Final Results
Trinity Mirror PLC
26 February 2004
26 February 2004
Trinity Mirror plc
2003 Preliminary Results
Trinity Mirror plc announces the Group's preliminary results for the 52 weeks
ended 28 December 2003.
Operational highlights
• 'Stabilise Revitalise Grow' strategy to improve performance and enhance
shareholder value delivering ahead of expectations
• Strong performance in uncertain and challenging market conditions: Group
operating profit(1) and earnings per share, before exceptional items, up
11.5% and 10.8% respectively
• Operating margin(1) before exceptional items increased from 17.6% to
19.4% with Regionals division including Digital Media improving
operating margin from 21.9% to 23.6% and Nationals division improving
operating margin from 15.7% to 17.4%
• Cost savings of £5.0 million achieved in 2003 from Chief Executive's
review, incremental savings of £18.0 million targeted in 2004 (increased
from £16.0m) with annualised savings target for 2005 increased to £30.0
million (from £25m). These are in addition to gross incremental cost
savings of £9.2 million from previous cost reduction plans
• Disposal of titles in Ireland completed on 15 January 2004
• Dividends increased by 4.0% to 18.3p per share
• Net debt reduced by £61.0 million from £666.1 million to £605.1 million
Financial highlights
Like-for-like(1) (pre exceptional items(2)) Actual (post
exceptional items(2) )
2003 2002(3) % 2003 2002(3) %
£m £m Change £m £m Change
Turnover 1,095.0 1,082.3 1.2% 1,095.1 1,089.3 0.5%
Group 212.5 190.5 11.5% 100.5 59.8 68.1%
operating
profit
Profit 172.5 155.5 10.9% 60.6 26.2 131.3%
before tax
Earnings/ 41.1p 37.1p 10.8% 4.6p (6.6)p 169.7%
(loss)
per share
Proposed 12.8p 12.3p 4.1%
final
dividend
per
share
Total 18.3p 17.6p 4.0%
dividends
per share
Net debt 605.1 666.1
(1) Turnover and operating profit adjusted to exclude the results of
Post Publications Limited and Ethnic Media Group Limited which were disposed
of in June 2002, Channel One which ceased trading in November 2002 and
Wheatley Dyson & Son Limited which was disposed of in February 2003. During
the 52 weeks ended 28 December 2003 these businesses achieved turnover of
£0.1 million (2002: £7.0 million) and operating profit of £nil (2003 : £0.5
million)
(2) Group operating exceptional items of £112.0 million (2002: £131.2
million) include a £100.0 million (2002: £125.0 million) impairment charge
against the carrying value of the publishing rights and titles of the
Regional titles in London and the South East (2002 : Midlands). Total
exceptional items before tax of £111.9 million (2002: £129.3 million), and
after tax of £106.7 million (2002: £127.5 million), also include the net
profit on the disposal of subsidiary undertakings and, in 2002, the Group's
share of associate's non operating exceptional items
(3) Turnover has been restated to reflect Arrow Interactive revenues
net of commissions payable to third parties. This change in accounting
policy has no impact on the Group operating profit for 2003 or 2002
Sir Victor Blank, Chairman of Trinity Mirror plc, commented:
'Our 2003 figures represent the results of less than a full year's efforts
by our new management team. They mark the first tangible signs of
achievement in businesses that have drive, fresh thinking and renewed
commitment. We are very pleased to have been able to achieve this
transformation while simultaneously driving improved performance and
delivery.'
Sly Bailey, Chief Executive, Trinity Mirror plc commented:
'The changes made during this year have delivered a performance ahead of
expectations. 2003 represents the best year on year profit improvement for
the Group since the merger in 1999 and sets the benchmark for further value
creating performance for enhancing shareholder value.
While there is still much work to be done, we are now significantly
progressed on the first phase of our three phase transformation programme
'Stabilise Revitalise Grow' and the team is focused on continuing the pace
of change which has been apparent in 2003.'
Enquiries:
Trinity Mirror plc 020 7293 3000
Sly Bailey, Chief Executive
Vijay Vaghela, Group Finance Director
Nick Fullagar, Director of Corporate Communications
Finsbury 020 7251 3801
Rupert Younger
James Leviton
26 February 2004
Trinity Mirror plc
2003 Preliminary Results
Financial highlights
2003 2002 (3)
£m £m % change
Turnover
- actual 1,095.1 1,089.3 0.5%
- like-for-like (1) 1,095.0 1,082.3 1.2%
Group operating profit pre exceptional
items(2)
- actual 212.5 191.0 11.3%
- like-for-like(1) 212.5 190.5 11.5%
Group operating profit post exceptional
items (2)
- actual 100.5 59.8 68.1%
- like-for-like(1) 100.5 59.3 69.5%
Profit before tax pre exceptional items 172.5 155.5 10.9%
(2)
Profit before tax post exceptional items 60.6 26.2 131.3%
(2)
% %
Operating margin pre exceptional items(1) 19.4 17.6 1.8%
(2)
Per share Pence Pence
Underlying earnings pre exceptional items 41.1p 37.1p 10.8%
Exceptional items (2) (36.5)p (43.7)p 16.5%
Basic earnings/(loss)post exceptional 4.6p (6.6)p 169.7%
items
Proposed final dividend 12.8p 12.3p 4.1%
Total dividend 18.3p 17.6p 4.0%
Footnotes
(1) Turnover and operating profit adjusted to exclude the results of Post
Publications Limited and Ethnic Media Group Limited which were disposed of in
June 2002, Channel One which ceased trading in November 2002 and Wheatley Dyson
& Son Limited which was disposed of in February 2003. During the 52 weeks ended
28 December 2003 these businesses achieved turnover of £0.1 million (2002: £7.0
million ) and operating profit of £nil (2002 : £0.5 million)
(2) Group operating exceptional items of £112.0 million (2002: £131.2
million) include a £100.0 million (2002: £125.0 million) impairment charge
against the carrying value of the publishing rights and titles of the Regional
titles in London and the South East (2002: Midlands). Total exceptional items
before tax of £111.9 million (2002: £129.3 million), and after tax of £106.7
million (2002: £127.5 million), also include the net profit on the disposal of
subsidiary undertakings, and, in 2002, the Group's share of associate's non
operating exceptional items
(3) Turnover has been restated to reflect Arrow Interactive revenues net
of commissions payable to third parties. This change in accounting policy has no
impact on the Group operating profit for 2003 or 2002
Within the following review of operations, all figures are presented on a
like-for-like(1) pre exceptional items(2) basis unless otherwise specified.
Turnover has been restated to reflect Arrow Interactive revenues net of
commissions payable to third parties. This change in accounting policy has no
impact on the Group or total operating profit in 2002 and 2003.
Chief Executive's Review
In February 2003 a review of the Group's businesses was undertaken. The
objective of the review was to identify the actions required to deliver
significantly improved performance and enhanced shareholder value. The review
considered all options open to the Group.
The preliminary findings of the review were announced in July 2003. The review
highlighted the potential for improving performance and creating shareholder
value by running Trinity Mirror more effectively as a group of publishing
businesses. As a first step it was identified that there was a need to lay a
firm foundation in terms of this year's performance, principally through a
combination of tighter cost management and a more focused publishing approach.
