Interim Results
Trinity Mirror PLC
27 July 2001
INTERIM TRADING STATEMENT
for 26 week period to 1 July 2001
27 July 2001
Financial highlights
(3) %
2001 2000 change
Turnover - actual 581.4 559.9 3.8%
like-for-like (2) 581.4 575.3 1.1%
Group operating profit (1)
before digital media activities - 121.8 130.3 (6.5)%
actual
like-for-like (2) 121.8 128.1 (4.9)%
investment in digital media (15.0) (12.8) (17.2)%
Profit before tax (1) 80.9 89.6 (9.7)%
Earnings per share (1)
before digital media activities 23.1p 24.9p (7.2)%
underlying 19.5p 21.8p (10.6)%
Dividend per share 5.3p 5.3p
(1) excludes exceptional items
(2) excludes Belfast Telegraph Newspapers (sold July 2000) and includes
Southnews (acquired November 2000) on a 'pro forma' basis in 2000
(3) restated to reflect the adoption this year of FRS 19 'Deferred
Taxation'.
Strategic highlights
Comprehensive review of the business undertaken to maximise growth and address
current trading conditions
Strong and robust platform for growth in regional newspapers
Aim to be industry leader not only in size but also in readership, circulation
and financial performance by 2005 through:
- driving continuous improvement in performance of all businesses
- capturing the benefits of scale by reconfiguring the regional
newspaper organisation
- investing in improving the quality of our proposition to readers,
advertisers and staff
- exploiting opportunities for further growth through selective
acquisitions and new media platforms
Reducing costs and investing in the national titles
Management intend, as a minimum, to optimise value by maintaining each title's
share of circulation market by:
- continuing to invest in product enhancements, editorial, marketing and
promotional activity
- ongoing process of re-examining the UK Nationals' business model,
thereby, reducing costs
- Scottish nationals adopting similar approach to regional best
practice principles
Review will sharpen focus on short-term profit and should deliver
- £25 to £28 million of gross cost savings in 2002, increasing to £30
to £35 million per annum in 2003
- increased growth in revenue - assuming current market conditions
continue
- one off costs of implementation of approximately £10 million in both
2001 and 2002
- an element of the cost saving will be reinvested in product,
editorial and marketing to ensure retain competitive position and strength
of brands
Outlook for the year
Current advertising conditions remain volatile and visibility is limited.
Whilst classified advertising has held up reasonably well, there are signs of
a tightening in the recruitment advertising market and a more general slowdown
in growth rates in other categories of classified advertising. The market for
display advertising has been weak throughout the second quarter of the year.
However, while this has continued into July, there are currently no signs of
acceleration in decline.
The current cost saving initiatives should mitigate part of the profit
shortfall arising from the difficult advertising market. These savings and
the early implementation of the strategic plans of the regional and national
newspaper operations should ensure that:
(i) the adverse impact on the Group of these conditions is minimised;
(ii) the Group is well placed to benefit from any improvement in the
market; and
(iii) the Group has good medium to long term growth prospects.
Sir Victor Blank, Chairman of Trinity Mirror plc, commented:
'In a challenging marketplace, we have positive plans for the future, strong
profitable businesses and a clear sense of direction.'
Enquiries:
Trinity Mirror plc 020 7293 3000
Philip Graf, Chief Executive
Margaret Ewing, Group Finance Director
Finsbury Ltd 020 7251 3801
Rupert Younger
James Leviton
27 July 2001
Chairman's Statement
Financial summary
Group revenue increased by 3.8% to £581.4 million (2000: £559.9 million). On
a like-for-like basis, adjusting to eliminate from 2000 the revenues of
Belfast Telegraph Newspapers (sold on 30 July 2000) and include the revenues
of Southnews (acquired 28 November 2000), revenue increased by 1.1%.
Operating profit, before the net investment in digital media activities and
exceptional items, decreased by 6.5% to £121.8 million. On a like for like
basis, the decrease was 4.9%, reflecting the difficult advertising market in
the second quarter and a 12% increase in the price of newsprint from the
beginning of the year. During the 26 week period, the Group invested £15.0
million (2000: £12.8 million) in digital media activities.
Interest costs of £26.0 million (2000: £27.8 million) reflect lower interest
rates. Before exceptional costs, profit before tax has decreased 9.7% on the
previous year to £80.9 million.
Exceptional costs of £5.3 million have been incurred during the 26 week period
in respect of the closure of the central digital media sites and ongoing
restructuring of the Group's finance systems. In addition, the formulation
and implementation of strategic and profit improvement plans, including cost
reduction measures, across the Group has incurred exceptional costs of £2.3
million in the first half of the year. It is anticipated that £8.0 million
additional costs of implementation will be incurred during the latter half of
the year, with a further £10.0 million in 2002.
