Half-Yearly Financial Report For the 26 weeks ended 2 July 2017

Transcription

1 Half-Yearly Financial Report For the 26 weeks 31 July Results Adjusted results (1) Statutory results 26 Weeks 27 Weeks 26 Weeks 27 Weeks Revenue Operating profit Profit before tax Earnings per share 17.9p 19.1p 10.6p 12.8p Dividends per share p 2.10p Financial Highlights Resilient performance despite difficult trading environment, with one week less trading versus Strong management of the cost base limited the decline in adjusted operating profit to 9.4% or 6.5 million despite revenue falling by 14.6% or 54.7 million. Adjusted operating margin increased by 1.2 percentage points to 19.6%. Like for like (2) revenue fell by 9.3% or 32.9 million. Continued growth in digital revenue Like for like publishing digital revenue grew by 5.9% to 41.4 million with digital display and transactional revenue growing by 18.0%. This was partially offset by digital classified revenue falling by 23.9%. Structural cost savings target increased to 20 million We delivered structural cost savings of 10 million in the period. These were ahead of target and we have increased our structural cost savings target for the year to 20 million, 5 million ahead of the 15 million target. Decline in pension deficit by 59.2 million The IAS19 pension deficit fell by 59.2 million to million ( million net of deferred tax). The Group paid 20.6 million into the defined benefit pension schemes in the period. Net debt reduced to 22.4 million and continued financial flexibility Adjusted EBITDA (3) of 72.9 million and reduction in net debt (4) of 8.1 million to 22.4 million. The Group continues to have financial flexibility and during the period made the final payment of 68.3 million on the private placement loan notes utilising cash and a 30 million drawing on the 110 million bank facility. Interim dividend up 7.1% to 2.25 pence per share We remain committed to our progressive dividend policy and the Board expects dividends to increase by at least 5% per annum. The interim dividend has been increased by 7.1% from 2.10 pence to 2.25 pence per share. Share buyback progressing The Group acquired 4.2 million shares for 4.6 million during the period under the 10 million share buyback programme announced in August bringing the total amount purchased to 6.7 million shares for 6.9 million. Historical legal issues As previously announced, the provision for dealing with historical legal issues has been increased by 7.5 million. Strategy and outlook We continue to make progress with our strategy of growing digital display and transactional revenue whilst at the same time tightly managing our cost base to support profits and cash flow. Although the trading environment remains challenging, at this stage, the Board expects full year adjusted results to be in line with expectations. 1

2 Commenting on the interim results for, Simon Fox, Chief Executive, Trinity Mirror plc, said: Whilst the trading environment for print in the first half was volatile, we remain on course to meet expectations for the year. I continue to anticipate that the second half will show improving revenue momentum as we benefit from initiatives implemented during the first half of the year. Strategic Highlights Grow - Average monthly page views grew by 9.4% to almost 680 million with two thirds of these now on mobile - With 32.6 million unique UK browsers in June Trinity Mirror had more monthly unique browsers in the UK than any other commercial news brand - We delivered over 300 million video streams in the period, up 38% year on year Build - football.london was launched in January and achieved 1.8 million monthly browsers and 5.5 million page views in June - Belfast Live, Dublin Live and Glasgow Live delivered 4.2 monthly browsers and 14.0 million page views in June up on the 3.0 million monthly browsers and 8.7 million page views in December - Insider.co.uk and InYourArea.co.uk launched in the period and we anticipate good traction on audience during the second half Protect - Structural cost savings (including synergy savings from the integration of Local World) of 10 million - Secured a five year print and distribution contract for the Guardian and Observer newspapers - Renewed a five year print and distribution contract for the Racing Post - Sports Media secured match day programme and tournament magazine publishing contract for FIFA 2018 Consolidate - We continue to evaluate a number of ongoing opportunities that drive value and see ourselves as a consolidator in the newspaper industry Our progress on delivering the strategy is measured through five KPIs. In the period we achieved three out of the five KPI targets and anticipate further progress in the second half. Further details are on page 7. Board Changes The Company s Chairman, David Grigson, has indicated his intention to step down from the Board of Directors during the next calendar year, by which time he will have completed two three-year terms in office. Helen Stevenson, Senior Independent Director, will lead an orderly succession process, with the support of external consultants Egon Zehnder. Notes (1) On an adjusted basis excluding non-recurring items, restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results. (2) The like for like revenue trends for exclude from the comparative: the extra week of trading in, the Independent print and distribution contract which ceased in April, Rippleffect which was sold in August and the four Metros handed back to DMGT and other portfolio changes. Set out in note 17 is the reconciliation between reported revenue and the like for like revenue. (3) Adjusted operating profit ( 62.6 million) plus depreciation ( 10.3 million). (4) On a contracted basis assuming at that the private placement loan notes and related cross-currency interest rate swaps were not terminated prior to maturity. 2

