28th Jul 2005 07:03
Trinity Mirror PLC28 July 2005 Trinity Mirror plc 2005 Interim Results for the 26 weeks ended 3 July 2005 28 July 2005 Trinity Mirror plc announces the Group's Interim Results(3) for the 26 weeksended 3 July 2005. The operational and financial highlights reflect the adoptionof International Financial Reporting Standards for the period. Operational highlights • Revenue and operating profit(1) growth of 1.2% and 7.9% respectively in a challenging advertising revenue environment • Improved Group operating margins(1) by 1.3% to 22.1% with Regionals division operating margins(1) increasing by 1.1% to 28.4% • Earnings per share growth, before impact of IAS 39(4) on financial instruments and before non-recurring items(2), of 13.2%, with the interim dividend increased by 8.5% to 6.4 pence per share • Incremental cost savings of £4.1 million and on track to achieve at least £35 million net annualised savings for the year • £32.5 million expended on share buy-back programme during the period and on track to achieve a £250 million return of capital over three years • £83 million capital investment in printing presses over three years enhancing manufacturing efficiency and providing full colour for the Group's five National newspapers and a number of Regional newspaper titles by the beginning of 2008 • Strong operating cash flows up 2.0% to £129.9 million and stable net debt at £457.4 million excluding the impact of IAS 39(4) Financial highlights 2005(2) 2004(2) Change £m £m %Revenue 579.3 572.7 +1.2%Group operating profit pre non-recurring items (1) 128.3 118.9 +7.9%Group operating profit post non-recurring items 128.3 115.4 +11.2%Profit before IAS 39(4) impact and pre non-recurringitems (2) 112.5 99.5 +13.1%Profit before tax post non-recurring items 113.2 98.5 +14.9% Per share Pence Pence Change %Underlying earnings before IAS 39(4) impact and prenon-recurring items(2) 26.6p 23.5p +13.2%Underlying earnings pre non-recurring items (2) 26.7p 23.5p +13.6%Basic earnings post non-recurring items 26.7p 23.5p +13.6%Dividend per share 6.4p 5.9p +8.5% (1) Excludes operating non-recurring items of £nil (2004: £3.5 million charge) (2) Excludes net non-recurring items before tax of £nil (2004: £1.0 million charge) (3) Accounting policies used in the preparation of the unaudited financial information for the 26 weeks ended 3 July 2005 reflect changes resulting from the adoption of International Financial Reporting Standards. The accounting policies adopted are detailed in note 2 on page 14. The 2004 interim results have been restated on this basis. (See note 17 on page 27) (4) Impact of fair value, exchange rate, and amortisation adjustments on borrowings and associated financial instruments accounted for under IAS 39. References to IAS 39 throughout this document shall have the same meaning Sir Victor Blank, Chairman of Trinity Mirror plc, commented: "Management continues to deliver value to shareholders by improving thebusiness, delivering against our financial targets and driving the growthstrategy forward with even greater vigour." Sly Bailey, Chief Executive of Trinity Mirror plc, commented: "We have delivered a satisfactory performance, despite the current tradingenvironment. I believe that this demonstrates that we have stabilised andrevitalised the business to achieve sustainable improvements in performance.Having stabilised the core business, we remain fully focused on growth." Enquiries:Trinity Mirror plc 020 7293 3000Vijay Vaghela, Group Finance DirectorNick Fullagar, Director of Corporate Communications Finsbury 020 7251 3801Rupert YoungerJames Leviton Within the following Chief Executive's review and review of operations, allfigures are presented on a pre non-recurring items basis, as defined infootnotes (1) and (2) on page 1, unless otherwise stated, and reflect the impactof implementing International Financial Reporting Standards (IFRS) for both 2005and 2004. A full reconciliation of the performance from IFRS to UK GAAP is shownon pages 35 to 36. Chief Executive's Statement During the 26 weeks ended 3 July 2005 Group revenues increased by 1.2% from£572.7 million to £579.3 million, operating profits* increased by 7.9% from£118.9 million to £128.3 million and operating margin* improved by 1.3% from20.8% to 22.1%. The improved performance has been achieved despite a difficultadvertising market and reflects the continued benefits of the Group's "StabiliseRevitalise Grow" strategy. In particular, the Group operating margin improvementreflects the effectiveness of the strategy in driving continuous improvementacross our portfolio of products and publishing processes. Following a good start to the year in January and February, advertising marketconditions deteriorated in March and remained challenging during the secondquarter. The UK economy has slowed from the beginning of the year contributingto a weakening retail environment with sluggish consumer spending. This hasimpacted most advertising categories across our portfolio of newspaper titles.In common with other regional newspaper publishers, we have also seen areduction in the volume of recruitment advertising across the business. Despitethe weak advertising environment, our national titles continue to hold theiradvertising volume market share. As there remains limited visibility in theadvertising market place, we are managing the business on the assumption thatthe advertising conditions experienced in the first half will continue for theremainder of the year. Delivery against stated financial objectives The difficult advertising market conditions have not distracted management fromdelivery against our stated financial objectives. The short-term financialobjectives of the strategy, updated in March 2005, are as follows: • Annualised