Final Results
Trinity Mirror PLC
03 March 2005
Trinity Mirror plc
2004 Preliminary Results
for 53 weeks ended 2 January 2005
3 March 2005
Trinity Mirror plc announces the Group's Preliminary Results for the 53 weeks
ended 2 January 2005.
Operational highlights
• 'Stabilise Revitalise Grow' strategy delivering ahead of expectations
• Robust revenue and profit performance Revenues(1) up 5.8% with operating
profit(1,2) up 20.9%. Excluding the benefit of an additional week's
trading, revenues(1) are up 4.5% and operating profit(1,2) is up 16.6%
• Continued improvement in Group margin(1,2) Increased from 19.4% to
22.2%. Excluding the additional week's trading margin(1,2) improved to
21.7%
• Incremental cost savings of £23.0 million Delivered net annualised
savings of £28 million in 2004 and on target for at least £35 million net
annualised savings for 2005
• Continued strength of cash flow contributing to £154.7 million fall in
net debt to £450.4 million
• Final dividend increased by 11.7% Annual dividend increased by 10.4% to
20.2 pence per share
• Intention to return up to £250 million capital to shareholders through a
three-year share buy-back programme commencing in 2005
Financial highlights
Like-for-like(1,2) (pre exceptional items) Actual (post exceptional items)
2004 2004 2003 % % 2004 2003 %
53 weeks 52 weeks 52 weeks Change Change £m £m Change
£m £m £m 2004 53 weeks 2004 52 weeks
Turnover 1,141.7 1,127.5 1,078.9 5.8% 4.5% 1,141.7 1,095.1 4.3%
Operating
profit 253.1 244.2 209.4 20.9% 16.6% 240.9 100.5 139.7%
Profit
before
tax 216.8 208.5 172.5 25.7% 20.9% 207.1 60.6 241.7%
Earnings
per
share 50.9p 49.0p 41.1p 23.8% 19.2% 48.9p 4.6p 963.0%
Dividend
per
share 20.2p 18.3p 10.4%
Net debt 450.4 605.1
Footnotes
(1) Turnover and operating profit adjusted to exclude the results of
Wheatley Dyson & Son Limited which was disposed of in February 2003 and the
Irish regional newspaper titles in Belfast, Derry and Donegal which were
disposed of in January 2004. During the 53 weeks ended 2 January 2005 these
businesses achieved turnover of £nil million (2003: £16.2 million) and operating
profit of £nil million (2003: £3.1million). Further narrative on the statutory
financial information is provided in the financial summary on pages 11 and 12.
(2) Group operating exceptional items of £12.2 million (2003: £112.0
million) include a £nil million (2003: £100.0 million) impairment charge against
the carrying value of the publishing rights and titles of our Regional titles in
the South. Total exceptional items before tax of £9.7 million (2003: £111.9
million), and after tax of £6.0 million (2003: £106.7 million), also include the
net profit on the disposal of subsidiary undertakings and properties. Further
narrative on the statutory financial information is provided in the financial
summary on pages 11 and 12.
Sir Victor Blank, Chairman of Trinity Mirror plc, commented:
'We are in good shape both operationally and financially. The management team is
focused on growth, both organically from within our existing businesses, and by
reviewing the opportunities for acquisition. We have both the talent and
resources to achieve this and in returning capital to shareholders, we will not
be inhibiting our plans for growth'
Sly Bailey, Chief Executive of Trinity Mirror plc, commented:
'The results represent the effect of the first full year of our performance
based strategy Stabilise Revitalise Grow. They are also a testament to the
highly motivated and talented people who make up Trinity Mirror and have
refocused and reprioritised their efforts. This is absolutely a team effort and
together we have delivered all of the financial targets we promised.'
Enquiries:
Trinity Mirror plc 020 7293 3000
Vijay Vaghela, Group Finance Director
Nick Fullagar, Director of Corporate Communications
Finsbury 020 7251 3801
Rupert Younger
James Leviton
Chief Executive's Statement
The 2004 results have benefited from the first full year of our
performance-based strategy 'Stabilise Revitalise Grow'. The Group has delivered
significantly improved results with a 5.8% increase in turnover* from £1,078.9
million to £1,141.7 million, and a 20.9% improvement in operating profit* from
£209.4 million to £253.1 million. Group operating margins* increased by 2.8%
from 19.4% to 22.2%. Excluding the impact of the additional week's trading in
2004, turnover* increased by 4.5% to £1,127.5 million, operating profits*
increased by 16.6% to £244.2 million and operating margins* increased by 2.3% to
21.7%.
Furthermore, we achieved all of our stated financial targets as follows:
• Incremental net cost savings of £23 million representing annualised
savings of £28 million in 2004. The Group is on track to deliver a minimum
of £7 million incremental net cost savings in 2005, contributing to net
annualised cost savings of at least £35 million in 2005
• The final dividend has been increased by 11.7% which coupled with the
increased interim dividend of 7.3% represents an increase in the total
dividend of 10.4%
• Net debt reduced by £154.7 million to £450.4 million
• Operating margins* for the Regionals division further improved by 4.2%
to 27.9%. Excluding the additional week's trading, operating margins* have
increased by 3.9% to 27.6%
• Digital media activities achieved a profit of £0.7 million, an
improvement of £4.5 million from a loss of £3.8 million in 2003
While the Group surpassed all of its financial targets, the six-monthly market
share performance of the Daily Mirror was disappointing. Although market share
stabilised at around 19.5% by the end of the year, it fell by 0.8% during 2004.
This was principally as a result of an estimated 3% loss of circulation
following the publication in May of the fake Iraq prisoners abuse pictures.
In the highly competitive Sunday tabloid market, which is driven by substantial
promotional activity, the Sunday Mirror improved its six-monthly average market
share from 15.6% to 15.9% while The People lost 0.7% market share from 10.5% to
9.8%.
Looking forward, the maintenance of market share for the Group's National titles
will remain a key focus. However, the emphasis will be on building profitability
and enhancing shareholder value rather than maintaining market share at any cost
in a marketplace characterised by significant price cutting and marketing
activity.
Building a platform for growth
2004 was a year of substantial change and progress for the Group as we continued
to strengthen our financial position while building a robust platform for
growth. The key areas of progress during the year were as follows:
• Strengthened management and operational structures within the core
business. In the Regionals division a new Managing Director has been
appointed who will manage the division through a newly created Regionals
Executive Board. The Executive Board consists of senior management drawn
from within the division and the centre. A new senior post of Newspaper
Sales Director has been created in the Regionals division to focus on
driving and improving circulation performance. The Nationals division (UK
and Scottish) is now managed by a single Managing Director with
responsibility for all aspects of the division's operations.
• An increased focus on driving top-line revenues, both in the core
business and from developing new activities. Examples can be seen across the
Group and include the creation of new standard advertising platforms for the
Regional titles, significant growth in digital revenues, increased revenues
from the Metro titles, and the launch of The One Directory in Scotland. The
Nationals division achieved growth in advertising revenues for the first
time since 2000.
• Establishment of a Group-wide Advertising Board to assist in the drive
for higher performance and best practice across the advertising function, to
co-ordinate sales activity with key clients and to oversee the installation
of a common Group-wide Advertising system. The introduction of more
efficient processes, the development of specialist sector knowledge and
cross-selling between our Regional and National titles have already begun to
drive incremental revenues.
• Circulation revenue benefits seen from the 'little and often' cover
pricing policy implemented across the Group.
• Creation of an efficient Manufacturing network. The number of print
sites across the Group has been reduced from 12 to 9 contributing to better
operational efficiencies and significantly reducing capital requirements.
This network of printing assets has enabled the Group to drive new printing
revenues and to secure a new 15-year contract with Guardian Media Group to
print their regional titles in the North of England. The same contract also
halved the £45 million capital expenditure requirement for four new
full-colour presses in Oldham. The Group has also saved a further £30
million of future capital expenditure through the closure of two plants in
Huddersfield and Chester. The newspapers previously printed at these sites
are now using print facilities in Oldham, Liverpool, Birmingham and Scotland
and have benefited from a switch to a tabloid format with increased colour,
making them more attractive to readers and advertisers alike.
