results, Sly Bailey, Chief Executive of Trinity Mirror plcsaid: "I am pleased to be able to announce a return to profit growth in the first halfof the year. This is due to a combination of improving market conditionstogether with our continued focus on portfolio development and stringent costcontrol. Looking ahead, the progress of our multi-platform strategy coupled withimproving trends in our advertising markets gives us confidence in our abilityto drive further growth and to deliver value for our shareholders" * Including the Sports division and excluding the Magazines and Exhibitions division and traditional recruitment consultancy business, non recurring items (including the £150 million impairment of Regional newspaper titles), the amortisation of intangible assets and the impact of IAS 39. A reconciliationbetween the adjusted and the statutory numbers is provided in note 17 on page 23. ** Underlying includings the impact of acquisitions completed in 2006 and 2007 as if they had been owned by the Group in the current and corresponding periods. Enquiries: Trinity MirrorVijay Vaghela, Group Finance Director 020 7293 3000Nick Fullagar, Director Corporate Communications 020 7293 3622 MaitlandNeil Bennett 020 7379 5151 Within the following Chief Executive's Statement and Review of Operations, allfigures are presented on an adjusted basis (including the Sports division andexcluding the Magazines and Exhibitions division and the traditional recruitmentconsultancy business, non recurring items (including the £150 million impairmentof Regional newspaper titles), the amortisation of intangible assets and theimpact of IAS 39) unless otherwise stated. A reconciliation between the adjustedand the statutory numbers is provided in note 17 on page 23. Underlying includesthe impact of acquisitions completed in 2006 and 2007 as if they had been ownedby the Group in the current and corresponding periods. Chief Executive's Statement Overview We have experienced a gradual improvement in advertising market conditionsduring the first half of 2007 with the rate of decline in advertising revenuesslowing. Whilst the advertising environment remains volatile month on month weare encouraged by the more stable trends that are emerging as the rate ofdecline slows. This, together with our continued drive to deliver efficienciesacross the Group, has contributed to a 5.9% increase in operating profit. Thedevelopment of our strategy, to build a growing multi-platform media business,continues to progress via the launch of new products and services, acquisitionsand the implementation of improved technology platforms. Whilst Group revenues fell by £1.9 million to £526.3 million, the impact onprofits was more than mitigated through tight cost management which contributedto operating profits increasing by £6.1 million to £109.4 million. On astatutory basis Group revenues fell by £21.2 million and operating lossesreduced from £159.7 million to £55.6 million. The statutory operating lossesreflect a charge of £150.0 million (2006: £250.0 million) for the impairment ofthe carrying value of the Group regional newspaper titles in the Midlands andLondon and the South East. This charge has been required as it has become clearfrom the disposals process for these businesses that the Group will not be ableto crystalise their carrying value. Whilst margins have been under pressure for the past two years due to thechallenging advertising environment, our continued focus on efficiencies hasenabled operating margins to improve by 1.2% to 20.8%. This improvement has beenachieved despite the fall in revenues. All of our businesses continued to show an improvement in performance withparticularly strong results from our Nationals and Sports divisions whichachieved operating profit growth of 21.7% and 29.0% respectively. This reflectsimprovements in the advertising environment, further efficiency gains and thebenefits of having successfully defended our market positions for the DailyRecord and Racing Post during 2006. Our Regionals division saw a significantreduction in the rate of decline in advertising revenues, which form a largerproportion of revenues relative to our other divisions. The improved revenueenvironment coupled with a tight focus on costs contained the fall in operatingprofits of our Regionals division to 4.1%. Further improvements to advertisingrevenues will continue to benefit the performance of the Regionals division. Our digital businesses across the Group have achieved strong underlying revenuegrowth of 23.7% with Regionals growing by 25.4% and Nationals growing by 16.8%. We delivered £6 million net cost savings in the period and remain on track todeliver at least £10 million in the full year and £20 million annualised costsavings by 2008. The improved profit performance has resulted in earnings per share increasing by7.3% to 23.5 pence per share and the interim dividend being maintained at 6.4pence per share. The Group continues to generate strong operating cash flows which ensured thatnet debt increased by only £26.9 million to £467.8 million despite paying £45.1million for the 2006 final dividend, £26.1 million in net capital expenditure,£11.8 million for the acquisition of totallylegal.com and totallyfinancial.comand £16.1 million accelerated pension deficit funding payments. We remain confident that the reorganisation we have started following the 2006Business Review, the strength of our portfolio and our growing success atbuilding and acquiring digital assets will all contribute to growth as thecurrent cyclical advertising downturn comes to an end. Strategy Development The first six months of the year have seen continued progress in the developmentof our strategy to build a multiplatform media business through: • Innovation. We continue to focus on driving growth from new initiatives, deepening our presence in our core markets and geographies both in print and on-line. Examples include the launch of new regional print titles, strengthening our marketplaces with the launch of new local exhibitions and the continued development of our on-line portfolio with a number of new regional launches. In addition our newspaper companion sites, both regional and national, are benefiting from improved design, functionality and increased user-generated content. • Acquisition. The acquisition of totallylegal.com and totallyfinancial.com expands our portfolio of on-line recruitment sites and further improves our share of the on-line recruitment market. We remain focused in building a market-leading portfolio of on-line brands through acquisition which complement our publishing skills and market positions. • Technology. The implementation of our new technology-led operating model is progressing well, and is on time and on budget. Examples include the roll out of a standardised advertising booking system, new pre-press systems which reduce advertisement creation time, and the upgrading of our editorial systems to facilitate multi-media content creation across print and on-line. • Manufacturing. Our programme of investment in colour presses is progressing to plan. Our Scottish Nationals site repressing programme completed on schedule in the first quarter of 2007. The repressing of our UK Nationals print site in Watford is scheduled to complete in the first quarter of 2008. • People. During the period we strengthened the management team with the creation of a new role of Group Digital Publishing Director to accelerate the digital development of our core publishing activities, and the appointment of a new Head of Digital for our UK Nationals. Disposals During the period we have made progress on the disposals as envisaged followingthe conclusion of our review of our business during 2006. We have disposed ofsome of our businesses in London and the South East for a total consideration of£92.9 million. The proceeds we expect from the disposals will be lower than our originalexpectations and therefore we reduced the carrying value of our regionalnewspapers in the Midlands and London and the South East by £150.0 million. Weare in detailed negotiations for the remaining assets. These assets, togetherwith the Sports division, are expected to realise total gross proceeds in theregion of £450 million. We do not envisage a tax liability on these disposals. The completion of the disposals will result in a group with increased focus on astreamlined portfolio of high quality media assets. These assets offersignificant opportunities for growth in revenues, margins and earnings. Thestrong cash flows of our continuing businesses will support this growth throughcontinued investment and selected acquisitions providing rewards toshareholders. The process will be completed by the end of the third quarter, after which timewe intend to optimise our capital structure by returning surplus capital toshareholders. We will confirm the details of this once we have completed thedisposals. Publishing activities Regionals Our Regionals division continued to benefit from a strong focus on portfoliodevelopment, with the launch of new print titles, new events and exhibitions anda number of on-line launches including 15 hyper local sites targeting specificpostcodes. A further five hyper local sites are scheduled for launch in thecoming months. Circulation volumes remain broadly in line with the market. Circulation revenuesincreased by 0.7% and our little and often cover pricing policy remains inplace. We have seen a steady improvement in print advertising trends during the firsthalf with revenues declining by 3.6% which compares favourably to declines of10.1% in 2006. Our digital platforms continued to see a strong performance with underlyingrevenues up 25.4% representing good growth across both our organic and acquiredbusinesses. Unique users have grown by more than 40% during the first half to2.9 million. Nationals Our Nationals division delivered strong operating profit growth on