net cost savings of £35 million in 2005 with net incremental cost savings of £7 million in 2005 • Intention to return up to £250 million capital to shareholders through a three-year share buy-back programme commencing in 2005 • A policy to progressively increase dividends • Improvements in operating margins for the Regionals division The Group has delivered against each of the stated financial objectives asfollows: • Incremental cost savings of £4.1 million have been achieved in the period and the Group is on track to deliver at least £35 million net annualised cost savings this year • 4.9 million shares have been acquired since March 2005 at a cost of £32.5 million. The Group remains on track to complete the £250 million return of capital over three years to 2007 • The interim dividend has been increased by 8.5% • Operating margins* for the Regionals division have further increased by 1.1% to 28.4% In addition to meeting the stated objectives, including the returning of capitalto shareholders, the Group has maintained stable net debt, which has onlyincreased marginally by £3.4 million to £457.4 million excluding the impact ofIAS 39. Driving growth The positive momentum created through our performance-based strategy "StabiliseRevitalise Grow" has continued during the period. Despite the difficult trading conditions management has continued to focusattention on driving longer-term growth, through investment in both the corebusiness and complementary new products and revenue streams. In the core business, we have concentrated on the disciplines of portfoliomanagement through revitalising and relaunching existing titles, improvingconsumer and advertiser propositions, continuing with the 'little and often'cover pricing policy, making improvements to the distribution and availabilityof our titles, a strong focus on advertising yield management and attention tocost management. This focus has strengthened and revitalised our portfolio and is deliveringtangible benefits that are clear to see in our results. In addition to strengthening and building our portfolio of newspaper titles, wehave continued the process of growing and transforming Trinity Mirror into amulti-platform publishing business. This has been achieved by focusing onmeeting the broader needs of our market segments, geographies and customergroups, by deepening and strengthening penetration in our core markets both inprint and on-line and so securing a strong foundation for further developmentand growth. While the Group is still in the early stages of the growth phase of itsstrategy, real progress has been made over the last six months: • Since joining in February, Georgina Harvey, Managing Director for the Regionals division, has undertaken a root and branch review of the business and has formulated clear action plans to further improve performance. These plans have been framed into three clear strategic priorities: to drive top and bottom line performance to further improve margins, to drive efficiencies in the operating model by fully capturing the benefits of scale and to accelerate growth through a stronger focus on growth and innovation. • This month we announced the acquisition of smartnewhomes.com - the UK's largest and most successful online business focused exclusively on the new homes sector. This is the first acquisition the Group has made since announcing the "Stabilise Revitalise Grow" strategy and builds on our existing print presence in this core market. The acquisition will be immediately cash flow positive with significant growth potential. • In the Autumn the Racing Post will launch its joint venture with Racing UK to provide a broadband service, linking live and archive video of horseracing with online betting and form research. This will use Racing UK's rights from 31 premier racecourses and the Racing Post's expertise in online content and betting to create a new platform for horseracing enthusiasts. Five of the UK's leading bookmakers have been selected to partner the venture. Each of these partners will have a prime position on the site and consumers will also be able to watch the video stream in a bookmaker-specific site. • We have continued to segment and deepen our presence in our core recruitment advertising markets with the launch of local recruitment websites which build on the successful launches seen in Scotland and Wales last year. To date in 2005 we have launched new sites in the South East, North East and the North West. During August we will complete coverage of our regional markets with the launch of another new site in the Midlands. These local sites provide precision targeting for advertisers and job seekers, to complement the reach of the national fish4jobs network, the UK's most popular online recruitment brand. • In August, we will strengthen our position in the key public sector recruitment area, launching Insidepublic.co.uk, a national website providing news, career advice and job opportunities to those seeking work in the public sector. • In June the Group launched a new public sector magazine - Communities Today. This new title will be published alongside our market-leading title Inside Housing, further strengthening our position in the public sector via a cluster publishing strategy. • We are commencing a £83 million capital expenditure programme which secures full colour for the Group's five National newspapers and a number of Regional newspaper titles by early 2008. In addition to securing full colour this investment replaces presses and ancillary equipment which are coming to the end of their useful economic life and provides substantial operating efficiencies from 2007. This investment will be funded through cash flow, with total capital expenditure being maintained at approximately £60 million per annum for 2006 and 2007 before reverting to a more normalised spend, which is expected to be below £30 million per annum. • We are piloting paid for e-editions of our newspapers, with the launch of The Journal e-edition - an electronic edition of the North East of England's best-selling morning newspaper. • We continue to develop our directories business. We plan to publish four editions of The One directory across Scotland in the second half of 2005. We expect to publish a further three editions in 2006 bringing the total to seven editions. In addition to the above initiatives, the Group is considering a range of otherorganic and acquisition opportunities for growth. We expect some of these to beevident in the second half of this year. Despite the continued challenges in trading conditions we remain committed topursuing and accelerating options for growth across the Group's portfolio ofbusinesses. We are confident that our strategy will deliver enhanced returns forshareholders and we will provide a further update on progress at theannouncement of our preliminary results for the year in March 2006. Sly Bailey, Chief Executive28 July 2005 Review of operations Group revenue increased by 1.2% from £572.7 million to £579.3 million and Groupoperating profit* increased by 7.9% from £118.9 million to £128.3 million. Groupoperating margins* have increased by 1.3% from 20.8% to 22.1%. The results reflect the impact of difficult advertising market conditions, whichcontributed to advertising revenues falling by 0.4% from £324.2 million to£323.0 million whilst circulation revenues increased by 3.1% from £194.8 millionto £200.9 million. The operating profit performance incorporates the benefit of net incrementalcost savings of £4.1 million and a reduced operating profit pension charge(excluding past service enhancements) under IAS 19 of £1.7 million which havebeen partially offset by a 7.0% newsprint price increase for the year whichincreased costs by £5.0 million in the period. There are no reported non-recurring items for the period. Earnings per share before non-recurring items increased by 13.6% from 23.5 penceper share to 26.7 pence per share, reflecting the increased operating profit,reduced finance costs and the benefit of the reduced number of shares in issuedue to the share buy-back programme. The interim dividend has been increased by 8.5% to 6.4 pence per share (2004:5.9 pence per share). It will be paid on 1 November 2005 to shareholders on theregister at 7 October 2005. Under International Financial Reporting Standardsthe dividend has not been recognised in the Interim Balance Sheet as a liabilityas it was not approved by the Board until 28 July 2005 which was after theinterim period end. The Group continued to deliver strong operating cash flows which increased by2.0% to £129.9 million (2004: £127.4 million). These strong cash flows enablednet debt to increase only marginally by £3.4 million from £454.0 million at 2January 2005 to 457.4 million at 3 July 2005 excluding the impact of IAS 39despite net capital expenditure of £13.2 million, £32.5 million expenditure forthe share buy back and payment of the 2004 final dividend of £41.7 million. The adoption of IFRS and the consequent adoption of IAS 39 potentially createssignificant volatility in both the income statement and reported debt levels. Toprovide clarity moving forward, all adjustments arising from IAS 39 will beidentified and underlying debt levels excluding the impact of IAS 39 willcontinue to be disclosed. The reported net debt including the adoption of IAS 39is shown in note 11. Net debt excluding the impact of IAS 39, which reflects theunderlying position, is shown in note 16. Capital expenditure of £60 million is expected for the full year reflecting thecontinued expenditure in relation to the re-pressing at the Oldham print siteand £4 million relating to the £83 million capital expenditure programmeannounced today. On 18th July 2005 the Group completed the acquisition of Smart Media ServicesLtd., the owner of smartnewhomes.com, the UK's leading internet marketing portalfor new-build homes. An initial consideration of £11.3 million (excludingtransaction costs) has been settled by £10.6 million in cash and the issue of£0.7 million loan notes. During the period the IAS 19 operating profit pension charge for current servicefell by £1.7 million to £14.1 million with cash contributions (excluding pastservice enhancements) increasing by £11.9 million to £25.6 million. Pensionscheme liabilities, before the provision of deferred taxation increased by £8.9million to £330.8 million. This reflects an increase in liabilities of £79.0million and an increase in assets of £70.1 million. The increase in liabilitiesreflects a fall in the real rate of return applied to discount liabilities. Thisfell from 2.55% at 2 January 2005 to 2.35% at 3 July 2005. Net pension scheme liabilities, after the provision of deferred taxation,increased by £6.3 million from £225.3 million to £231.6 million. Regionals division The Regionals division achieved revenue growth of 2.6% from £270.4 million to£277.3 million and operating profit* growth of 6.6% from £73.9 million to £78.8million. Operating margin* increased by 1.1% from 27.3% to 28.4%. The increasein operating profit* incorporates a £3.3 million increase for the Regionalnewspaper titles excluding Metros, £0.5 million increase in Metros and profitsof £0.9 million for Digital Media activities compared to a loss of £0.2 millionin 2004. Advertising revenues increased 1.5% to £214.1 million (2004: £211.0 million)with growth of 0.4% from £203.3 million to £204.1 million for our Regionalnewspapers titles (excluding Metros), an increase in advertising revenue for theMetro titles of 15.8% from £5.7 