Annual Report • Dec 31, 2017
Annual Report
Open in ViewerOpens in native device viewer
Annual Report 2017
Trinity Mirror is the largest commercial national and regional news publisher in the UK, producing and distributing content through newspapers and associated digital platforms
| Strategic Report | 01-30 |
|---|---|
| In summary | 01 |
| Chairman's introduction | 02 |
| Chief Executive's introduction | 03 |
| Our business | 04 |
| Strategy and KPIs | 09 |
| Our audience | 11 |
| Our people | 12 |
| Risks and uncertainties | 16 |
| Group financial review | 20 |
| Divisional financial review | 27 |
| Governance | 31-70 |
|---|---|
| Chairman's governance introduction | 31 |
| Board of directors | 32 |
| Corporate governance report | 34 |
| Nomination Committee report | 40 |
| Audit & Risk Committee report | 41 |
| Remuneration report | 46 |
| Corporate responsibility report | 61 |
| Directors' report | 67 |
| Independent auditor's report | 71 |
|---|---|
| Consolidated income statement | 77 |
| Consolidated statement of comprehensive income |
77 |
| Consolidated cash flow statement | 78 |
| Consolidated statement of changes in equity |
78 |
| Consolidated balance sheet | 79 |
| Notes to the consolidated financial statements |
80 |
| Parent company balance sheet | 112 |
| Parent company statement of changes in equity |
112 |
| Notes to the parent company financial statements |
113 |
For further information or to read the Annual Report online, go to www.trinitymirror.com
This Annual Report is sent to shareholders who have elected to receive a hard copy and is available on our website www.trinitymirror.com for those shareholders who have elected to receive a copy electronically. In this document, references to 'the Group', 'the Company', 'we' or 'our' are to Trinity Mirror plc and its subsidiaries. A reference to a year expressed as 2017 is to the 52 weeks ended 31 December 2017 and a reference to a year expressed as 2016 is to the 53 weeks ended 1 January 2017. References to 'the year' and 'the current year' are to 2017 and references to 'last year' and 'the prior year' are to 2016. The Annual Report contains forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future and could cause actual results and outcomes to differ materially from those expressed in or implied by the forward-looking statements. No assurance can be given that the forward-looking statements will be realised. Statements about the directors' expectations, beliefs, hopes, plans, intentions and strategies are inherently subject to change and they are based on expectations and assumptions as to future events, circumstances and other factors which are in some cases outside the Company's control. The Annual Report has been prepared on the basis of the knowledge and information available to directors at the date of its preparation and the Company does not undertake any obligation to update or revise the information during the financial year ahead. It is believed that the expectations set out in these forward-looking statements are reasonable, but they may be affected by a wide range of variables which could cause actual results or trends to differ materially. The forward-looking statements should be read in the context of the principal risk factors set out on pages 16 and 17 of the Strategic Report.
Strong cash flows further reducing net debt with financial flexibility to invest, to grow dividends and over time to meet pension obligations.
We have made continued progress with our strategic initiatives to grow digital display and transactional revenue, whilst tightly managing our cost base to support profits and cash flows. We continue to launch new products and we completed the acquisition of Northern & Shell's UK publishing assets.
The Board remains confident that our strategy will meet our objective to deliver sustainable growth in revenue, profit and cash flow over the medium term.
In addition to the financial performance measures above, the Group is focused on a number of other key performance indicators to deliver the Group's strategy. These are set out in the strategy and key performance indicators section on page 10 of the Strategic Report.
"As the company moves into its next chapter, we remain aware of the external landscape and how it is rapidly changing."
David Grigson, Chairman
This is my last Annual Report as Chairman, following my notice to step down at the 2018 Annual General Meeting. It has been a memorable six years serving the Company, and I will depart in May knowing that the Board and the Group are in good hands with the appointment of Nick Prettejohn on 6 March 2018. Nick joins us from Scottish Widows and Lloyds Banking Group plc where he is currently serving as Chairman and non-executive director respectively, and I would like to extend him a warm welcome to the Board.
I would like to express special thanks to the Board for their support and wish them and the Group the very best of luck for the future.
As the Company moves into its next chapter, we remain aware of the external landscape and how it is rapidly changing.
The Board remains committed to ensuring that it drives shareholder value whilst appropriately managing the interests of other key stakeholders such as our pension schemes, our debt providers and our staff. We continue to believe that managing the business well in difficult circumstances, and having clear plans to return your Company to growth in the medium term, will ultimately be to the benefit of all those whose livelihoods depend on the future success of your Company, whether as pensioners, members of staff or shareholders. I hope that this Annual Report demonstrates that our strategy is consistent with this goal.
I am delighted to confirm that the Board proposes a final dividend of 3.55 pence per ordinary share, bringing the total dividend for the year to 5.80 pence per ordinary share, a year on year increase of 6.4%. The Board continues to adopt a progressive dividend policy and expects dividends to increase by at least 5% per annum. You can find details of the Board's dividend policy on page 68 of the Directors' Report.
Our strong cash generation enabled the Board to successfully complete a £10 million share buyback programme in November 2017.
We remain totally committed to appropriately funding our longterm pension obligations. We continue to work closely with the Trustees of our pension schemes to balance the need to fund the pension deficit, with the need to invest in the business and ensure we create value for our shareholders. Alongside the £10 million share buyback programme the Board made a £7.5 million contribution to the pension schemes.