3 Enquiries Trinity Mirror Brunswick Simon Fox, Chief Executive Nick Cosgrove, Partner Vijay Vaghela, Group Finance Director Will Medvei, Director Investor presentation A presentation for analysts will be held at 9.30am on Monday 31 July. The presentation will be live on our website: at 9.30am and a playback will be available from 2.00pm. Statutory and adjusted basis In the Management Report, performance is stated on an adjusted basis to provide a more meaningful comparison of the Group s trading performance. The adjusted results aim to demonstrate the performance of the Group without the volatility created by non-recurring items, restructuring charges in respect of cost reduction measures and accounting items such as the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results. Like for like revenue trend Revenue trends are distorted by a number of items in. The like for like revenue trends for exclude from the comparative: the extra week of trading in, the Independent print and distribution contract which ceased in April, Rippleffect which was sold in August, the four Metros handed back to DMGT and other portfolio changes. Set out in note 17 is the reconciliation between the reported revenue and the like for like revenue. Forward looking statements Statements contained in this Half-Yearly Financial Report are based on the knowledge and information available to the Company's directors at the date it was prepared and therefore the facts stated and views expressed may change after that date. By their nature, the statements concerning the risks and uncertainties facing the Company in this Half- Yearly Financial Report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. To the extent that this Half-Yearly Financial Report contains any statement dealing with any time after the date of its preparation such statement is merely predictive and speculative as it relates to events and circumstances which are yet to occur. The Company undertakes no obligation to update these forward-looking statements. 3

4 Management Report Operational Performance The Group delivered a resilient performance in the first half of despite the difficult trading environment which saw pressure on revenues, particularly print display advertising and both print and digital classified advertising. We continue to deliver good growth in our digital audience and the associated display and transactional revenue. Group revenue fell by 14.6% or 54.7 million to million. The fall in revenue includes the impact of an additional week of trading in the first half of, the cessation of the Independent print and distribution contract in April, the sale of Rippleffect in August and the impact of handing back four Metros to DMGT and other portfolio changes. On a like for like basis, Group revenue fell by 9.3% or 32.9 million. Like for like Publishing revenue fell by 9.8% to million. Publishing print revenue fell by 11.9% to million and we continued to achieve growth in digital revenue of 5.9% to 41.4 million with digital display and transactional revenue growing by 18.0% partially offset by digital classified revenue falling by 23.9%. Good cost control limited the fall in Group adjusted operating profit to 9.4% or 6.5 million to 62.6 million and the Group delivered adjusted EBITDA of 72.9 million (: 80.4 million). The Group delivered structural cost savings (including an incremental 5 million of synergy savings from the integration of Local World) of 10 million. Adjusted profit before tax fell by 8.4% to 61.3 million and adjusted earnings per share fell by 6.3% to 17.9 pence reflecting the impact of the falling revenues partially offset by tight cost management. Statutory operating profit fell by 6.3 million, profit before tax fell by 7.0 million and earnings per share fell by 2.2 pence. Non-recurring items were a charge of 7.3 million (: 4.0 million) and restructuring charges in respect of cost reduction measures were 6.4 million (: 10.1 million). The trading environment, particularly for our regional titles, has been very challenging during the period and it became clear that our regional organisational structure was not driving the optimum commercial focus. Therefore we initiated a restructure of the senior regional commercial management team to ensure that their full focus is on maximising advertising revenue from each local market. The objectives of the changes are to bring more clarity and accountability to roles, to speed up decision making and to improve our commercial performance. Financial Flexibility The cash flows generated by the Group provide resilience and financial flexibility to invest in the business, to grow dividends and over time meet pension obligations despite the uncertain economic environment. Reduction in contracted net debt of 8.1 million is lower than the reduction of 44.9 million in the first half of due to the share buyback and associated additional payment to the pension schemes, higher payments in relation to phone hacking and broadly flat working capital movements, whereas benefited from the extra week of trading and the timing of the period end. During the period, the Group repaid the final 68.3 million of the private placement loan notes utilising cash and drawing 30 million on the 110 million bank facility. The bank facility is committed until 2021 and the facility size amortises over the term reducing to 50 million for the last year of the term. Following the repayment of the private placement loan notes net debt is the same on both a contracted and statutory basis. Net debt of 22.4 million at the period end comprised the 30.0 million drawn on the bank facility and cash balances of 7.6 million. Historical Legal Issues We have continued to make progress on the settlement of civil claims in relation to phone hacking with damages for over 80% of claims settled. However, the lengthy process of settling claims and the structure and quantum of legal fees for the claimants has required the provision for settling these matters to be increased by 7.5 million in the period. The provision at the end of the period was 15.4 million. Although there remains uncertainty as to how these matters will progress, the Board remains confident that the exposures arising from these historical events are manageable and do not undermine the delivery of the Group s strategy. Pension Schemes The accounting pension deficit fell by 59.2 million to million ( million net of deferred tax) driven by strong asset returns and the benefit of a decrease in future mortality assumptions more than offsetting a further reduction in the discount rate. The fall in the accounting pension deficit does not have an immediate impact on the agreed funding commitments. The triennial valuation date of the schemes is 31 December and the valuations, which are currently in progress, are required to be completed by March