• A drive for greater efficiencies in the supply chain, covering all
newstrade activities from distribution and trade marketing through to retail
and home delivery. Progress to date has included the re-negotiation of
long-term contracts with wholesale partners, for the first time across the
entire Group. Presently the Group is evaluating the potential benefits of
moving some of its internal regional distribution network to its external
wholesale partners.
• Increased operational efficiencies through completion of the
centralisation of our Finance, Human Resources and IT functions. This has
the dual benefit of allowing local management to focus on driving publishing
initiatives in their markets while being supported by improved Group
management of these functions.
• A continued focus on cost management which is now embedded in the
corporate culture of the Group. This is demonstrated by the higher than
targeted cost savings achieved in the year.
In addition to the improvements seen as a result of implementing the Group's
performance-based strategy, the business benefited from a general improvement in
the advertising market, in particular for the Regionals division. However, the
Group faces the industry-wide challenge of improving overall circulation volume
performance.
Growth initiatives
As the performance of the business has stabilised and improved, management has
focused attention on driving growth initiatives, seeking to grow revenues both
from the core business and from new products and revenue streams, building on
its competencies, market positions and customer relationships.
Ongoing initiatives to revitalise and grow the business include the following:
• A number of the Group's Regional titles have been relaunched in tabloid
format with benefits to both advertising and circulation revenues, including
a positive impact on circulation volumes. 2005 will see a continued focus on
the management of the portfolio, both through improvements to existing
titles and new launches, such as the successful launch of a new free
newspaper in Maidenhead in October 2004.
• Our digital activities have been refined and developed across the Group
during 2004 and will form a key pillar of the strategy going forwards. In
our Regionals division management has focused on becoming a true
multi-platform local publishing and advertising business. Performance of
digital media activities in the Regionals division has been significantly
improved, with strong revenue growth of 60.5% and profits seen for the first
time in 2004. The Group's commitment to fish4 is beginning to pay real
dividends with the recent NORAS survey rating fish4 as the UK's most popular
website for job seekers. The online activities of the Group's Sports
division also continue to show marked improvements with profits* of £0.6
million in 2004, an increase of 100%. New digital launches have included the
launch of ScotCareers, a new recruitment website in Scotland, and a public
sector recruitment website in Wales.
• Building on our core competencies and strong market positions, the Group
is also exploring new activities. Utilising existing infrastructure, The One
Directory has been successfully launched in Edinburgh and Glasgow. This
unique combination of editorial and classified directory content has secured
new revenue and delivered profit in its first year. Building on this success
the Group is considering further roll-out of The One Directory in 2005,
initially in Scotland.
Our focus on continuing to improve the core businesses while seeking out
opportunities in new but related markets is part of our strategy of growing the
business. While initiatives to date derive from our existing core businesses,
the Group will also consider external opportunities to grow the business. Any
opportunities must satisfy our key objective of enhancing shareholder value.
A firm foundation to grow shareholder value
As a direct result of the continually improving profitability of the core
business, the Group has exceeded its financial targets. Given the highly
cash-generative nature of the Group's businesses coupled with continued
confidence in improving performance, the Board believes it appropriate to
commence a substantial return of capital to shareholders in order to maintain an
efficient yet prudent capital structure. While we will continue to review all
opportunities for enhancing returns to shareholders it is our current intention
to return up to £250 million through a share buy-back programme over the next
three years.
In addition to returning capital to shareholders through a share buy-back
programme, the Group is committed to progressively increasing dividends.
The combination of increased dividends and a share buy-back programme represents
the most significant return of capital to shareholders in the history of the
Group.
Board changes
Penny Hughes and David Marlow, non-executive directors, will retire at the
conclusion of the Annual General Meeting on 5 May 2005 and will stand down from
the Board.
Gary Hoffman, Chief Executive of Barclaycard, has been appointed as
non-executive director with effect from 3 March 2005.
Outlook
The strong results delivered in 2004 and the continuing benefits of our
performance-based strategy lead the Board to look forward to another year of
progress during 2005.
Review of operations
Regionals division
The turnover* and operating profit* of the Group's Regionals division,
incorporating Metros and Digital Media, are as follows:
53 weeks 52 weeks 52 weeks Change Change
2004 2004 2003 53 weeks 52 weeks
£m £m £m % %
Turnover*
Regional newspaper
titles 522.1 517.7 494.8 5.5% 4.6%
Metros 11.9 11.9 10.5 13.3% 13.3%
Digital media
activities 6.1 6.1 3.8 60.5% 60.5%
Regionals division 540.1 535.7 509.1 6.1% 5.2%
Operating profit*
Regional newspaper
titles 148.6 145.7 124.4 19.5% 17.1%
Metros 1.3 1.3 0.2 550.0% 550.0%
Digital media
activities 0.7 0.7 (3.8) n/a n/a
Regionals division 150.6 147.7 120.8 24.7% 22.3%
Operating margin* 27.9% 27.6% 23.7% 4.2% 3.9%
The combination of numerous revenue initiatives and the continued tight
management of costs has driven robust operating profit* and margin* progression
for the Regionals division.
Revenue* increased by 6.1% and operating profit* increased by 24.7%. Excluding
the benefit of the additional week's trading, revenues* increased by 5.2% and
operating profit* increased by 22.3%. A strong performance for core Regional
newspaper titles was supported by significant improvements from Metros and
Digital Media activities. The Group's three Metros achieved a £1.1 million
improvement in operating profits* to £1.3 million while Digital Media activities
achieved a profit* of £0.7 million, representing an improvement of £4.5 million
compared to a loss of £3.8 million in 2003.
Operating margin*, a key area of management focus, improved by 4.2% to 27.9%.
Excluding the benefit of the additional week's trading, operating margin*
improved by 3.9% to 27.6%.
Advertising revenue* for the Regionals division increased by 6.0% from £394.0
million to £417.8 million. This includes advertising revenue* growth of 5.2% for
the Regional newspaper titles excluding Metros, 13.5% for Metros and 100.0% for
Digital Media activities. Excluding the additional week's trading, advertising
revenues* increased by 5.3% with Regional newspaper titles, excluding Metros,
achieving growth of 4.5%. The division achieved year-on-year growth for all
categories (excluding the additional week's trading) with Display up 3.9%,
Recruitment up 6.8%, Property up 12.5%, Motors up 0.3% and other classified
categories up 2.8%.
Advertising revenues for the Regional newspaper titles in London and the South
East have continued to improve with growth of 4.5% (3.8% excluding the
additional week's trading) reflecting 3.7% in the first half and 5.2% (4.0%
excluding the additional week's trading) in the second half compared to a
decline of 2.5% in 2003.
Metros achieved strong advertising revenue growth of £1.4 million (13.5%) driven
by an 11.7% (excluding the additional week's trading) increase in Display and a
43.6% (excluding the additional week's trading) increase in Recruitment.
Digital Media activities delivered a robust performance with total revenues up
60.5% with advertising revenues increasing by 100.0% with all categories
achieving strong year-on-year growth.
Circulation revenue* increased by 6.0% from £76.1 million to £80.7 million.
Excluding the benefit of the additional week's trading, circulation revenues
increased by 4.3% to £79.4 million. The performance reflects the benefit of
cover price increases partially offset by circulation volume declines. During
the year the Regionals division experienced circulation declines of 5.6% for
Evening titles, 3.0% for Morning titles, 2.0% for Weekly titles and 8.7% for
Sunday titles. Improving this circulation performance remains a key area of
focus for management. Some improvement in performance was achieved for a number
of titles in the second half of the year with the daily Morning titles declining
by 2.3% in the second half compared to 3.7% in the first.