Total payments to fund historical pension deficits were £38.7 million in 2017. We have finalised the 2016 triennial valuations and have agreed to pay annual contributions of £43.8 million from 2018 to 2027.
We have also made additional commitments to our pension schemes as part of the acquisition of Northern & Shell's UK publishing assets, and you can see the details of this on page 8 of the Strategic Report.
I am pleased that the business continues to generate strong operating cash flows which remains a core strength of your Company. Net debt was only £9.0 million at the end of 2017. The strong cash flows present the business with secure financing and increased financial flexibility.
We made good progress on settling civil claims. We increased the provision for dealing with these historical matters by £10.5 million in 2017 reflecting increased costs of settling claims. The Board remains confident that claims arising from these historical events are manageable and do not undermine the delivery of the Group's strategy.
Part of my role as your Chairman is to ensure that your Board has the necessary skills, knowledge and experience to make informed judgements that are in the best interests of all the stakeholders in your Company.
You can find details of the membership of the Board on pages 32 and 33.
I am confident that the Board's composition is appropriate and that the Group, especially with Nick at the helm, will continue to navigate the challenges which 2018 is sure to bring.
On behalf of the Board, I would like to thank our colleagues who did such a stellar job in delivering the Group's resilient performance in 2017 and into 2018. Our business depends on talented people and you can read more about our people on pages 12 to 15 of the Strategic Report.
I would also like to thank our shareholders for your continued support and I look forward to speaking with many of you at the forthcoming Annual General Meeting.
Now that we have completed the acquisition of Northern & Shell's UK publishing assets I am more confident than ever that the Group's strategy and strong management team will ensure that 2018 will be another year of continued progress.
Chairman 5 March 2018
"Our vision is to be an essential part of people's daily lives by delivering quality content and services that inform, enlighten and enrich."
Simon Fox, Chief Executive
I am delighted that we have delivered a resilient financial performance in the year despite the challenging environment we face. I am particularly pleased with the strategic progress we have made during the year.
We ended 2017 in a strong financial position with minimal debt and this has enabled the Group to acquire Northern & Shell's UK publishing assets.
We delivered an adjusted operating profit of £124.7 million and adjusted earnings per share of 36.1 pence per share due to tight management of the cost base, including £20 million of structural (including synergy) cost savings.
Our four key areas of strategic focus are to grow digital audience and revenue, to build new diversified revenue streams, to protect our strong print brands and to seek out strategic consolidation opportunities that drive value. Our medium term objective remains to achieve total revenue growth, as digital and new revenue streams outstrip print decline.
We made good progress with our strategy in 2017, and full information on the key achievements against our four key areas of strategic focus is set out on pages 9 and 10.
Our digital revenue saw continued growth, with like for like digital revenue growing by 7.0%. In particular display and transactional revenue grew by 18.2% driven by growth in digital audience with average monthly page views on a like for like basis growing by 7% to 682 million.
We continued to enhance our print brands through the roll-out of new design and content. Alongside enhancing our newspapers we rationalised the portfolio and closed a small number of regional newspapers and handed back a further two Metros franchises we operated to DMGT.
Our talented people are the foundation of our business, and we aim to create a dynamic environment that enables our people to embrace their passions and ambitions. I would like to thank everyone who has contributed to our resilient performance this year for their hard work and dedication to the Group, and I look forward to working with them in the year ahead.
I am pleased that we completed the acquisition of Northern & Shell's publishing assets (excluding Republic of Ireland) on 28 February 2018. We hope to complete the acquisitions in the Republic of Ireland later this year. Consolidation is a key pillar of our strategy and the acquisition builds on the Local World acquisition completed in 2015 and will be financially and strategically beneficial for all stakeholders in the Group. Further details are provided on page 8 of the Strategic Report.
We look forward to working closely with the staff of our newly acquired publishing business.
A resolution proposing that the Company changes its name to Reach plc to reflect the larger business will be put forward at the Annual General Meeting on 3 May 2018.
Print markets, in particular advertising revenue trends, are expected to remain challenging during 2018 while digital audience and revenue is expected to continue to grow.
In the medium term, growth from digital and new revenue streams will outstrip print declines on an aggregate basis. This, combined with our inbuilt and relentless focus on efficiencies, makes me confident that the delivery of sustainable growth in revenue, profit and cash flow is achievable in the future, for the benefit of all stakeholders.
Chief Executive 5 March 2018
How we create value and what makes us different
We are the largest commercial news publisher with national and regional newsbrands across the UK, including influential and iconic brands such as the Daily Mirror, Sunday Mirror, Sunday People, Daily Record, Sunday Mail and market leading daily titles in key metropolitan markets across the country. Following the acquisition of Northern & Shell's UK publishing assets, our portfolio has been further enlarged.
Our brands have a long heritage of being trusted sources of news and information with our editorial conviction and high standards of journalism providing audiences with timely information and opinion across multiple platforms.
The business is split into four operating segments, each of which is a division: Publishing, Printing, Specialist Digital and Central.