5 Management Report continued Dividends and Share Buyback The final dividend for of 3.35 pence per share was paid in June. The Board has approved an interim dividend for of 2.25 pence per share, representing an increase of 7.1% on the interim dividend. This will be paid on 29 September to shareholders on the register on 8 September. This is in line with the progressive dividend policy which is aligned to the free cash generation of the business with the Board expecting to increase dividends by at least 5% per annum. The Group acquired a further 4.2 million shares for 4.6 million during the period under the 10 million share buyback programme announced in August bringing the total amount purchased to 6.7 million shares for 6.9 million. Alongside the share buyback, the Board agreed to contribute a minimum of 5 million or up to a maximum of 75% of the share buyback as additional funding to the defined benefit pension schemes. The Group paid 5.0 million in and paid the remaining 2.5 million in the period. Current Trading and Outlook In July, Group revenue is expected to fall by 8% on a like for like basis and represents an improvement on the 9% decline in the first half. Structural cost savings for the year are expected to be some 20 million, which is 5 million ahead of our initial 15 million target, while restructuring charges are expected to be 15 million, 5 million ahead of our initial 10 million guidance. We continue to make progress with our strategy of growing digital display and transactional revenue whilst at the same time tightly managing our cost base to support profits and cash flow. Although the trading environment remains challenging, at this stage, the Board expects full year adjusted results to be in line with expectations. Strategic Update We refreshed our strategy at the beginning of the year and adopted new financial KPIs to ensure even closer alignment between our strategic initiatives and their financial outcomes. Our vision is to be an essential part of people s daily lives by delivering quality content and services that inform, enlighten and enrich. To deliver this vision it is clear that quality content is and will remain at the heart of our business. Our strategic objective remains to deliver sustainable growth in revenue, profit and cash flow over the medium term. This will be delivered through four key areas of strategic focus: Grow: Grow digital audience and revenue through deepening relationships with readers and optimising response for advertisers; Build: Build a diversified product portfolio and sustainable mix of new revenue; Protect: Protect our print brands by efficiently delivering quality products; and Consolidate: Seek out strategic opportunities that drive value. Growth from digital and new revenue streams will begin to outstrip print declines on an aggregate basis, leading to a stabilisation of Group revenue and then a return to top line growth. This, combined with our inbuilt and relentless focus on efficiencies, makes the Board confident that the delivery of sustainable growth in revenue, profit and cash flow is achievable in the future, for the benefit of all stakeholders. Key highlights of progress on each area of strategic focus during the first half of are set out below: Grow Publishing digital display and transactional revenue, which is primarily driven by audience, grew on a like for like basis by 18.0% to 32.8 million, benefitting from the higher page views and an increase in higher yielding revenues categories such as video. Video streams in the period were over 300 million, up 38% year on year. Digital classified revenue which is predominantly upsold from print fell on a like for like basis by 23.9% with the largest category, recruitment, falling by 33.3%. Digital audience growth continues with average monthly page views in the period growing by 9.4% year on year to almost 680 million. Mobile page views were some two thirds of the page views and grew by 22% while desktop pages views fell by 13%. Three quarters of page views were UK page views which grew by 11% while non UK page views grew by 4%. Page view growth rates have been adversely impacted by the removal of Streamo and Live Event page views as this functionality reduced the viewability of ads served due to the speed at which the pages were viewed by users. It is estimated to have impacted the growth rate by over 10%. 5