The impact of this first step can be seen in the 2003 results which delivered an
11.5% improvement in operating profits* with operating margins* increasing by
1.8% from 17.6% to 19.4% despite challenging market conditions.
To deliver the required transformation, an overlapping three-phase performance
based strategy: 'Stabilise Revitalise Grow' was implemented throughout the
Group.
For the two key divisions the review highlighted that:
• the Regionals businesses are strong with robust, market leading
positions in many of the UK's most important metropolitan markets.The 'from
Biggest to Best' initiative has delivered an improved performance. However,
the division has significant scope for further improvement in revenue,
profit and margin, to be achieved through tighter and more focused
management and an acceleration in the pace of change
• the National titles remain very large consumer franchises. However, it
was clear that the division needs to focus on strengthening its core
publishing skills, and developing a greater understanding of its customers,
both readers and advertisers. Clarity of publishing strategy across the
Nationals portfolio, coupled with improvements to product content and
quality, marketing, availability through the supply chain and advertising
sales were each identified as key levers to an improved performance of both
the top and bottom line
The Transformation Programme and Benefits
Phase 1: Stabilise
The first phase of the programme is designed to stabilise performance and ensure
a robust platform for the future. Clear strategies are now in place across all
of the Group's businesses. Structures have been reviewed and changed where
necessary to ensure delivery of objectives. Management changes have ensured we
have the right people, with the right skills, in the right jobs, doing the right
things. A sharp focus on costs is delivering savings in most business areas and
across most functions, through actions such as the centralisation of Finance, HR
and IT. A greater focus on core publishing skills has improved our ability to
drive better quality and value for our customers.
Phase 2: Revitalise
In this second and overlapping phase we are focused on revitalising our products
and services to drive top line revenues, and on redesigning internal processes
and ways of working to become a more agile and efficient Group. A greater focus
on creativity and innovation, coupled with regular consumer research will drive:
• new insights and inform changes to brands and content
• better targeted marketing
• the strengthening of advertising sales capability
Major Group wide areas underpinning overall performance such as Manufacturing,
Supply Chain and Procurement are also being reviewed.
Phase 3: Grow
Pursuing the opportunities identified in phases 1 and 2 will create the
momentum, financial headroom and organisational capability to access and drive
value through longer-term growth opportunities. We have already assembled a
small strategic development team that is beginning to explore the longer term
growth options and routes that may lie open to the Group.
Benefits
This performance-based strategy will deliver enhanced earnings and margins. It
will deliver better performance from individual brands and businesses whilst
increasing the value of the Group as a whole by capturing the full benefits of
scale, sharing of best practice and ensuring that the right level of focus,
performance measures and incentives are in place.
Progress to date
Delivery against specific benefits announced in July 2003
The key specific benefits of the transformation plan announced in July 2003
were:
• £25 million annualised cost savings in 2005. £4 million in 2003 and an
incremental £16 million in 2004
• Disposal of our regional newspaper titles in Ireland
• A policy to increase dividends progressively
• Commitment to reduce debt
Delivery against these are detailed below:
• £5.0 million net savings have been achieved in 2003. In addition, the
incremental savings targeted in 2004 are being increased to £18.0 million
with annualised net savings in 2005 increased to a target of £30.0 million.
Staff numbers were reduced by 314 in 2003 in delivery of these savings
• The disposal of our regional newspaper titles in Ireland was completed
on 15 January 2004 achieving gross sale proceeds of £46.3 million including
net cash disposed of £2.0 million
• The final dividend has been increased by 4.1% bringing the total
dividend for the year to 18.3 pence per share
• Net debt has been reduced by £61.0 million to £605.1 million. This
excludes the proceeds from the disposal of our titles in Ireland
As well as meeting the specific targets announced in July the Group has
delivered the best year on year operating performance since the merger of
Trinity plc and Mirror Group plc in 1999 with operating profits* and earnings
per share* increasing by 11.5% and 10.8% respectively.
Corporate Centre
The role of the Corporate Centre has been clearly defined with improved
communication across the Group to ensure that the goals and objectives of the
businesses are aligned. Significant progress has been made during the year in
this area:
• the Corporate Centre, operating through the Executive Committee, is
playing a greater role in the setting of strategies and budgets for
business units with unified processes now in place across all businesses
• a central fund has been established to finance innovation across the
Group. This will ensure that businesses are focused on improving underlying
performance without having to re-direct financial resource to fund
innovation. Guidance and support from the centre will ensure that the best
revenue growth opportunities are receiving appropriate funding and
management focus. The fund has been created through cost savings
• a Capex Committee, chaired by the Chief Executive, has been established
to co-ordinate and manage centrally the Group's capital investment
programme to maximise return on all investment
• to ensure that the full value of Trinity Mirror's scale is captured a
number of centrally co-ordinated projects have commenced. These include the
review of manufacturing, supply chain, procurement, content creation/
sharing, advertising sales and the management of 'expert' functions such as
Finance, HR and IT
• the reporting structures for the expert functions have been centralised
to ensure clear and unambiguous leadership from the centre, allowing the
businesses to focus fully on driving publishing activities. Further work is
ongoing, in particular for IT, to standardise systems and processes across
the Group to gain efficiencies through the sharing of best practice and
support the businesses to improve performance
• the first Group wide senior management conference was held in November
attended by our top 55 senior managers. The agenda focused on the practical
application of our strategy and the management action required to drive
momentum and improve performance
• during the year, attention has been focused on developing a remuneration
policy which is fully aligned to performance objectives.
Key Projects
During 2003 management focused on three key projects, Manufacturing, Supply
Chain and Procurement.
The Manufacturing Project is being driven by the Group Operating Forum (GOF), a
small group of senior operations management drawn from across the Group. The
objective of the project is four-fold:
• to improve operating efficiencies
• to reduce printing costs
• to reduce, over time, the level of capital expenditure required for the
Group's printing assets thereby improving the return on capital invested
• to improve the quality of products to serve the needs of readers and
advertisers better
The Group has in excess of 40 printing presses operating across 12 print sites
with press utilisation varying from as low as 25% up to over 90% at peak times.
With the exception of the three National print sites, all sites have been
managed independently under the direct control of local management. Whilst the
Manufacturing project is likely to run for some time, a number of changes which
will drive improvements in 2004 are already being implemented:
• a Group manufacturing division is being structured with the objective of
creating a world class newspaper manufacturing operation
• control of all print sites will move from the publishing businesses and
into the manufacturing division
• press investment is now centrally co-ordinated through the Group
Operating Forum and approved by the Capex Committee
• a system of common KPI's is being established for all print sites across
the business
The consolidation of print sites and improving the average utilisation rate is
of paramount focus at this stage whilst ensuring that all our products continue
to reach customers in an efficient and timely manner.
The two Midlands print sites are already being consolidated in a single print
site in Birmingham. The new site will provide full colour capabilities for the
Midlands titles and will have the capacity to print other Group titles.