The newly acquired publishing assets will be reported in the relevant reporting segment. The acquisition includes national newspapers: the Daily Express, Sunday Express, Daily Star and Daily Star Sunday; the Express.co.uk and Dailystar.co.uk websites; the paid for celebrity magazines: OK!, New! and Star; the ok.co.uk, newmagazine.co.uk and star-magazine.co.uk websites; and the print plant in Luton which has four full colour presses.
The structure of the Group provides flexibility to drive efficiencies, through a unified organisational structure which ensures activity is driven to benefit the Group overall. This helps to support profits and cash flows while print revenue remains under pressure, meaning the Group is able to maximise revenue and drive efficiencies without impacting quality.
The Group owns most of its print plants and printing presses, and a number of its key offices outside London. The information technology and infrastructure is hosted by a third party and the Group has data centres in key locations. The unencumbered printing assets provide flexibility to secure contract printing revenue as spare capacity is created through falling volumes or to retire capacity thereby reducing infrastructure costs. The freehold property assets provide potential disposal opportunities and at the same time also reduce infrastructure costs.
| Publishing | Publishing includes all of our national and regional newspaper titles and associated digital publishing sites. This segment produces and distributes content to mass market audiences across the UK, through paid-for and free newspapers and related multi-platform digital sites (desktop, tablet, mobile). Within our Publishing division, Trinity Mirror Solutions is the commercial team working with media agencies and advertising clients to help them reach the national, regional, print and digital media audiences of the Trinity Mirror newsbrands and other media publishers with tailored marketing solutions and commercial partnerships. This division also holds events and exhibitions related to publishing activities, such as the 'Pride of…' series, which includes the Pride of Britain and Pride of Sport awards. Additionally within the division, Trinity Mirror Sport Media provides contract publishing for football clubs and other sport related organisations. The division will also include the newly acquired magazines. |
|
|---|---|---|
| Operating segments |
Printing | Trinity Mirror Printing provides internal print services to the Publishing division and externally to third parties, making it the largest provider of newspaper contract printing services in the UK. Trinity Mirror Printing (including the newly acquired print plant) operates six print sites and 24 full colour presses. |
| Specialist Digital | Specialist Digital contains our digital classified recruitment business, Trinity Mirror Digital Recruitment, which comprises digital classified sites including TotallyLegal, GAAPweb and SecsintheCity and our digital marketing services business, The Communicator Corporation Limited. |
|
| Central | Central includes revenue and costs not allocated to the operational divisions and our share of results of associates. The Group has a 21.53% stake in news agency the PA Group Limited and a 50% stake in event organiser Brand Events TM Limited. |
The Group's revenue streams are from print and digital activities. Although print related revenue is expected to remain under pressure in the future, the strength of our unique portfolio of trusted national and regional brands, aided by our ability to provide advertisers with a unique portfolio of national and regional packages, provides confidence that the rate of decline in print revenue is manageable. Within print revenues, more stable circulation revenues represent an increasing percentage. Continued focus on driving our digital audience together with new revenues streams, both organic and acquired, will over time deliver revenue growth to offset the decline in print and drive growth.
The Group is clear on the challenges it faces and we refreshed our strategic action plans in 2016 to ensure an even closer alignment between our strategic initiatives and their financial outcomes for 2017 and future years. More details can be found on pages 9 and 10 of the Strategic Report. The strong cash generation of the Group provides financial flexibility to invest, to grow dividends and over time to meet pension obligations.
| Daily Record ECHO 24 Mirror Mirror |
||
|---|---|---|
| $\bigstar$ | POST Post ECHO EveningNews DAISLEY DAILY & POST |
|
| CAMBRIDGE $Derby$ Felegraph Leicester Alercury Coening Dost Burton Mail |
||
| BAILY MAIL Western Mail奖 Frimsby Telegraph Coventry Telegraph The Sentinel Chronicle |
||
| The Journal * Examiner The Gasette Herald Daily Press |
The Group's businesses operate in the rapidly evolving media sector and face a challenging trading environment which continues to place structural pressure on the Group's print related revenue while at the same time presenting opportunities to grow the Group's digital revenue.
The print market continues to face challenges with print advertising and paid-for newspaper sales declining. Whilst print revenue will remain under pressure due to continued structural challenges, any improvement in the overall macroeconomic environment will help reduce the impact of the structural challenges.
National newsbrands advertising is estimated to have declined by 9.8% in 2017 (13.2% decline in print and 2.1% increase in digital) with a slower decline of 6.7% forecast for 2018 (source: WARC/AA).
Regional newsbrands advertising is estimated to have declined by 11.9% in 2017 (14.5% decline in print and 1.7% decline in digital) with a slower decline of 9.8% forecast for 2018 (source: WARC/AA).
The Group has experienced print advertising declines worse than these market forecasts which we believe are broadly in line with actual market trends. The Group has outperformed the digital advertising trend.
Circulation revenue will see lower declines than other print revenues due to the benefit of cover price increases even though volume will remain under pressure.
Contract printing revenue grew for a number of years with spare capacity being utilised by third parties. However, as publishers have already retired significant capacity in recent years, there now remains limited scope for growth. The Group will continue to maximise revenue to fill spare capacity or retire capacity if it is more efficient to do so as was seen with the closure of four of our smaller print plants in the last four years.