6 Management Report continued Strategic Update continued Grow continued We are simplifying our digital portfolio to focus on brands which can deliver scale and significant daily local audience reach in their market places. We continue to migrate the former Local World digital brands onto our Escenic content publishing platform and onto our fully responsive new Chameleon site. In the period, the Cambridge News, the Bristol Post, the Bath Chronicle, Gloucestershire Live, Somerset Live, the Hull Daily Mail, the Grimsby Telegraph, the Scunthorpe Telegraph and Lincolnshire Live have all moved and are benefiting from the new look design, cleaner template and more powerful digital storytelling tools. The new sites provide greater emphasis on video, and a much improved live blogging system. The roll out to all sites is expected to be completed by the end of September. We have established a national direct digital sales team, working with direct clients both existing and new, across our entire national and regional digital portfolio. With initial categories including Education, Travel and Professional Services, we will offer the opportunity to utilise our digital scale and develop audience marketing solutions. Build We continue to explore new product ideas to leverage our portfolio of print and digital brands whilst seeking to diversify the revenue streams beyond advertising. The three Live sites (Belfast, Glasgow and Dublin) delivered 4.2 million monthly browsers and 14.0 million page views in June, up on the 3.0 million monthly browsers and 8.7 million page views in December. The Live sites are a digital one-stop shop for all things relating to the city featuring live breaking news, local sport, entertainment, events, local interest, traffic and travel and What s On. InYourArea sites are being trialled for very local content. InYourArea is a hyperlocal news, information and local community product that aggregates in realtime the latest hyperlocal news, events, crime data, local issues, council updates, social media content and more, all using a postcode. We launched Insider.co.uk, a dynamic daily business news site, which operates alongside the market leading Business Insider magazine. The Insider team will provide Scottish businesses with a rich mix of live breaking city news, expert analysis and original economic data. We launched football.london in January which is a 24/7, fan-led, standalone digital site covering London football clubs with a focus on issues fans really care about, behind-the-scene, podcasts, interactive quizzes and games. The site has positive advocates on social media as a result of developing a particular tone of voice and authority. The site achieved 1.8 million monthly browsers and 5.5 million page views in June. The Group acquired a 50% stake in Brand Events in October. Brand Events is one of the UK s leading creators and operators of consumer event formats. The focus of the joint venture is to expand and create events in three main sectors: Sports, Crafts and Food. The target audience of the events are in line with our core audience and we are able to leverage our in-house marketing expertise across print and digital to help promote events and our regional footprint allows the efficient marketing of a roll-out of existing shows. Events will be centred on the main metropolitan cities which complements our regional and Scottish portfolios. Since the investment, Brand Events has launched three new events, bringing the total to five in. Protect Protecting our print brands through understanding our print readers and delivering a quality product, whilst leveraging our brands, communities and advertisers to maximise our financial performance remains a key area of strategic focus. Print markets remained challenging particularly advertising with display and other declining on a like for like basis by 17.9% and classified declining on a like for like basis by 23.5%. Circulation, the largest revenue category, performed better falling on a like for like basis by 6.3% with cover price increases reducing the impact of volume declines. Our national and regional newspapers showed the power of the brands in reporting on the election and other events on the national and regional stage in the period. In light of the challenging trading conditions across the Regionals business, a number of changes to the commercial management structure have been made. The objectives of the changes are to bring more clarity and accountability to roles, to speed up decision making and to improve our commercial performance. 6

7 Management Report continued Strategic Update continued Protect continued We have also reorganised the senior editorial teams and further reorganised the regional newsrooms across the UK. The restructure followed a review of growth opportunities in each of the markets we operate, and a review of our editorial print production practices. The review has identified opportunities for greater investment, particularly around digital and content creation, as we look to increase engagement and connect with digital audiences on a larger scale. The review of editorial print production has identified examples of best practice that is becoming standardised across the regions. We continue to rationalise the portfolio and have announced the closure of a small number of regional titles. Sport Media continues to consolidate its position as the UK's leading sports publishing business working with the best in the Premier League and World football, from clubs to international organisations and some of the top individuals in sport. It has recently been awarded the 2018 FIFA World Cup matchday programme and tournament magazine contract and this builds on the Rugby World Cup matchday programme in After a busy end to the football season which culminated in Sport Media helping Tottenham Hotspur deliver a hugely successful souvenir programme and record-breaking sales operation for the historic last game at White Hart Lane, and a special Champions book for Chelsea FC, Sport Media are currently focusing on a summer football calendar growth strategy. The Group delivered structural cost savings (including synergy savings from the integration of Local World) of 10 million. Restructuring charges in respect of cost reduction measures were 6.4 million. For the full year, we expect 20 million of structural cost savings (including synergy savings from the integration of Local World), 5 million ahead of the target for the year and 15 million of restructuring charges in respect of cost reduction measures. During the period, the Group secured a five year print and distribution contract for the Guardian and Observer newspapers from early 2018 and renewed a five year print and distribution contract for the Racing Post. Consolidate We continue to seek out strategic opportunities that drive value. We will continue to exercise rigorous discipline in considering any acquisition opportunities that enhance our strategy or brings new diversified revenue streams. We see ourselves as a consolidator in the newspaper industry and will continue to do so subject to tight financial returns. Key Performance Indicators To track delivery of our strategy, the following KPIs are reported on at each reporting date: FINANCIAL MEASURE GROUP KPIs PERFORMANCE IN THE PERIOD Publishing digital revenue growth At least 15% pa Circulation revenue Single digit declines Print advertising revenue At least in line with national market trends Operating margin Grow operating margin to support profits Dividend growth At least 5% pa Publishing digital revenue like for like growth of 5.9% for the period is below the KPI due to the material decline of 23.9% in classified advertising revenue with the audience related display and transactional revenue continuing to grow strongly by 18.0%. Circulation revenue like for like decline of 6.3% is in line with the target with cover price increases partially mitigating volume declines. Print advertising revenue is being impacted by volume declines which have been worse than the national market trends due to the strong performance during June from the European Football Championship related activity, particularly for the Daily Mirror, and a marked increase in travel advertising which benefited competitors more than our titles. Continued focus on costs has resulted in adjusted operating margin increasing by 1.2 percentage points from 18.4% to 19.6%. The interim dividend of 2.25 pence per share is an increase of 7.1% on the interim dividend. We anticipate an improvement in performance against the KPIs in the second half as we benefit from a number of initiatives started in the first half. 7