Nationals division
The turnover and operating profit* of the Group's Nationals division is as
follows:
53 weeks 52 weeks 52 weeks Change Change
2004 2004 2003 53 weeks 52 weeks
£m £m £m % %
Turnover
UK Nationals 407.2 400.1 386.2 5.4% 3.6%
Scottish Nationals 112.5 110.7 106.0 6.1% 4.4%
Nationals division 519.7 510.8 492.2 5.6% 3.8%
Operating profit*
UK Nationals 70.4 66.3 60.8 15.8% 9.0%
Scottish Nationals 24.7 23.5 25.0 (1.2)% (6.0)%
Nationals division 95.1 89.8 85.8 10.8% 4.7%
Operating margin* 18.3% 17.6% 17.4% 0.9% 0.2%
The Nationals division has delivered a robust performance in an extremely
challenging and competitive marketplace. Revenues were up 5.6% with operating
profits* up 10.8%. Excluding the benefit of the additional week's trading,
revenues increased by 3.8% and operating profit* increased by 4.7%. A strong
performance for the UK Nationals was partially offset by a weaker performance in
the Scottish Nationals. The reduced operating profit* in the Scottish Nationals
reflects additional investment in product and marketing, a net investment of
£0.4 million in ScotCareers, a substantially increased FRS17 pension charge and
there being no increase in the cover price for the Monday to Friday editions of
the Daily Record until November 2004.
Operating margins* improved slightly by 0.9% from 17.4% to 18.3%. Excluding the
benefit of the additional week's trading, operating margins* increased by 0.2%
to 17.6% with the UK Nationals improving by 0.9% to 16.6% and the Scottish
Nationals falling by 2.4% to 21.2%.
Circulation revenue increased by 6.5% from £261.9 million to £279.0 million,
reflecting a 7.4% increase for the UK Nationals and a 3.3% increase for the
Scottish Nationals. Excluding the benefit of the additional week's trading, c
irculation revenue increased by 4.7% to £274.2 million, reflecting a 5.5%
increase for the UK Nationals and a 1.7% increase for the Scottish Nationals.
The increase in circulation revenues reflects the benefit of increased cover
prices partially offset by reduced circulation volumes.
The Daily Mirror average circulation volume over the 12-month period fell by
6.9% (6.8% fall in 2003). The disappointing performance reflects the impact of
reduced volumes following the publication of the fake Iraq prisoner abuse
pictures in May. Average circulation volumes were down 5.3% in the first half
compared to 8.4% in the second half. Six-monthly market share (excluding
sampling) for the Daily Mirror fell by 0.8% from 20.3% to 19.5% during the year.
The market share was maintained at 20.3% for the first 5 months but fell
following the publication of the fake Iraq abuse pictures in May.
The Sunday Mirror and The People continue to operate in a highly competitive
Sunday market driven by marketing and promotional activity. Despite the
increased level of competitive activity in the marketplace, the Sunday Mirror
limited average circulation volume decline over the 12-month period to 1.8%. The
2004 performance compares to declines of 6.9% in 2003. Average circulation
volumes were down 3.0% in the first half compared to 0.6% in the second half. In
the final quarter of 2004 the Sunday Mirror achieved year-on-year growth of 0.4%
with every month achieving growth. The significantly improved circulation
performance enabled the Sunday Mirror to increase six-monthly market share
(excluding sampling) by 0.3% from 15.6% to 15.9%.
The People had a disappointing circulation volume performance with circulation
falling by 8.6% during the 12-month period. However, the title improved its rate
of decline compared to the 13.8% fall in 2003. The circulation performance of
The People contributed to a fall in six-monthly market share of 0.7% to 9.8%.
For the first 10 months The People maintained market share in excess of 10.0%.
The Scottish National newspaper market continues to be challenging with price
discounting and substantial marketing investment by rival UK tabloid newspapers.
However, despite the intense competition, the Daily Record improved its
year-on-year circulation trend. This improved trend reflects the benefit of
additional product and marketing investment and the first full year of the new
editor appointed in September 2003. The Daily Record and Sunday Mail average
circulation volume (Scottish sales only) declined over the 12-month period by
4.3% (6.4% for 2003) and 5.1% (4.6% for 2003) respectively.
An improved advertising environment during 2004 enabled advertising revenues for
the Nationals division to increase by 3.9% with the UK Nationals increasing by
3.6% and the Scottish Nationals increasing by 4.8%. Excluding the benefit of the
additional week's trading, advertising revenues for the Nationals division
increased by 2.1% with the UK Nationals increasing by 1.7% and the Scottish
Nationals increasing by 3.1%. This represents the first year of increased
advertising revenues for the Nationals division since 2000.
For the three UK titles advertising revenue growth of 2.6% in the first half was
partially reduced by growth of 0.7% (excluding the additional week's trading) in
the second half. Advertising revenues in December, excluding the additional
week's trading, fell by 2.5%, reflecting the stronger comparative for 2003 when
advertising revenue grew by 8.7%.
In Scotland, advertising revenue growth of 2.9% in the first half was supported
by growth of 3.6% in the second half. The better performance for the Scottish
titles includes the benefit of the newly launched The One Directory in Glasgow
and Edinburgh. Excluding The One Directory, advertising revenues in the Scottish
Nationals increased by 1.1% for the year (excluding the additional week's
trading) with the second half growing by 0.3%.
Sports division
The Sports division continued to deliver strong performance with revenues
increasing by 12.7% to £48.9 million and operating profits* increasing by 26.8%
to £18.0 million (2003: £14.2 million). Excluding the benefit of the additional
week's trading, revenues increased by 10.8% to £48.1 million and operating
profits* increased by 21.8% to £17.3 million.
Circulation revenues grew by 10.2% from £28.3 million to £31.2 million.
Excluding the benefit of the additional week's trading, circulation revenues
grew by 8.1% to £30.6 million. The circulation revenue performance reflects the
benefit of increased cover prices for all titles and additional Sunday
publishing days. This was partially offset by reduced volumes for the Monday to
Saturday editions of the Racing Post, which fell by 2.5% in part due to a hiatus
in satellite TV coverage of UK racing between March and June 2004 .
The division achieved strong advertising revenue growth of 18.0% from £12.2
million to £14.4 million. Excluding the additional week's trading, advertising
revenues increased by 16.4% to £14.2 million.
The division's online operations continued to make further improvements with
revenues increasing by 20.0% to £1.8 million and operating profits* increasing
by 100.0% to £0.6 million. Racingpost.co.uk, which was merged with
Smartbet.co.uk during the year, had average monthly page impressions of 44.3
million in 2004.
Operating margin* for the Sports division improved by 4.1% from 32.7% to 36.8%.
Excluding the benefit of the additional week's trading, operating margins*
improved by 3.3% from 32.7% to 36.0%.
Magazines and Exhibitions
The division achieved revenue growth of 4.3% from £30.5 million to £31.8 million
and operating profit* growth of 47.9% from £4.8 million to £7.1 million. The
2004 results demonstrate the benefits of portfolio restructuring during 2003 and
2004.
Circulation revenue increased by 4.7% to £4.5 million driven by cover price
increases partially offset by reduced volumes.
Advertising revenue increased by 2.8% to £14.7 million. Other revenue, which is
principally stand and ticket sales for exhibitions, increased by 5.9% to £12.6
million. The Wedding and Bridal shows in particular achieved strong stand space
revenue and visitor numbers.
Operating margin* for the Magazines and Exhibitions division improved by 6.6%
from 15.7% to 22.3% reflecting the full-year benefits of the cost savings
generated by the comprehensive restructuring programme.
Arrow Interactive
Arrow Interactive reported losses* of £1.3 million, an increase of £1.0 million
from £0.3 million losses in 2003. The division has now been refocused on driving
revenues for the Group only and will not be separately reported for 2005.
Central Costs
During the year central costs* increased by £0.5 million, from £15.9 million to
£16.4 million. The increase in central costs reflects the benefit of cost
savings offset by additional costs associated with the newly launched Long Term
Incentive Plan (LTIP), increased bonus payments to central areas driven by
improved performance and an increase in the size of the central development team
to focus on revitalising our products and processes and to develop growth
opportunities.
Progress on key projects
The Group continues to make significant progress on the three key projects:
Manufacturing, Supply Chain and Procurement.