million to £6.6 million and Digital Mediaadvertising achieving growth of 70.0% from £2.0 million to £3.4 million. The division achieved growth in advertising revenues of 4.0% for January toApril with a fall in advertising revenues of 3.3% for May and June. Growth of3.1% for Display, 17.9% for property and 3.4% for other classified categorieshas been partially offset by declines of 6.7% for recruitment and 2.7% formotors. With the exception of the regional newspaper titles in the South and theMidlands where advertising revenues fell by 1.6% and 0.8% respectively, and theNorth West, where revenues were flat, all regions achieved year on yearadvertising revenue growth for the period. Regional newspapers circulation revenue increased by 5.1% from £39.6 million to£41.6 million, with the continued benefit of the 'little and often' cover pricepolicy. Circulation volumes for the Regional titles declined by 0.9% for dailymorning titles, 4.6% for daily evening titles, 5.5% for Sunday titles and 3.6%for the weekly titles. Excluding the Midlands titles, which continue to haveweak circulation performance for the daily morning, evening and Sunday titles,there has been a general improvement in circulation volume performance, with anincrease of 0.3% for daily morning titles, a fall of 2.5% for the evening titlesand a fall of 0.9% for the Sunday titles. A new management team has beenappointed in the Midlands to address the weak performance of our titles in thisregion. The results of smartnewhomes.com, acquired in July 2005, will be reported withinthe results of the Regionals division. For 2005, revenues post acquisition areexpected to be £1.5 million. Nationals division In a difficult advertising market where total national newspapers advertisingvolumes suffered a substantial reduction, our Nationals divisional revenues fellby 0.9% from £257.9 million to £255.5 million. Despite the fall in revenues,operating profit* increased by 5.9% from £40.5 million to £42.9 million due tothe benefits of cost savings partially offset by inflationary price increasesand a 7.0% increase in the price of newsprint. Operating margin* improved from15.7% to 16.8%. Revenues for the UK Nationals fell by 1.6% from £202.2 million to £198.9 millionand those for the Scottish Nationals increased by 1.6% from £55.7 million to£56.6 million. Despite the fall in revenues, operating profit for the UKNationals increased by 11.8% reflecting continued tight cost management. For theScottish Nationals operating profit fell by 8.6% or £1.0 million, reflectingcosts of £0.6 million for The One Directory, losses of £0.1 million forScotcareers and additional investment in product and marketing of £0.4 million. Circulation revenue for the Group's five National titles (and relatedbusinesses) increased by 2.0% from £137.4 million to £140.1 million reflectingthe benefit of cover price increases implemented during 2004 for the two dailytitles and increases in January this year for the three Sunday titles.Circulation revenues for the UK and Scottish Nationals increased by 1.0% and5.8% respectively. In a competitive national newspaper marketplace we have seen some improvementsin the year-on-year circulation volume performance for the Daily Mirror andSunday Mirror in recent months. The Daily Mirror circulation volume, excluding sampling, declined by 7.7%year-on-year during the period. The six-monthly volume market share for theDaily Mirror fell by 0.2% to 19.3% during the period. The year-on-year volumeperformance has improved in recent months with declines of 3.6% and 5.0% for Mayand June respectively compared to declines of 9.4% and 8.9% for the firstquarter and April respectively. The improved year-on-year performance reflectsthe benefits of a more consistent publishing mix and the passing of theanniversary of the fake Iraqi prisoner abuse pictures published in May 2004. The Sunday Mirror and The People circulation volume, excluding sampling,declined year-on-year by 3.4% and 7.1% respectively during the period. Thesix-monthly volume market share for the Sunday Mirror fell by 0.1% to 15.8% andfor the People remained flat at 9.8% during the period. The circulation volumes for the Daily Record and the Sunday Mail declined by5.5% and 5.7% respectively for the period. Advertising revenue for the Nationals division declined by 5.4% from £99.0million to £93.7 million during the period. Although the market continues to beunpredictable and volatile, our national newspapers continue to maintain volumemarket share of advertising. The UK Nationals advertising revenue declined by 7.0% from £73.9 million to£68.7 million and the Scottish Nationals advertising revenue declined by 0.4%from £25.1 million to £25.0 million. Sports division The Sports division continues to deliver strong results with revenues increasingby 10.5% from £23.7 million to £26.2 million, and operating profits* increasingby 9.3% from £8.6 million to £9.4 million. Advertising and circulation revenueincreased by 14.9% and 9.7% respectively. The on-line activities of the division continue to deliver positive results withrevenues increasing by 34.6% to £1.2 million and operating profits doubling to£0.5 million. In April the Racing Post announced that it had joined forces with Racing UK, theUK's leading horseracing channel, to provide an innovative broadband service foron-line customers. The service offers consumers a combination of live andarchive video coverage from Racing UK's 31 premier racecourses together withcomprehensive racing analysis and form supplied by the Racing Post. The servicehas secured significant commercial support from five of the UK's leadingbookmakers and will enable customers to bet and watch live racing. Magazines and Exhibitions Despite a difficult trading environment the Magazines