We are currently reviewing our options in relation to Scotland where we operate
two print sites. There are likely to be greater opportunities for collaboration
and integration here, although at this stage it is too early in the project to
make firm commitments. In the North West we currently operate 4 print sites,
however we announced to our staff this week that Huddersfield will cease
operation by the end of April 2004. The Huddersfield Examiner will be enhanced
by a tabloid format with more colour by moving into our plant at Oldham. This
will provide both revenue and cost benefits. Future capital requirements for the
Group will also be reduced.
The Supply Chain Project is, for the first time, looking at the supply chain
across our National and Regional titles together, with a view to capturing the
benefits of Group scale, reducing costs and improving circulation volume and
revenue performance. Analysis of efficiencies and performance measures used to
drive newspaper sales across Regional and National titles suggests there may be
room for improving the overall economics of our supply chain. We shall be
looking to our wholesale partners to work closely with us - particularly during
the forthcoming round of contract negotiations - to drive out benefits in
service, cost and quality standards.
The Procurement project is well under way. We are already buying more
efficiently and at lower cost across a range of areas with benefits achieved in
2003.
Regionals
By applying a more focused management approach to these businesses, operating
margins* have been improved from 21.9% to 23.6% with operating profit*
increasing from £112.4 million to £123.9 million. Whilst previous initiatives
have delivered an improving performance, there is a renewed emphasis to
accelerate the pace of change to significantly drive performance. Key activities
of note are:
• the continued delayering of the central management team
• the regionalisation programme for the division has been accelerated with
the North West and North East regionalisation programmes at very advanced
stages and the Midlands regionalisation already underway - six months ahead
of schedule
• a more aggressive approach to increasing cover prices for the Regional
newspaper titles was implemented in the second half of the year and this has
delivered improved circulation revenues
• Digital Media activities were restructured with further reductions in
the cost base and numerous revenue driving initiatives to accelerate the
path to profitability and move the business to break even by the end of 2004
• The Daily Post in Liverpool re-launched with separate Welsh and English
editions
• a new Managing Director has been appointed to the business in the South.
Supported by the Corporate Centre, he is currently reviewing all aspects of
the business with the objective of improving performance
Nationals
The senior management team of the division has been substantially restructured
with a number of key management changes made:
• a change in reporting lines of the editors of the UK National titles who
now report directly to the Chief Executive
• the appointment of a new General Manager with profit responsibility for
the division, directly overseeing the commercial areas of the business -
circulation, advertising and marketing
• the appointment of a new Advertising Sales Director at UK Nationals
reporting to the General Manager
• new editors for The People and the Daily Record
Numerous changes have been made to improve performance through better publishing
of core products and tighter management of the cost base:
• the development of a Nationals portfolio strategy with clear consumer
propositions and market positionings for each title, reflected in content,
tone, marketing and pricing
• the regular and disciplined use of consumer research to inform
publishing and editorial decisions and refine reader appeal
• circulation volumes of the titles are beginning to show signs of
stability. Although still reporting year on year volume declines, the
titles have enjoyed stable month on month volumes since April 2003
• the Saturday package of the Daily Mirror has been substantially enhanced
by discontinuing the publication of 'Look' (an improved newsprint product)
and the expensive glossy 'M' magazine. These have been replaced by 'We Love
Telly' a new glossy TV listings magazine and a new football focused section
'FC'
• the Scottish edition of the Daily Mirror increased its Monday to Friday
cover price to 30p on 29th December 2003, the third cover price increase
during 2003, with the Saturday price increased by 5p to 40p, reflecting our
portfolio strategy in Scotland
• 'We Love Telly' content re-branded as 'TV Record' and incorporated into
the Daily Record Saturday package. The benefits of closer cooperation
between the Group's businesses is already becoming apparent
• a new midweek regionalised Sports section has been launched in the Daily
Record after research identified a growing appetite for sports in the
Scottish market place
Initiatives already underway in 2004 include:
• a new 'Homes and Holidays supplement for the Sunday Mirror, and a new
glossy supplement for The People 'Take it Easy', both launched in January.
With distinct editorial content, both supplements are designed to improve
reader value and advertiser appeal. Cover prices were increased by 5p to
75p for The People and10p to 80p for the Sunday Mirror in January
• the cover price of the Sunday Mail was increased by 10p to 80p in
January
• on January 17 the Daily Mirror replaced its Saturday racing pullout 'The
Winner' with the 'Racing Post Extra' pullout, drawing upon the best in
class 'Racing Post' brand and expertise
• the first quarter of 2004 will see the creation of an MGN magazines
unit. The unit, under Editorial Director Magazines, Phil Hall, will focus
on improving the quality of our magazine supplements to better serve
readers and drive advertising revenue. No additional costs will be incurred
in setting up the unit
• effective March 1 the Monday to Friday cover price of the Daily Mirror
will increase by 3p to 35p
• Wednesday March 3 sees the launch of '3am' a new female targeted
celebrity magazine which builds on one of the Daily Mirror's most
successful in-paper brands
Sports
The Group's Sports titles have sustained and strengthened their market leading
positions in the growing market for horseracing and sports betting. These titles
have achieved exceptional improvements in performance over a number of years and
over the last three years have demonstrated their resilience to difficult
economic and advertising market conditions.
The Sports division provides numerous opportunities to drive performance further
by continuous improvements to the core newspaper titles and sharing of content
and best practice with the rest of the Group. Initiatives ongoing during 2003
and early 2004 include:
• a change in working practices to 7 day publishing to accommodate more
Sunday racing without creating a separate team to publish the Sunday title
• provision of content for the new Racing Post Extra newsprint pull-out in
the Daily Mirror on Saturdays
• creation of new revenue opportunities for online content
Magazines and Exhibitions
The Magazines and Exhibitions division includes a range of niche publications
and shows which have been added to the portfolio over a number of years. Whilst
it continues to have a number of strong titles and shows, an unstructured
approach to growing the division in the past has resulted in a wide ranging
portfolio of unrelated products and services, some of which are loss making.
Since 2001 the management has been focused on restructuring the portfolio to
improve overall performance of the core products whilst looking to divest or
close non core loss making activities.
Whilst the restructuring is ongoing, progress in 2003 has included a number of
disposals and the discontinuation of non-core or loss making magazines and
exhibitions.
Arrow Interactive (formerly Voice Media)
The Arrow Interactive business, which specialises in the provision of
interactive telephone services, increased the range of its products and services
during the year with the acquisition of the business and assets of Quartez, a
company specialising in the provision of mobile data services such as SMS.
Increasing competition in the market place for its services has resulted in a
significant reduction in operating margins for its services to third parties.
Given these challenging market conditions the division is increasingly seen as a
vehicle for servicing the needs of the Group's core businesses.
The way forward
Having restructured the senior management team and reinvigorated the focus and
direction of the Group through the performance based strategy 'Stabilise
Revitalise Grow', in 2004 we will build on the achievements of 2003 and continue
the drive to further improve performance. Our commitment to reduce costs by an
annualised £30.0m in 2005, reduce debt and progressively increase dividends will
be maintained.