The strategic and profit improvement plans will give rise to an estimated £9.0
million gross cost saving in the second half of the year, increasing to £25.0
to £28.0 million in 2002 and £30.0 to £35.0 million per annum in 2003. This
is in addition to any potential reduction in the level of the Group's ongoing
investment in its digital media activities. It is also before any
reinvestment in product, editorial and marketing activity to ensure the
Group's newspapers retain their competitive position and brand strength.
Earnings per share, before exceptional items, have decreased from 21.8p to
19.5p. The interim dividend is being held at the same level as the 2000
interim dividend, 5.3p. It will be paid on 31 October 2001 to shareholders on
the register at 5 October 2001.
Net debt at 1 July 2001 was £771.8 million, an increase of £3.6 million since
the year end. This increase reflects primarily the additional digital media
investment of £15.0 million, the final payment of deferred consideration for
Thomson Regional Newspapers of £5.0 million and £2.4 million of further costs
in respect of the acquisition of Southnews.
Review of operations
Regional newspapers
Performance
The Group's regional newspapers business, including the three Metro titles,
achieved a 10.9% increase in revenue (from £246.6 million to £273.4 million)
and 0.8% increase in operating profit (from £64.8 million to £65.3 million).
On a like-for-like basis, adjusting for the effects of Belfast Telegraph
Newspapers and Southnews, revenue grew by 4.4% (from £262.0 million to £273.4
million) and operating profit increased 4.3% (from £62.6 million to £65.3
million).
During the 26 weeks, advertising revenues, on a like-for-like basis, have
grown by 6.5% to £212.1 million. Excluding £4.0 million (2000: £0.5 million)
of advertising revenue achieved by the three Metro titles, the growth was 4.7%
to £208.1 million (2000: £198.7 million), with growth of 7.8% in the first
quarter compared to 2.2% in the second quarter. This increase was driven by
recruitment advertising revenue, which remained strong throughout the period,
increasing 17.5% overall (to £68.1 million), with growth of 20.4% in the first
quarter easing to 14.6% for the second quarter. This rate of growth in the
second quarter was relatively constant throughout the three months and has
continued at this level into July. The easing of recruitment in the second
quarter has been most evident in Trinity Mirror South ('TMS' - the merged
operations of the former Southnews and Trinity Newspapers Southern
businesses), which experienced a marked slow-down in recruitment advertising
growth as a result of vacancies in the hi-tech sector declining significantly.
However, the Board remains confident that the integration of Southnews will
realise at least £4 million of cost savings in the first full year of
ownership.
Property advertising revenue grew by 5.9% (to £24.2 million), with a clear
north-south divide being evident. Cardiff, TMS and Birmingham each achieved
growth in property advertising in excess of 11.0% during the period, whilst an
aggressive competitive property publication was launched in Newcastle and
tougher property markets were seen in Liverpool and Scotland. Motors
advertising remains weak and a flat Easter and May bank holiday (rather than
the expected uplift previously experienced) affected display advertising,
particularly national display. The foot and mouth epidemic adversely affected
the performance of a number of the Group's regional titles throughout the UK
(with an estimated £1.0 million adverse effect on operating profit).
Circulation has continued to decline, however, the rate of decline has
reduced. The Group's titles remain amongst the highest 'actively purchased'
within the regional newspaper industry. Circulation revenue, on a like for
like basis, decreased by 0.5% to £42.3 million.
Strategic direction
Sound management and strong underlying markets have delivered a healthy
financial performance for the regional newspaper division over the past five
years. A judicious acquisition strategy has created the UK's largest regional
newspaper business. The acquired businesses operate under an umbrella
structure within the Group but continue to have considerable local autonomy.
The result of this is that the Group has been unable to take full advantage of
its scale. The division is characterised by a range of systems, cultures,
performance measures and standards and, therefore, cannot act as a single
coherent entity.
During the past three months, management has undertaken a comprehensive '
bottom up' review of the regional newspaper division involving all aspects of
the operations. This review has led to a full understanding of the
opportunity to reconfigure and closely align the operations and move the
portfolio onto a fundamentally stronger footing
By 2005 the Group's regional newspaper business will be the industry leader,
not only in terms of size but also in terms of readership, circulation and
financial performance. Subject to the relaxation of appropriate regulatory
restrictions, the Group will seek to grow market share (organically and by
selective acquisitions) and achieve revenue and profit growth ahead of the
industry average through the economic cycle.