marginallyincreased revenues. We are pleased with an improvement in the rate of circulation volume decline forthe Daily Mirror despite the competitive marketplace which has seen continuedcover price discounting and significant promotional activity by competitors,both of which contributed to a distortion of underlying circulation volumesacross the market. The Sunday Mirror saw a strong circulation volume performanceduring the period, outperforming the market and improving its market share. InScotland we achieved strong growth in circulation revenues following thecessation of vouchering undertaken during 2006 to protect our market positionagainst a 10p Sun. Our five National titles continue to have the greatestproportion of full rate sales when compared to our competitors. Advertising revenues saw a general improvement with the rate of decline slowing.For the Daily Mirror, whilst advertising revenues remain under pressure, we areseeing some stability in volume market share. The business saw a particularlystrong performance from the Scottish Nationals with advertising revenue growthof 2.7% for the period. Record PM is now well established in the market and isproviding advertisers with increased geographical and audience reach. Digitalrevenues for our National newspapers grew by 16.8% during the period with growthof 42.6% in Scotland. Sports Our Sports division delivered a strong advertising performance and stablecirculation revenues. Circulation volumes have seen some pressure from inclementweather conditions resulting in some race meeting cancellations. Board changes On 10 May 2007, at the Group's Annual General Meeting, three non-executivedirectors, Peter Birch, Sir Angus Grossart and David Ross retired from theBoard. Gary Hoffman, Chairman of the Remuneration Committee, was appointed SeniorIndependent Director on 10 May 2007 and on 11 May 2007 Kathleen O'Donovan joinedthe Board as a non-executive director and was appointed Chairman of the AuditCommittee. Outlook Whilst the advertising environment remains volatile from month to month wecontinue to see improved stability in our advertising markets as the rate ofdecline slows. The Board remains confident that our 2007 performance will be inline with expectations. Review of Operations Group revenues fell by £1.9 million (0.4%) from £528.2 million to £526.3million. Group advertising revenues decreased by £4.0 million (1.4%) from £289.7million to £285.7 million while Group circulation revenue increased by £1.6million (0.8%) from £196.8 million to £198.4 million and other revenue increasedby £0.5 million. On a statutory basis Group revenues fell by £21.2 million(4.1%) from £521.7 million to £500.5 million. The statutory Group revenues in2006 included the revenues of the disposed traditional recruitment consultancybusiness. Although revenues fell, Group operating profit increased by £6.1 million (5.9%)from £103.3 million to £109.4 million. On a statutory basis operating lossesfell by £104.1 million from a loss of £159.7 million to a loss of £55.6 million.The statutory operating loss reflects a charge of £150.0 million (2006: £250.0million) for the impairment of the carrying value of the Regional newspapertitles in the Midlands and London and the South East. Total operating costs have fallen by £9.1 million (2.1%) from £426.1 million to£417.0 million despite a 5% increase in the price of newsprint and otherinflationary increases in costs. Non recurring items of £153.1 million (2006: £250.0 million) have been charged.This includes an impairment charge of £150.0 million (2006: £250.0 million),£3.9 million (2006: £nil million) of restructuring costs offset by £0.8 million(2006: £nil million) profit on disposal of property.The Group's share of profits from associates was £0.1 million (2006: £1.2million) and reflects the Group's share of profits in PA Group, net of taxationpayable thereon. During the period dividends of £0.3 million (2006: £0.5million) were received. The IAS 19 "Employee Benefits" defined benefit current service cost and financecredit were £13.5 million (2006: £14.8 million) and £5.5 million (2006: £4.6million) respectively. For the full year, the IAS 19 defined benefit operatingcharge is estimated to reduce by £2.9 million to £27.5 million with the financecredit estimated to increase by £2.4 million to £12.3 million. The IAS 19pension deficit has fallen from £213.0 million to £154.2 million during the halfyear reflecting the benefit of increasing asset values due to the improvedperformance of the equity markets and deficit funding payments, and a marginalreduction in liabilities due to an increase in the real discount rate applied toliabilities from 2.10% to 2.55% offset by changed mortality assumptions. Finance costs, excluding the impact of IAS 19 and IAS 39 "Financial Instruments:Recognition and Measurement", increased by £0.2 million from £16.5 million to£16.7 million. The increase in finance costs reflects higher interest ratespartially offset by reduced debt levels. The IAS 39 impact during the half year,in relation to the US$ private placement and related cross currency interestrate swaps, was a £3.6 million charge (2006: £14.9 million). The IAS 39 impactreflects the fair value, exchange rate and amortisation adjustments onborrowings and associated financial instruments accounted for under IAS 39. Group profit before tax increased by £6.8 million (7.4%) from £91.4 million to£98.2 million. On a statutory basis losses before tax fell by £116.1 millionfrom £186.5 million to £70.4 million. The tax charge for the period of £29.7 million (2006: £27.7 million) represents30.2% (2006: 30.3%) of profit before tax of £98.2 million (2006: £91.4 million).On a statutory basis the tax credit of £65.8 million (2006: £55.7 million)includes a £42.0 million credit in respect of the impairment charge (2006: £75.0million), £18.0 million (2006: £nil million) relating to the change in tax baseof held for sale assets and a £30.0 million (2006: £nil) credit relating to theimpact on deferred tax of the corporation tax rate change from 1 April 2008. Earnings per share were 23.5 pence per share (2006: 21.9 pence per share), anincrease of 7.3%. On a statutory continuing operations basis losses per sharefell by 96.5% from a 44.9 pence loss per share to a 1.6 pence loss per share. An interim dividend of 6.4 pence per share (2006: 6.4 pence per share) will bepaid on 30 October 2007 to shareholders on the register at 5 October 2007. Regionals division The Regionals division publishes over 200 local and regional newspapers whichare complemented by more than 300 websites offering news, information andadvertising and includes our acquired specialist recruitment and propertywebsites businesses. The revenue and operating profit of the Group's Regionals division are asfollows: 2007 2006 % £m £m ChangeRevenue- Regional core 234.3 243.0 (3.6)%- Metros 9.8 8.3 18.1%- Digital media activities 15.7 11.8 33.1%Total revenue 259.8 263.1 (1.3)% Operating Profit- Regional core 55.6 61.2 (9.2)%- Metros 1.9 1.3 46.2%- Digital media activities 5.5 3.2 71.9%Total operating profit 63.0 65.7 (4.1)% Operating Margin 24.2% 25.0% (0.8)% Revenue fell by £3.3 million (1.3%) and operating profit fell by £2.7 million(4.1%). Excluding totallylegal.com and totallyfinancial.com acquired in May2007, revenue fell by £3.7 million (1.4%) and operating profit fell by £2.9million (4.4%). Operating profit declines for the core Regional newspaper titles were partiallyoffset by the continuing improvements from the Metro titles and our Digitalmedia activities. The division's five Metros achieved a £0.6 million (46.2%)improvement in operating profit to £1.9 million. The division's Digital mediaactivities continued to deliver further improvements with operating profitsincreasing by 71.9%. Continued focus on costs has partly mitigated the impact onoperating profit of the shortfalls in Regional core revenues with Regional coreoperating profits falling by only £5.6 million despite revenue declines of £8.7million. The acquisition in May 2007 of totallylegal.com and totallyfinancial.comcontributed revenues and operating profits before amortisation of intangibleassets of £0.4 million and £0.2 million respectively. Advertising revenue for the Regionals division fell by 1.4% from £201.0 millionto £198.1 million. By category, Display was down by 0.4%, Recruitment was downby 1.3%, Motors was down by 10.3% and other classified categories were down by3.9%, while Property increased by 4.0%. Recruitment excluding totallylegal.comand totallyfinancial.com was down by 2.1%. Metros achieved strong advertising growth of £1.5 million (18.1%), driven by anincrease in core advertising revenues and the benefit of an additional two Metrotitles launched in March 2006. Excluding the Liverpool and Cardiff Metrosadvertising revenues for Metros increased by 9.4%. Digital media activities, continued their growth trajectory with underlyingrevenues increasing by 25.4%. The newly acquired totallylegal.com andtotallylfinancial.com achieved underlying growth of 22.1%. Circulation revenue increased by £0.3 million (0.7%). The division continued todrive circulation revenue through the ongoing policy to increase cover prices ona little and often basis. During the period, the division experiencedcirculation volume declines of 6.6% for Evening titles, 6.7% for Morning titles,6.4% for Weekly titles and 4.3% for Sunday titles. Other revenue fell by £0.7 million (3.5%) from £19.9 million to £19.2 million. Nationals division The Nationals division publishes three UK National titles (the Daily Mirror, theSunday Mirror and The People) and two Scottish Nationals (the Daily Record andthe Sunday Mail) complemented by a portfolio of digital assets. The revenue and operating profit of the Group's Nationals division are asfollows: 2007 2006 % £m £m Change Revenue 240.7 240.3 0.2%Operating profit 45.5 37.4 21.7%Margin 18.9% 15.6% 3.3% The Nationals division achieved significant