The majority of the Group's revenue is currently generated from print and our strategy is to ensure that declines in print revenue are minimised. At the same time we look to deliver growth in digital revenue by investing in digital capabilities across products, editorial and commercial to grow our digital audience and revenue. Alongside this investment, the Group will seek out new revenues streams, both organic and acquired.
Trinity Mirror's digital portfolio has seen strong growth in 2017, reaching 120 million monthly unique browsers for the first time. Mirror Online has over 70 million monthly unique browsers, and was the most popular multi-platform commercial news website in the UK.
The Group's adjusted cost base in 2017 comprised: Labour (44%), Newsprint (11%), depreciation (4%) and other (41%). The most significant elements of other costs are printing (including external printing of magazines), distribution, information technology and property related costs.
As a consequence of the challenging print environment, the Group continues to focus on cost efficiency including the delivery of material structural cost savings.
In the medium term, growth from digital and new revenue streams will outstrip print declines.
Our vision and strategy supports our overriding goal of driving shareholder value whilst over time funding our historical pension obligations.
This section summarises our vision and strategic objectives.
Our vision is "to be an essential part of people's daily lives by delivering quality content and services that inform, enlighten and enrich". To deliver this vision it is clear that quality content is and will remain at the heart of our business.
Our belief is that engaging, differentiated content is at the heart of our business. It is this content that makes us central to our audience's daily lives and our context which makes us so valuable to advertisers.
Our values were refreshed at the start of 2016 to more accurately reflect the behaviours which we believe are necessary for us to succeed and deliver – collaboration, imagination, determination.
Our talented people are the foundation of our business. We create a dynamic environment that embraces their passions and ambitions.
Our financial objective in the short term is to support profits and cash flows through revenue and efficiency initiatives while in the medium term to deliver sustainable growth in revenue, profit and cash flow.
Our strategy to grow, build, protect and consolidate our strong position in the communities we serve will be delivered through four key areas of strategic focus:
Growth from digital and new revenue streams will begin to outstrip print declines on an aggregate basis, leading to a stabilisation of Group revenue and then a return to top-line growth. This, combined with our inbuilt and relentless focus on efficiencies, makes the Board confident that the delivery of sustainable growth in revenue, profit and cash flow is achievable in the future, for the benefit of all stakeholders.
Key highlights of progress on each area of strategic focus and the key performance indicators can be found on pages 9 and 10 of the Strategic Report. The achievement of the Group's strategic objective and the key performance indicators are all impacted by the risks and uncertainties set out on pages 16 to 19 of the Strategic Report.
The Group delivered a resilient performance in 2017 despite the difficult trading environment. We continued to tightly manage the cost base and delivered good growth in our digital audience and the associated display and transactional revenue. Strong management of the cost base enabled adjusted operating margin to increase by 0.7 percentage points to 20.0% delivering an adjusted operating profit of £124.7 million. Statutory operating profit increased by 4.7% to £97.9 million.
Group revenue fell by 12.6% or £89.8 million to £623.2 million impacted by the weak print trading environment and pressure on digital classified revenues, which are substantially jointly sold with print. The fall in revenue includes the impact of an additional week of trading in 2016, the cessation of the Independent print and distribution contract in April 2016, the sale of Rippleffect in August 2016 and the impact of handing back four Metros to DMGT in December 2016 and other portfolio changes in 2016 and 2017. Digital revenue continued to grow with strong growth in like for like display and transactional revenue of 18.2% to £68.7 million driven by an increase in audience, engagement, video and digital marketing services partly offset by weaker classified revenue, primarily due to recruitment. On a like for like basis, Group revenue fell by 8.8% or £60.2 million.
Like for like Publishing revenue fell by 9.0% to £577.8 million. Publishing print revenue fell by 11.3% to £493.9 million and we continued to achieve growth in digital revenue of 7.0% to £83.9 million with digital display and transactional revenue growing by 18.2% partially offset by digital classified revenue falling by 25.1%.
Strong cost control limited the fall in Group adjusted operating profit to 9.3% to £124.7 million and Group adjusted EBITDA to 9.1% to £145.1 million. The Group delivered structural cost savings (including an incremental £5 million of synergy savings from the integration of Local World) of £20 million. Group adjusted profit before tax fell by 8.0% to £122.5 million and adjusted earnings per share fell by 5.2% to 36.1 pence reflecting the impact of the falling revenues partially offset by tight cost management.
Adjusted items impacting operating profit (note 8) were a charge of £26.8 million (2016: £44.0 million).
Statutory operating profit improved by 4.7% or £4.4 million to £97.9 million. Statutory financing costs were £16.0 million (2016: £17.0 million) and statutory profit before tax increased by 7.1 % or £5.4 million to £81.9 million. The statutory tax charge was £19.1 million (2016: £7.0 million) with the prior year benefitting from a £9.8 million deferred tax credit as a result of the future change in the rate of corporation tax. Statutory earnings per share fell by 7.6% or 1.9 pence reflecting the increased statutory tax charge more than offsetting the benefit of increased profit before tax and the share buyback.