Review of operations
Revenues* increased by only 1.2% reflecting challenging market conditions. Group
operating profit* before exceptional items* increased by £22.0 million
representing an increase of 11.5% from £190.5 million to £212.5 million.
The 2003 performance has benefited from cost savings of £5.0 million from
initiatives arising from the Chief Executive's Review, incremental cost savings
of £9.2 million from previous cost reduction programmes which have contributed
to annualised costs savings of £42.0 million since 2001 and a reduction in
newsprint prices which contributed a £10.7 million benefit in 2003.
The Group continued to generate strong net operating cash flows during the year
of £246.2 million (2002: £219.0 million) with net debt falling by £61.0 million
to £605.1 million (2002: £666.1 million).
The annual review of the carrying value of the Group's publishing rights and
titles, undertaken in accordance with FRS 10, has indicated that an impairment
charge of £100.0 million (2002: £125.0 million) was required. The impairment
charge reduces the carrying value of the Regional titles in London and the South
East. In 2002 an impairment charge of £125.0 million related to the Regional
titles in the Midlands.
During the year the FRS 17 pension deficit has increased from £163.1 million to
£248.1 million (net of deferred tax). Total contributions to defined benefit
pension schemes to fund ongoing accrual of benefits and past service deficits
increased by £7.8 million to £25.2 million in 2003 and are expected to increase
by £8.4 million in 2004. The FRS 17 operating profit charge, before past service
costs (£1.7 million) was £24.5 million in 2003 and is expected to be £32.6
million in 2004. The FRS 17 finance charge of £2.9 million is expected to remain
the same for 2004.
For 2004, the Group results will cover a 53 week period to 2 January 2005
representing the closest Sunday to 31 December 2004. The additional week will
benefit operating performance in 2004.
Regionals Division
The turnover* and operating profit* of the Group's Regionals division,
incorporating Metros and Digital Media, is as follows:
2003 2002 Change Margin* Margin*
£m £m % 2003 2002
Turnover*
Regional newspaper titles 510.9 504.6 1.2%
Metros 10.5 9.1 15.4%
Digital media activities 3.8 0.7 442.9%
Regionals division 525.2 514.4 2.1%
Operating profit*
Regional newspaper titles 127.5 121.5 4.9% 25.0% 24.1%
Metros 0.2 (1.5) 113.3% 1.9% (16.5%)
Digital media activities (3.8) (7.6) 50.0%
Regionals division 123.9 112.4 10.2% 23.6% 21.9%
Operating profit* The Regionals division achieved operating profit* growth of
10.2% to £123.9 million with turnover* increasing by 2.1% to £525.2 million and
operating margin* increasing by 1.7% to 23.6%. The Regional newspaper titles
achieved 4.9% growth in operating profits* despite continued difficult trading
conditions in London and the South East. A strong advertising performance,
coupled with tight cost control enabled the Group's Metro titles to move into
profit* ahead of expectations. Digital media activities also performed strongly
with a four fold increase in revenues contributing to a reduction in operating
losses* of £3.8 million from £7.6 million to £3.8 million.
Advertising revenue* for the Regionals division increased by 2.4% from £394.5
million to £404.0 million. The improved performance has been driven by
advertising revenue* growth of 1.5% for the Regional newspaper titles excluding
Metros, 15.6% growth for Metros and Digital advertising revenues of £2.4 million
(2002: £nil).
For the Regional newspaper titles, London and the South East continues to prove
difficult with advertising revenue* declining by 2.5% for the year. However, an
improving trend has emerged in the fourth quarter of the year in London and the
South East with advertising revenue* growth of 1.0% which represents the first
period of year on year growth since the first quarter of 2001. With the
exception of London and the South East, all regions achieved year on year
advertising revenue* growth. Excluding London and the South East, all
categories, with the exception of Motors, achieved year on year revenue growth
with Display up 0.6%, Recruitment up 4.1%, Property up 8.4% and Other classified
categories up 3.5%. Motors was down 2.8%.
Metros achieved strong advertising revenue growth of £1.4 million (15.6%) driven
primarily by a 14.1% increase in National Display.
Circulation revenue* for the Regional newspaper titles increased by 0.5% from
£81.1 million to £81.5 million. An improved performance in the second half with
revenues* growing by 1.9% offset declines of 1.0% in the first half. The
improvement in the second half reflects a more aggressive approach to cover
price increases.
Exceptional costs of £6.2 million (2002: £7.9 million) were incurred for
severance and other costs to achieve the cost savings from the Chief Executive
initiatives and the ongoing cost reduction plans 'from Biggest to Best'. The
Regionals division delivered incremental cost savings of £8.2 million in the
year, which includes £2.6 million for Chief Executive initiatives.
Nationals Division
The turnover* and operating profit* of the Group's Nationals division is as
follows:
2003 2002 Change Margin* Margin*
£m £m % 2003 2002
Turnover* 492.2 494.0 (0.4%)
Operating profit* 85.8 77.6 10.6% 17.4% 15.7%
Operating profit* The Nationals division achieved operating profit* growth of
£8.2 million from £77.6 million to £85.8 million despite difficult market
conditions which contributed to revenues falling £1.8 million with advertising
revenue falling by £4.1 million.
Tight management of the cost base and a reduction in newsprint prices
contributed to the division improving operating margins* by 1.7% from 15.7% to
17.4%. Operating margins* for the UK Nationals improved by 2.2% to 15.7% and for
the Scottish Nationals by 0.2% to 23.6%.
Circulation revenue increased by 0.5% from £260.7 million to £261.9 million. The
increase is after price cutting activity at a cost of £8.0 million (2002 : £23.5
million), including £6.9 million (2001: £21.8 million) for the Daily Mirror.
The Daily Mirror circulation volume over the 12 month period fell by 7.2% (3.4%
fall in 2002). Excluding sampling, which was discontinued from May 2002,
circulation fell by 6.8% (2.0% fall in 2002). The year on year declines have
been adversely impacted by the cessation of price discounting in March 2003
which contributed to a reduced sale in April 2003 to 1.9 million. Since April
2003, the circulation has remained at or above 1.9 million copies. Circulation
revenues for the Daily Mirror increased by 11.8% in the second half compared to
a decrease of 2.7% in the first half.
The Sunday Mirror and The People continued to operate in an intensely
competitive market with the continuing impact on year on year circulation
volumes from the launch of the Daily Star Sunday in September 2002.
The Sunday Mirror limited the decline in circulation for the 12 month period to
7.4%, representing a decline of 6.9% (3.2% in 2002) when sampling, discontinued
from May 2002, is excluded. The circulation of the Sunday Mirror has remained an
average of 1.6 million since April 2003.
The People circulation fell by 14.4% during the 12 month period, representing a
fall of 13.8% (6.5% in 2002) excluding sampling. The sale of The People has
remained at approximately 1.1 million since April 2003.
The Scottish market has been testing during the year with 12 month declines in
circulation (Scottish sales only) for the Daily Record and Sunday Mail of 6.4%
(5.8% for 2002) and 4.6% (3.8% for 2002) respectively. The appointment of a new
editor in September coincided with the launch of the TV Record glossy listings
supplement and has resulted in a series of changes throughout the final quarter
of 2003 which are expected to have a positive impact on the underlying trend
from January 2004.