growth in operating profit of 21.7%on marginally increased revenues. Revenue for the UK Nationals declined by 1.1%and for the Scottish Nationals increased by 4.9%. The improved operating profits have been achieved through the tight managementof costs resulting in operating margin for the division increasing by 3.3%. Circulation revenues for the Nationals division increased by 0.8% reflecting adecrease of 0.2% for the UK Nationals offset by an increase of 4.8% for theScottish Nationals. The half year benefited from cover price increases in 2006and in 2007 together with the absence of vouchering by the Daily Record. TheSaturday editions of the Daily Mirror and Daily Record cover prices wereincreased by 5p to 60p and the Sunday Mirror cover price was increased by 5p to90p during the period. The six monthly year-on-year change in circulation volumes and the six monthlymarket share for our Nationals titles were as follows: six monthly circulation six monthly volume change market share % % Daily Mirror (5.5)% 18.6%Sunday Mirror (4.3)% 15.9%The People (13.6)% 8.4%Daily Record (Scotland only) (8.4)% 33.8%Sunday Mail (Scotland only) (4.9)% 35.7% Advertising revenues for the Nationals division fell by 2.3% with declines of4.2% for the UK Nationals and an increase of 2.7% for the Scottish Nationals.The UK Nationals performance reflects an improving trend, however, the marketremains challenging. The strong growth for the Scottish Nationals was driven byan improved advertising environment. Digital revenues increased by 16.7% from £1.2 million to £1.4 million withincreases of 4.0% for the UK Nationals and 42.6% for the Scottish Nationals. Other revenue increased by £1.2 million (6.1%) from £19.8 million to £21.0million with increases of 3.4% for the UK Nationals and 28.6% for the ScottishNationals. Sports division The Sports division delivered a strong performance in the half year. Revenuesincreased by 4.0% from £24.8 million to £25.8 million and operating profitsincreased by 29.0% from £6.9 million to £8.9 million. Advertising revenues achieved a strong growth of 12.5% from £6.4 million to £7.2million. Circulation revenues increased by £0.2 million reflecting the impact ofcover price increases off-setting volume declines. Other revenues were flat at£2.0 million. Central costs Central costs increased by £0.2 million from £7.9 million to £8.1 million. Acquisition During the half year, the Group completed the acquisition of Totallylegal.comLimited for a consideration of £11.8 million. In the 12 months prior toacquisition Totallylegal.com Limited and its subsidiary achieved revenues of£1.9 million and operating profit of £0.3 million. Cash flow and net debt Net cash from operating activities decreased by £7.8 million to £97.4 millionwith the increase in operating profit before impairment charge more than offsetby accelerating £16.1 million of pension scheme deficit funding into the firsthalf. Net debt increased by £26.9 million from £440.9 million to £467.8 million.The increase in net debt is after paying dividends of £45.1 million, net capitalexpenditure of £26.1 million, the £11.8 million acquisition of Totallylegal.comLimited and the £16.1 million accelerated pension deficit funding. Capital expenditure in the half year was £26.1 million net of disposal proceeds(2006: £38.4 million) against a depreciation charge of £17.3 million (2006:£19.7 million). On 25 July 2007 the Group announced a further £23 millioncapital investment in presses to secure a 12 year printing contract for theIndependent. This expenditure will be incurred over the next two years. Capitalexpenditure for 2007 is now estimated at £75 million and capital will befinanced from operating cash flows. At 1 July 2007 committed facilities of £725.9 million (2006: £728.2 million)were available to the Group, of which £244.5 million (2006: £259.5 million) wasavailable for draw down. The committed facilities include a £269 millionsyndicated bank facility, US$602 million and £26 million unsecured fixed rateloan notes and £6 million floating rate loan notes (representing the totalobligations under a series of private placement US dollar and sterling loannotes respectively), obligations under finance leases of £13.7 million and £0.6million of acquisition loan notes. No new financing facilities were procuredduring the period and no debt facilities were repaid other than in accordancewith their normal maturity date. Consolidated income statement (unaudited)for the 26 week period to 1 July 2007 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) notes £m £m £m----------------------------------------------------------------------------------------------Continuing operations Revenue 2 500.5 521.7 1,003.5Cost of sales (244.9) (260.3) (503.8)----------------------------------------------------------------------------------------------Gross profit 255.6 261.4 499.7Distribution costs (55.8) (57.1) (108.9)Administrative expenses: Non-recurring Impairment of intangible assets 3 (150.0) (250.0) (250.0) Other 3 (3.1) - 2.0 Amortisation of intangible assets (3.0) (7.0) (10.6) Other (99.4) (108.2) (195.9)Share of results of associates 0.1 1.2 1.3----------------------------------------------------------------------------------------------Operating loss 2 (55.6) (159.7) (62.4) IAS 19 finance credit 4 5.5 4.6 9.9IAS 39 impact 4 (3.6) (14.9) (4.9)Other finance costs 4 (16.7) (16.5) (31.5)----------------------------------------------------------------------------------------------Loss before tax (70.4) (186.5) (88.9) Tax credit 5 65.8 55.7 24.8----------------------------------------------------------------------------------------------Loss for the period from continuing operations (4.6) (130.8) (64.1) Discontinued operationsProfit for the period from discontinued operations 6 6.2 8.8 14.9Profit on sale of discontinued operations - - 37.7----------------------------------------------------------------------------------------------Profit/(loss) for the period attributable to equityholders of the parent 1.6 (122.0) (11.5)---------------------------------------------------------------------------------------------- Earnings/(loss) per share (pence) Pence Pence Pence Adjusted earnings per share* - basic 8 23.5 21.9 43.6 Adjusted earnings per share*- diluted 8 23.4 21.8 43.5----------------------------------------------------------------------------------------------Loss per share - continuing operations - basic 8 (1.6) (44.9) (22.0)Loss per share - continuing operations - diluted 8 (1.6) (44.9) (22.0)----------------------------------------------------------------------------------------------Earnings per share - discontinued operations - basic 8 2.1 3.0 18.0Earnings per share - discounted operations - diluted 8 2.1 3.0 18.0---------------------------------------------------------------------------------------------- Earnings/(loss) per share - total operations - basic 8 0.5 (41.9) (4.0)Earnings/(loss) per share - total operations - diluted 8 0.5 (41.9) (4.0)---------------------------------------------------------------------------------------------- *Including the Sports division and excluding the Magazines and Exhibitionsdivision and traditional recruitment consultancy business, non-recurring items(including the £150 million impairment of Regional newspaper titles), theamortisation of intangible assets and the impact of IAS 39. A reconciliationbetween the adjusted and the statutory numbers is provided in note 17 on page23. Consolidated statement of recognised income and expense (unaudited)for the 26 week period to 1 July 2007 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) notes £m £m £m---------------------------------------------------------------------------------------------- Actuarial gains on defined benefit pension schemes taken to equity 13 22.5 55.9 62.7Tax on actuarial gains on defined benefit pension schemes taken to equity (6.3) (16.8) (18.8)Share of pension scheme actuarial gains and currency gains recognised in equity by associates (0.7) 1.3 1.3Deferred tax charge resulting from the future change in tax rate 5 (2.8) - ----------------------------------------------------------------------------------------------- Net income recognised directly in equity 12.7 40.4 45.2---------------------------------------------------------------------------------------------- Profit/(loss) for the period 1.6 (122.0) (11.5)----------------------------------------------------------------------------------------------Total recognised income and expense for theperiod attributable to equity holdersof the parent 14 14.3 (81.6) 33.7---------------------------------------------------------------------------------------------- Consolidated balance sheet (unaudited)at 1 July 2007 31 December 2006 1 July 2007 2 July 2006 2006 (audited) notes £m £m £m----------------------------------------------------------------------------------------------Non-current assetsGoodwill 70.3 69.6 61.1Other intangible assets 846.1 1,367.9 1,357.3Property, plant and equipment 417.2 405.9 420.5Investments in associates 9.3 10.1 10.2Deferred tax asset 58.9 76.5 74.3---------------------------------------------------------------------------------------------- 1,401.8 1,930.0 1,923.4----------------------------------------------------------------------------------------------Current assets Inventories 7.3 7.3 7.0Available-for-sale financial assets - 0.5 -Trade and other receivables 114.1 160.7 134.9Cash and cash equivalents 11 20.5 27.2 32.8---------------------------------------------------------------------------------------------- 141.9 195.7 174.7----------------------------------------------------------------------------------------------Held for sale assets 10 407.7 11.6 -----------------------------------------------------------------------------------------------Total assets 1,951.4 2,137.3 2,098.1----------------------------------------------------------------------------------------------Non-current