Manufacturing
Manufacturing includes the Group's print facilities across the country and
accounts for approximately £124 million of annual costs excluding the costs
associated with external print contracts. These costs are to some extent
dependent on volumes. Prior to July 2003, all print sites, with the exception of
the three Nationals print sites in Watford, Oldham and Cardonald, were managed
independently. During 2003 the Group set a number of key objectives in this area
as follows:
•Improve the quality of products to better serve the needs of readers and
advertisers
•Improve operating efficiencies
•Reduce printing costs
•Significantly reduce, over time, the level of capital expenditure
required for the Group's printing assets
The Group has made good progress during 2004 in achieving these objectives
through a transformation of the operational structure of printing through the
creation of a Manufacturing network. From 12 print sites and 41 printing presses
in 2003, the Group has now consolidated into 9 print sites and reduced the
number of printing presses to 37. The reduction in the number of print sites and
printing presses has reduced the potential future re-pressing costs for the
Group of some £30 million and will contribute to annualised costs savings of £5
million during 2005.
While the obvious benefits of consolidation in terms of operating efficiencies
and cost savings are being achieved there have also been additional benefits in
terms of product enhancements and additional contract print revenues.
The availability of colour for our newspapers has been significantly improved
during the year. Three of our sites have full-colour printing presses and
additional colour units have been installed in the Newcastle print plant. In
addition the Group has announced a joint investment with Guardian Media Group
Regional newspaper division (GMG Regionals) of £45 million in 4 new colour
presses in Oldham, which will provide full colour for the Daily Mirror and a
number of our Regional titles in the North West in 2006. Whilst providing
improved colour facilities the GMG Regionals contract demonstrates the Group's
approach to reducing the level of capital investment in print sites whilst
improving quality of our products. In addition to the benefits of sharing
capital investment, the Group has secured a 15-year contract to print the GMG
Regionals titles in the North which will benefit the Group in reducing overall
net costs of printing.
The Group's largest 12-press print site at Watford, the 4-press site in
Cardonald, Scotland and the 3-press site in Liverpool may require additional
investment in the short to medium term. While no commitments have been made to
date, we envisage the costs associated with repressing the Watford print plant
to be approximately £55 million and we will consider our options in relation to
Cardonald and Liverpool over the next couple of years. As the Group now operates
all its printing assets through the Manufacturing network, the capital costs for
these sites will be significantly lower than that under the previous structure
where printing assets were managed through the local publishing businesses.
Supply Chain
The Supply Chain review covers all newstrade activities from distribution and
trade marketing through to retail and direct to home delivery. For the first
time this review is being undertaken across the entire Group with the specific
aim of:
• Improving circulation volumes and thus revenues
• Capturing the benefits of scale
• Reducing costs
• Increasing flexibility and responsiveness
The project will help drive better overall performance across the business
through shared learning, improved copy management and more targeted analysis of
market opportunity.
Progress during 2004 has included the following:
• Conclusion of new 5-year wholesaler supply chain contracts on mutually
beneficial terms
• Commencement of a detailed review of our current in-house distribution
network in some regions with our wholesale partners. The review will seek
to evaluate the most efficient method of distribution (i.e. external or
internal) with a view to finalising plans by the second half of 2005
• Commencement of the establishment of a centrally-led network (CLN) for
circulation management for the Regional newspaper titles. A new Newspaper
Sales Director for the Regionals division has been recruited and joined the
Group in February 2005 and will lead the CLN. The CLN will better drive
circulation performance through the establishment of common systems and
procedures, thereby reducing overall operating costs, optimising investment
and improving copy allocation and availability to drive circulation volume
performance
• Improved copy allocation and availability across all National titles
The benefits of some of this work will become evident in the 2005 performance.
Procurement
In prior periods, with the exception of newsprint, the Group was not extracting
the full benefits of leveraging its scale in procurement. The establishment of a
procurement committee has enabled significant benefits to be extracted in all
areas where common services and materials are acquired across the Group. Areas
reviewed have included utilities, security, property services, insurance,
travel, print materials and other consumables. The benefits of these new
contracts are included in the reported cost savings targets.
Financial Summary
Accounting policies used in the preparation of the financial information for the
53 weeks ending 2 January 2005 are consistent with those set out in the Group's
financial statements for 2003.
Profit and loss account
On a statutory basis Group revenues increased 4.3% from £1,095.1 million to
£1,141.7 million and operating profit before exceptional items increased by
19.1% from £212.5 million to £253.1 million. On a like-for-like basis, excluding
the results of disposed activities from the 2003 results as defined in footnotes
(1) and (2) on page 1, Group revenues* increased by 5.8% from £1,078.9 million
to £1,141.7 million and Group operating profit before exceptional items
increased by £43.7 million, representing an increase of 20.9% from £209.4
million to £253.1 million.
The 2004 results cover a 53-week compared to a 52-week period for 2004. The 2004
period ended 2 January 2005, which was the closest Sunday to 31 December 2004.
During the additional week, the final week of the period, revenue and operating
profit was £14.2 million and £8.9 million respectively. Excluding the benefit of
the additional week's trading, Group revenue* increased by 4.5% to £1,127.5
million and operating profit* increased by 16.6% to £244.2 million.
The 2004 results incorporate the benefits of £23 million incremental net cost
savings partially offset by an increased FRS 17 operating profit current service
pension charge of £8.1 million. Further net incremental cost savings of at least
£7.0 million are targeted for 2005 with annualised net cost savings of at least
£35.0 million. The FRS 17 operating profit current service pension charge for
2005 is expected to be £28.6 million, representing a decrease of £4.0 million.
Contribution from associates was £1.3 million (2003: £1.2 million), reflecting
the Group's share of profits from its associate, The Press Association.
Dividends totalling £3.2 million have been received from The Press Association
during 2004 (2003: £0.9 million).
Net interest payable (excluding the FRS 17 finance charge) fell by £3.4 million
to £34.9 million, reflecting the benefit of lower debt levels, which have been
partially offset by increased interest rates. Excluding the additional week's
interest charge, net interest payable fell by £4.0 million to £34.3 million.
Group operating profit before exceptional items covers the net interest cost 7.3
times.
Other finance charges/income, reflecting the FRS 17 interest charge, fell by
£0.2 million from £2.9 million in 2003 to £2.7 million. For 2005 an FRS 17
finance credit of £1.8 million is expected.
Exceptional costs, before tax, of £9.7 million (2003: £111.9 million) were
incurred during the year. These include net operating exceptional costs of £18.0
million offset by profits on disposal of properties of £1.0 million,
Maxwell-related receipts of £1.3 million, release of old accruals for which no
further costs are expected of £3.5 million and non-operational profits of £2.5
million. Note 4 to the summary financial information attached to this
preliminary results statement details the nature of the exceptional items. A
continuing focus on driving through cost savings may result in additional
exceptional items in 2005, but will be supported by incremental cost benefits.
Profit before tax and exceptional items was £216.8 million (2003: £172.5
million). Excluding the benefit of the additional week's trading profit before
tax and exceptional items was £208.5 million.
The tax charge for 2004 of £63.0 million incorporates a charge of £66.7 million
on profit before tax and exceptional items of £216.8 million, representing an
underlying rate of 30.8% (2003: 30.2%).
Underlying earnings per share, before exceptional items, were 50.9 pence per
share (2003: 41.1 pence per share) an increase of 23.8%. Excluding the benefit
of the additional week's trading in 2004, underlying earnings per share, before
exceptional items, were 49.0 pence, representing an increase of 19.2%.
Subject to the approval of the shareholders at the Annual General Meeting, the
directors propose a final dividend of 14.3p per share to be paid on 10 June 2005
to shareholders on the register at 6 May 2005. This will bring the full-year
dividend to 20.2p per share, an increase of 10.4%. The dividend is covered 2.5
times by pre exceptional earnings and will be fully funded from operating cash
flow.
FRS 17
During the year the FRS 17 pension deficit has decreased from £248.1 million to
£222.5 million (net of deferred tax). Total contributions to defined benefit
pension schemes to fund ongoing accrual of benefits and past service deficits
increased by £11.3 million from £25.2 million to £36.5 million. Contributions to
defined contribution pension schemes increased from £0.2 million to £0.5
million. For 2005, we currently expect defined benefit funding to increase by a
further estimated £10 million. The FRS 17 defined benefit operating profit
charge, before past service costs (£0.6 million) was £32.6 million in 2004 and
is expected to be £28.6 million in 2005. The FRS 17 finance charge is expected
to decrease by £4.5 million from a £2.7 million charge in 2004 to a credit of
£1.8 million in 2005.