The Group maintained financial flexibility with net debt falling by £21.5 million to £9.0 million and adjusted EBITDA of £145.1 million. During the year, the Group fully repaid the outstanding £68.3 million on the private placement loan notes. Only £25 million is drawn on the Group's £100 million bank facility. The bank facility is committed until 2021 and the facility amortises over the term reducing to £50 million for the last year of the term. Following the repayment of the private placement loan notes net debt is the same on both a contracted and statutory basis. Net debt of £9.0 million at the period end comprised the £25.0 million drawn on the bank facility and cash balances of £16.0 million.
The strong cash flows generated by the Group provide resilience and financial flexibility to invest in the business, to grow dividends and over time meet pension obligations.
The costs associated with the settlement of civil claims in relation to phone hacking have been higher than expected, in particular the legal fees of the claimant's lawyers and the general court process. Therefore, we have increased the provision for settling these historical claims by £10.5 million during the year. £10.7 million of the provision remains outstanding at the year end.
Although there remains uncertainty as to how these matters will progress, the Board remains confident that the exposures arising from these historical events are manageable and do not undermine the delivery of the Group's strategy.
The IAS 19 accounting pension deficit fell by £88.4 million to £377.6 million (£311.4 million net of deferred tax) driven by strong asset returns and the benefit of a fall in future mortality improvements more than offsetting a further reduction in the discount rate. The fall in the accounting pension deficit does not have an immediate impact on the agreed funding commitments. The Group reached agreement with the Trustees on the 2016 triennial valuations in December 2017 whereby annual contributions to the three pension schemes would increase to £43.8 million per annum for a period of 10 years commencing 2018. The increase in annual contributions reflects the increase in deficits since the last valuation which have been largely driven by the fall in long term interest rates. Additional contributions of £67.0 million over ten years were agreed in connection with the acquisition of Northern & Shell's UK publishing assets (further
details opposite).
The Board proposes a final dividend of 3.55 pence per share for 2017, an increase of 6.0%, bringing the total dividend for 2017 to 5.80 pence per share, an increase of 6.4%. The final dividend which is subject to approval by shareholders at the Annual General Meeting on 3 May 2018 will be paid on 8 June 2018 to shareholders on the register on 11 May 2018.
The final dividend for 2016 of 3.35 pence per share was paid in June 2017 and the interim dividend for 2017 of 2.25 pence per share was paid in September 2017. Total dividend payments in 2017 amounted to £15.3 million.
During November 2017, the Group completed the £10 million share repurchase programme announced in August 2016. The Group acquired a total of 10,017,620 shares.
The Board continues to adopt a progressive dividend policy which is aligned to the free cash generation of the business. The free cash generation for the purposes of assessing the dividend is the net cash flow generated by the Group before the repayment of debt, dividend payments, other capital returns to shareholders and additional contributions made to the defined benefit pension schemes as a result of any substantial increase in dividends and/or capital returns to shareholders. When setting the level of dividends the Board will ensure that the Group maintains adequate headroom for investment and any unexpected cash flow requirements for historical events or to fund further restructuring. Based on the Board's expectation of future cash flows, the Board expects dividends to increase by at least 5% per annum.
The Company will also continue to consider, if appropriate, the return of capital to shareholders through a share buyback if it has generated surplus cash and sees an opportunity to enhance earnings per share and therefore shareholder value. Prior to initiating a share buyback programme the Company will carefully consider the cash generation of the business, investment requirements and the Group's obligations to the Group's defined benefit pension schemes.
The Group announced the proposed acquisition of Northern & Shell's publishing assets on 9 February 2018 which was subsequently approved at the General Meeting held on 27 February 2018.
On 28 February 2018, the Group completed the acquisition of 100% of the equity in Northern & Shell Network Limited (renamed Trinity Mirror Network Limited) and its subsidiaries for a cash consideration of £42.7 million and the issue of 25,826,746 shares at 77.44 pence per share and with deferred consideration of £59.0 million payable as £18.9 million, £16.0 million, £17.1 million and £7.0 million on the second, third, fourth and fifth anniversaries respectively of the acquisition. A new £75 million amortising term loan ('Acquisition Term Loan') was procured to partially fund the acquisition and £70 million has been drawn.
The acquisition of the 50% equity interest in Independent Star Limited for £4.5 million and 100% of the equity in International Distribution 2018 Limited for £0.5 million is subject to clearance by the competition authorities in the Republic of Ireland. The remaining £5 million under the Acquisition Term Loan will be drawn on completion of these acquisitions.
The Group has agreed to make an upfront payment of £41.2 million to the defined benefit pension schemes of subsidiaries of Trinity Mirror Network Limited and has entered into recovery plans amounting to £29.2 million over the period 2018 to 2027 (£1.9 million per annum 2018 to 2020, £4.1 million per annum 2021 to 2023, £3.3 million per annum 2024 to 2026 and £1.3 million in 2027). The Group also revised the schedule of contributions for the Group's existing defined benefit pension schemes amounting to an increase of £67.0 million over the period 2018 to 2027 (£3.2 million per annum 2018 to 2020 and £8.2 million per annum 2021 to 2027). In addition, the Group agreed to increase from 50% to 75%, the additional contributions that would be paid to the defined benefit pension schemes if dividends increased by more than 10% in 2018, 2019 and 2020.