and Exhibitions divisiondelivered a strong performance with revenues increasing by 4.6% to £20.3 millionand operating profits* increasing by 10.2% to £5.4 million. June saw the launch of Communities Today, a fortnightly title targeted at thepublic sector. August sees the launch of InsidePublic, a specialist websiteserving the needs of the public sector, which builds on the strength of theGroup's market leading title, Inside Housing. Central Costs Central costs have reduced by 3.4% from £8.8 million to £8.5 million reflectingtight cost control. Outlook The advertising market has remained difficult since March and reflects thegeneral slowdown in the UK economy since the beginning of the year. Managementare running the business on the assumption that the difficult tradingenvironment will continue for the remainder of the year. The Board remains confident in the strategy and continues to expect asatisfactory outcome for the year. * Pre non-recurring items as defined in footnote (1) on page 1 Trinity Mirror plc Consolidated income statement (unaudited)for the 26 week period to 3 July 2005 26 weeks 26 weeks 53 weeks to to to 3 July 27 June 2 January 2005 2004 2005 (audited) £m £m £m Notes Revenue 3 579.3 572.7 1,141.7Cost of sales (277.4) (272.6) (533.6) -------- -------- ---------Gross profit 301.9 300.1 608.1 Distribution costs (69.0) (72.6) (140.5)Administrative expenses:Non-recurring 4 - (3.5) (12.2)Other (104.9) (109.0) (213.4)Share of results of associates 0.3 0.4 0.8 -------- -------- ---------Operating profit 3 128.3 115.4 242.8 Finance costs (excluding IAS39 impacts*) 9 (15.8) (19.4) (38.2)IAS 39 impact* 9 0.7 - -Profit on disposal ofsubsidiary undertakings 4 - 2.5 2.5 -------- -------- ---------Profit before tax 113.2 98.5 207.1 Tax 5 (34.7) (29.3) (62.0) -------- -------- ---------Profit for the period 78.5 69.2 145.1 ======== ======== =========Attributable to:Equity holders of the parent 78.5 69.1 145.0Minority interest - 0.1 0.1 -------- -------- --------- 78.5 69.2 145.1 ======== ======== =========Earnings per share (pence) 7 Pence Pence PenceExcluding IAS 39 impact*--------------------------Underlying earning per share 26.6 23.5 51.2Non-recurring items - - (2.0)Earnings per share - basic 26.6 23.5 49.2Earnings per share - diluted 26.3 23.2 48.7 Including IAS 39 impact*--------------------------Underlying earning per share 26.7 23.5 51.2Non-recurring items - - (2.0)Earnings per share - basic 26.7 23.5 49.2Earnings per share - diluted 26.4 23.2 48.7 All revenue and results arose from continuing operations * Impact of fair value, exchange rate, and amortisation adjustments onborrowings and associated financial instruments accounted for under IAS 39.References to IAS 39 throughout this document shall have the same meaning. Trinity Mirror plc Consolidated statement of changes in equity (unaudited)for the 26 week period to 3 July 2005 26 weeks to Share capital and Share Revaluation Retained Total3 July 2005 capital redemption Premium reserves earnings and reserve other reserves £m £m £m £m £m Openingbalances 29.7 1,101.7 4.9 (430.7) 705.6 ----------- -------- -------- ----------- ------Profit for theperiod - - - 78.5 78.5Dividends - - - (41.7) (41.7) Actuariallosses ondefinedbenefit pensionschemes (netof tax) - - - (13.9) (13.9) ----------- -------- -------- ----------- ------Totalrecognisedincome andexpense - - - 22.9 22.9 ----------- -------- -------- ----------- ------Recogniseddirectly inequityNew sharecapitalsubscribed 0.1 4.2 - - 4.3Buy-backsharescancelled (0.5) - - (32.0) (32.5)Investment inshares forLTIP - - - (5.7) (5.7)Available-for-sale financialassets fair value movementnet of tax - - - 2.0 2.0Expense of thecost of theinvestment in LTIPshares - - - 1.9 1.9 ----------- -------- -------- ----------- ------Net changedirectly inequity (0.4) 4.2 - (33.8) (30.0) ----------- -------- -------- ----------- ------Total movements (0.4) 4.2 - (10.9) (7.1) ----------- -------- -------- ----------- ------ Equity at theend of theperiod 29.3 1,105.9 4.9 (441.6) 698.5 ----------- -------- -------- ----------- ------ 26 weeks to Share Share Revaluation Retained Total27 June 2004 capital Premium reserves earnings and other reserves £m £m £m £m £m Openingbalances 29.4 1,089.5 5.0 (537.5) 586.4 -------- -------- ------------ ----------- ------Profit for theperiod - - - 69.2 69.2Dividends - - - (37.6) (37.6)Actuarialgains ondefinedbenefit pension schemes (netof tax) - - - 16.3 16.3 -------- -------- ------------ ----------- ------Totalrecognisedincome andexpense - - - 47.9 47.9 -------- -------- ------------ ----------- ------Recognised directlyin equityNew sharecapitalsubscribed 0.1 7.2 - - 7.3Investment inshares forLTIP - - - (6.2) (6.2)Othermovements - - - (0.2) (0.2) -------- -------- ------------ ----------- ------Net changedirectly inequity 0.1 7.2 - (6.4) 0.9 -------- -------- ------------ ----------- ------Totalmovements 0.1 7.2 - 41.5 48.8 -------- -------- ------------ ----------- ------Equity at theend of theperiod 29.5 1,096.7 5.0 (496.0) 635.2 -------- -------- ------------ ----------- ------ Trinity Mirror plc Consolidated statement of changes in equity (unaudited)for the 26 week period to 3 July 2005 53 weeks to Share Share Revaluation Retained earnings Total2 January 2005 capital Premium reserves and other reserves £m £m £m £m £m Openingbalances 29.4 1,089.5 5.0 (537.5) 586.4 -------- -------- ------------ -------------- ------Profit for theperiod - - - 145.1 145.1Dividends - - - (55.1) (55.1)Actuarialgains ondefinedbenefit pension schemes(net of tax) - - - 24.9 24.9 -------- -------- ------------ -------------- ------Totalrecognisedincome andexpense - - - 114.9 114.9 -------- -------- ------------ -------------- ------Recogniseddirectly inequityNew sharecapitalsubscribed 0.3 12.2 - - 12.5Investment inshares forLTIP - - - (6.2) (6.2) Expense of thecost of theinvestment - - - 1.8 1.8in LTIP sharesMovement onrevaluation - - (0.1) - (0.1)Purchase ofminorityinterest - - - (3.7) (3.7) -------- -------- ------------ -------------- ------Net changedirectly inequity 0.3 12.2 (0.1) (8.1) 4.3 -------- -------- ------------ -------------- ------Totalmovements 0.3 12.2 (0.1) 106.8 119.2 -------- -------- ------------ -------------- ------Equity at theend of theperiod 29.7 1,101.7 4.9 (430.7) 705.6 -------- -------- ------------ -------------- ------ Trinity Mirror plc Consolidated balance sheet (unaudited)at 3 July 2005 Notes 3 July 27 June 2 January 2005 2004 2005 (audited) £m £m £m Non-current assetsGoodwill 6.0 6.0 6.0Other intangible assets 1,579.9 1,579.9 1,579.9Property, plant and equipment 380.4 394.4 387.8Investments in associates 7.2 7.2 7.5Deferred tax asset 109.1 113.2 106.5 -------- -------- --------- 2,082.6 2,100.7 2,087.7 -------- -------- ---------Current assetsInventories 6.5 6.6 6.7Available-for-sale financial assets 8 4.1 1.1 1.3Trade and other receivables 159.3 171.5 147.7Cash and cash equivalents 29.2 33.7 43.4 -------- -------- --------- 199.1 212.9 199.1 -------- -------- ---------Total assets 2,281.7 2,313.6 2,286.8 -------- -------- ---------Non-current liabilitiesBorrowings (382.2) (470.7) (440.8)Obligations under finance leases (16.1) (24.0) (17.7)Retirement benefit obligation 13 (330.8) (338.3) (321.9)Deferred tax liabilities (538.0) (543.7) (540.9)Long term provisions (9.9) (8.6) (8.1)Derivative financial instruments 10 (59.0) - - -------- -------- --------- (1,336.0) (1,385.3) (1,329.4) -------- -------- ---------Current liabilitiesBorrowings (27.2) (63.5) (36.4)Trade and other payables (173.9) (188.8) (175.0)Current tax liabilities (39.3) (33.0) (33.2)Obligations under finance leases (2.3) (2.8) (2.5)Short term provisions (4.5) (5.0) (4.7) -------- -------- --------- (247.2) (293.1) (251.8) -------- -------- ---------Total liabilities (1,583.2) (1,678.4) (1,581.2) -------- -------- ---------Net assets 698.5 635.2 705.6 ======== ======== =========EquityShare capital (29.8) (29.5) (29.7)Share premium account (1,105.9) (1,096.7) (1,101.7)Revaluation reserves (4.9) (5.0) (4.9)Capital redemption reserve 0.5 - -Retained earnings and other 441.6 499.7 430.7reserves -------- -------- ---------Equity attributable to equityholders (698.5) (631.5) (705.6)of the parent Minority interest - (3.7) - -------- -------- ---------Total equity (698.5) (635.2) (705.6) ======== ======== ========= Trinity Mirror plc Consolidated cash flow statement (unaudited)For the 26 week period to 3 July 2005 Notes 26 weeks 26 weeks 53 weeks to to to 3 July 27 June 2 January 2005 2004 2005 (audited) £m £m £m Cash flows from operatingactivitiesCash generated from operations 11 129.9 127.4 288.8Income tax paid (29.1) (22.9) (55.6) -------- -------- ---------Net cash from operating activities 100.8 104.5 233.2 Investing activitiesInterest received 0.8 0.3 0.8Dividends received from associated undertakings 0.6 3.2 3.2Purchase of shares from minority interests - - (4.5)Net cash balances disposed of with subsidiary undertaking - (2.1) (2.1)Proceeds from sales of subsidiary undertakings - 44.7 44.7Proceeds on disposal of property, plant and equipment 0.9 1.0 1.8Purchases of property, plant and equipment (13.2) (14.8) (37.3)Proceeds from sale of motor cycle show business - 0.2 0.2 -------- -------- ---------Net cash (used in)/from investing activities (10.9) 32.5 6.8 -------- -------- ---------Financing activitiesDividends paid (41.7) (37.6) (55.1)Dividend paid to minority shareholders - (0.1) (0.1)Interest paid (16.9) (17.9) (33.8)Interest paid on finance leases (0.6) (0.7) (2.2)Repayments of borrowings (13.7) (84.8) (138.2)Principal payments under finance leases (1.8) (4.4) (11.0)Purchase of shares under share buy-back (32.5) - -Issue of shares 4.3 7.3 12.5Purchase of own shares under LTIP (5.7) (6.2) (6.2)Increase in bank overdrafts 4.5 6.8 3.2 -------- -------- ---------Net cash used in financing activities (104.1) (137.6) (230.9) -------- -------- ---------Net (decrease)/increase in cash and cash equivalents (14.2) (0.6) 9.1Cash and cash equivalents at the beginning of period 43.4 34.3 34.3 -------- -------- ---------Cash and cash equivalents at the end of period 29.2 33.7 43.4 ======== ======== ======== Trinity Mirror plc Notes to the interim financial report (unaudited) 1. General information The financial statements for the 26 weeks to 3 July 2005 do not constitutestatutory accounts for the purposes of Section 240 of the Companies Act 1985 andhave not been audited. No statutory accounts for the period have been deliveredto the Registrar of Companies. The financial information in respect of the 53 weeks ended 2 January 2005 hasbeen produced using extracts from the statutory accounts under UK GAAP for thisperiod and amended by adjustments arising from the implementaion ofInternational Financial Reporting Standards (IFRS). The statutory accounts forthis period have been filed with the Registrar of Companies. The auditors'report on these accounts was unqualified and did not contain a statement underSections 237 (2) or (3) of the Companies Act 1985 which deal respectively withthe maintaining of proper accounting books and records and the availability ofinformation to the auditors. The financial information presented on pages 9 to36 has been prepared based on the adoption of IFRS, including InternationalAccounting Standards (IAS) and interpretations issued by the InternationalAccounting Standards Board (IASB) and its committees, as interpreted by anyregulatory bodies relevant to the Group. These are subject to ongoing amendmentby the IASB and subsequent endorsement by the European Commission and aretherefore subject to change. As a result the accounting policies used to preparethe interim financial report will need to be updated for any subsequentamendment to IFRS required for first time adoption, or any new standards thatthe Group may elect to adopt early. The auditors have carried out a review of the interim report and their report isset out on page 37. The interim report was approved by the directors on 28 July 2005. 