Advertising revenue. Volatile advertising conditions in the National newspaper
market coupled with strong growth in the third quarter of 2002 and the closure
of the Daily Mirror's 'M' magazine published on Saturday (in August 2003)
contributed to advertising revenues falling by 2.1% for the Nationals division.
Advertising revenues for the UK and Scottish Nationals fell by 1.5% and 3.8%
respectively.
For the three UK titles flat advertising revenues for the first half have been
offset by declines of 3.1% in the second half. The uncertainty and volatility of
advertising noted in the first half continued in the second half with
advertising revenue declines of 7.2% in the third quarter offset by increases of
0.7% in the fourth quarter. Despite the improvement that emerged in the last
quarter, with strong growth in retail, it is too early to determine a longer
term trend given the volatility experienced during 2003.
In Scotland, a significant fall in advertising revenues in the third quarter of
9.8% contributed to full year revenues falling by 3.8%. In line with the UK
Nationals, an improving performance emerged in the fourth quarter with
advertising revenues increasing by 1.0 %.
Exceptional costs of £6.9 million were incurred during 2003 by UK and Scottish
Nationals for severance costs to achieve incremental cost savings of £4.6
million and £1.1 million respectively. This includes cost savings as part of
Chief Executive initiatives of £2.2 million and £0.2 million respectively.
Sports Division
The Sports division continues to deliver strong performance with operating
profits* increasing by 20.3% to £14.2 million (2002: £11.8 million).
Circulation revenues grew by 8.4% reflecting cover price increases for all
titles and strong circulation performance for the Racing Post with volumes
increasing by 1.0% year on year (excluding Sunday sales).
The division achieved strong advertising revenue growth of 11.9% driven by
growth in the second half of 20.0% reflecting continued strength in the core
advertising markets.
Racing Post Online, the division's web site achieved an operating profit* of
£0.3 million (2002: £0.1 million) following advertising growth of 22.2%.
Racingpost.co.uk and Smartbet.co.uk had average monthly page impressions of 27.9
million and 6.8 million respectively.
Magazines and Exhibitions
The division achieved operating profit* of £4.8 million representing a fall of
9.4% (£0.5 million). Turnover fell by 1.6% (£0.5 million) primarily from a
reduction in advertising revenue of 4.0% (£0.6 million).
A new wedding show was successfully launched in 2003 generating revenues of £0.4
million.
The motorbike shows were sold in January 2004. In 2003 they made a small
operating loss* on a turnover of £0.5 million.
Arrow Interactive (formerly Voice Media)
Arrow Interactive is a provider of interactive telephone response services to
both internal newspaper operations and external media and advertisers. Due to
significant pressure during the year on margins for telephony and in particular
TV contracts, the division reported an operating loss* for the year of £0.3
million (2002: £0.2 million operating profit*).
Central Costs
During the year central costs* fell by £0.9 million, from £16.8 million to £15.9
million. The fall in costs is primarily due to reduced consultancy and severance
costs.
Disposals
In February 2003, the Group disposed of Wheatley Dyson & Son Limited for a
consideration of £0.1 million, realising a profit of £0.1 million. During the 52
week period ended 28 December 2003, Wheatley Dyson & Son Limited contributed
£0.1 million revenue (2002: £1.6 million) and operating profit* of £nil million
(2002: operating profit* £0.1 million).
On 31 July 2003, the Group announced its intention to dispose of the Irish
regional newspaper titles in Belfast, Derry and Donegal. Following a tender
process, the Group announced the disposal of these titles to 3i for £46.3
million on 1 December 2003. The transaction was completed on 15 January 2004.
During the 52 week period ended 28 December 2003, these titles contributed £16.1
million revenue (2002: £15.7million) and operating profit* of £3.1 million
(2002: operating profit* £2.8 million).
Outlook
The improving trend in advertising seen in the final quarter of 2003 has
continued into the first two months of 2004. Given this outlook for the key
divisions, coupled with the benefits of the 'Stabilise Revitalise Grow'
transformation programme, the Board is anticipating continued improvement in
performance during 2004.
Financial summary
Accounting policies used in the preparation of the financial information for the
52 weeks ending 28 December 2003 are consistent with those set out in the
Group's financial statements for 2002, as amended by the adoption of UITF 38
'Accounting for ESOP trusts' and the restatement of revenues for Arrow
Interactive. Previously, third party revenues for Arrow Interactive were
accounted for gross of amounts payable to external customers. A review of the
contractual obligations for Arrow has highlighted that the Group's revenue
entitlement is only the commission on these sales and therefore revenues have
been restated for 2002 to reflect this change. The restatement of revenue for
Arrow Interactive has no impact on the operating profit for 2003 or 2002 and
further details are provided in Note 8.
Revenue of the Group increased by 0.5% to £1,095.1 million (2002: £1,089.3
million). Advertising revenues increased by 0.4% to £620.6 million and revenue
from newspaper and magazine sales increased by 0.7% to £376.0 million. Contract
print and other revenues increased by 0.7% to £98.5 million.
Group operating profit before exceptional items increased by £21.5 million
(11.3%) to £212.5 million. The pre exceptional items operating margin increased
from 17.5% to 19.4%.
Contribution from associates was £1.2 million (2002: £1.4* million), reflecting
the Group's share of profits from its associate, The Press Association.
Net interest payable (excluding the FRS 17 finance charge) fell by £4.7 million,
to £38.3 million reflecting the benefit of lower debt levels and reduced
interest rates. Group operating profit before exceptional items covers the net
interest cost 5.5 times.
Other finance charges/income, reflecting the FRS 17 interest charge/credit, fell
from a £6.1 million credit to a charge of £2.9 million. For 2004 a charge of
£2.9 million is expected.
Exceptional costs, before tax, of £111.9 million (2002: £129.3 million) were
incurred during the year. Note 4 to the summary financial information attached
to this preliminary results statement details the nature of the exceptional
items. These items include an impairment charge of £100.0 million (2002: £125.0
million) in relation to the carrying value of the publishing rights and titles;
£14.6 million of costs associated with the cost saving measures arising from the
Chief Executive's Review and ongoing cost reduction programmes, including £6.2
million of severance costs which have been partially offset by Maxwell related
receipts of £3.1 million. The ongoing implementation of the strategic and cost
saving plans are anticipated to result in a further £15.0 million of related
implementation costs during 2004.
The cost saving initiatives delivered incremental cost savings of £5.0 million
from initiatives arising from the Chief Executive's Review and further cost
savings of £9.2 million from ongoing cost reductions. The previously targeted
cost savings of £42.0 million have now been achieved and the Group is on track
to at least deliver £30.0 million net cost savings in 2005. This represents an
increase of £5.0 million on the target of £25.0 million announced in July 2003.
Profit before tax and exceptional items was £172.5 million (2002: £155.5
million).
Tax charge for 2003 of £46.9 million incorporates a charge of £52.1 million on
profit before tax and exceptional items of £172.5 million representing an
underlying rate of 30.2% (2002 : 30.2%).