On 1 March 2018, the Competition and Markets Authority launched a merger investigation and made an initial enforcement order (a "hold separate" order) under the Enterprise Act 2002, in relation to the acquisition. The Board continues to believe that there will be no reduction in media plurality as a result of the acquisition, as each newspaper brand will continue with its current editorial positioning, and that there will not be any detrimental impact on competition as a result of the acquisition
Revenue in the first two months of 2018 fell by 9% on a like for like basis (excluding from the 2017 comparative: the handing back of two Metros in December 2017 and other portfolio changes in 2017).
The acquisition of the publishing assets of Northern & Shell is expected to be earnings enhancing in 2018.
At this early stage we anticipate performance for the year to be in line with our expectations.
Progress highlights
Publishing digital display and transactional revenue, which is primarily driven by audience, grew on a like for like basis by 18.2% to £68.7 million, benefitting from the higher page views and an increase in higher yielding revenues categories such as video. Video streams in the year were marginally under 600 million, up 27% year on year. Digital classified revenue which is predominantly upsold from print fell on a like for like basis by 25.1% with the largest category, recruitment, falling by 35.8%.
Digital audience growth continues with average monthly page views in the year growing by 7% year on year to 682 million. Mobile page views were some two thirds of the page views and grew by 19% while desktop pages views fell by 15%. Three quarters of page views were UK page views which grew by 11% while non UK page views fell by 3%. Page view growth rates have been impacted by the removal of Streamo and Live Event page views as this functionality reduced the viewability of ads served due to the speed at which the pages were viewed by users. It is estimated to have reduced the reported growth in page views by over 8%.
We continue to simplify our digital portfolio to focus on brands which can deliver scale and significant daily local audience reach in their market places.
We completed the migration of the former Local World digital brands onto the Escenic content publishing platform and onto our fully responsive new Chameleon site. The brands are benefiting from the new look design, cleaner template and more powerful digital storytelling tools. The new sites provide greater emphasis on video and a much improved live blogging experience.
We continue to explore new product ideas to leverage our portfolio of print and digital brands whilst seeking to diversify the revenue streams beyond advertising.
The three "Live" sites (Belfast, Glasgow and Dublin) delivered 3.6 million monthly browsers and 16.5 million page views in December 2017, up on the 3.0 million monthly browsers and 8.7 million page views in December 2016. The 'Live' sites are a digital one-stop shop for all things relating to the city featuring live breaking news, local sport, entertainment, events, local interest, traffic and travel and What's On.
Leeds Live launched in November 2017 promising to be a new voice in a growing and modern city. The site uses the latest digital storytelling techniques to bring the latest developments and incidents to those living and working in Leeds city centre. Across the live news channels readers are kept in the know about what's happening in Leeds bringing readers all the news they would expect, as well as challenging readers to see it, and Leeds, in a different way.
We launched InYourArea, a hyperlocal news, information and local community product that aggregates in realtime the latest hyperlocal news, events, crime data, local issues, council updates, social media content and more, all using a postcode. It offers an easy to use self-service advertising tool to local advertisers.
We launched football.london in January 2017 which is a 24/7, fanled, standalone digital site covering London football clubs with a focus on issues fans really care about, behind-the-scene, podcasts, interactive quizzes and games. The site has positive advocates on social media as a result of developing a particular tone of voice and authority. The site achieved 2.0 million monthly browsers and 5.1 million page views in December 2017.
We launched Insider.co.uk, a dynamic daily business news site, which operates alongside the market leading Business Insider magazine. The site provides Scottish businesses with a rich mix of live breaking city news, expert analysis and original economic data.
The Group acquired a 50% stake in Brand Events in October 2016. Brand Events is one of the UK's leading creators and operators of consumer event formats. The focus of the joint venture is to expand and create events in three main sectors: Sports, Crafts and Food. The target audience of the events are in line with our core audience and we are able to leverage our inhouse marketing expertise across print and digital to help promote events and our regional footprint allows the efficient marketing of a rollout of existing shows. Events will be centred on the main metropolitan cities which complements our regional and Scottish portfolios. Since the investment, Brand Events has continued to launch new events, holding six during 2017 and adding a further four to the schedule for 2018.
Protecting our print brands through understanding our print readers and delivering a quality product, whilst leveraging our brands, communities and advertisers to maximise our financial performance remains a key area of strategic focus.
Print markets remained challenging particularly advertising with display and other declining on a like for like basis by 14.8% and classified declining on a like for like basis by 23.5%. Circulation, the largest revenue category, performed better falling on a like for like basis by 6.5% with cover price increases reducing the impact of volume declines.
In light of the challenging trading conditions across the regional titles, a number of changes to the commercial management structure were made during the year. There is now more clarity and accountability to roles and decision making is faster. The change aims to improve the regional commercial performance during the current and future years.
We also reorganised the senior editorial teams and further reorganised the regional newsrooms across the UK. The restructure followed a review of growth opportunities in each of the markets we operate, and a review of our editorial print production practices. The review identified opportunities for greater investment, particularly around digital and content creation, as we look to increase engagement and connect with digital audiences on a larger scale. The review of editorial print production identified examples of best practice that is increasingly being standardised across the regions.
We continue to rationalise the portfolio and handed back a further two Metro franchises at the end of 2017 and have announced the closure of a small number of regional titles.