Cash flow and net debt
The Group continued to generate strong cash flows, with net operating cash flow
increasing by £41.6 million from £246.2 million to £287.8 million. The strong
operating cash flows, coupled with the net proceeds of £42.6 million from the
disposal of the regional newspaper titles in Ireland and £12.5 million proceeds
from the issues of additional shares following the exercise of share options,
contributed to a reduction in net debt of £154.7 million, from £605.1 million to
£450.4 million. The reduction in net debt has been achieved despite the payment
of increased dividends of £55.1 million, capital expenditure of £35.5 million,
the buy-out of the minority interest in The Adscene Group Limited at a cost of
£4.5 million and the purchase of shares for £6.2 million to provide for the
possible awards under the new Long Term Incentive Plan launched in 2004.
Capital expenditure in 2004 was £35.5 million (net) (2003: £55.2 million)
against a depreciation charge of £41.0 million (2003: £43.3 million). The
capital expenditure included a further £23.7 million in respect of the regional
press replacement project. Planned capital expenditure for 2005 is approximately
£65.0 million, including £22.0 million for completing the installation of the
inserting equipment in Birmingham and the Oldham re-pressing. All capital
expenditure is expected to be financed from operating cash flows.
At 2 January 2005 committed facilities of £742.0 million were available to the
Group, of which £259.5 million were undrawn. The committed facilities include a
£269.0 million syndicated bank facility, US$602.0 million and £26.0 million
unsecured fixed rate loan notes and £6.0 million floating rate loan notes
(representing the total obligations under a series of private placement US
dollar and sterling loan notes respectively), obligations under finance leases
of £16.6 million and £13.9 million of acquisition loan notes.
Net assets
At 2 January 2005 net assets were £1,143.7 million, an increase of £117.8
million. This includes the total carrying value of the Group's acquired
publishing and newspaper titles of £1,579.9 million, goodwill of £5.6 million,
tangible fixed assets of £385.7 million, net debt of £450.4 million and the FRS
17 pension deficit of £222.5 million. The FRS 17 pension deficit decreased from
£248.1 million to £222.5 million during the year, reflecting general market
conditions.
International Accounting Standards
The Group has completed its review in advance of adopting International
Accounting Standards in 2005. The key differences between the 2004 reported
results and those that would have been reported under International Accounting
Standards are explained in Note 10 on pages 21 to 25.
*On a like-for-like basis, pre exceptional items basis as defined in footnotes
(1) and (2) on page 1.
Consolidated profit and loss account
for the 53 weeks ended 2 January 2005 (52 weeks ended 28 December 2003)
notes Before Exceptional Total Before Exceptional Total
Exceptional items 2004 exceptional items 2003
items (note 4) items (note 4)
£m £m £m £m £m £m
------------------- ----- -------- -------- ------ ------- ------- -------
Turnover 2 1,141.7 - 1,141.7 1,095.1 - 1,095.1
------------------- ----- -------- -------- ------ ------- ------- -------
Group operating
profit 3 253.1 (12.2) 240.9 212.5 (112.0) 100.5
Share of results of
associated
undertakings 1.3 - 1.3 1.2 - 1.2
------------------- ----- -------- -------- ------ ------- ------- -------
Total operating
profit 254.4 (12.2) 242.2 213.7 (112.0) 101.7
Profit on disposal
of subsidiary
undertakings/
motorcycle
show business 4 - 2.5 2.5 - 0.1 0.1
------------------- ----- -------- -------- ------ ------- ------- -------
Profit on ordinary
activities before
interest 254.4 (9.7) 244.7 213.7 (111.9) 101.8
Net interest
payable (34.9) - (34.9) (38.3) - (38.3)
Other finance
(charges)/income (2.7) - (2.7) (2.9) - (2.9)
------------------- ----- -------- -------- ------ ------- ------- -------
Profit on ordinary
activities before
taxation 216.8 (9.7) 207.1 172.5 (111.9) 60.6
Tax on profit
on ordinary
activities 5 (66.7) 3.7 (63.0) (52.1) 5.2 (46.9)
------------------- ----- -------- -------- ------ ------- ------- -------
Profit on ordinary
activities
after taxation 150.1 (6.0) 144.1 120.4 (106.7) 13.7
Non-equity minority
interest (0.1) - (0.1) (0.3) - (0.3)
------------------- --- -------- -------- ------ ------- ------- -------
Profit for the
financial year 150.0 (6.0) 144.0 120.1 (106.7) 13.4
Ordinary
dividends on
equity shares (59.8) (53.7)
------------------- ----- -------- -------- ------ ------- ------- -------
Retained
profit/(loss)
for the
financial year 84.2 (40.3)
------------------- ----- -------- -------- ------ ------- ------- -------
Earnings per
share (pence) 6
Underlying
earnings per
share 50.9 41.1
Exceptional items (2.0) (36.5)
------------------- ----- -------- -------- ------ ------- ------- -------
Earnings per
share - basic 48.9 4.6
------------------- ----- -------- -------- ------ ------- ------- -------
Earnings per
share - diluted 48.3 4.6
------------------- ----- -------- -------- ------ ------- ------- -------
Turnover and operating profit include the results of Wheatley Dyson & Son
Limited which was disposed of in February 2003 and the Irish regional newspaper
titles in Belfast, Derry and Donegal which were disposed of in January 2004.
During the 53 weeks ended 2 January 2005 these businesses achieved turnover of
£nil million (2003: £16.2 million) and operating profit of £nil million (2003:
£3.1million).
All turnover and results arose from continuing operations.
Consolidated statement of total recognised gains and losses
for the 53 weeks ended 2 January 2005 (52 weeks ended 28 December 2003)
2004 2003
£m £m
------------------------------------------------------------ ------- ------
Profit for the financial year 144.0 13.4
Difference between actual and expected return
on pension schemes' assets 24.7 55.1
Experience gains/(losses) arising on pension
schemes' liabilities 5.0 (18.0)
Effects of changes in assumptions underlying
the present value of pension schemes' liabilities 6.4 (154.7)
Deferred tax (liability)/asset associated
with movement on pension schemes' deficits (10.8) 35.3
------------------------------------------------------------ ------- ------
Total recognised gains and losses in the year 169.3 (68.9)
------------------------------------------------------------ ------- ------
Consolidated balance sheet
at 2 January 2005 (28 December 2003)
notes 2004 2003
£m £m
---------------------------------------------- ----- --------- ---------
Fixed assets
Intangible assets 1,585.5 1,622.4
Tangible assets 385.7 401.0
Investments 7.7 9.9
---------------------------------------------- ----- --------- ---------
1,978.9 2,033.3
---------------------------------------------- ----- --------- ---------
Current assets
Stocks 6.7 7.0
Debtors 148.8 160.8
Cash at bank and in hand 43.4 34.3
---------------------------------------------- ----- --------- ---------
198.9 202.1
---------------------------------------------- ----- --------- ---------
Creditors: amounts falling due within one
year
Bank loans, loan notes and overdrafts (36.4) (57.3)
Obligations under finance leases (1.7) (4.4)
Other creditors (250.0) (249.5)
---------------------------------------------- ----- --------- ---------
(288.1) (311.2)
---------------------------------------------- ----- --------- ---------
Net current liabilities (89.2) (109.1)
---------------------------------------------- ----- --------- ---------
Total assets less current liabilities 1,889.7 1,924.2
Creditors: amounts falling due after more
than one year
Bank loans and loan notes (440.8) (554.9)
Obligations under finance leases (14.9) (22.8)
---------------------------------------------- ----- --------- ---------
(455.7) (577.7)
---------------------------------------------- ----- --------- ---------
Provisions for liabilities and charges (67.8) (68.8)
Non equity minority interest - (3.7)
---------------------------------------------- ----- --------- ---------
Net assets excluding pension schemes' 1,366.2 1,274.0
liabilities
---------------------------------------------- ----- --------- ---------
Pension schemes' liabilities 7 (222.5) (248.1)
---------------------------------------------- ----- --------- ---------
Net assets including pension schemes' 1,143.7 1,025.9
liabilities
---------------------------------------------- ----- --------- ---------
Equity capital and reserves
Called up share capital 29.7 29.4
Share premium account 1,101.7 1,089.5
Revaluation reserve 4.9 5.0
Profit and loss account 7.4 (98.0)
---------------------------------------------- ----- --------- ---------
Equity shareholders' funds 1,143.7 1,025.9
---------------------------------------------- ----- --------- ---------