8 Management Report continued Group Review Income statement Statutory results Adjusted results Revenue Publishing Print Digital Printing Specialist Digital Central Revenue Costs (273.0) (321.3) (257.9) (306.0) Associates Operating profit Financing (9.1) (8.4) (1.3) (2.2) Profit before tax Tax (9.1) (9.2) (12.0) (13.5) Profit after tax Earnings per share 10.6p 12.8p 17.9p 19.1p The results have been prepared for the 26 weeks () and the comparative period is for the 27 weeks (). The results are presented on a statutory and adjusted basis to provide a more meaningful comparison of the Group s performance. Set out in note 16 is the reconciliation between the statutory results and the adjusted results. Group revenue fell by 14.6% or 54.7 million to million. The fall in revenue includes the impact of an additional week of trading in the first half of, the cessation of the Independent print and distribution contract in April, the sale of Rippleffect in August and the impact of handing back four Metros to DMGT and other portfolio changes. On a like for like basis, Group revenue fell by 9.3% or 32.9 million. Further details on the revenue trends for each division are shown in the Divisional Review. Set out in note 17 is the reconciliation between the reported revenue and the like for like revenue. Statutory results Adjusted results Labour (111.4) (125.7) (111.4) (125.7) Newsprint (30.8) (35.6) (30.8) (35.6) Depreciation (10.3) (11.3) (10.3) (11.3) Other (120.5) (148.7) (105.4) (133.4) Non-recurring items (7.3) (4.0) - - Amortisation of intangible assets (0.2) (0.2) - - Pension administrative expenses (1.2) (1.0) - - Restructuring charges in respect of cost reduction measures (6.4) (10.1) - - Other (105.4) (133.4) (105.4) (133.4) Costs (273.0) (321.3) (257.9) (306.0) Statutory costs fell by 48.3 million or 15.0% to million reflecting reduced adjusted operating costs and the benefit of lower restructuring costs in the period compared to the first half in which helped offset the more challenging advertising markets and higher non-recurring items in the period compared to the first half of. Nonrecurring items comprise the 7.5 million increase in the provision for dealing with and resolving civil claims arising from phone hacking partially offset by a 0.2 million gain on the sale of a property. Adjusted operating costs fell by 48.1 million or 15.7% to million reflecting the benefit of the impact of an additional week of trading in the first half of, the cessation of the Independent print and distribution contract in April, the sale of Rippleffect in August and the impact of handing back four Metros to DMGT and other portfolio changes together with reduced costs from structural cost savings and ongoing cost mitigation. 8

9 Management Report continued Group Review continued Statutory results Adjusted results Operating profit pre associates Associates Operating profit Statutory operating profit pre associates fell by 6.4 million or 12.0% to 47.0 million while adjusted operating profit pre associates fell by 6.6 million or 9.6% to 62.1 million. The Group has a 21.53% investment in PA Group and a 50% investment in Brand Events, accounted for as associated undertakings. The statutory and adjusted share of results from associates increased by 0.1 million to 0.3 million and 0.5 million respectively. The statutory operating profit fell by 6.3 million or 11.8% to 47.3 million. Adjusted operating profit fell by 6.5 million or 9.4% to 62.6 million with operating margin increasing by 1.2 percentage points from 18.4% to 19.6%. Statutory results Adjusted results Investment revenues Pension finance charge (5.9) (5.2) - - Finance costs (3.3) (3.5) (1.4) (2.5) Interest on bank overdrafts and borrowings (1.4) (2.5) (1.4) (2.5) Fair value (loss)/gain on derivative financial instruments (3.8) Foreign exchange gain/(loss) on retranslation of borrowings 1.9 (8.3) - - Financing (9.1) (8.4) (1.3) (2.2) Statutory financing costs which include the pension finance charge, the change in derivative financial instruments and the foreign exchange changes on retranslation of foreign currency borrowings increased by 0.7 million to 9.1 million. Adjusted financing costs fell by 0.9 million to 1.3 million reflecting the benefit of the repayment of borrowings in the prior year. The statutory tax charge of 9.1 million (: 9.2 million) comprises a current tax charge of 8.3 million (: 9.0 million) and a deferred tax charge of 0.8 million (: 0.2 million). The statutory effective tax rate is higher than the standard rate of corporation tax for the reasons set out in the reconciliation below: Reconciliation of tax charge % % Standard rate of corporation tax (19.3) (20.0) Items not deductible in determining taxable profit (non qualifying depreciation/costs) (4.7) (1.3) Tax effect of items that are not taxable in determining taxable profit (property disposal/utilised losses) Prior period adjustment (current and deferred tax) Tax effect of share of results of associates (brought in post tax) Tax charge rate (23.8) (20.4) The adjusted tax charge of 12.0 million (: 13.5 million) represents 19.6% (: 20.2%) of adjusted profit before tax. The adjusted effective rate is less than the statutory effective rate as the main items not deductible in determining taxable profit relate to non-recurring items. Statutory results Adjusted results Profit after tax Weighted average number of shares (000 s) 274, , , ,172 Earnings per share 10.6p 12.8p 17.9p 19.1p Statutory earnings per share fell by 2.2 pence or 17.2% to 10.6 pence. Adjusted earnings per share fell by 1.2 pence or 6.3% to 17.9 pence. The fall in the weighted average number of shares year on year reflects the shares bought back as part of the share buyback programme. 9