Clearly defined milestones, financial and operational targets and key
performance indicators and measurements have been developed to support the
delivery of this strategy. The key activities that underpin it include:
(i) driving continuous improvement - the Group's regional
newspaper businesses currently have a wide spread of performance. By applying
best practice and moving the performance of our less strongly performing
businesses up to the current average performance within the Group, both a
significant cost reduction and increase in revenues can be achieved. To
ensure these benefits are captured as quickly and effectively as possible, the
division is implementing an improved performance management system;
(ii) reconfiguring the regional newspaper organisation - into
a clearly structured, single and cohesive division will allow the Group to
capture the benefits of scale and is critical to the delivery of the
division's vision. The division will move from vertically integrated local
business units to businesses configured around regional clusters, with
appropriate sharing of activities and expertise across the individual local
businesses (which will remain very locally focused). There will also be
strong divisional co-ordination, policy and strategy formulation and driving
of performance;
(iii) investing in quality for key stakeholders by developing
an enhanced level of insight into reader perceptions of value and advertiser
needs, thereby improving products and services (e.g. a more co-ordinated
management approach to key advertising categories and avenues to market).
This investment, although not significant in value, will form an essential
part of the integrated change programme within the division. In addition, the
£100 million press replacement programme currently underway within the
regional newspaper division will improve the quality of the newspapers and
provide enhanced value for advertisers;
(iv) exploiting opportunities for growth beyond that which can
be generated by our existing regional division through selective acquisitions
and appropriate participation in new media platforms that help to preserve the
Group's leading position in the local media franchise.
As previously indicated, the Group anticipates achieving between £30.0 and £
35.0 million of gross cost saving per annum by 2003. Implementation of the
activities underlying the regional newspaper division's strategy will give
rise to a significant contribution to the Group's total cost saving.
Improvements in advertising yields and category management, as a result of the
application of benchmarks and best practice, will lead to robust growth in
revenues (assuming no further deterioration in the advertising market). This
strategy will also provide revenue protection should the market decline
further.
This strategy and these actions will place the regional newspaper division on
a stronger platform for growth, providing a business model that is more
scaleable and flexible for the future. The Group's regional business will also
be in a fundamentally stronger position to meet the increasingly competitive
challenges of new media technologies and to afford and integrate further
newspaper businesses.
National newspapers
Performance
During the 26 week period to 1 July 2001, operating profit declined by £9.7
million (17.5%) to £45.7 million. This decrease in operating profit reflects
a decline in revenue of 2.2% (£6.0 million) to £262.9 million (due primarily
to increased promotional Mirror cover price cutting), a £3.7 million increase
in newsprint costs and a loss of £2.5 million net contribution from
Independent News & Media for services previously provided by the Group. The
overall operating margin of the Group's national newspaper business remains
the highest in the industry.
Circulation revenue of the UK titles fell by 3.4% during the 26 week period to
£109.2 million. The circulation performance of The Mirror improved from a
year on year decline of 5.3% in January to 1.6% in June, driven primarily by
the improved performance of the Saturday edition following the move of M
magazine to Saturday. Despite heavy promotional spend by the major
competitor, the Sunday Mirror's share of the popular circulation market at the
end of June remained identical to that of June 2000. The Sunday People
continues to be a significant profit and cash contributor despite circulation
volumes and total revenues declining by 8.0% and 3.5% respectively.
For the 26 week period, the three UK titles achieved a 2.3% growth in
advertising revenue. A 7.5% increase in the first quarter was followed by a
decline of 2.9% in the second quarter, including a 7.0% decline in June. All
three titles have achieved volume growth (The Mirror 5.3%, Sunday Mirror 3.6%
and Sunday People 3.4%) and an improved share of the tabloid display
advertising market. Increases of 11.6% and 6.0% in retail and classified
advertising respectively during the period have been offset by sharp declines
in motors, finance, travel and FMCG display advertising during the second
quarter. Growth of 2.0% is anticipated in July.
A tough economic and competitive local market meant that revenue of the
Scottish national newspaper operations fell by 1.5% leading to a fall of 6.4%
in operating profit (to £11.7 million) during the period. The difficulties
within the national display advertising market during the second quarter of
the year have led to a 2.6% fall in advertising revenue to £25.8 million for
the 26 week period. The Daily Record's circulation in Scotland declined by
3.9% (which is a slower rate of decrease than experienced last year). The
Sunday Mail also reduced its rate of circulation decline to 4.2%.
Strategic direction
Over the past five years, despite participating in an extremely competitive
and mature market, the Group's national titles have remained highly
profitable, with good margins and strong cashflows. The Mirror's relative
circulation performance over this period has been robust, marginally
outperforming its main competitor in spite of a significant disadvantage in
terms of marketing spend. The Board has determined that the optimal approach
to managing the value of these titles is, as a minimum, to maintain share of
the circulation market.
The Group will continue to invest prudently in product enhancements,
editorial, marketing and promotional activity to maintain circulation market
share of its national titles. Cost savings from within the business will fund
any incremental investment above current levels.
Managing the national titles (and in particular the Mirror titles) and keeping
margins at current levels will require an ongoing process of re-examining the
business model, thereby seeking to reduce the structural level of costs.