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. Accounting policies The policies set out below have been consistently applied to all the yearspresented except for those relating to the classification and measurement offinancial instruments. Trinity Mirror plc consolidated financial statements were prepared in accordancewith Generally Accepted Accounting Principles (UK GAAP) until 2 January 2005. UKGAAP differs in some areas from IFRS. In preparing Trinity Mirror plc 2005consolidated interim financial statements, management has amended certainaccounting, valuation and consolidation methods applied in the UK GAAP financialstatements to comply with the recognition and measurement criteria of IFRS. Thecomparative figures in respect of 2004 were restated to reflect theseadjustments. The Group has made use of the exemption available under IFRS 1 to only applyIAS32 "Financial Instruments: Disclosure and Presentation" (IAS 32) and IAS 39"Financial Instruments: Recognition and Measurement" (IAS 39) from 3 January2005. Reconciliations and descriptions of the effect of the transition from UK GAAP toIFRS on the Group's equity and its net income and cash flows are provided innote 17. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company for the 26 weeks to 3 July2005. Associates Associates are all entities over which the Group has significant influence butnot control and are accounted for by the equity method of accounting, initiallyrecognised at cost. The Group's share of its associates' post-acquisition profits or losses isrecognised in the income statement, and its share of post-acquisition movementsin reserves is recognised in reserves. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary, associate or jointly controlled entityat the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in profit or loss and is notsubsequently reversed. On disposal of a subsidiary, associate or jointly controlled entity, theattributable amount of goodwill is included in the determination of the profitor loss on disposal. Goodwill arising on acquisitions before the date of transition to IFRS has beenretained at the previous UK GAAP amounts subject to being tested for impairmentat that date. 2.Accounting policies (continued) Revenue recognition Revenue comprises Group sales, net of applicable discounts and value added tax.Advertising revenue is recognised upon publication and circulation revenue isrecognised at the time of sale. Other revenue is recognised at the time of saleor provision of service. Property, plant and equipment Property, plant and equipment are stated in the balance sheet at cost less anysubsequent accumulated depreciation and subsequent accumulated impairmentlosses. Assets in the course of construction are carried at cost, less any recognisedimpairment loss. Depreciation commences when the assets are ready for theirintended use. Depreciation is charged so as to write off the cost, other than assets underconstruction, using the straight-line method over the estimated useful livesdetailed below: Property 15 - 67 yearsPlant and equipment 3 - 25 years Assets held under finance leases are depreciated over their expected usefullives on the same basis as owned assets or, where shorter, over the term of therelevant lease. Intangibles Intangibles comprise acquired publishing rights and titles. These have anindefinite life and are not amortised. The carrying value is based on fair valueattributed on acquisition less any subsequent impairment. Impairment of assets excluding goodwill The Group reviews, annually, the carrying amounts of its tangible and intangibleassets to determine whether those assets have suffered an impairment loss. Ifany such loss exists, the recoverable amount of the asset is estimated in orderto determine the extent of the impairment loss (if any). An intangible assetwith an indefinite useful life is tested for impairment annually and wheneverthere is an indication of a loss the asset may be impaired. Recoverable amount is the higher of fair value less disposal costs and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using the Group's weighted average cost of capital. If the recoverable amount of an asset is estimated to be less than its carryingamount, the carrying amount of the asset is reduced to its recoverable amount.An impairment loss is recognised as an expense immediately. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Investments Investments are classified as available-for-sale, and are initially measured atcost and subsequently reported at fair value. Available-for-sale investments andgains and losses arising from changes in fair value are recognised directly inequity, until the security is disposed of or is determined to be impaired, atwhich time the cumulative gain or loss previously recognised in equity isincluded in the net profit or loss for the period. 