Consolidated cash flow statement
for the 53 weeks ended 2 January 2005 (52 weeks ended 28 December 2003)
2004 2003
£m £m
Net cash inflow from operating activities 287.8 246.2
Dividends received from associated undertakings 3.2 0.9
Net cash outflow from returns on investments and servicing
of finance (34.7) (42.4)
Taxation paid (55.6) (44.9)
Net cash outflow from capital expenditure and financial
investment (35.5) (55.2)
Net cash inflow/(outflow) from acquisitions and disposals 38.3 (0.3)
Dividends paid (55.1) (52.0)
----------------------------------------------------------- ------ -----
Net cash inflow before financing 148.4 52.3
Net cash outflow from financing (142.5) (53.5)
----------------------------------------------------------- ------ -----
Increase/(decrease) in cash 5.9 (1.2)
----------------------------------------------------------- ------ -----
Reconciliation of net cash flow to movement in net debt
for the 53 weeks ended 2 January 2005 (52 weeks ended 28 December 2003)
2004 2003
£m £m
Increase/(decrease) in cash in the year 5.9 (1.2)
Cash outflow from movement in debt and leasing finance 148.8 62.2
----------------------------------------------------------- ------ -----
Change in net debt resulting from cash flows 154.7 61.0
----------------------------------------------------------- ------ -----
Movement in net debt in the year 154.7 61.0
Net debt at 28 December 2003 (605.1) (666.1)
----------------------------------------------------------- ------ -----
Net debt at 2 January 2005 (450.4) (605.1)
----------------------------------------------------------- ------ -----
Analysis of net debt
for the 53 weeks ended 2 January 2005 (52 weeks ended 28 December 2003)
At 28 Cash flow Loans repaid At 2
December £m £m January
2003 2005
£m £m
Cash at bank and in hand 34.3 9.1 - 43.4
Bank overdrafts (19.3) (3.2) - (22.5)
------------------ -------- -------- -------- --------
Net cash balances 15.0 5.9 - 20.9
------------------ -------- -------- -------- --------
Debt due within one year (38.0) - 24.1 (13.9)
Debt due after one year (554.9) - 114.1 (440.8)
Finance leases (27.2) 10.6 - (16.6)
------------------ -------- -------- -------- --------
Bank loans, loan notes and
finance leases (620.1) 10.6 138.2 (471.3)
------------------ -------- -------- -------- --------
Net debt (605.1) 16.5 138.2 (450.4)
------------------ -------- -------- -------- --------
Notes to the 2004 preliminary statement
1. Change in accounting policies
There were no changes to the Group's accounting policies during the 53 weeks to
2 January 2005.
2. Turnover
The analysis of the Group's turnover is as follows:
2004 2003
£m £m
Regionals division* 540.1 525.3
Nationals division 519.7 492.2
Sports division 48.9 43.4
Magazines and exhibitions 31.8 30.5
Arrow Interactive 1.2 3.7
------------------------------- ----------- -----------
Group turnover by division 1,141.7 1,095.1
------------------------------- ----------- -----------
* Regionals division includes turnover relating to Wheatley Dyson & Son Limited
which was disposed of in February 2003 and the Irish regional newspaper titles
in Belfast, Derry and Donegal which were disposed of in January 2004. During the
53 weeks ended 2 January 2005 these businesses achieved turnover of £nil million
(2003: £16.2 million)
3. Group operating profit before exceptional items
The analysis of the Group's operating profit before exceptional items is as
follows:
2004 2003
£m £m
Regionals division* 150.6 123.9
Nationals division 95.1 85.8
Sports division 18.0 14.2
Magazines and exhibitions 7.1 4.8
Arrow Interactive (1.3) (0.3)
Central costs (16.4) (15.9)
-------------------------------------------------- ----------- -----------
Group operating profit before exceptional items by
division 253.1 212.5
-------------------------------------------------- ----------- -----------
* Regionals division includes operating profit relating to Wheatley Dyson & Son
Limited which was disposed of in February 2003 and the Irish regional newspaper
titles in Belfast, Derry and Donegal which were disposed of in January 2004.
During the 53 weeks ended 2 January 2005 these businesses achieved operating
profit of £nil million (2003: £3.1 million)
Details of operating exceptional items totalling £12.2 million (2003: £112.0
million) are set out in note 4, with the resultant Group operating profit after
exceptional items being £240.9 million (2003: £100.5 million).
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 2004 preliminary statement (continued)
4. Exceptional items
2004 2003
£m £m
---------------------------------------------------------- --------- ---------
Operating exceptional items
Impairment of carrying value of publishing rights and titles - 100.0
(a)
Write off of carrying value of goodwill (b) - 1.6
Restructuring costs (c) 11.0 14.6
Maxwell related recoveries (d) (1.3) (3.1)
Write down of presses in Chester and Oldham (e) 7.0 -
Profit on disposal of land and buildings (f) (1.0) (1.1)
Release of old accruals for which no further costs are
expected (g) (3.5) -
---------------------------------------------------------- --------- ---------
Total exceptional items charged against operating profit 12.2 112.0
---------------------------------------------------------- --------- ---------
Profit on sale of subsidiary undertakings (h) (2.5) (0.1)
Profit on sale of motorcycle show business (h) - -
---------------------------------------------------------- --------- ---------
Net exceptional items before taxation 9.7 111.9
---------------------------------------------------------- --------- ---------
a) The impairment charge of £100.0 million in 2003, undertaken in accordance
with FRS10, related to a reduction in the carrying value of publishing rights
and titles for our Regionals newspaper titles in London and the South East to
the net present value of future cash flows to be derived from those assets
discounted at 8.0%.
b) Goodwill of £1.6 million was written off in 2003 in relation to a number of
motorcycle shows disposed of on 8 January 2004.
c) Restructuring costs of £11.0 million (2003: £14.6 million) relate to costs of
£10.1 million primarily incurred for cost reduction measures and to the
restructure of the Arrow Interactive division (£0.9 million) which has been
refocused on driving revenues for the Group and will not be reported separately
in 2005.
d) In 2004 the Group recovered £1.3 million (2003: £3.1 million) from the
liquidators of Maxwell related companies for claims outstanding since 1992.
e) Costs of £7.0 million have been incurred in the write down of press fixed
assets from the closure of the Chester print site and the repressing project at
Oldham as part of the Manufacturing Project which was announced in February
2004.
f) In 2004 the Group disposed of surplus land and buildings realising a profit
on disposal of £1.0 million (2003: £1.1 million).
g) In 2004 the Group released old sundry accruals of £3.5 million, for which no
further costs are expected.
h) In January 2004, the Group disposed of its Irish subsidiaries for a
consideration of £46.1 million, realising a profit of £2.5 million and its
Motorcycle Show business for a consideration of £0.2 million, realising a profit
of £nil million. 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.
Notes to the 2004 preliminary statement (continued)
5. Tax on profit on ordinary activities before exceptional items
2004 2003
£m £m
---------------------------------------------------------- --------- ---------
Profit before tax on ordinary activities before exceptional
items 216.8 172.5
---------------------------------------------------------- --------- ---------
Corporation Tax
Corporation tax charge for the year 64.1 52.1
Prior year adjustment 2.0 (1.2)
---------------------------------------------------------- --------- ---------
Total current tax charge 66.1 50.9
---------------------------------------------------------- --------- ---------
Deferred Tax
Deferred tax charge for the year 3.7 3.8
Prior year adjustment (3.1) (2.6)
---------------------------------------------------------- --------- ---------
Total deferred tax 0.6 1.2
---------------------------------------------------------- --------- ---------
Total tax on profit on ordinary activities before
exceptional items 66.7 52.1
---------------------------------------------------------- --------- ---------
Exceptional:
UK corporation tax on exceptional items (2.7) (5.2)
UK deferred tax on exceptional items (1.0) -
---------------------------------------------------------- --------- ---------
Tax on profit on ordinary activities 63.0 46.9
---------------------------------------------------------- --------- ---------
Included within the deferred tax charge for the year is an FRS 17 charge of £0.2
million (2003: credit of £1.1 million).