Underlying earnings per share, before exceptional items, were 41.1p (2002:
37.1p) an increase of 10.8%.
Dividends - subject to the approval of the shareholders at the Annual General
Meeting, the directors propose a final dividend of 12.8p per share to be paid on
7 June 2004 to shareholders on the register at 7 May 2004. This will bring the
full year dividend to 18.3p per share, an increase of 4.0%. The dividend is
covered 2.2 times by pre exceptional earnings and will be fully funded from
operating cash flow.
Net assets of the Group at 28 December 2003 were £1,025.9 million. This includes
the total carrying value of the Group's acquired publishing and newspaper titles
of £1,616.2 million, goodwill of £6.2 million, tangible fixed assets of £401.0
million, net debt of £605.1 million and the FRS 17 pension deficit of £248.1
million. The FRS 17 pension deficit has increased from £163.1 million to £248.1
million during the year, reflecting general market conditions.
Cash flow from operating activities during 2003 (after exceptional items)
increased by £27.2 million to £246.2 million. This primarily reflects the
improved operating cash flows and improved working capital. Other principal cash
outflows in 2003 related to £42.4 million interest and dividends to minority
shareholders (2002: £45.1 million), lower than 2002 due to lower interest rates
and debt levels, tax paid of £44.9 million (2002: £39.2 million), net capital
expenditure of £55.2 million (2002: £43.2 million) and the £52.0 million payment
of equity dividends (2002: £51.3 million). With the exception of £0.1 million
cash inflow from disposals, £0.4 million cash outflow for acquisitions and £0.9
million received from associates, there were no material cash inflows other than
from operating activities.
Net debt at 28 December 2003 was £605.1million (net of £34.3 million of cash and
£19.3 million of bank overdrafts) compared to £666.1 million at 29 December
2002.
Capital expenditure in 2003 was £55.2 million (net) (2002: £43.2 million)
against a depreciation charge of £43.3million (2002: £43.1 million). The capital
expenditure included a further £44.8 million in respect of the regional press
replacement project (total expenditure between 2002 and 2004 is estimated to be
approximately £94.9 million). Planned capital expenditure for 2004 is
approximately £62.0 million, including £27.0 million in respect of the press
replacement project. All capital expenditure is to be financed from operating
cash flows.
Funding and liquidity - at 28 December 2003 committed facilities of £876.7
million were available to the Group, of which £240.1 million were undrawn. The
committed facilities include a £369.0 million syndicated bank facility, US$
624.8 million and £26.0 million unsecured loan fixed rate and £6 million
floating rate notes (representing the total obligations under a series of fixed
rate, differing maturity private placement US dollar and sterling loan notes
respectively), obligations under finance leases of £27.2 million and £23.1
million of acquisition loan notes.
Consolidated profit and loss account
for the 52 weeks ended 28 December 2003 (52 weeks ended 29 December 2002)
Before Exceptional Total Before Exceptional Total
Exceptional Items 2003 exceptional items 2002
items items (restated)
(restated)
£m £m £m £m £m £m
________________________________________________________________________________________
Turnover 1,095.1 - 1,095.1 1,089.3 - 1,089.3
________________________________________________________________________________________
Group
operating
profit 212.5 (112.0) 100.5 191.0 (131.2) 59.8
Share of
results of
associated
undertakings 1.2 - 1.2 1.4 0.1 1.5
________________________________________________________________________________________
Total
operating
profit 213.7 (112.0) 101.7 192.4 (131.1) 61.3
Profit on
disposal of
magazine
titles - - - - 1.7 1.7
Profit on
disposal of
subsidiary/
associated
undertakings - 0.1 0.1 - 0.1 0.1
________________________________________________________________________________________
Profit on
ordinary
activities
before
interest 213.7 (111.9) 101.8 192.4 (129.3) 63.1
Net interest
payable (38.3) - (38.3) (43.0) - (43.0)
Other
finance
(charges)
/income (2.9) - (2.9) 6.1 - 6.1
________________________________________________________________________________________
Profit on
ordinary
activities
before
taxation 172.5 (111.9) 60.6 155.5 (129.3) 26.2
Tax on
profit
on ordinary
activities (52.1) 5.2 (46.9) (47.0) 1.8 (45.2)
________________________________________________________________________________________
Profit/
(loss)
on ordinary
activities
after
taxation 120.4 (106.7) 13.7 108.5 (127.5) (19.0)
Non-equity
minority
interest (0.3) - (0.3) (0.3) - (0.3)
________________________________________________________________________________________
Profit/
(loss)
for the
financial
year 120.1 (106.7) 13.4 108.2 (127.5) (19.3)
Ordinary
dividends on
equity
shares (53.7) (51.4)
________________________________________________________________________________________
Retained
loss
for the
financial
year (40.3) (70.7)
________________________________________________________________________________________
Earnings per
share
(pence)
Underlying
earnings per
share 41.1 37.1
Exceptional
items (36.5) (43.7)
________________________________________________________________________________________
Earnings/
(loss) per share
- basic 4.6 (6.6)
________________________________________________________________________________________
Earnings/
(loss) per share
- diluted 4.6 (6.6)
________________________________________________________________________________________
All turnover and results arose from continuing operations.
Turnover and net operating expenses have been restated to reflect Arrow
Interactive revenues net of commissions payable (previously disclosed as
operating expenses) to third parties. This change in accounting policy has no
impact on the Group operating profit for 2003 or 2002 (see note 8).
Consolidated statement of total recognised gains and losses
for the 52 weeks ended 28 December 2003 (52 weeks ended 29 December 2002)
2003 2002
£m £m
________________________________________________________________________________
Profit/(loss) for the financial year 13.4 (19.3)
Difference between actual and expected return
on pension 55.1 (170.6)
schemes' assets
Experience losses arising on pension schemes'
liabilities (18.0) (11.1)
Effects of changes in assumptions underlying
the present (154.7) (12.4)
value of pension schemes' liabilities
Deferred tax asset associated with
movement on pension
schemes' deficits 35.3 58.3
________________________________________________________________________________
Total recognised gains and losses in (68.9) (155.1)
the year
________________________________________________________________________________
Consolidated balance sheet
at 28 December 2003 (29 December 2002)
2003 2002
£m (restated)
£m
________________________________________________________________________________
Fixed assets
Intangible assets 1,622.4 1,724.5
Tangible assets 401.0 389.9
Investments 9.9 9.7
________________________________________________________________________________
2,033.3 2,124.1
________________________________________________________________________________
Current assets
Stocks 7.0 7.3
Debtors 160.8 152.6
Cash at bank and in hand 34.3 40.0
________________________________________________________________________________
202.1 199.9
________________________________________________________________________________
Creditors: amounts falling due within one year
Bank loans, loan notes and overdrafts (57.3) (66.7)
Obligations under finance leases (4.4) (4.9)
Other creditors (249.5) (243.8)
________________________________________________________________________________
(311.2) (315.4)
________________________________________________________________________________
Net current liabilities (109.1) (115.5)
________________________________________________________________________________
Total assets less current liabilities 1,924.2 2,008.6
Creditors: amounts falling due after more than one year
Bank loans and loan notes (554.9) (599.1)
Obligations under finance leases (22.8) (35.4)
________________________________________________________________________________
(577.7) (634.5)
________________________________________________________________________________
Provisions for liabilities and charges (68.8) (67.5)
Non equity minority interest (3.7) (3.7)
________________________________________________________________________________
Net assets excluding pension schemes' (liabilities)/ 1,274.0 1,302.9
assets
________________________________________________________________________________
Pension schemes' liabilities (248.1) (163.1)
________________________________________________________________________________
Net assets including pension schemes' (liabilities)/ 1,025.9 1,139.8
assets
________________________________________________________________________________
Equity capital and reserves
Called up share capital 29.4 29.2
Share premium account 1,089.5 1,080.6
Revaluation reserve 5.0 5.0
Profit and loss account (98.0) 25.0
________________________________________________________________________________
Equity shareholders' funds 1,025.9 1,139.8
________________________________________________________________________________
The consolidated balance sheet as at 29 December 2002 has been restated in
accordance with UITF 38 Accounting for ESOP Trusts (see note 8).