An integrated marketing strategy review for The Mirror and Sunday Mirror is to
be completed. This will encompass brand, product, pricing, promotion and
distribution.
Similar management rigour will be applied to the Sunday People to drive its
performance.
The two Scottish national titles outsell all other tabloid titles in Scotland
and have a level of household penetration that is higher than that of any
other newspaper in Europe. However, over recent years, competition in the
Scottish tabloid market has intensified and circulation of the two titles has
been under pressure. Consequently, operating margins have not been maintained
at a level to be expected from a business with such a strong position in a
local market.
To address these issues of the Scottish national newspapers, to ensure that
full advantage is taken of the scale and leadership position of the titles and
to improve performance, the Group is adopting a similar approach to that being
adopted in the regional newspaper division. Appropriate benchmarks will be
created and best practice applied. Recent cost reduction initiatives will
form the base of further enhancing performance.
This strategy for management of the Scottish national newspaper operations
will improve revenue and profit performance over the next two to three years
and secure the titles' leadership position in Scotland.
Sports newspapers
The division's operating profit decreased by 7.3% to £3.8 million despite an
11.4% growth in advertising revenue. This reflects the effect of the foot and
mouth epidemic on the racing industry and calendar. Circulation sales of all
titles were affected by an estimated £0.8 million of revenue lost during the
26 weeks (total circulation revenue for the period being £11.4 million) and
circulation volume of the Racing Post declining by 6.0%. During recent weeks
the division has seen a significant improvement in circulation performance as
the industry recovers from the effects of the epidemic.
In June, smartbet.co.uk, the interactive virtual 'betting ring', was launched
with five major bookmakers supplying smartbet with a live odds feed direct
from their own betting engines. The response to the product has been
encouraging given the very early stage of development. Additional bookmakers
are being recruited and are expected to join the service in the autumn.
On 17 July, 'The Budd' report on gambling was released by the Government. The
conclusions of the report were favourable to the gambling industry with a
broad range of deregulation recommended, which combined with zero tax is
setting the scene for the further development of the gaming industry.
Digital media
The Group announced in March the closure of its central vertical icShowbiz and
icSports sites, the discontinuance of the icChoice site development and the
realignment and refocusing of its investment in digital media activities. 13
regional ic sites have since been launched, integrated and aligned with the
Group's regional newspaper operations, further strengthening the regional
franchises, ensuring the Group's ability to participate in digital and other
new media platforms and improving its position as the dominant provider of
local information in the areas in which it operates.
The net cost of investment in the first half of the year was £13.2 million.
On an annual basis, the net cost of maintaining the current digital media
activities will be approximately £12.0 million (excluding the investment in
Fish4). The Group continues to review the possibility of reducing the net
cost whilst ensuring that the sites and infrastructure meet the strategic
needs and opportunities for growth of its regional newspaper operations.
The Group has continued to invest (£1.8 million during the 26 weeks) in Fish4,
one of the leading national on-line providers of jobs, motors and property
classified advertising, thereby strengthening the regional franchise
proposition available to customers and protecting its regional classified
revenue streams.
Other businesses
The smaller businesses in the Group's portfolio continue to make sound,
profitable contributions to overall performance.
Voice Media, the Group's telephone service operator, has improved operating
profit from £1.4 million to £2.4 million during the period, primarily as a
result of the continued provision of the premium phone line service to the '
This Morning' TV show, the current series having finished on 12 July 2001.
The sales process undertaken in respect of the magazine and exhibitions
business indicated that an appropriate price for this business could not be
achieved, given the current condition of the market. There is no requirement
for the Group to dispose of this business. Consequently, the magazines and
exhibitions business will be retained and developed to improve its value.
During the 26 week period, revenue has declined by 6.7% and operating profit
decreased by 2.1% to £4.6 million.
The sale process in respect of the Group's and The Press Association's
interests in PA Sporting Life is continuing.
On 24 July the Group agreed to the sale of the subscribers to the ISP, ic24,
to Brightview Ltd for a cash consideration of £4.5 million.
Outlook
Current advertising conditions remain volatile and visibility is limited.
Whilst classified advertising has held up reasonably well there are signs of a
tightening in the recruitment advertising market and a more general slowdown
in growth rates in other categories of classified advertising. The market for
display advertising has been weak throughout the second quarter of the year.
However, while this has continued into July, there are currently no signs of
acceleration in decline.
The current cost saving initiatives should mitigate part of the profit
shortfall arising from the difficult advertising market. These savings and
the early implementation of the strategic plans of the regional and national
newspaper operations should ensure that:
(i) the adverse impact on the Group of these conditions is minimised;
(ii) the Group is well placed to benefit from any improvement in the market;
and
(iii) the Group has good medium to long term growth prospects.