liabilitiesBorrowings 11 (338.6) (365.7) (346.3)Obligations under finance leases 11 (10.2) (13.6) (13.2)Retirement benefit obligation 13 (154.2) (232.8) (213.0)Deferred tax liabilities (306.9) (470.5) (482.4)Provisions (8.3) (13.2) (8.9)Derivative financial instruments 11 (119.5) (97.9) (107.4)---------------------------------------------------------------------------------------------- (937.7) (1,193.7) (1,171.2)----------------------------------------------------------------------------------------------Current liabilitiesBorrowings 11 (16.5) (79.5) (4.0)Trade and other payables (161.1) (189.0) (163.3)Current tax liabilities (26.1) (33.1) (31.1)Obligations under finance leases 11 (2.3) (2.7) (2.8)Provisions (0.3) (1.1) (2.5)---------------------------------------------------------------------------------------------- (206.3) (305.4) (203.7)----------------------------------------------------------------------------------------------Held for sale liabilities 10 (112.6) (8.7) -----------------------------------------------------------------------------------------------Total liabilities (1,256.6) (1,507.8) (1,374.9)----------------------------------------------------------------------------------------------Net assets 694.8 629.5 723.2----------------------------------------------------------------------------------------------EquityShare capital 14 (29.3) (29.3) (29.3)Share premium account 14 (1,120.5) (1,120.0) (1,120.0)Revaluation reserve 14 (4.9) (4.9) (4.9)Capital redemption reserve 14 (0.8) (0.8) (0.8)Retained earnings and other reserves 14 460.7 525.5 431.8----------------------------------------------------------------------------------------------Equity attributable to equity holders ofthe parent 14 (694.8) (629.5) (723.2)----------------------------------------------------------------------------------------------Total equity (694.8) (629.5) (723.2)---------------------------------------------------------------------------------------------- Consolidated cash flow statement (unaudited)for the 26 week period to 1 July 2007 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) notes £m £m £m---------------------------------------------------------------------------------------------- Cash flows from operating activities- continuing operationsCash generated from operations 9 88.5 92.5 203.7Income tax paid (19.2) (22.6) (40.6)----------------------------------------------------------------------------------------------Net cash inflow from operating activities 69.3 69.9 163.1----------------------------------------------------------------------------------------------Investing activitiesInterest received 0.5 0.1 0.3Dividends received from associated undertakings 0.3 0.5 0.5Proceeds on disposal of available-for-sale financial assets - - 2.1Proceeds on disposal of subsidiary undertakings - - 8.5Proceeds on disposal of property, plant and equipment 1.0 0.3 2.1Purchases of property, plant and equipment (27.1) (38.7) (75.0)Acquisition of subsidiary undertakings 15 (11.2) (4.2) (4.2)----------------------------------------------------------------------------------------------Net cash used in investing activities (36.5) (42.0) (65.7)----------------------------------------------------------------------------------------------Financing activitiesDividends paid (45.1) (45.1) (63.7)Interest paid on borrowings (16.0) (15.7) (31.0)Interest paid on finance leases (0.4) (0.1) (1.0)Increase in borrowings 14.9 - -Repayment of borrowings - - (40.1)Repayment of obligations under finance leases (2.3) (2.1) (2.4)Issue of ordinary share capital 0.5 1.1 1.1(Increase)/decrease in bank overdrafts (2.4) 20.8 (14.6)----------------------------------------------------------------------------------------------Net cash used in financing activities (50.8) (41.1) (151.7)----------------------------------------------------------------------------------------------Net cash from discontinued operations 5.7 9.5 53.9 Net decrease in cash and cash equivalents 11 (12.3) (3.7) (0.4) Cash and cash equivalents at the beginning of period 11 32.8 33.2 33.2----------------------------------------------------------------------------------------------Cash and cash equivalents at the end of period 11 20.5 29.5 32.8 ------Cash and cash equivalents in held for sale assets - (2.3)---------------------------------------------------------------------------------Cash and cash equivalents excluding held for sale assets 20.5 27.2--------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Cash flow from discontinued operationsNet cash flow from operating activities 5.7 9.0 14.7Net cash flow from investing activities - 0.5 39.2Net cash flow from financing activities - - -----------------------------------------------------------------------------------------------Net movement in cash and cash equivalents 5.7 9.5 53.9---------------------------------------------------------------------------------------------- Notes to the interim financial report (unaudited) 1. General information Following European regulation issued in 2002, the Group now presents itsconsolidated financial statements in accordance with International FinancialReporting Standards (IFRS) as adopted by the European Union. Whilst thefinancial information included in this interim announcement has been computed inaccordance with IFRS, this announcement does not itself contain sufficientinformation to comply with IFRS. The condensed financial statements for the 26 weeks to 1 July 2007 do notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985 and have not been audited. No statutory accounts for the period havebeen delivered to the Registrar of Companies. The financial information in respect of the 52 weeks ended 31 December 2006 hasbeen produced using extracts from the statutory accounts for this period. Thestatutory accounts for this period have been filed with the Registrar ofCompanies. The auditors' report on these accounts was unqualified and did notcontain a statement under Sections 237 (2) or (3) of the Companies Act 1985. The accounting policies used in the preparation of the interim financialstatements for the 26 weeks to 1 July 2007 have been consistently applied to allthe periods presented and are as set out in the Group's financial statements forthe 52 weeks to 31 December 2006. The auditors have carried out a review of the interim report and their report isset out on page 24. The interim report was approved by the directors on 2 August 2007. Thisannouncement is being sent to shareholders and will be made available at thecompany's registered office at One Canada Square, Canary Wharf, London, E14 5AP. 2. Business and geographical segments For management purposes, the continuing operations of the Group are currentlyorganised into the following divisions: Regionals, Nationals and Central costs.These divisions are the basis on which the Group reports its primary segmentinformation. During the period the Sports division has been held for sale and isshown within discontinued operations. In the prior period the Magazines andExhibitions division, which was disposed of in July 2006, was held for sale andis shown within discontinued operations. The Regional businesses in the Midlandsand London and the South East which are held for sale are included within theRegionals division as continuing operations. The secondary reporting segment isa geographical destination analysis of revenue.The Regionals division publishes a large portfolio of newspaper and on-linebrands across the UK. The Nationals division, comprising the UK and ScottishNationals, publishes five daily and Sunday newspapers. Central costs includecosts not attributed to specific divisions. The revenues and costs of eachsegment are clearly identifiable and allocated according to where they arise.Segment information for these principal activities is presented below. Primary segments - business segment analysis 26 weeks to 1 July 2007 Continuing Discontinued Regionals Nationals Central costs operations operations 2007 2007 2007 2007 2007 £m £m £m £m £m----------------------------------------------------------------------------------------------RevenueSegment sales 262.4 248.0 - 510.4 25.8Inter-segment sales (2.6) (7.3) - (9.9) -----------------------------------------------------------------------------------------------Total revenue 259.8 240.7 - 500.5 25.8----------------------------------------------------------------------------------------------ResultSegment result 60.0 45.5 (8.1) 97.4 8.9-------------------------------------------------------------------Non recurring items (153.1)* -Share of results of associates 0.1 - ----------------------Operating (loss)/profit (55.6) 8.9IAS 19 finance credit 5.5 -IAS 39 impact (3.6) -Other finance costs (16.7) - ----------------------(Loss)/profit before tax (70.4) 8.9Tax credit/(charge) 65.8 (2.7) ----------------------(Loss)/profit for the period (4.6) 6.2---------------------------------------------------------------------------------------------- \* The non recurring items include a £150.0 million impairment charge against thecarrying value of newspaper titles in Midlands and London and the South Eastwhich are part of the Regionals segment. Discontinued operations relate to the Sports division. 