Consolidated cash flow statement
for the 52 weeks ended 28 December 2003 (52 weeks ended 29 December 2002)
2003 2002
£m £m
Net cash inflow from operating activities 246.2 219.0
Dividends received from associated undertakings 0.9 9.5
Net cash outflow from returns on investments and servicing of
finance (42.4) (45.1)
Taxation paid (44.9) (39.2)
Net cash outflow from capital expenditure and financial
investment (55.2) (43.2)
Net cash (outflow)/ inflow from acquisitions and disposals (0.3) 17.5
Dividends paid (52.0) (51.3)
________________________________________________________________________________
Net cash inflow before financing 52.3 67.2
Net cash outflow from financing (53.5) (85.3)
________________________________________________________________________________
Decrease in cash (1.2) (18.1)
________________________________________________________________________________
Reconciliation of net cash flow to movement in net debt
for the 52 weeks ended 28 December 2003 (52 weeks ended 29 December 2002)
2003 2002
£m £m
Decrease in cash in the year (1.2) (18.1)
Cash outflow from movement in debt and leasing finance 62.2 87.0
________________________________________________________________________________
Change in net debt resulting from cash flows 61.0 68.9
________________________________________________________________________________
Movement in net debt in the year 61.0 68.9
Net debt at 30 December 2002 (666.1) (735.0)
________________________________________________________________________________
Net debt at 28 December 2003 (605.1) (666.1)
________________________________________________________________________________
Analysis of net debt
for the 52 weeks ended 28 December 2003 (52 weeks ended 29 December 2002)
At 30 Cash flow Loans repaid Other At 28
December £m £m non-cash December
2002 changes 2003
£m £m £m
Cash at bank and in 40.0 (5.7) - - 34.3
hand
Bank overdrafts (23.8) 4.5 - - (19.3)
________________________________________________________________________________
Net cash balances 16.2 (1.2) - - 15.0
________________________________________________________________________________
Debt due within one (42.9) - 19.8 (14.9) (38.0)
year
Debt due after one (599.1) - 29.3 14.9 (554.9)
year
Finance leases (40.3) 13.1 - - (27.2)
________________________________________________________________________________
Bank loans, loan (682.3) 13.1 49.1 - (620.1)
notes and
finance leases
________________________________________________________________________________
Net debt (666.1) 11.9 49.1 - (605.1)
________________________________________________________________________________
Notes to the 2003 preliminary statement
1. Change in accounting policies
The only changes to the Group's accounting policies during the 52 weeks to 28
December 2003 were in respect of the full adoption of UITF 38 Accounting for
ESOP Trusts and the restatement of turnover and net operating expenses to
reflect Arrow Interactive revenues net of commission payable to third parties.
These changes in accounting policy have no impact on the Group or total
operating profit in 2002 and 2003.
UITF 38 provides that shares held within Employee Share Option Schemes are dealt
with in the balance sheet as a deduction from shareholder funds.
2. Turnover
2003 2002
£m (restated)
£m
Regionals division* 525.3 521.4
Nationals division 492.2 494.0
Sports division 43.4 39.4
Magazines and exhibitions 30.5 31.0
Arrow Interactive (formerly Voice Media) 3.7 3.5
________________________________________________________________________________
Group turnover by division 1,095.1 1,089.3
________________________________________________________________________________
* Regionals division includes turnover relating to Post Publications Limited of
£nil (52 weeks to 29 December 2002: £2.6 million) and Ethnic Media Group Limited
of £nil (52 weeks to 29 December 2002: £2.2 million), which were sold in June
2002, Channel One which ceased trading in November 2002 of £nil (52 weeks to 29
December 2002: £0.6 million) and Wheatley Dyson & Son Limited of £0.1million (52
weeks to 29 December 2002: £1.6 million) which was disposed of in February 2003.
Turnover and net operating expenses have been restated to reflect Arrow
Interactive revenues net of commissions payable (previously disclosed as
operating expenses) to third parties. This change in accounting policy has no
impact on the Group operating profit for 2003 or 2002 (see note 8).
3. Group operating profit
The analysis of the Group's operating profit (before exceptional items) is as
follows:
2003 2002
£m £m
Regionals division* 123.9 112.9
Nationals division 85.8 77.6
Sports division 14.2 11.8
Magazines and exhibitions 4.8 5.3
Arrow Interactive (formerly Voice Media) (0.3) 0.2
Central costs (15.9) (16.8)
________________________________________________________________________________
Group operating profit by division 212.5 191.0
________________________________________________________________________________
* Regionals division includes losses relating to Post Publications Limited of £
nil (52 weeks to 29 December 2002: £0.1 million) and profits relating to Ethnic
Media Group Limited of £nil (52 weeks to 29 December 2002: £0.5 million), which
were sold in June 2002, Channel One of £nil (52 weeks to 29 December 2002: £nil
million) which ceased trading in November 2002 and Wheatley Dyson & Son Limited
of £nil million (52 weeks to 29 December 2002: £0.1million) which was disposed
of in February 2003.
Group operating profit by geographical destination has not been presented as the
element of Group operating profit arising outside of the United Kingdom and
Republic of Ireland is immaterial.