Sir Victor Blank, Chairman
27 July 2001
Consolidated profit and loss account (unaudited)
26 weeks to 1 July 2001 26 weeks 52 weeks
to to 31
Before Exceptional After 2 July December
exceptional items exceptional 2000 2000
items (note 4) items (restated)(restated)
notes £m £m £m £m £m
Turnover 2
Continuing 581.4 - 581.4 559.1 1,079.1
operations
Discontinued - - - 0.8 1.2
operations
581.4 - 581.4 559.9 1,080.3
Operating profit
Continuing 106.8 (7.6) 99.2 105.8 166.4
operations
Discontinued - - - (0.2) 0.7
operations
Group operating 3 106.8 (7.6) 99.2 105.6 167.1
profit
Share of results 0.1 - 0.1 (0.1) -
of associated
undertakings
Total operating
profit
Ordinary 3 106.9 - 106.9 117.4 201.4
activities before
exceptional
items
Exceptional items 4 - (7.6) (7.6) (11.9) (34.3)
106.9 (7.6) 99.3 105.5 167.1
Share of
exceptional items
of associated 4 - - - - 17.5
undertaking
(continuing)
Profit on sale of 4 - - - - 164.5
operations
Profit on 106.9 (7.6) 99.3 105.5 349.1
ordinary
activities before
interest
Net interest (26.0) - (26.0) (27.8) (47.3)
payable
Profit on 80.9 (7.6) 73.3 77.7 301.8
ordinary
activities before
taxation
Tax on profit on 5 (24.2) 2.3 (21.9) (24.1) (46.8)
ordinary
activities
Profit on 56.7 (5.3) 51.4 53.6 255.0
ordinary
activities after
taxation
Ordinary 6 (15.4) (14.9) (51.2)
dividends on
equity shares
Retained profit 36.0 38.7 203.8
for the financial
period
Earnings per 7
share (pence)
Before digital 23.1 24.9 48.5
media activities
Digital media (3.6) (3.1) (10.4)
activities
Underlying 19.5 21.8 38.1
earnings per
share
Exceptional items (1.8) (3.3) 49.9
Earnings per 17.7 18.5 88.0
share - basic
Earnings per 17.7 18.4 87.4
share - diluted
Consolidated balance sheet (unaudited)
notes 1 July 2 July 31 December 2000
2001 2000 (restated)
(restated)
£m £m £m
Fixed assets
Intangible assets 2,017.7 1,781.1 2,018.4
Tangible assets 393.0 419.1 404.3
Investments 15.4 7.0 16.0
2,426.1 2,207.2 2,438.7
Current assets
Stocks 7.2 14.7 7.7
Debtors 186.7 173.7 179.3
Cash at bank and in hand 49.6 29.9 57.7
243.5 218.3 244.7
Creditors: amounts falling due within
one year
Bank loans, loan notes and overdrafts (134.0) (222.6) (259.4)
Obligations under finance leases (7.0) (8.0) (5.8)
Other creditors (255.5) (245.4) (294.4)
(396.5) (476.0) (559.6)
Net current liabilities (153.0) (257.7) (314.9)
Total assets less current liabilities 2,273.1 1,949.5 2,123.8
Creditors: amounts falling due after
more than one year
Bank loans and loan notes (643.4) (506.5) (518.8)
Obligations under finance leases (37.0) (47.3) (41.9)
Other creditors - (3.8) -
(680.4) (557.6) (560.7)
Provisions for liabilities and (89.3) (95.4) (97.0)
charges
Non-equity minority interest (3.7) - (3.7)
Net assets 1,499.7 1,296.5 1,462.4
Equity capital and reserves
Called up share capital 29.0 29.2 29.1
Share premium account 1,075.7 1,073.7 1,074.3
Revaluation reserve 5.0 5.5 5.0
Profit and loss account 390.0 188.1 354.0
Equity shareholders' funds 10 1,499.7 1,296.5 1,462.4
Gearing 51.5% 58.2% 52.5%
Consolidated cash flow statement (unaudited)
26 weeks 26 weeks 52 weeks to
to 1 to 2 31 December
July July 2000
notes 2001 2000
£m £m £m
Net cash inflow from operating 8 88.9 105.2 219.9
activities
Dividends received from associated 0.7 3.0 8.7
undertakings
Returns on investments and servicing of
finance
Interest received 0.5 0.3 5.6
Interest paid (27.2) (22.3) (42.7)
Investment income - - 0.1
Interest element of finance lease rental (1.2) (2.4) (3.7)
payments
Net cash outflow from returns on (27.9) (24.4) (40.7)
investments and servicing of finance
Taxation paid (13.4) (9.6) (41.6)
Net cash inflow before investing 48.3 74.2 146.3
activities
Capital expenditure and financial
investment
Purchase of tangible fixed assets (10.1) (12.0) (38.9)
Sale of tangible fixed assets - - 1.4
Net cash outflow from capital (10.1) (12.0) (37.5)
expenditure and financial investment
Net cash inflow before acquisitions and 38.2 62.2 108.8
disposals
Acquisitions and disposals
Purchase of subsidiary and associated
undertakings (including deferred
consideration) (7.4) (6.7) (275.2)
Net overdraft acquired - - (0.2)
Sale of subsidiary undertakings, net of - - 169.6
loan repaid