6. Earnings per ordinary 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:
2004 2003
No. of shares No. of shares
Basic (millions) 294.8 292.4
------------------------------------ -------- --------
Diluted (millions) 297.9 293.8
------------------------------------ -------- --------
pence pence
Underlying earnings per share 50.9 41.1
Exceptional items (2.0) (36.5)
--------------------- --------- --------
Earnings per share - basic 48.9 4.6
--------------------- --------- --------
Earnings per share - diluted 48.3 4.6
--------------------- --------- --------
The earnings per share for each category of exceptional items disclosed in Note
4 is as follows:
2004 2003
pence pence
------------------------------------ -------- --------
Impairment of carrying values of publishing rights and titles - (34.2)
------------------------------------ -------- --------
Write-off carrying value of goodwill - (0.5)
------------------------------------ -------- --------
Restructuring costs (2.5) (3.2)
------------------------------------ -------- --------
Maxwell related recoveries 0.4 1.0
------------------------------------ -------- --------
Write down of presses in Chester and Oldham (1.9) -
------------------------------------ -------- --------
Profit on disposal of land and buildings 0.2 0.4
------------------------------------ -------- --------
Release of old accruals for which no further costs are
expected 1.0 -
------------------------------------ -------- --------
Profit on sale of subsidiary undertakings 0.8 -
------------------------------------ -------- --------
Earnings per share - exceptional items (2.0) (36.5)
------------------------------------ -------- --------
Notes to the 2004 preliminary statement (continued)
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 2004.
Scheme liabilities have been calculated using a consistent projected unit
valuation method and compared to the schemes' assets at the 2 January 2005
market value as below:
Total as at Total as at Total as at
2 January 28 December 29 December
2005 2003 2002
£m £m £m
-------------- -------- --------- ---------
Fair value of schemes' assets 1,053.8 970.7 872.8
Actuarial value of schemes'
liabilities (1,371.6) (1,325.2) (1,105.8)
----------------- -------- --------- ---------
Schemes' deficits (317.8) (354.5) (233.0)
Deferred tax asset 95.3 106.4 69.9
----------------- --------- --------- ---------
Net schemes' liabilities (222.5) (248.1) (163.1)
----------------- --------- --------- ---------
8. Sale of subsidiary undertakings
The Group disposed of its Motorcycle Show business and Irish subsidiaries on 8
and 15 of January 2004 respectively.
The results of the companies up to the date of disposal have been included in
continuing operations.
Sale of Irish Sale of Total
newspaper Motorcycle Show
titles business
£m £m £m
----------------------------- --------- --------- ---------
Net assets disposed of:
----------------------------- --------- --------- ---------
Intangible
fixed assets 36.3 0.2 36.5
Tangible fixed
assets 3.0 - 3.0
Current assets 4.2 - 4.2
Creditors
falling due
within one
year (1.3) - (1.3)
----------------------------- --------- --------- ---------
42.2 0.2 42.4
Costs of
disposal 1.4 - 1.4
Profit on
disposal 2.5 - 2.5
----------------------------- --------- --------- ---------
46.1 0.2 46.3
----------------------------- --------- --------- ---------
Satisfied by:
Cash
consideration 46.1 0.2 46.3
----------------------------- --------- --------- ---------
Analysis of the net cash inflow in
respect of the disposals of subsidiary
undertakings and motorcycle show
business
----------------------------- --------- --------- ---------
Cash
consideration 46.1 0.2 46.3
Costs of
disposal (1.4) - (1.4)
Net cash
balance
transferred on
disposal (2.1) - (2.1)
----------------------------- --------- --------- ---------
42.6 0.2 42.8
----------------------------- --------- --------- ---------
Notes to the 2004 preliminary statement (continued)
9. Issue of Annual Report and Accounts
The 2004 Annual Report and Accounts will be posted to shareholders on 4 April
2005. Copies may be obtained after 4 April 2005 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 2 January 2005 or 28 December 2003, but
is derived from those accounts. Statutory accounts for 2003 have been delivered
to the Registrar of Companies and those for the period ended 2 January 2005 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.
Notes to the 2004 preliminary statement (continued)
10. Implication of Adopting International Financial Reporting Standards
A. Presentation of IFRS pro forma financial information for 53 weeks ended
2 January 2005
Trinity Mirror plc is preparing for the adoption of International Financial
Reporting Standards ('IFRS') as its primary accounting basis, following the
adoption of Regulation No. 1606/2002 by the European Parliament on 19 July 2002.
IFRS will apply for the first time in the Group's Annual Report for the 52 weeks
ending 1 January 2006. The first financial report prepared under IFRS will be
for the 26 weeks ended 3 July 2005.
To facilitate the understanding of the change from UK GAAP to IFRS, certain pro
forma financial information in relation to the 53 weeks ended 2 January 2005 and
the balance sheet as at 2 January 2005 has been included in this analysis for
illustrative purposes only. As set out in the Basis of Preparation below, this
information does not reflect the full adoption of IFRS but has been presented to
provide an indication of how the adoption of IFRS would have affected the
Group's consolidated income statement and balance sheet at the date and for the
period stated above.
Reconciliations between UK GAAP and IFRS are presented to give further clarity
to the potential changes.
B. First-time Adoption of International Financial Reporting and Accounting
Standards
For the 53 weeks to 2 January 2005 the Group has applied the principles set out
in 'IFRS 1, First-time Adoption of International Financial Reporting Standards'
(IFRS 1), which has been applied in preparing this pro forma financial
information.
IFRS 1 sets out the procedures that must be followed when adopting IFRS for the
first time as the basis for preparing the Group's consolidated financial
statements. The Group is required to establish its IFRS accounting policies as
at 1 January 2006 and, in general, apply these retrospectively to determine the
IFRS opening balance sheet at the date of transition, 29 December 2003. IFRS 1
provides a number of optional exemptions to this general principle.
C. Basis of Preparation
The financial information presented has been prepared based on the adoption of
International Financial Reporting Standards ('IFRS'), including International
Accounting Standards ('IAS') and interpretations issued by the International
Accounting Standards Board ('IASB') and its committees, as interpreted by any
regulatory bodies relevant to the Group. These are subject to ongoing amendment
by the IASB and subsequent endorsement by the European Commission and are
therefore subject to change. As a result, information contained herein will need
to be updated for any subsequent amendment to IFRS required for first time
adoption, or any new standards that the Group may elect to adopt early.
Under the accounting statement on First-time Adoption, IFRS 1, the Group has
elected by way of an exemption to apply financial instrument accounting under
IAS 32 and IAS 39 from 3 January 2005. In preparing this financial information,
the Group has assumed that the European Commission will endorse the amendment to
IAS 19, 'Employee Benefits - Actuarial Gains and Losses, Group Plans and
Disclosures' (IAS 19).
Notes to the 2004 preliminary statement (continued)
10. Implication of Adopting International Financial Reporting Standards
(continued)
D. Summary of differences between IFRS and UK GAAP
The key changes for the Group in adopting IFRS in 2005 are as follows:
(i) Presentation - IAS 1, Presentation of Financial Statements
The presentation format of IFRS is different from UK GAAP and the illustrative
financial information herein is designed to assist the reader to understand
these changes.
(ii) Dividends - IAS 10, Events After the Balance Sheet Date
Dividends proposed will be disclosed as a 'Non-adjusting Event after the Balance
Sheet Date' under IAS 10, Events after the Balance Sheet Date. Under IFRS
dividends are not recognised as liabilities (IAS 37, Provisions, Contingent
Liabilities and Contingent Assets) until they are appropriately approved and are
no longer at the discretion of the directors. Accordingly the 2004 proposed
dividend amount under UK GAAP is removed from the IFRS accounts.
(iii) Capitalised Leases - IAS 17, Leases
This standard has a wider scope than UK GAAP and has resulted in a small number
of short leasehold buildings being capitalised on the Balance Sheet.
(iv) Employee Option and Performance Share Schemes - IFRS 2, Share-based
Payments
All transactions within the scope of IFRS 2 are valued based on the fair value
of the option or award at grant date and expensed to the Income Statement over
the vesting period of the scheme.