Sport Media continues to consolidate its position as the UK's leading sports publishing business working with the best in the Premier League and World football, from clubs to international organisations and some of the top individuals in sport. It has been awarded the 2018 FIFA World Cup matchday programme and tournament magazine contract and this builds on the Rugby World Cup of 2015. Sport Media helped Tottenham Hotspur deliver a hugely successful souvenir programme and recordbreaking sales operation for the historic last game at White Hart Lane. Internationally, in addition to the Confederations Cup in Russia last Summer, it also produced official tournament programmes for the 2017 Women's Euros in the Netherlands working with UEFA, and for the International Champions Cup tournament in USA featuring the 'El Clasico' contest between Real Madrid and Barcelona in Miami, and, in Texas, the first ever Manchester United and Manchester City derby played away from British soil. It also had 2017 successes in the book market delivering the second-highest selling football autobiography in the UK in 2017 (Peter Reid) and the top-selling football autobiography in Ireland (Shay Given).
During the year, the Group secured a five year print and distribution contract for the Guardian and Observer newspapers from early 2018, renewed a five year print and distribution
contract for the Racing Post and secured an extension to our print and distribution contract with Johnston Press, to continue printing the i newspaper as well as the Scotsman and Scotland on Sunday for a further three years.
The Group delivered structural cost savings (including synergy savings from the integration of Local World) of £20 million in the year, £5 million ahead of the initial £15 million target set for the year. Restructuring charges in respect of cost reduction measures were £12.6 million. For 2018, we have targeted a further £15 million of structural cost savings.
We continue to seek out strategic opportunities that drive value. We will continue to exercise rigorous discipline in considering any acquisition opportunities that enhance our strategy or brings new diversified revenue streams. We see ourselves as a consolidator in the newspaper industry and will continue to do so, subject to tight financial returns.
The acquisition of Northern & Shell's publishing assets was approved by shareholders at the General Meeting held on 27 February 2018 and the acquisition of the UK publishing assets completed on 28 February 2018 (further details are set out in the our business section on page 8 of the Strategic Report).
To track delivery of our strategy, the following KPIs will be reported on at each reporting date:
| Financial measure Group KPIs |
Performance in the period | |
|---|---|---|
| Publishing digital revenue growth | At least 15% pa | ✗ |
| Circulation revenue | Single digit declines | ✓ |
| Print advertising revenue | At least in line with national market trends | ✗ |
| Operating margin | Grow operating margin to support profits | ✓ |
| Dividend growth | At least 5% pa | ✓ |
Publishing digital revenue like for like growth of 7.0% for the period is below the target due to the material decline of 25.1% in classified advertising revenue with the audience related display and transactional revenue continuing to grow strongly by 18.2%.
Circulation revenue like for like decline of 6.5% is in line with the target with cover price increases partially mitigating volume declines. Print advertising revenue is being impacted by volume declines which have been worse than the national market trends. Continued focus on costs has resulted in adjusted operating margin increasing by 0.7 percentage points from 19.3% to 20.0%.
The total dividend for the year of 5.80 pence per share is an increase of 6.4% on the 2016 total dividend.
For 2018, the publishing digital revenue target will relate to digital display and transactional revenue with a target of at least 20% growth which compares to growth of 18.2% in 2017. All other targets remain the same as those set for 2017.
The Daily Mirror's Pride of Britain Awards returned for the nineteenth year to honour the nation's unsung heroes and recognise the amazing achievements of ordinary people.
Prince William joined more than 100 celebrities in attendance to listen to acts of incredible courage, battles against the odds, and inspirational campaigning.
The awards were held in November 2017, and broadcast on ITV to an audience of 5 million viewers. The winners and their inspirational stories captured the hearts of the nation, and ensured the awards remain the biggest national event of its kind.
We are an essential part of everyday life for millions of people across the country, and they are loyal to our brands.
Our readers trust us to do the right thing, and they are drawn to our strong social conscience. You can find examples of our successful campaigns and community activity on page 66 of the Corporate Responsibility Report.
Our audience is the mass market mainstream, and our understanding of their values and their beliefs underpin our editorial approach and helps us work with commercial partners to target them with relevant activity.
Total UK reach of our national and regional
110 regional newspapers
Over 50 websites
In 20172
Total UK page views per year Mobile UK page views per year 4 4
UK monthly online audience3
newsbrands per month1
39.3m +4%
2016: 37.8m
2016: 5.4 billion
In a fast paced media environment, the talent, dedication, and enthusiasm of our staff are what drive the business forward. There is a pride in what we do and what we stand for. Our loyal readers and advertisers are attracted by the knowledge, insight and values that our iconic brands provide, none of which would be possible without our people.
We standardised our pensions offering to all new employees and Local World staff were transferred to, or auto enrolled into, the Trinity Mirror Pension Plan. In addition to providing the defined contribution pension scheme, the Group continues to offer life assurance, sickness benefits, and an employee assistance programme for staff and their families giving confidential and impartial advice on a wide range of welfare issues. At the same time as the pension changes, we took the opportunity to move our Local World employees onto the Group's standard sickness, maternity, paternity and holiday policies. Furthermore, all employees are given the opportunity to participate in a range of additional voluntary benefits.