Net cash outflow from acquisitions and (7.4) (6.7) (105.8)
disposals
Equity dividends paid (35.7) (32.9) (48.3)
Net cash (outflow)/inflow before (4.9) 22.6 (45.3)
financing
Financing
Issue of shares 1.3 1.4 2.4
New unsecured loans 20.0 - 65.1
Repayment of unsecured loans (19.5) (29.9) -
Principal payments under finance leases (3.7) (2.1) (5.3)
Net cash (outflow)/inflow from financing (1.9) (30.6) 62.2
(Decrease)/increase in cash 9 (6.8) (8.0) 16.9
Reconciliation of net cash flow to
movement in net debt
(Decrease)/increase in cash in the (6.8) (8.0) 16.9
period
Cash movement in debt and lease 3.2 32.0 (59.8)
financing
Change in net debt resulting from cash (3.6) 24.0 (42.9)
flows
Debt acquired with Southnews - - (40.1)
Debt disposed with Belfast Telegraph - - 120.4
Newspapers
New loan notes issued on acquisition of - - (27.1)
subsidiary
Movement in net debt in the period (3.6) 24.0 10.3
Opening net debt (768.2) (778.5) (778.5)
Closing net debt (771.8) (754.5) (768.2)
Notes to the interim financial information
1 Basis of preparation
The accounting policies used in the preparation of the interim financial
statements for the 26 weeks to 1 July 2001 are as set out in the Group's
financial statements for the 52 weeks ended 31 December 2000, as amended by
the adoption in this period of two new financial reporting standards, FRS 18,
Accounting Policies, and FRS 19, Deferred Taxation, which the Group will adopt
in its full year accounts to 30 December 2001. The Group has elected not to
discount the deferred tax assets and liabilities.
The profit and loss account, balance sheet and reconciliation of movements in
consolidated shareholders' funds have been amended to reflect the adoption of
FRS 19. The prior period figures have been restated to reflect the full
provision for deferred tax on timing differences and no provision for deferred
tax on investment revaluations. Adjustments amounting to £36.7 million have
been made to goodwill to reflect the effect of the implementation of FRS 19
for acquisitions in prior periods. Due to impairment at the date of
acquisition, this goodwill has been written off - £23.2 million has been
written off in 1999 and the balance remaining of £13.5 million (of which £4.2
million relates to the 26 weeks to 2 July 2000) has been written off during
2000.
The adoption of FRS18 has not had an impact on the profit and loss account or
balance sheet.
2 Turnover
The analysis of the Group's turnover is as follows:
26 weeks to 26 weeks to 52 weeks to
1 July 2 July 31 December
2001 2000 2000
(restated)
£m £m £m
By geographical destination:
United Kingdom and Republic of Ireland 578.4 **557.3 **1,074.4
Continental Europe 2.7 2.3 5.3
Rest of the World 0.3 0.3 0.6
581.4 559.9 1,080.3
By type:
Circulation 194.6 203.4 396.8
Advertising 330.6 296.8 574.8
Other 56.2 **59.7 **108.7
581.4 559.9 1,080.3
By division:
Regional newspapers* 273.4 246.6 465.3
National newspapers 262.9 268.9 532.4
Sports newspapers 16.3 15.6 31.6
Magazines and exhibitions 19.6 21.0 35.3
Digital media 0.9 1.2 2.5
Other 8.3 **6.6 **13.2
581.4 559.9 1,080.3
* the comparatives for the 26 weeks to 2 July 2000 have been restated to
incorporate revenue of the Metro titles (£0.5 million) and regional new media
(£0.8 million) within regional newspapers. These were previously reported as
developing activities.
** includes £0.8 million for the 26 weeks to 2 July 2000 and £1.2 million
for the 52 weeks to 31 December 2000 in relation to discontinued operations.
3 Group operating profit
The analysis of the Group's operating profit (before exceptional items) is as
follows:
26 weeks to 26 weeks to 52 weeks to
1 July 2 July 31 December
2001 2000 2000
(restated)
By division: £m £m £m
Regional newspapers* 65.3 64.8 114.8
National newspapers 45.7 55.4 111.0
Sports newspapers 3.8 4.1 8.2
Magazines and exhibitions 4.6 4.7 6.8
Digital media (15.0) (12.8) (42.3)
Other 2.4 1.3 2.9
106.8 117.5 201.4
* the comparatives for the 26 weeks to 2 July 2000 have been restated to
incorporate operating profit of the Metro titles (£2.5 million loss) and
regional new media (£0.4 million profit) within regional newspapers. These
were previously reported as developing activities.