Notes to the 2003 preliminary statement (continued)
4. Exceptional items
2003 2002
£m £m
________________________________________________________________________________
Operating exceptional items
Impairment of carrying value of publishing rights and titles
(a) 100.0 125.0
Write off of carrying value of goodwill (b) 1.6 -
Restructuring costs (c) 14.6 13.2
Maxwell related recoveries (d) (3.1) (5.6)
Birmingham circulation issue receipt (e) - (1.4)
Profit on disposal of land and buildings (f) (1.1) -
________________________________________________________________________________
Group exceptional items charged against Group operating profit 112.0 131.2
________________________________________________________________________________
Share of exceptional items of associated undertakings (g) - (0.1)
________________________________________________________________________________
Total exceptional items charged against operating profit 112.0 131.1
________________________________________________________________________________
Profit on sale of magazine titles (h) - (1.7)
Profit on sale of subsidiary undertakings (i) (0.1) (0.1)
________________________________________________________________________________
Net exceptional items before taxation 111.9 129.3
________________________________________________________________________________
a) The annual impairment review of the carrying value of the Group's publishing
rights and titles, undertaken in accordance with FRS 10, indicated that an
impairment charge was required. The impairment reduces the carrying value of the
Regional titles in the South by £100.0 million (2002: Regional titles in the
Midlands by £125.0 million), to the net present value of future cash flows to be
derived from those assets discounted at 8.0% (2002: 7.5%).
b) Following a review of a number of motorcycle shows during the year, in
advance of their subsequent disposal in January 2004, goodwill of £1.6 million
has been written off.
c) Restructuring costs of £14.6 million (2002: £13.2 million) relate primarily
to costs incurred for cost reduction measures.
d) In 2003, the Group recovered £3.1 million (2002: £5.6 million) from the
liquidators of Maxwell related companies for claims outstanding since 1992.
e) In 2002, the Group received compensation of £1.4 million (net of costs) in
relation to outstanding issues following the identification of errors in the
circulation of the Birmingham titles in 1999.
f) In 2003 the Group disposed of the Colmore Circus office tower in the
Midlands for consideration of £4.7 million and an element of the land of the
former Anderston Quay building for the Scottish Daily Record for a cash
consideration of £1.0 million realising a profit of £0.4 million and £0.7m
respectively.
g) In 2002, Press Association, an associated undertaking, disposed of a
property, the Group share of the profit being £0.1 million.
h) In December 2002, the Group disposed of three biker magazines for a cash
consideration of £1.8 million realising a profit of £1.7 million. The results of
the magazines to the date of disposal were included in continuing operations.
Tax was charged in respect of this disposal of £0.2 million based on a
chargeable gain of £0.8 million.
i) In February 2003 the Group disposed of Wheatley Dyson & Son Limited for cash
consideration of £0.1 million realising a profit on disposal of £0.1 million. In
June 2002, the Group disposed of Post Publications Limited for cash
consideration of £6.5 million, realising a loss of £0.3 million and Ethnic Media
Group Limited for total consideration of £10.2 million, of which £9.2 million
was paid in cash and £1.0 million is deferred for two years, realising a profit
of £0.4 million. The results of the companies to the date of disposal were
included in continuing operations. No tax liability arose on these disposals.
Notes to the 2003 preliminary statement (continued)
5. Tax on profit on ordinary activities
2003 2002
£m £m
________________________________________________________________________________
Profit before tax on ordinary activities before exceptional
items 172.5 155.5
________________________________________________________________________________
Corporation Tax
Corporation tax charge for the year 52.1 45.5
Prior year adjustment (1.2) 0.6
________________________________________________________________________________
Total current tax charge 50.9 46.1
________________________________________________________________________________
Deferred Tax
Deferred tax charge for the year 3.8 2.9
Prior year adjustment (2.6) (2.0)
________________________________________________________________________________
Total deferred tax 1.2 0.9
________________________________________________________________________________
Total tax on profit on ordinary activities before exceptional
items 52.1 47.0
________________________________________________________________________________
Exceptional:
UK corporation tax on exceptional items (5.2) (1.8)
________________________________________________________________________________
Tax on profit on ordinary activities 46.9 45.2
________________________________________________________________________________
Included within the deferred tax charge for the year is an FRS 17 credit of £1.1
million (2002: £0.6 million).
6. Earnings per share
Earnings per share are based on the profit or loss on ordinary activities after
taxation. They are calculated using the weighted average number of shares in
issue (basic) increased by the number of share options in issue (diluted) as
shown below.
2003 2002
No. of shares No. of shares
Basic (millions) 292.4 291.6
________________________________________________________________________________
Diluted (millions) 293.8 291.9
________________________________________________________________________________
7. Pensions
The Group operates a number of funded final salary pension schemes including two
executive arrangements, all of which have been set up under Trusts that hold
their financial assets separately from those of the Group.
Valuations have been performed in accordance with the requirements of FRS 17 as
at 31 December 2003.
Scheme liabilities have been calculated using a consistent projected unit
valuation method and compared to the schemes' assets at the 28 December 2003
market value as below:
Total as at Total as at Total as at
28 December 29 December 30 December
2003 2002 2001
£m £m £m
________________________________________________________________________________
Fair value of schemes' assets 970.7 872.8 999.9
Actuarial value of schemes'
liabilities (1,325.2) (1,105.8) (1,036.9)
________________________________________________________________________________
Schemes' deficits (354.5) (233.0) (37.0)
Deferred tax 106.4 69.9 11.1
________________________________________________________________________________
Net schemes' liabilities (248.1) (163.1) (25.9)
________________________________________________________________________________
Notes to the 2003 preliminary statement (continued)
8. Restatement of comparatives
a) Arrow Interactive
Turnover and net operating expenses have been restated to reflect Arrow
Interactive revenues net of commissions payable (previously disclosed as
operating expenses) to third parties. This change in accounting policy has no
impact on the Group operating profit for 2003 or 2002.
As a result of this change in accounting policy, the comparatives have been
restated as follows:
Turnover Net operating
expenses
Consolidated Profit and Loss Account £ m £ m
________________________________________________________________________________
Year to 29 December 2002 reported 1,092.2 1,032.4
Change in revenue recognition policy (2.9) (2.9)
________________________________________________________________________________
2002 restated 1,089.3 1,029.5
________________________________________________________________________________
The change in revenue recognition policy reduces turnover and net operating
expenses by £4.1 million for 2003.
b) UITF 38 Accounting for ESOP Trusts
UITF 38 requires that shares held by employee share schemes should be presented
in the balance sheet as a deduction from shareholder funds and the acquisition
of shares should be presented in the financial statements as a change in
shareholder funds.
As a result of this change in accounting policy, the comparatives have been
restated as follows:
Fixed asset Shareholders'
investments Funds
Consolidated Balance Sheet £ m £ m
________________________________________________________________________________
At 29 December 2002
reported 0.5 1,140.2
Reclassification of ESOP
shares to shareholders'
funds (0.4) (0.4)
________________________________________________________________________________
2002 restated 0.1 1,139.8
________________________________________________________________________________
9. Post balance sheet events
On 15 January 2004, the Group disposed of its Irish subsidiaries for cash
consideration of £46.3 million, realising an estimated profit of £1.4 million.
On 8 January 2004, the Group disposed of its Motorcycle Show business at book
value for cash consideration of £0.2 million.
10. Issue of Annual Report and Accounts
The 2003 Annual Report and Accounts will be posted to shareholders on 30 March
2004. Copies may be obtained after 30 March 2004 from the Company Secretary,
Trinity Mirror plc at One Canada Square, Canary Wharf, London E14 5AP.
The financial information set out above does not constitute the Company's
statutory accounts for the periods ended 28 December 2003 or 29 December 2002,
but is derived from those accounts. Statutory accounts for 2002 have been
delivered to the Registrar of Companies and those for the period ended 28
December 2003 will be delivered following the Company's Annual General Meeting.
The auditors have reported on those accounts; their reports were unqualified and
did not contain statements under section 237(2) or (3) of the Companies Act
1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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