10 Management Report continued Divisional Review The Group has four operating segments, each of which is a division, that are regularly reviewed for the purposes of allocating resources and assessing performance. The divisional review that follows is presented on an adjusted basis and there is no difference between the operating profit by division and the segment result of each operating segment that is shown in note 3. The operating segments are: Publishing which includes all of our newspapers and associated digital publishing; Printing which provides printing services to the Publishing segment and to third parties; Specialist Digital which includes our acquired digital classified recruitment and digital marketing services businesses; and Central which includes revenue and costs not allocated to the operational divisions and our share of results of associates. The revenue and adjusted operating profit by operating segment is presented below: Variance Variance % Publishing (49.1) (14.2%) Printing (2.6) (13.3%) Specialist Digital (2.9) (37.7%) Central (0.1) (5.0%) Revenue (54.7) (14.6%) Publishing (7.3) (9.9%) Printing Specialist Digital % Central (5.5) (6.2) % Adjusted operating profit (6.5) (9.4%) The year on year revenue trends are distorted by the extra week of trading in, the Independent print and distribution contract which ceased in April, Rippleffect which was sold in August and the four Metros handed back to DMGT and other portfolio changes which took place in. The like for like revenue trends for exclude from the comparative the impact of these items. Publishing The revenue and adjusted operating profit for the Publishing division is as follows: Variance Variance % Print (50.8) (16.6%) Circulation (16.0) (9.9%) Advertising (34.1) (26.8%) Other (0.7) (4.1%) Digital % Display and transactional % Classified (3.0) (25.9%) Revenue (49.1) (14.2%) Costs (229.6) (271.4) % Adjusted operating profit (7.3) (9.9%) Adjusted operating margin 22.5% 21.4% 1.1% 5.1% Revenue fell by 14.2% or 49.1 million to million with print revenue falling by 16.6% and digital revenue growing by 4.3%. On a like for like basis revenue fell by 9.8% with print revenue declining by 11.9% and digital revenue growing by 5.9%. Costs fell by 15.4% or 41.8 million to million. This includes the benefit of the impact of an additional week of trading in the first half of, the cessation of the Independent distribution contract in April and the impact of handing back four Metros to DMGT and other portfolio changes together with the benefit of structural cost savings and ongoing cost mitigation actions. Operating profit fell by 7.3 million or 9.9% to 66.8 million with operating margin increasing by 1.1 percentage points from 21.4% to 22.5%. 10

11 Management Report continued Divisional Review continued Publishing continued Print revenue Print revenue fell by 16.6%. On a like for like basis print revenue fell by 11.9%. Circulation revenue fell by 9.9%. On a like for like basis circulation revenues fell by 6.3% with volume declines partially mitigated by cover price increases. The circulation volume trends in the market have been distorted by cover price differentials, cover price discounting and increased sampling. Excluding the impact of sampling, the Daily Mirror volume fell by 11.1% compared to a 9.1% fall for the UK national daily tabloid market and the Daily Record fell 10.3% against an overall Scottish daily tabloid market decline of 10.0%. The Sunday Mirror and Sunday People volumes declined by 15.2% and 15.9% respectively in a UK national Sunday tabloid market that fell by 10.9% and the Sunday Mail declined 12.6% against an overall Scottish Sunday tabloid market decline of 10.7%. The market for our regional titles remained challenging with declines of 12.9% for paid for dailies, 14.0% for paid for weeklies and 14.1% for paid for Sundays. Print advertising revenue fell by 26.8% with display and other down by 27.3% and classified down by 26.3%. Like for like print advertising revenues fell by 20.9% with display and other down 17.9% and classified down 23.5%. Increased challenges in print advertising markets saw declines in display advertising across a number of sectors, in particular retail. The year on year trends have also been adversely impact by the strong advertising performance during June from the European Football Championship. Most classified advertising categories also came under pressure, in particular recruitment and property which experienced like for like declines of 35.3% and 34.3% respectively. The Daily Mirror print advertising volume market share in the UK national daily tabloid market fell from 17.8% to 15.8%. The Sunday Mirror share fell from 17.3% to 14.7% and the Sunday People share fell from 10.8% to 10.3%. The Daily Record share improved from 16.0% to 19.0% and the Sunday Mail share declined from 33.2% to 28.4%. The more challenging market performance has been driven by the strong performance during June from the European Football Championship related activity, particularly for the Daily Mirror, and a marked increase in travel advertising which benefited competitors more than our titles. Our regional titles continue to experience difficult advertising markets, particularly display advertising in our metropolitan titles and classified across all titles. Other print revenue fell by 4.1%. Like for like other revenues are in line with last year with improvements in Sports Media and syndication offset by declines in leaflets and business enterprise revenue. Digital revenue Digital revenue grew by 4.3% with display and transactional revenue growing by 16.7% and classified revenue declining by 25.9%. Like for like digital revenue grew by 5.9% with strong growth from display and transactional revenue of 18.0% driven by an increase in audience, engagement, video and digital marketing services partly offset by classified revenue, which is predominantly upsold from print, which declined by 23.9%, primarily due to recruitment which fell by 33.3%. Digital audience growth continues with average monthly page views in the period growing by 9.4% year on year to almost 680 million. Mobile page views were some two thirds of the page views and grew by 22% while desktop pages views fell by 13%. Three quarters of page views were UK page views which grew by 11% while non UK page views grew by 4%. Page view growth rates have been adversely impacted by the removal of Streamo and Live Event page views as this functionality reduced the viewability of ads served due to the speed at which the pages were viewed by users. It is estimated to have impacted the growth rate by over 10%. 11