(v) Pension costs - IAS 19, Employee Benefits
The main difference between IFRS and UK GAAP is the measurement of scheme
assets. The IFRS valuation is determined at bid rather than mid market price
thus increasing the Group's pension scheme liabilities. In addition, there is a
presentational difference with the pension scheme liability now being shown
gross of its' deferred tax asset.
(vi) Holiday pay - IAS 19, Employee Benefits
IAS 19 requires the recording of a holiday pay accrual. This has been included
in the opening IFRS balance sheet at 29 December 2003. As it is expected that
this adjustment will be relatively stable in magnitude from one year to another,
the position at 2 January 2005 is unchanged with no Income Statement impact for
2004.
(vii) Goodwill - IAS 38, Intangible Assets
Under IAS 38 goodwill is not amortised. Instead it is subject to an annual
impairment review. An adjustment has been made to remove the goodwill
amortisation charge.
(viii) Associates - IAS 28, Investments in Associates
IFRS requires the Share of Profit of Associate to be shown post tax (IAS 1).
Under UK GAAP this amount is shown before tax with the tax charge included as
part of the Group tax charge.
(ix) Presentation of Financial information
The primary statements within the financial information have been presented
substantially in accordance with IAS 1. However, this format has been adapted to
assist the reader and will, where necessary, be modified to take into account
future guidance and practice in the development of IFRS reporting.
Notes to the 2004 preliminary statement (continued)
10. Implication of Adopting International Financial Reporting Standards
(continued)
E. IFRS Financial information
Summary Consolidated IFRS Income Statement
for the 53 weeks ended 2 January 2005
UK GAAP Accounting IFRS Notes
Adjustments
Total £m Total
2004 2004
£m £m
-------------------------- -------- -------- --------
Revenue 1,141.7 - 1,141.7
-------------------------- -------- -------- --------
Group operating profit 240.9 1.1 242.0 a)
Share of profit of associate 1.3 (0.5) 0.8 b)
Profit on disposal of
subsidiary undertakings 2.5 - 2.5
Net finance costs (37.6) (0.6) (38.2) c)
-------------------------- -------- -------- --------
Profit before tax 207.1 - 207.1
Tax (63.0) 0.4 (62.6) d)
-------------------------- -------- -------- --------
Profit for the year 144.1 0.4 144.5
-------------------------- -------- -------- --------
Notes
a) Operating profit movements
i. Certain leasehold properties are treated as finance leases which
results in a net credit of £0.5 million. Rental payments have been credited to
Group operating profit and are replaced by depreciation on the capitalised lease
cost.
ii. Goodwill of £0.4 million charged against income under UK GAAP has
been credited as goodwill is not amortised under IFRS but subject to impairment
review.
iii. The adoption of IFRS2 'Share-based payments' results in a net credit
of £0.2 million. Under UK GAAP £2.0 million is charged against profit for the
LTIP launched in 2004. Under IFRS the LTIP is valued on a different basis and
prior period share option schemes are also charged against profit, the combined
impact of which is a charge of £1.8 million.
b) Share of profit of associate
i. IFRS requires the Group's share of associate's profit to be shown
net of tax of £0.5 million.
c) Net finance costs movement
i. £0.4 million interest cost on leasehold properties capitalised as
explained in a) i. above.
ii. £0.2 million pension finance cost on additional deficit to FRS 17
arising from valuing assets at bid and not mid market price.
d) Taxation
i. £0.1 million charge in respect of share based payments.
ii. £0.5 million credit in respect of the reduction arising from the
change in presentation of the associate.
Notes to the 2004 preliminary statement (continued)
10. Implication of Adopting International Financial Reporting Standards
(continued)
E. IFRS Financial information (continued)
Summary IFRS Consolidated Balance Sheet
at 2 January 2005
UK GAAP Accounting IFRS Notes
Adjustments
Total £m Total e)
2004 2004
£m £m
------------------------- -------- -------- --------
Fixed assets
Non-current assets
Intangible assets 1,585.5 0.4 1,585.9 f)
Property, plant and
equipment 385.7 2.1 387.8 g)
Investments in associates 7.7 - 7.7
Deferred tax asset 9.6 96.9 106.5 h)
------------------------- -------- -------- --------
1,988.5 99.4 2,087.9
------------------------- -------- -------- --------
Current assets
Inventories 6.7 - 6.7
Trade and other receivables 148.8 - 148.8
Cash and cash equivalents 43.4 - 43.4
------------------------- -------- -------- --------
198.9 - 198.9
------------------------- -------- -------- --------
Total assets 2,187.4 99.4 2,286.8
------------------------- -------- -------- --------
Equity
Capital and reserves
attributable to equity
holders of the parent
Share capital 29.7 - 29.7
Share premium account 1,101.7 - 1,101.7
Revaluation reserve 4.9 - 4.9
Retained earnings and
other reserves 7.4 37.9 45.3 i)
------------------------- -------- ------- --------
Total equity 1,143.7 37.9 1,181.6
------------------------- -------- -------- --------
Liabilities
Non-current liabilities
Borrowings 440.8 - 440.8
Obligations under finance
leases 14.9 2.8 17.7 j)
Deferred tax liabilities 64.9 - 64.9
Provisions for liabilities
and charges 7.8 0.3 8.1 k)
Retirement benefit
obligations 222.5 99.6 322.1 l)
------------------------- -------- -------- --------
750.9 102.7 853.6
------------------------- -------- -------- --------
Current liabilities
Borrowings 36.4 - 36.4
Obligations under finance
leases 1.7 0.8 2.5 j)
Trade and other payables 250.0 (42.0) 208.0 m)
Provisions for liabilities
and charges 4.7 - 4.7
------------------------- -------- -------- --------
292.8 (41.2) 251.6
------------------------- -------- -------- --------
Total liabilities 1,043.7 61.5 1,105.2
------------------------- -------- -------- --------
Total equity and
liabilities 2,187.4 99.4 2,286.8
------------------------- -------- -------- --------
Notes
e) UK GAAP numbers include presentational reclassifications.
f) Intangible assets - £0.4 million increase due to UK GAAP amortised
goodwill being written back under IFRS.
g) Plant, property and equipment - £2.1 million increase due to short
leasehold buildings being capitalised under IAS 17.
h) Deferred tax asset - arising from 'grossing-up' the pension scheme
liabilities (£96.6 million), a change in accounting treatment of certain short
leasehold properties (£0.4 million) and a decrease of £0.1 million arising from
share-based payments.
i) Retained earnings and reserves increase by a total of £37.9 million
which is the combined effect of all the IFRS adjustments, with the most
significant being the reversal of the 2004 proposed final dividend (£42.4
million), partially offset by the effects of IAS 19 for pensions and holiday pay
accrual adjustments (£3.5 million).
Notes to the 2004 preliminary statement (continued)
10. Implication of Adopting International Financial Reporting Standards
(continued)
E. IFRS Financial information (continued)
Notes (continued)
j) Obligations under finance leases
i. £2.8 million non-current, increase due to short leasehold
buildings being capitalised under IAS 17.
ii. £0.8 million current, increase due to short leasehold
buildings being capitalised under IAS 17.
k) Provisions for other liabilities and charges - £0.3 million relates
to share-based payments and the NIC liability on the cumulative
expense to date.
l) Retirement benefit obligations - £99.6 million
i. £96.6 million is the 'grossing-up' effect of disclosing
separately the deferred tax asset that is included in the
pension schemes' liabilities under UK GAAP.
ii. £0.2 million financing costs.
iii. £0.4 million actuarial movement, the other side of the
adjustment being taken to the Statement of Recognised
Income and Expense ('SORIE').
iv. £2.4 million is the opening Balance Sheet adjustment
relating to the differences between mid and bid market
pricing net of deferred tax.
m) Trade and other payables - £42.0 million reduction
i. £0.1 million leasehold properties - decrease in opening
Balance Sheet corporation tax liability.
ii. £42.4 million reversal of 2004 proposed dividend.
iii. £0.5 million holiday pay accrual established in the
opening Balance Sheet.
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Friday, 3rd January 2025
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