26 weeks to 2 July 2006 Continuing Discontinued Regionals Nationals Central costs operations operations 2006 2006 2006 2006 2006 £m £m £m £m £m----------------------------------------------------------------------------------------------RevenueSegment sales 283.6 247.5 - 531.1 44.9Inter-segment sales (2.2) (7.2) - (9.4) -----------------------------------------------------------------------------------------------Total revenue 281.4 240.3 - 521.7 44.9----------------------------------------------------------------------------------------------ResultSegment result 59.6 37.4 (7.9) 89.1 12.7-------------------------------------------------------------------Non recurring items (250.0)* -Share of results of associates 1.2 - ---------------------Operating (loss)/profit (159.7) 12.7IAS 19 finance credit 4.6 -IAS 39 impact (14.9) -Other finance costs (16.5) - ---------------------(Loss)/profit before tax (186.5) 12.7Tax credit/(charge) 55.7 (3.9) ---------------------(Loss)/profit for the period (130.8) 8.8---------------------------------------------------------------------------------------------- * The non recurring items include a £250.0 million impairment charge against thecarrying value of newspaper titles in Midlands and London and the South Eastwhich are part of the Regionals segment. In 2006 discontinued operations relate to the Sports division (revenue £24.8million, operating profit £6.9 million and tax charge £2.1 million) and theMagazines and Exhibitions division (revenue £20.1 million, operating profit £5.8million and tax charge £1.8 million). 52 weeks to 31 December 2006 Continuing Discontinued(audited) Regionals Nationals Central costs operations operations 2006 2006 2006 2006 2006 £m £m £m £m £m----------------------------------------------------------------------------------------------RevenueSegment sales 535.9 486.4 - 1,022.3 69.6Inter-segment sales (4.8) (14.0) - (18.8) -----------------------------------------------------------------------------------------------Total revenue 531.1 472.4 - 1,003.5 69.6----------------------------------------------------------------------------------------------ResultSegment result 118.1 80.9 (14.7) 184.3 21.6----------------------------------------------------------------------------------------------Non recurring items (248.0)* 37.7Share of results of associates 1.3 - ---------------------Operating (loss)/profit (62.4) 59.3IAS 19 finance credit 9.9 -IAS 39 impact (4.9) -Other finance costs (31.5) - ---------------------(Loss)/profit before tax (88.9) 59.3Tax redit/(charge) 24.8 (6.7) ---------------------(Loss)/profit for the period (64.1) 52.6----------------------------------------------------------------------------------------------* The non recurring items include a £250.0 million impairment charge against thecarrying value of newspaper titles in Midlands and London and the South Eastwhich are part of the Regionals segment. In 2006 discontinued operations relate to the Sports division (revenue £49.5million, operating profit £15.8 million and tax charge £4.9 million) and theMagazines and Exhibitions division (revenue £20.1 million, operating profit £5.8million and tax charge £1.8 million). Secondary segments - geographical destination and source segment analysis The Group's operations are located in the United Kingdom. The following tablesprovide an analysis of the Group's revenue by geographical market and source: 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------United Kingdom and Republic of Ireland 497.7 519.1 997.3Continental Europe 2.5 2.6 5.8Rest of World 0.3 - 0.4----------------------------------------------------------------------------------------------Total - continuing operations 500.5 521.7 1,003.5---------------------------------------------------------------------------------------------- Circulation 181.8 180.4 358.6Advertising* 278.5 283.3 543.2Other* 40.2 58.0 101.7----------------------------------------------------------------------------------------------Total - continuing operations 500.5 521.7 1,003.5----------------------------------------------------------------------------------------------* The comparatives have been amended by £0.4 million (26 weeks to 2 July 2006)and by £1.0 million (52 weeks to 31 December 2006) to reflect a reclassificationfrom other revenue to advertising revenue. Revenue relating to discontinued operations was primarily from the UnitedKingdom and Republic of Ireland. For the 26 weeks to 1 July 2007 revenuerelating to discontinued operations was split: £16.6 million circulation (26weeks to 2 July 2006: £16.4 million and 52 weeks to 31 December 2006: £31.8million), £7.2 million advertising (26 weeks to 2 July 2006: £6.4 million and 52weeks to 31 December 2006: £13.3 million) and £2.0 million other (26 weeks to 2July 2006: £2.0 million and 52 weeks to 31 December 2006: £4.4 million). 3. Non-recurring items 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------Impairment of intangible assets (a) (150.0) (250.0) (250.0)Restructuring costs (b) (3.9) - (2.4)Profit on disposal of land and buildings (c) 0.8 - 0.8Loss on disposal of subsidiary (d) - - (1.8)Release of accruals for which no further costs are expected (e) - - 3.8Profit on disposal of available-for-sale financial assets (f) - - 1.6----------------------------------------------------------------------------------------------Non-recurring items (153.1) (250.0) (248.0)----------------------------------------------------------------------------------------------(a) During the period, an impairment review of the carrying value of theGroup's intangible assets undertaken in accordance with IAS 36 indicated that animpairment charge was required. Due to the significance of the intangible assetsthe review is performed at each reporting date. In addition the Group iscurrently completing a disposal programme. The impairment charge reduced thecarrying value of the Regional newspaper titles in the Midlands and London andthe South East by £150.0 million (26 weeks to 2 July 2006 and 52 weeks to 31December 2006: £250.0 million) before tax. Net of tax, including changes in thetax base, the impairment reduced the carrying value of the Regional newspapertitles by £90.0 million (26 weeks to 2 July 2006 and 52 weeks to 31 December2006: £175.0 million). The impairment charge was based on comparing carryingvalue with fair value less costs to sell in respect of these businesses. (b) Restructuring costs of £3.9 million (52 weeks to 31 December 2006: £2.4million) were incurred in delivery of cost reduction measures and implementationof a new operating model for the Group. (c) The Group disposed of surplus land and buildings releasing a profit ondisposal of £0.8 million (52 weeks to 31 December 2006: £0.8 million). (d) In 2006 the Group disposed of the hotgroup traditional recruitmentconsultancy business realising a loss on disposal of £1.8 million. (e) In 2006 the Group released accruals of £3.8 million for which no furthercosts were expected. (f) In 2006 the Group disposed of an asset realising a profit on disposal of£1.6 million. 4. Finance costs IAS 19 IAS 39 Other Total £m(a) £m(b) £m(c) £m------------------------------------------------------------------------------26 weeks to 1 July 2007Income 43.4 8.5 0.5 52.4Expense (37.9) (12.1) (17.2) (67.2)------------------------------------------------------------------------------Total finance income /(cost) 5.5 (3.6) (16.7) (14.8)------------------------------------------------------------------------------26 weeks to 2 July 2006Income 40.5 0.6 0.1 41.2Expense (35.9) (15.5) (16.6) (68.0)------------------------------------------------------------------------------Total finance income/(cost) 4.6 (14.9) (16.5) (26.8)------------------------------------------------------------------------------52 weeks to 31 December 2006 (audited)Income 81.6 45.9 0.3 127.8Expense (71.7) (50.8) (31.8) (154.3)------------------------------------------------------------------------------Total finance income/(cost) 9.9 (4.9) (31.5) (26.5)------------------------------------------------------------------------------ (a) IAS 19 finance income represents expected return on scheme assets net ofexpected expenses and IAS 19 finance expense represents the interest cost onscheme liabilities.(b) Impact of fair value, exchange rate, and amortisation adjustments onborrowings and associated financial instruments accounted for under IAS 39.(c) Other finance costs include interest on obligations under finance leases of£0.4 million (26 weeks to 2 July 2006 £0.5 million and 52 weeks to 31 December2006 £1.0 million). 5. Tax 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------Current taxCorporation tax charge for the period (20.4) (19.1) (34.9)Prior period adjustment (1.8) - (0.9)----------------------------------------------------------------------------------------------Current tax charge (22.2) (19.1) (35.8)----------------------------------------------------------------------------------------------Deferred taxTax credit for the period 36.4 74.8 60.8Change in tax rates 30.0 - -Change in tax base 18.0Prior period adjustment 3.6 - (0.2)----------------------------------------------------------------------------------------------Deferred tax credit 88.0 74.8 60.6----------------------------------------------------------------------------------------------Total tax credit - continuing operations 65.8 55.7 24.8---------------------------------------------------------------------------------------------- Tax charge on discontinued operations ----------------------------------------------------------------------------------------------Tax on profit from operations (2.7) (3.9) (6.7)----------------------------------------------------------------------------------------------Total tax charge - discontinued operations (2.7) (3.9) (6.7)---------------------------------------------------------------------------------------------- Reconciliation of tax charge - continuing operations % % %---------------------------------------------------------------------------------------------- Standard rate of corporation tax 30.0 30.0 30.0Tax effect of items that are not deductible in determining taxable loss (4.0) (0.4) (2.8)Tax effect of items that are not taxable in determining taxable loss - - 0.2Tax effect of utilisation of tax losses not previously recognised in determining taxable loss - - 0.7Tax effect of share of results of associate 0.1 0.1 0.4Tax effect of rolled over and revaluation gains - 0.1 0.6Impact on the opening deferred tax provision of the future change in tax rate 42.6 - -Impact on the current period deferred tax charge of the future change in tax rate (3.7) - -Impact of the change in the tax base of assets held for sale 25.7 - -Prior period adjustment 2.8 - (1.2)----------------------------------------------------------------------------------------------Tax charge rate - continuing operations 93.5 29.8 27.9---------------------------------------------------------------------------------------------- The impact of the substantively enacted change in the standard rate ofcorporation tax to 28% from 1 April 2008 has resulted in the opening deferredtax provision being recalculated with a £30.0 million credit in the incomestatement and a £2.8 million debit taken directly to equity. The deferred tax credit includes a credit of £42.0 million (26 weeks to 2 July2006 and 52 weeks to 31 December 2006: £75.0 million) in relation to theimpairment charge with respect to intangible assets and a credit of £18.0million (26 weeks to 2 July 2006 and 52 weeks to 31 December 2006: £nil million)in respect of the impact of the change in the tax base of held for sale assets. In addition to the amount charged to the income statement, deferred tax relatingto the actuarial gains on defined benefit pension schemes of £6.3 million (26weeks to 2 July 2006: £16.8 million and 52 weeks to 31 December 2006: £18.8million) has been debited directly to equity. 