12 Management Report continued Divisional Review continued Printing The revenue and adjusted operating result of the Printing division is as follows: Variance Variance % Contract printing (2.5) (18.2%) Newsprint supply (0.5) (10.6%) Other revenue % Revenue (2.6) (13.3%) External costs (68.8) (76.6) % Publishing division recharge (5.2) (9.1%) Adjusted operating result Revenue fell by 2.6 million or 13.3% to 16.9 million. The fall in revenue includes the 1.3 million impact of the cessation of the Independent print contract in April and the impact of one week less of trading. On a like for like basis revenue fell by 0.7 million or 4.0% reflecting the impact of lower volumes and newsprint supply partially offset by an increase in paper and plate waste sales due to increased prices. External costs fell by 7.8 million or 10.2% to 68.8 million with the benefit of one week less of trading, cost reduction initiatives and the reduction in costs associated with falling contract print revenue. The net cost recharged to the Publishing division was 51.9 million compared to 57.1 million in the prior year due to cost reductions exceeding the revenue decline. Specialist Digital The revenue and adjusted operating profit of the Specialist Digital division is as follows: Variance Variance % Advertising (0.1) (4.0%) Other (2.8) (53.8%) Revenue (2.9) (37.7%) Costs (3.5) (6.5) % Adjusted operating profit % The Specialist Digital division includes Trinity Mirror Digital Recruitment, our digital classified recruitment business and Communicator Corp, our digital marketing services business. Rippleffect was sold in August. Trinity Mirror Digital Recruitment advertising revenues fell by 0.1 million while Communicator Corp revenues increased by 0.1 million offset by the Rippleffect disposal impact of 2.9 million. Operating profit improved by 0.1 million. Central The revenue and adjusted operating loss of the Central division is as follows: Variance Variance % Revenue (0.1) (5.0%) Costs (7.9) (8.6) % Associates % Adjusted operating loss (5.5) (6.2) % The Central division includes revenue and costs not allocated to the operational divisions and the share of results of associates. The result for the period was a loss of 5.5 million compared to a loss of 6.2 million in the prior period. Revenue primarily relates to rental income from surplus office space at the Group s main office at Canary Wharf. Costs fell by 0.7 million from 8.6 million to 7.9 million reflecting the ongoing tight management of costs. Share of results from associates improved by 0.1 million in the period. 12

13 Management Report continued Other Items Principal risks and uncertainties The principal risks and uncertainties together with mitigating actions that affected the Group during the first half and going forward are described on pages 14 to 16 in the Trinity Mirror plc Annual Report. The current principal risks and uncertainties are: Strategy the overall strategy or elements of the strategy are inappropriate and the delivery of the strategy is badly executed; Revenue loss faster than anticipated loss of revenue from print and failure to deliver new revenue streams to offset print decline and drive revenue growth; Pensions pension deficits grow at such a rate so as to affect the viability of the Group itself or so that the annual funding costs consume a disproportionate level of cash flow; and Historical legal issues damage to reputation arising from historical events, direct financial impact from legal claims and distraction of senior management time from delivering the strategy. There continues to be increased macroeconomic uncertainty created by the process of Britain exiting the European Union and political uncertainty created by the General Election. The Group s pension deficit continues to be impacted by the reduction in gilt and bond yields and the weakening of Sterling has increased newsprint costs. Considerations in relation to the uncertainty and these immediate impacts are included in the principal risks above. Whilst the impact of the uncertainty is hard to assess there is a risk that our revenues could be lower than expectations. Assessment of the Group's prospects The directors have assessed the Group's prospects, both as a going concern and its longer term viability. Going concern statement The directors consider it appropriate to adopt the going concern basis of accounting in the preparation of the Group's half-yearly financial report. In accordance with LR 9.8.6(3) of the Listing Rules, and in determining whether the Group s interim condensed consolidated financial statements can be prepared on a going concern basis, the directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowing facilities and the principal risks and uncertainties relating to its business activities. Having considered all the factors impacting the Group s businesses, including downside sensitivities, the directors are satisfied that the Group will be able to operate within the terms and conditions of the Group s financing facilities for the foreseeable future. The directors have reasonable expectations that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group s interim condensed consolidated financial statements. Viability statement The directors have a reasonable expectation that the Company and the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment. The directors assessed the prospects of the Group over a three year period which reflects the budget and planning cycle adopted by the Group. A three year period is adopted as it enables the directors to consider the impact of declining print revenues, the investment required to drive growth in digital and to identify the extent to which costs need to be minimised to support profits and cash flow. The assessment takes into account the Group s current position and the principal risks and uncertainties facing the Group including those that would threaten the business model, future performance, solvency or liquidity. Sensitivity analysis is applied to the projections to model the potential effects should principal risks and uncertainties actually occur, individually or in combination. The Board also assessed the likely effectiveness of any proposed mitigating actions. It is understood that such future assessments are subject to a level of uncertainty that increases with time and, therefore, future outcomes cannot be guaranteed or predicted with certainty. Also, this assessment was made recognising the principal risks and uncertainties that could have an impact on the future performance of the Group and also the financial risks described in the notes to the Group s interim condensed consolidated financial statements. Further information concerning the review of going concern and viability are set out in the Trinity Mirror plc Annual Report. 13