4 Exceptional items
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31
December
2001 2000 2000
(restated)(restated)
£m £m £m
Operating exceptional items
Restructuring costs (a) 7.6 7.7 13.3
Impairment of goodwill arising from the - 4.2 13.5
implementation of FRS 19 (b)
Accelerated depreciation in respect of press - - 7.5
impairment (c)
Total exceptional items charged against operating 7.6 11.9 34.3
profit
Profit on sale of operation (d) - - (164.5)
Share of exceptional item of associated - - (17.5)
undertaking (e)
Net exceptional items before taxation 7.6 11.9 (147.7)
a) Restructuring costs of £5.3 million (26 weeks to 2 July 2000: £7.7
million; 52 weeks to 31 December 2000: £13.3 million) relate primarily to the
closure of the central digital media sites (£2.3 million) and ongoing
restructuring of the Group's finance systems (£3.0 million). In addition,
costs have been incurred in 2001 relating to the formulation and
implementation of strategic and profit improvement plans, including cost
reduction measures, amounting to £2.3 million.
b) Goodwill of £36.7 million arising on the implementation of FRS 19
has been written off due to an impairment in its value (see note 10).
c) Following an assessment of the Group's future press policy
undertaken during 2000, accelerated depreciation of £7.5 million was applied
to certain press facilities reflecting their impairment as at 31 December
2000.
d) The sale of Belfast Telegraph Newspapers in July 2000 resulted in a
net profit on disposal of £164.5 million.
e) The share of associated undertaking's exceptional item relates to
the net profit on disposal of businesses during 2000 by The Press Association.
5 Tax on profit on ordinary activities
26 weeks to 26 weeks to 52 weeks to
1 July 2 July 31 December
2001 2000 2000
(restated) (restated)
£m £m £m
The charge for taxation is as follows:
Underlying:
UK corporation tax at 30% (2000: 30%) 23.5 25.0 43.2
Deferred taxation 0.7 1.4 0.6
24.2 26.4 43.8
Exceptional:
UK corporation tax on exceptional items (2.3) (1.9) 3.8
Deferred taxation on exceptional items - (0.4) (0.8)
21.9 24.1 46.8
The taxation charge for the period has been calculated by applying the
Directors' best estimate of the annual effective tax rate to the taxable
profit for the period. The statutory tax rate for the period is 30%.
The increase in UK corporation tax charge for the 26 weeks to 2 July 2000 of £
0.4 million and the decrease for the 52 weeks to 31 December 2000 of £0.2
million from that previously reported arises as a result of the implementation
of FRS 19, which requires deferred tax to be provided on a full provision
basis.
Included in the UK corporation tax charge on exceptional items for the 52
weeks to 31 December 2000 is £4.5 million in respect of the profit on disposal
of Belfast Telegraph Newspaper. The tax charge in respect of the profit on
disposal is less than the UK corporation tax rate of 30% due to the tax
effective disposal of this subsidiary.
6 Dividends
The Directors have declared the payment of an interim dividend of 5.3p (2000:
5.3p) per 10p ordinary share. The total dividend in 2000 was 17.6p.
7 Earnings per ordinary share
The calculation of earnings per share is based on the profit on ordinary
activities after taxation, using the weighted average number of shares in
issue (basic) increased by the number of share options in issue (diluted) as
shown below:
26 weeks to 26 weeks to 52 weeks to
1 July 2 July 31 December
2001 2000 2000
No. of shares No. of shares No. of shares
Basic (millions) 290.1 289.6 289.8
Diluted (millions) 291.0 290.6 291.9
7 Earnings per ordinary share (continued)
The implementation of FRS 19 has affected the earnings per ordinary
share as follows:
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31
December
2001 2000 2000
pence pence pence
Underlying earnings per share before digital media
activities - as 23.1 25.8 48.4
previously reported
Effect of implementation of FRS 19 - (0.9) 0.1
Underlying earnings per share before digital media
activities
- as restated 23.1 24.9 48.5
Digital media activities (3.6) (3.1) (10.4)
Underlying earnings per share 19.5 21.8 38.1
Exceptional items - as restated (1.8) (3.3) 49.9
Basic - as restated 17.7 18.5 88.0
Diluted - as previously reported 17.7 20.0 92.0
Effect of implementation of FRS 19 - (1.6) (4.6)
Diluted - as restated 17.7 18.4 87.4
8 Consolidated cash flow statement
The following information is supplementary to the consolidated cash
flow statement:
26 weeks 26 weeks 52 weeks
to to to
1 July 2 July 31
Reconcilation of operating profit to net cash December
flow from 2001 2000 2000
operating activities (restated)(restated)
£m £m £m
Operating profit 99.2 105.6 167.1
Depreciation 21.4 20.2 47.3
Amortisation/impairment of goodwill 0.7 4.5 14.1
Profit on disposal of fixed assets - - (0.8)