6. Discontinued operations During the period the Group discontinued its Sports division and in the priorperiod the Group discontinued its Magazines and Exhibitions division. Theresults of the discontinued operations, which have been included in theconsolidated income statement, were as follows: 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------Revenue 25.8 44.9 69.6Cost of sales (11.9) (23.9) (35.9)----------------------------------------------------------------------------------------------Gross profit 13.9 21.0 33.7Distribution costs (2.2) (3.8) (6.4)Administrative expenses: Non-recurring - - - Other (2.8) (4.5) (5.7)----------------------------------------------------------------------------------------------Operating profit 8.9 12.7 21.6Tax charge (2.7) (3.9) (6.7)----------------------------------------------------------------------------------------------Profit for the period 6.2 8.8 14.9---------------------------------------------------------------------------------------------- 7. Dividends 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------Amounts recognised as distributions to equity holders in the period:Dividend paid (a) 45.1 45.1 63.7---------------------------------------------------------------------------------------------- Pence Pence Pence----------------------------------------------------------------------------------------------Dividend paid per share (a) 15.5 15.5 21.9---------------------------------------------------------------------------------------------- £m £m £m---------------------------------------------------------------------------------------------- Dividend proposed but not paid nor included in the accounting records (b) 18.8 18.8 45.4---------------------------------------------------------------------------------------------- Pence Pence Pence----------------------------------------------------------------------------------------------Dividend proposed per share (b) 6.4 6.4 15.5---------------------------------------------------------------------------------------------- (a) The amount of £45.1 million is in respect of the final dividend for the52 weeks to 31 December 2006 of 15.5 pence per share; the amount of £45.1million is in respect of the final dividend for the 52 weeks to 1 January 2006of 15.5 pence per share; the amount of £63.7 million is in respect of the finaldividend for the 52 weeks to 1 January 2006 of 15.5 pence per share and theinterim dividend for the 52 weeks to 31 December 2006 of 6.4 pence per share. (b) The amount of £18.8 million represents the proposed interim dividend forthe 26 weeks to 1 July 2007 of 6.4 pence per share, which had not been approvedby the Board and as such is not reflected as a liability in this interimfinancial report; the amount of £18.8 million represents the proposed interimdividend for the 26 weeks to 2 July 2006 of 6.4 pence per share; the amount of£45.4 million represents the proposed final dividend for the 52 weeks to 31December 2006 of 15.5 pence per share. 8. Earnings per share 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited)Earnings £m £m £m----------------------------------------------------------------------------------------------Profit after tax before adjusted items* 68.5 63.7 127.1Adjusted items*: Sports division profit (after tax) (6.2) (4.8) (10.9) Non-recurring items (after tax) (92.1) (175.0) (173.0) Disposed business profit (after tax) - 0.6 0.6 Reduction in charge for share-based payments relating to 2004 and 2005 (after tax) - - 2.9 Amortisation of intangibles (after tax) (2.2) (4.9) (7.4) IAS 39 impact (after tax) (2.6) (10.4) (3.4) Tax credit resulting from the future change in tax rate 30.0 - ----------------------------------------------------------------------------------------------- Loss for the period from continuing operations (4.6) (130.8) (64.1) Profit for the period from discontinued operations 6.2 8.8 52.6----------------------------------------------------------------------------------------------Profit/(loss) for the period attributable to equity holders of the parent 1.6 (122.0) (11.5)---------------------------------------------------------------------------------------------- Number of shares ('000) ('000) ('000)----------------------------------------------------------------------------------------------Weighted average number of ordinary shares for the purpose of basic EPS 291,338 291,143 291,207Effect of dilutive potential ordinary shares - share options 780 1,201 711----------------------------------------------------------------------------------------------Weighted average number of ordinary shares for the purpose of diluted EPS 292,118 292,344 291,918---------------------------------------------------------------------------------------------- Discontinued operations relate to the Sports division for the 26 weeks to 1 July2007 and the Sports and Magazines and Exhibitions divisions for the 26 weeks to2 July 2006 and 52 weeks to 31 December 2006. Basic earnings per share is calculated by dividing profit attributable to equityholders by the weighted average number of ordinary shares during the period. Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares in issue on the assumption of conversion of allpotentially dilutive ordinary shares. Earnings per share Pence Pence Pence---------------------------------------------------------------------------------------------- Adjusted earnings per share* - basic 23.5 21.9 43.6----------------------------------------------------------------------------------------------Adjusted earnings per share* - diluted 23.4 21.8 43.5---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Loss per share - continuing operations - basic (1.6) (44.9) (22.0)----------------------------------------------------------------------------------------------Loss per share - continuing operations - diluted (1.6) (44.9) (22.0)---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Earnings per share - discontinued operations - basic 2.1 3.0 18.0----------------------------------------------------------------------------------------------Earnings per share - discontinued operations - diluted 2.1 3.0 18.0---------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Earnings/(loss) per share - total operations - basic 0.5 (41.9) (4.0)----------------------------------------------------------------------------------------------Earnings/(loss) per share - total operations - diluted 0.5 (41.9) (4.0)---------------------------------------------------------------------------------------------- *Including the Sports division and excluding the Magazines and Exhibitionsdivision and traditional recruitment consultancy business, non-recurring items(including the £150 million impairment of Regional Newspaper titles), theamortisation of intangible assets and the impact of IAS 39. A reconciliationbetween the adjusted and the statutory numbers is provided in note 17 on page23. The basic earnings/(loss) per share for each category of non-recurring itemsdisclosed in note 3 is as follows: Pence Pence Pence----------------------------------------------------------------------------------------------Impairment of intangibles (31.0) (60.1) (60.1)Restructuring costs (0.9) - (0.6)Profit on disposal of land and buildings 0.2 - 0.2Loss on disposal of subsidiary - - (0.5)Release of accruals for which no further costs are expected - - 1.2Profit on disposal of available-for-sale investments - - 0.4----------------------------------------------------------------------------------------------Earnings per share - non recurring items (31.7) (60.1) (59.4)---------------------------------------------------------------------------------------------- 9. Notes to the cash flow statement 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m---------------------------------------------------------------------------------------------- Operating loss from continuing operations (55.6) (159.7) (62.4)Depreciation of property, plant and equipment 17.3 19.7 39.8Amortisation of other intangible assets 3.0 7.0 10.6Share of result of associate (0.1) (1.2) (1.3)Impairment of other intangible assets 150.0 250.0 250.0Charge for share-based payments 1.6 1.4 2.4Charge for share-based payments in respect of 2004 and 2005 - - (4.2)Profit on disposal of land and buildings (0.8) - (0.8)Profit on disposal of available-for-sale financial assets - - (1.6)Loss on disposal of subsidiary - - 1.8Adjustment for IAS 19 pension funding (30.6) (12.3) (19.3)----------------------------------------------------------------------------------------------Operating cash flows before movements in working capital 84.8 104.9 