2.Accounting policies (continued) Borrowings Interest-bearing loans and bank overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anaccrual basis to the income statement using the effective interest method andare added to the carrying amount of the instrument to the extent that they arenot settled in the period in which they arise. Trade payables Trade payables are not interest-bearing and are stated at their nominal value. Derivative financial instruments The Group uses derivative financial instruments, including cross-currencyinterest rate swaps, interest rate swaps and other hedging instruments, tominimise exposure to the financial risks of changes in foreign currency exchangerates and interest rates. The Group does not use derivative financialinstruments for speculative purposes. Since 3 January 2005 derivative financial instruments are now separatelyrecognised at fair value in the financial statements. Changes in the fair valueof derivative financial instruments are recognised immediately in the incomestatement. Derivatives embedded in commercial contracts are treated as separate derivativeswhen their risks and characteristics are not closely related to those of theunderlying contracts, with unrealised gains or losses reported in the incomestatement. Tax The tax expense represents the sum of the corporation tax currently payable anddeferred tax. The corporation tax currently payable is based on taxable profit for the year.Taxable profit differs from profit before tax as reported in the incomestatement because it excludes items of income or expense that are taxable ordeductible in other years and it further excludes items that are never taxableor deductible. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Employee benefits - Retirement benefit costs The Group operates a number of funded defined benefit (final salary pension)schemes, all of which have been set up under Trusts that hold their financialassets separately from those of the Group. In addition, a number of definedcontribution arrangements are currently operated. Payments to defined contribution retirement benefit schemes are charged as anexpense as they fall due. The liability recognised in the balance sheet in respect of defined benefitpension plans is the present value of the defined benefit obligation at thebalance sheet date less the fair value of plan assets, together with adjustmentsfor unrecognised actuarial gains or losses and past service costs. The definedbenefit obligation is calculated annually by independent actuaries using theprojected unit credit method. The present value of the defined benefitobligation is determined by discounting the estimated future cash outflows usinginterest rates of high-quality corporate bonds approximating to the terms of therelated pension liability. Unrealised gains and losses are recognised in equityas an item within the statement of changes in equity. 2. Accounting policies (continued) Share-based payments The Group has applied the requirements of IFRS 2 Share-based Payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that were invested as of 3January 2005. The Group issues equity-settled benefits to certain employees.These equity-settled share-based payments are measured at fair value at the dateof grant. The fair value is determined at the grant date and is expensed on astraight-line basis over the vesting period, based on the Group's estimate ofshares that will eventually vest. Fair value is measured by use of a binomial model. The expected life used in themodel has been adjusted, based on management's best estimate, for the effects ofnon-transferability, exercise restrictions, and behavioural considerations. Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liabilityin the Group's financial statements in the period in which the dividends areapproved. Application of IFRS 1 The Group's financial statements for the year ended 1 January 2006 will be thefirst annual financial statements that comply with IFRS. These interim financialstatements have been prepared as described in note 1 including the principlesset out in IFRS 1. The Group's transition date is 29 December 2003. IFRS 1 sets out the procedures to be followed when adopting IFRS for the firsttime as the basis for preparing the Group's consolidated financial statements.The Group is required to establish its IFRS accounting policies as at 1 January2006 and, in general, apply these retrospectively to determine the IFRS openingbalance sheet at the date of transition. IFRS 1 provides a number of optionalexemptions to this general principle. The most significant of these are set outbelow, together with a description, in each case, of the exemption adopted bythe Group. • Business combinations - IFRS 3, Business Combinations The Group has elected not to restate business combinations recognised before thedate of transition. • Fair value as 'deemed' cost - IAS 16, Property, Plant and Equipment The Group has elected, where appropriate, to use fair value as the 'deemed' costof plant, property and equipment on adoption of IFRS. • Employee Benefits - IAS 19, Employee Benefits The Group has elected to recognise all cumulative actuarial gains and losses inrelation to employee benefit schemes at the date of transition. In subsequentperiods all actuarial gains and losses will be recognised in full in the periodin which they occur in the statement of changes in equity in accordance with theamendment to IAS 19, issued on 16 December 2004. • Financial Instruments - IAS 32, Financial Instruments:Disclosure and Presentation and IAS 39, Financial Instruments: Recognition andMeasurement The Group has elected to adopt IAS 32 and IAS 39 from 3 January 2005. Thereforethe comparative financial information in respect of financial instruments ispresented in accordance with UK GAAP. • Share-based Payments - IFRS 2, Share-Based Payments The Group has elected to apply IFRS 2 to all share-based awards and optionsgranted post 7 November 2002 but not vested at 3 January 2005. 3. Business segments For management purposes, the Group is currently organised into the followingdivisions: Regionals, Nationals, Sports, Magazines & Exhibitions and CentralRelated Shares:
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