Decrease/(increase) in stocks 0.5 (1.0) 1.5
Decrease/(increase) in trade and other debtors (7.4) (11.0) (7.4)
and prepayments
Decrease in trade and other creditors and (25.5) (13.1) (1.9)
accruals
Net cash inflow from operating activities 88.9 105.2 219.9
9 Analysis of net debt
At
31 Cash Other non-cash At
December flow changes 1 July
2000 2001
£m £m £m £m
Cash at bank and in hand 57.7 (8.1) - 49.6
Bank overdrafts (24.5) 1.3 - (23.2)
Net cash balances 33.2 (6.8) - 26.4
Debt due within one year (234.9) - 124.1 (110.8)
Debt due after one year (518.8) (0.5) (124.1) (643.4)
Finance leases (47.7) 3.7 - (44.0)
Bank loans, loan notes and finance (801.4) 3.2 - (798.2)
leases
Net debt (768.2) (3.6) - (771.8)
10 Reconciliation of movements in consolidated shareholders' funds
26 weeks 26 weeks 52 weeks
to 1 July to 2 July to 31
December
2001 2000 2000
£m £m £m
Profit for the financial period attributable to 51.4 58.2 268.3
shareholders - as previously reported
Goodwill arising as a result of implementation
of FRS 19 written off to the profit
and loss account following
its impairment (c) - (4.2) (13.5)
Effect of implementation of FRS 19 on
the tax charge for - (0.4) 0.2
the period (a)
Profit for the financial period attributable to 51.4 53.6 255.0
shareholders - as restated
Dividends (15.4) (14.9) (51.2)
Retained earnings 36.0 38.7 203.8
New share capital subscribed 1.3 1.9 2.4
Effect of share option expenses incurred
by parent company - (0.3) -
Net increase in shareholders' funds 37.3 40.3 206.2
Opening shareholders' funds - as
previously reported 1,503.2 1,283.7 1,283.7
Effect of implementation of FRS 19 (b) (4.1) (4.3) (4.3)
Goodwill created on implementation of FRS 19
written off to the profit
and loss account in 1999 (c) (36.7) (23.2) (23.2)
Opening shareholders' funds - as restated 1,462.4 1,256.2 1,256.2
Closing shareholders' funds 1,499.7 1,296.5 1,462.4
(a) The increase in profit attributable to shareholders for the 52 weeks
to 31 December 2000 of £0.2 million and the decrease for the 26 weeks to 2
July 2000 of £0.4 million arises as a result of the implementation of FRS 19,
which requires deferred tax to be provided on a full provision basis for these
periods.
(b) The fall in opening shareholders' funds for the 52 weeks to 31
December 2000 and the 26 weeks to 2 July 2000 of £4.3 million, and for the 26
weeks to 1 July 2001 of £4.1 million, arises as a result of the implementation
of FRS 19, which requires a prior year adjustment to make full provision for
deferred tax in prior periods.
(c) Goodwill totaling £36.7 million resulted from the implementation of
FRS 19. Due to the impairment of this goodwill at the date of acquisition and
following revisions to the provisional fair value adjustments on acquisition,
£23.2 million has been written off to the profit and loss account in 1999 and
a further £13.5 million (£4.2 million for the 26 weeks ended 2 July 2000) has
been written off in 2000.
11 Statutory information
The financial statements for the 26 weeks to 1 July 2001 do not constitute
statutory accounts for the purposes of Section 240 of the Companies Act 1985
and have not been audited. No statutory accounts for the period have been
delivered to the Registrar of Companies.
The financial information in respect of the 52 weeks ended 31 December 2000
has been extracted from the statutory accounts for this period which have been
filed with the Registrar of Companies. The auditors' report on these accounts
was unqualified and did not contain a statement under Section 237 (2) or (3)
of the Companies Act 1985.
The auditors have carried out a review of the interim report and their report
is attached. The interim report was approved by the Directors on 27 July 2001.
This announcement is being sent to shareholders and will be made available at
the Company's registered office at Kingsfield Court, Chester Business Park,
Chester, CH4 9RE.
Independent review report to Trinity Mirror plc
Introduction
We have been instructed by the Company to review the financial information for
the 26 weeks ended 1 July 2001, which comprises the profit and loss account,
the balance sheet, the cash flow statement and related notes 1 to 11. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies
with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority, which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than
an audit performed in accordance with United Kingdom Auditing Standards and,
therefore, provides a lower level of assurance than an audit. Accordingly, we
do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 26 week
period ended 1 July 2001.
Deloitte & Touche
Chartered Accountants
Hill House
1 Little New Street
London
EC4A 3TR
27 July 2001
Friday, 22nd November 2024
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