215.0(Increase)/decrease in inventories (0.3) (0.1) 0.2(Increase)/decrease in receivables (11.8) (17.2) 6.7Increase/(decrease) in payables 15.8 4.9 (18.2)----------------------------------------------------------------------------------------------Cash generated from operations 88.5 92.5 203.7---------------------------------------------------------------------------------------------- 10. Held for sale assets and liabilities The assets and liabilities relating to the Regional businesses in the Midlandsand London and the South East and the Sports division which are held for salehave been classified as held for sale assets and held for sale liabilities inthe consolidated balance sheet at 1 July 2007. The held for sale assets and heldfor sale liabilities at 2 July 2006 related to the Magazines and Exhibitionsdivision which was disposed of in July 2006. The analysis of assets and liabilities included in held for sale assets and inheld for sale liabilities is shown below: 1 July 2 July 31 December 2007 2006 2006 £m £m £m----------------------------------------------------------------------------------------------Held for sale assets: Non-current assets Intangible Assets 362.4 1.6 - Property, plant and equipment 12.0 0.2 - Deferred tax asset - 0.2 Current assets Inventories 0.1 - - Trade and other receivables 33.2 7.3 - Cash and cash equivalents - 2.3---------------------------------------------------------------------------------------------- 407.7 11.6 -----------------------------------------------------------------------------------------------Held for sale liabilities: Non-current liabilities Obligations under finance leases (0.9) - - Deferred tax liabilities (82.1) - - Provisions (0.5) - - Current liabilities Trade and other payables (21.1) (8.7) - Current tax liabilities (7.5) - - Obligations under finance leases (0.3) - - Provisions (0.2) - ----------------------------------------------------------------------------------------------- (112.6) (8.7) ----------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------Net held for sale assets and liabilities 295.1 2.9 ----------------------------------------------------------------------------------------------- 11. Net debt Other 31 December IAS 39 non-cash 1 July 2006 Cash flow impact charges 2007 £m £m £m £m £m----------------------------------------------------------------------------------------------Non-current Loan notes (346.3) - 8.5 (0.8) (338.6)Derivative financial instruments (107.4) - (12.1) - (119.5)Obligations under finance leases (13.2) 2.1 - - (11.1)---------------------------------------------------------------------------------------------- (466.9) 2.1 (3.6) (0.8) (469.2)----------------------------------------------------------------------------------------------CurrentBank overdrafts (3.3) 2.4 - - (0.9)Short term loans - (15.0) - - (15.0)Loan notes (0.7) 0.1 - - (0.6)Obligations under finance leases (2.8) 0.2 - - (2.6)---------------------------------------------------------------------------------------------- (6.8) (12.3) - - (19.1)----------------------------------------------------------------------------------------------Cash and cash equivalents 32.8 (12.3) - - 20.5----------------------------------------------------------------------------------------------Net Debt (440.9) (22.5) (3.6) (0.8) (467.8)---------------------------------------------------------------------------------------------- Included in net debt is £1.2 million of obligations under finance leases whichhave been included in held for sale liabilities in the consolidated balancesheet. Of this amount £0.9 million is non-current and £0.3 million is current. Cash and cash equivalents represents the sum of the Group's bank balances andcash in hand at the balance sheet date. Cash and cash equivalents at 1 July 2007include £nil million (2 July 2006: £2.3 million and 31 December 2006: £nil) ofheld for sale cash. The US and UK private placement loan notes totalling US$602 million and £32million were issued in 2001 and 2002. The fixed rate interest and capitalrepayments on the US$ denominated loan notes have been swapped into floatingrate sterling through the use of cross-currency interest rate swaps. As hedgeaccounting under IAS 39 has not been applied, the loan notes and cross-currencyswaps are shown separately in accordance with IAS 39. The loan notes aredisclosed at amortised cost and translated into sterling at the prevailingperiod-end exchange rate and the cross-currency swaps are disclosed at fairvalue at the period-end date. These values do not represent the amounts requiredto repay the loan notes or cancel the related cross-currency interest rateswaps. 12. Share-based payments During the period 745,552 (26 weeks to 2 July 2006 and 52 weeks to 31 December2006: 757,971) share awards were granted to senior managers on a discretionarybasis under the Long Term Incentive Plan approved in 2004. The exercise price ofthe granted awards is £1 for each block of awards granted. The awards vest afterthree years, subject to the continued employment of the participant andsatisfaction of certain performance conditions. During the period 343,196 (26 weeks to 2 July 2006 and 52 weeks to 31 December2006: 206,369) share awards were granted to senior managers on a discretionarybasis under the Deferred Share Award Plan approved in 2006. The exercise priceof the granted awards is £1 for each block of awards granted. The awards vestafter three years, subject to continued employment of the participant. Shares held for share-based payments are included in retained earnings and otherreserves at £11.9 million (2 July 2006 and 31 December 2006: £11.9 million) 13. Retirement benefit schemes The Group operates ten final salary pension schemes. All of these schemes areclosed to new employees. All new employees are entitled to participate in adefined contribution plan, the Trinity Mirror Pension Plan. Formal valuations of the defined benefit schemes are carried out regularly, theactuarial methods and assumptions used to calculate each scheme's assets andliabilities varying according to the actuarial and funding policies adopted bytheir respective trustees. Valuations have been performed in accordance with the requirements of IAS 19with scheme liabilities calculated using a consistent projected unit valuationmethod and compared to the market value of the schemes' assets at 29 June 2007,the last day prior to the period end for which such values were available. Based on actuarial advice, the financial assumptions used in calculating theschemes' liabilities and the total value of those liabilities under IAS 19 are: 1 July 2 July 31 December 2007 2006 2006Principal annual actuarial assumptions used: % % %---------------------------------------------------------------------------------------------- Discount rate 5.80 5.25 5.10Inflation rate 3.25 3.00 3.00Expected return on scheme assets 4.40-7.30 4.00-7.30 4.40-7.30Expected rate of salary increases 4.30 4.30 4.00Pension increases:Pre 6 April 1997 pensions 3.00-5.00 3.00-5.00 3.00-5.00Post 6 April 1997 pensions 3.25-3.75 3.00-3.50 3.00-3.50 Actuarial value of scheme liabilities £1,509.8m £1,478.9m £1,511.0mActual return on scheme assets £48.7m £15.6m £97.1m---------------------------------------------------------------------------------------------- Post-retirement mortality tables and future Future life expectancy (years) for Future life expectancy (years) atlife expectancies at age 65 a pensioner currently age 65 for a non-pensioner aged 65 currently aged 55Average Male Female Male FemaleAt 1 July 2007 20.1 23.0 21.6 24.4At 2 July 2006 18.6 21.3 19.6 22.4At 31 December 2006 18.6 21.3 19.6 22.4------------------------------------------------------------------------------------------------------------------------ The amount included in the balance sheet arising from the Group's obligations inrespect of its defined benefit retirement schemes is as follows: Defined benefit schemes 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------Net scheme liabilities:Present value of funded obligations (1,509.8) (1,478.9) (1,511.0)Fair value of schemes' assets 1,390.6 1,250.2 1,322.9Effect of asset ceiling (35.0) (4.1) (24.9)----------------------------------------------------------------------------------------------Schemes' deficits included in non-current liabilities (154.2) (232.8) (213.0)---------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------- Amounts recognised in the income statement 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------Current service cost (13.5) (14.8) (30.4)Past service cost (0.7) - (0.8)----------------------------------------------------------------------------------------------Total included in staff costs (14.2) (14.8) (31.2)---------------------------------------------------------------------------------------------- Expected return on scheme assets 43.4 40.5 81.6Interest cost on pension schemes' liabilities (37.9) (35.9) (71.7)----------------------------------------------------------------------------------------------Net finance credit 5.5 4.6 9.9----------------------------------------------------------------------------------------------Total included in the income statement (8.7) (10.2) (21.3)---------------------------------------------------------------------------------------------- Movement in deficits during the period:Opening deficits (213.0) (305.6) (305.6)Contributions 45.0 27.1 51.2Total charge to income statement (8.7) (10.2) (21.3)Actuarial gains 32.6 56.9 84.5Effect of asset ceiling (10.1) (1.0) (21.8)----------------------------------------------------------------------------------------------Closing deficits (154.2) (232.8) (213.0)---------------------------------------------------------------------------------------------- Movement not recognised in income statement:Actuarial gains 32.6 56.9 84.5Effect of asset ceiling (10.1) (1.0) (21.8)----------------------------------------------------------------------------------------------Total