14 Management Report continued Other Items continued Related party transactions There were no material related party transactions during the period. Management changes In January, the Group appointed Andy Atkinson as the Chief Revenue Officer for Trinity Mirror Solutions. Andy joined the Group in 2014 as Sales Director of Trinity Mirror Solutions, with responsibility for leading the sales teams in London and Manchester. Prior to joining the Group, Andy was Head of Trading at Google, and has also held senior roles at IDS and Channel 5. In May, in light of the ongoing challenging trading conditions across our regional business, a number of changes were announced to the management structure with Rachel Addison leaving the Group. Rachel has done a great job as Managing Director of Regionals over the past two years, particularly with the integration of Local World into Trinity Mirror. The Board would like to thank Rachel for everything she has achieved and wish her every future success. Board changes On 1 June, David Kelly was appointed Chairman of the Remuneration Committee, replacing Helen Stevenson, who continues as Senior Independent Director. Both Helen and David joined the Board in 2014 as independent nonexecutive directors and will remain as members of the Audit & Risk, Remuneration and Nomination Committees. The Company s Chairman, David Grigson, has indicated his intention to step down from the Board of Directors during the next calendar year, by which time he will have completed two three-year terms in office. Helen Stevenson, Senior Independent Director, will lead an orderly succession process, with the support of external consultants Egon Zehnder. Statement of directors responsibilities The directors are responsible for preparing the half-yearly financial report in accordance with applicable laws and regulations. The directors confirm to the best of their knowledge: a) the Group s interim condensed consolidated financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and b) the Management Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face. By order of the Board of directors Simon Fox Chief Executive 31 July Vijay Vaghela Group Finance Director 14

15 Consolidated income statement for the 26 weeks (27 weeks and 53 weeks ) notes 26 weeks 27 weeks 53 weeks Revenue 3, Cost of sales (154.6) (180.9) (342.1) Gross profit Distribution costs (32.2) (41.4) (76.0) Administrative expenses: Non-recurring items 5 (7.3) (4.0) (26.0) Restructuring charges in respect of cost reduction measures (6.4) (10.1) (15.1) Amortisation of intangible assets (0.2) (0.2) (0.3) Pension administrative expenses 13 (1.2) (1.0) (2.2) Other administrative expenses (71.1) (83.7) (158.5) Share of results of associates: Results before non-recurring items and amortisation Non-recurring items 5 (0.1) (0.1) (0.1) Amortisation of intangible assets (0.1) (0.1) (0.3) Operating profit Investment revenue Pension finance charge 13 (5.9) (5.2) (10.4) Finance costs 7 (3.3) (3.5) (7.2) Profit before tax Tax charge 8 (9.1) (9.2) (7.0) Profit for the period attributable to equity holders of the parent Statutory earnings per share Pence Pence Pence Earnings per share basic Earnings per share diluted Adjusted* earnings per share Pence Pence Pence Earnings per share basic Earnings per share diluted * Adjusted items relate to the exclusion of non-recurring items, restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results. Consolidated statement of comprehensive income for the 26 weeks (27 weeks and 53 weeks ) notes 26 weeks 27 weeks 53 weeks Profit for the period Items that will not be reclassified to profit and loss: Actuarial gains/(losses) on defined benefit pension schemes (132.5) (188.9) Tax on actuarial gains/(losses) on defined benefit pension schemes 8 (7.8) Deferred tax charge resulting from the future change in tax rate (0.6) Share of items recognised by associates (5.4) Other comprehensive income/(costs) for the period 32.5 (107.6) (156.3) Total comprehensive income/(costs) for the period 61.6 (71.6) (86.8) 15