included in statement of recognised income and expense (before tax) 22.5 55.9 62.7---------------------------------------------------------------------------------------------- Defined contribution schemes 52 weeks to 26 weeks to 26 weeks to 31 December 1 July 2 July 2006 2007 2006 (audited) £m £m £m----------------------------------------------------------------------------------------------Amounts recognised in the income statement:Current service cost 0.5 0.4 1.0---------------------------------------------------------------------------------------------- 14. Share capital and reserves---------------------------------------------------------------------------------------------------------------------- Capital Retained Share Share Revaluation redemption earnings and capital premium reserve reserve other reserves Total £m £m £m £m £m £m----------------------------------------------------------------------------------------------------------------------At 31 December 2006 (29.3) (1,120.0) (4.9) (0.8) 431.8 (723.2)Total recognised income and expense for the period - - - - (14.3) (14.3)Dividends - - - - 45.1 45.1New share capital subscribed - (0.5) - - - (0.5)Credit to equity for equity-settledshare-based payments - - - - (1.6) (1.6)Tax on equity-settled share basedpayments - - - - (0.3) (0.3)----------------------------------------------------------------------------------------------------------------------At 1 July 2007 (29.3) (1,120.5) (4.9) (0.8) 460.7 (694.8)---------------------------------------------------------------------------------------------------------------------- Purchase of shares are included in retained earnings and other reserves at £11.9million (2 July 2006 and 31 December 2006: £11.9 million), classified asTreasury Shares. Cumulative goodwill written off to reserves in respect ofcontinuing businesses acquired prior to 1998 is £25.9 million (2 July 2006 and31 December 2006: £25.9 million). The capital redemption reserve was created when the Company embarked on theshare buy-back programme in 2005 and represents the nominal value of the sharespurchased and subsequently cancelled. The revaluation reserve relates to therevaluation surplus on property, plant and equipment that has been revalued tofair value from its historical cost. 15. Acquisition of subsidiary undertakings On 4 May 2007, the Group acquired Totallylegal.com Limited and its subsidiaryTotallyfinancial.com Limited for £11.8 million plus £0.2 million of transactioncosts. The results of the acquisition have been included in the Regionalsdivision in continuing operations. The net assets acquired and the goodwill arising, are as follows: Acquiree's carrying amount Fair value Provisional before combination adjustments fair value-----------------------------------------------------------------------------------------------Net assets acquired:Cash and cash equivalents 0.8 - 0.8Current assets 0.7 - 0.7Current liabilities (1.2) (1.6) (2.8)Non-current liabilities - - ------------------------------------------------------------------------------------------------ 0.3 (1.6) (1.3)-----------------------------------------------------------------------------------------------Intangible assets 3.1Goodwill 10.2-----------------------------------------------------------------------------------------------Total consideration 12.0----------------------------------------------------------------------------------------------- Fair value adjustments reflect the alignment of the acquiree's accountingpolicies with those of the Group. The goodwill arising on the acquisition isattributed to the anticipated profitability and market share of the acquiree inits new markets and the anticipated synergies with other acquisitions. The initial accounting for the acquisition has not been finalised, due touncertainties regarding the valuation of acquired liabilities and provisions atthe acquisition date. These uncertainties are expected to be resolved within sixmonths of the acquisition date. Net cash outflow arising on acquisition: £mCash consideration paid 12.0Cash and cash equivalents acquired (0.8)-------------------------------------------------------------------------------- 11.2-------------------------------------------------------------------------------- The revenue and operating profit post acquisition of the subsidiary amounted to£0.4 million and £0.2 million respectively. Total consideration for theacquisition was satisfied in cash. 16. Post balance sheet events Since 1 July 2007 the Group has announced the sale of seven businesses in Londonand the South East for a combined consideration of £92.9 million. 17. Reconciliation of Group statutory results to adjusted results 26 weeks to 1 July 2007 Continuing operations Sports Non- Share- statutory division recurring Disposed based result items business payments (a) (b) (c) (d) (e) £m £m £m £m £m -----------------------------------------------------------------------------------------------Revenue 500.5 25.8 - - -Operating (loss)/profit (55.6) 8.9 153.1 - -(Loss)/profit before tax (70.4) 8.9 153.1 - ------------------------------------------------------------------------------------------------(Loss)/earnings per share:Basic (pence) (1.6) 2.1 31.7 - ------------------------------------------------------------------------------------------------ 26 weeks to 1 July 2007 IAS 39 Rate Amortisation impact change Adjusted (f) (g) (h) result £m £m £m £m--------------------------------------------------------------------------------Revenue - - - 526.3Operating (loss)/profit 3.0 - - 109.4(Loss)/profit before tax 3.0 3.6 - 98.2-----------------------------------------------------------------------------------------------(Loss)/earnings per share:Basic (pence) 0.7 0.9 (10.3) 23.5----------------------------------------------------------------------------------------------- 26 weeks to 2 July 2006 Continuing operations Sports Non- Share- statutory division recurring Disposed based result items business payments (a) (b) (c) (d) (e) £m £m £m £m £m -----------------------------------------------------------------------------------------------Revenue 521.7 24.8 - (18.3) -Operating (loss)/profit (159.7) 6.9 250.0 (0.9) -(Loss)/profit before tax (186.5) 6.9 250.0 (0.9) ------------------------------------------------------------------------------------------------(Loss)/earnings per share:Basic (pence) (44.9) 1.6 60.1 (0.2) ------------------------------------------------------------------------------------------------ 26 weeks to 2 July 2006 IAS 39 Rate Amortisation impact change Adjusted (f) (g) (h) result £m £m £m £m-------------------------------------------------------------------------------- Revenue - - - 528.2Operating (loss)/profit 7.0 - - 103.3(Loss)/profit before tax 7.0 14.9 - 91.4--------------------------------------------------------------------------------(Loss)/earnings per share:Basic (pence) 1.7 3.6 - 21.9-------------------------------------------------------------------------------- 52 weeks to 31 ContinuingDecember 2006 operations Sports Non- Share- statutory division recurring Disposed based result items business payments (a) (b) (c) (d) (e) £m £m £m £m £m -----------------------------------------------------------------------------------------------Revenue 1,003.5 49.5 - (20.9) -Operating (loss)/profit (62.4) 15.8 248.0 (0.8) (4.2)(Loss)/ profit before tax (88.9) 15.8 248.0 (0.8) (4.2)-----------------------------------------------------------------------------------------------(Loss)/earnings per shareBasic (pence) (22.0) 3.7 59.4 (0.2) (1.0)----------------------------------------------------------------------------------------------- 52 weeks to 31 IAS 39 Rate December 2006 Amortisation impact change Adjusted (f) (g) (h) result £m £m £m £m--------------------------------------------------------------------------------Revenue - - - 1,032.1Operating (loss)/profit 10.6 - - 207.0(Loss)/profit before tax 10.6 4.9 - 185.4--------------------------------------------------------------------------------(Loss)/earnings per shareBasic (pence) 2.5 1.2 - 43.6-------------------------------------------------------------------------------- (a) Loss per share on continuing operations excluding discontinuedoperations (Sports and Magazines and Exhibitions divisions).(b) Sports division has been included in adjusted as it had not beendisposed of prior to the interim date while the Magazines and Exhibitionsdivision has been excluded from adjusted as it was disposed of in July 2006.(c) Details of non-recurring items are set out in note 3.(d) Sale of hotgroup traditional recruitment consultancy business.(e) Share-based payments charge for 2004 and 2005 has been adjusted toreflect non-market based performance criteria.(f) Amortisation of intangible assets.(g) Impact of fair value, exchange rate and amortisation adjustments onborrowings and associated financial instruments, accounted for under IAS 39.(h) Impact of change in tax rate from 30% to 28% on the opening deferred taxposition. INDEPENDENT REVIEW REPORT TO TRINITY MIRROR PLC Introduction We have been instructed by the company to review the financial information forthe 26 weeks ended 1 July 2007 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated statement ofrecognised income and expense, the consolidated cash flow statement and relatednotes 1 to 17. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by Law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financialdata, and, based thereon, assessing whether the accounting policies andpresentation have been consistently applied unless otherwise disclosed. A reviewexcludes audit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly,we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the 26 weeks ended1 July 2007. Deloitte & Touche LLPChartered Accountants2 August 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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