An annual pay award was made to all staff, with the lowest earning employees receiving a higher increase and we continued our commitment to offering all our employees a true living wage as a minimum standard. Our employees participate in incentive schemes either through a management bonus scheme, local schemes or for all other qualifying staff through inclusion in the Group's employee bonus scheme. For the management scheme the average bonus payable is 35.4%. For the employee bonus scheme the bonus payable is 24.0%. In addition, members of the employee bonus scheme employed by the Group on 5 March 2018 will receive a £50 retail voucher.
During 2018, we will be offering an expanded wellbeing service through our retained Occupational Health Services by providing physiotherapy advice and support to staff across the Group. We are also partnering with a Financial Health Benefit provider to support our employees financial wellbeing.
During 2017, the Group contributed to the new apprenticeship levy and engaged in a number of Group wide apprenticeship programmes to maximise the usage of our levy funds. 37 employees are now participating in apprenticeship programmes funded via the levy and we have partnered with SEETEC to develop bespoke apprenticeship programs to support staff development across the Group that will be rolled out during 2018. Our aim is to harness and maximise the apprenticeship levy to its full potential.
We continue to provide valuable development opportunities across the Group which support the needs of the business, through our network of embedded trainers, including but not limited to Editorial Systems Training, Audience Engagement, Online Editorial, Video Editing, Online Self Development, Management Development and Sales Presentation Skills. We look forward to strengthening our offering and reporting capabilities in 2018 following the roll out of the new Learning Management System, which will allow us to accurately track and report on all development whether online, classroom or compliance after its launch.
At the year end, the Group employed 4,775 permanent employees across 72 locations.
In 2017, the voluntary rate of employee turnover was 13.7%, down from 15.3% in 2016 and the retention rate, defined as employees in the Group's employment for the full 12 months was 88.2% down from 89.7% in 2016. The restructuring process across the Group has impacted staff retention among longer serving employees.
In 2017, the Group's absenteeism rate, which follows the common definition used by the Advisory, Conciliation and Arbitration Service, increased to an average of 2.4% from 1.7% in 2016. This is above the latest UK average level of employee absence of 1.9% reported by the ONS for 2016 (the latest ONS report for 2017 has not yet been published) and is an increase over 2016 but the introduction of a new centralised reporting system gives us confidence this is due to improved reporting rather than a worsening trend.
During 2017, we continued the roll out of our centralised HR Services model and expanded our self service system to include holiday and absence reporting along with expenses. This improved processing time, tracking and also saves paper, proving to be both environmentally friendly and cost effective.
The Company regularly engages with employees and keeps them updated on Group news and other areas of interest through communications cascades, a staff intranet, email updates from senior leaders and local initiatives.
The Your Say survey, having run for four years, has been revised and revitalised into a more regular pulse survey. This gives each division and function the opportunity to target their staff more regularly on staff engagement and give real time feedback to line managers via the online engagement tool. Following successful trials during 2017 the new survey will be rolled out in 2018. All department managers with more than six employees who complete the survey can access their own data allowing quicker cascade of feedback and more direct development of local action plans.
We also launched our internal Pride of Trinity Mirror Community Award, where employees can nominate a colleague who goes the extra mile to help and support others.
The Group continued its commitment to equality of opportunity in all its employment practices to ensure we attract and retain the best people.
In 2017, the number of women within the Group fell slightly to 41% (2016: 42%) but the number of women occupying senior managerial roles remained at 31% (2016: 31%). Senior managers have responsibility for key businesses or functions within the Group.
The Board policy on gender diversity is set out on page 35 of the Corporate Governance Report along with the composition of the Board.
The Group is required to report data on three of its business entities in line with the UK Government reporting requirements for gender pay reporting on entities with more than 250 employees.
The regulations require us to report on "relevant employees" as at 5 April 2017, so this information uses a different definition of employees, and contains a wider data set than the employee data reported on elsewhere in the Annual Report.
We have also decided to voluntarily publish our information on a Group wide basis below:
| Mean | Median | |
|---|---|---|
| Hourly Pay | 18.0% | 15.0% |
| Bonus | 3.4% | (0.4%) |
Did not receive a bonus
The charts below show our gender distribution across four evenly distributed quartiles, as prescribed by the reporting regulations:
In common with many companies our gender pay gap is driven by more male employees in senior roles within the business. We also have an impact from a traditionally higher paid print workforce which is heavily male dominated throughout all levels. Given the declining nature of this part of our business this is unlikely to change. Whilst our position is not unique within the media sector and FTSE companies, the Group is committed to addressing this issue.
We have adopted the Living Wage Foundation Rates for employees over the last four years and we are committed to addressing diversity. We have launched a Women in Trinity Mirror Group Forum which is exploring ways of increasing female participation in our organisation at all levels and have reviewed our talent acquisition processes to ensure more focus on achieving better balanced candidate pools. We have also set a target for senior positions of having no all male shortlists.
Our legally reportable entities were MGN Limited covering publishing staff mainly in Canary Wharf but also across the UK, Local World Limited employing regional publishing staff across the UK and Media Scotland Limited covering the employees of Scotland. The Local World data on bonus demonstrates how a small number of senior team members receiving a bonus in 2017 can influence the numbers, this give us encouragement that if we can address the lack of senior roles held by female employees we will be able to reduce our overall gender pay position in the future.
52% 48% 40% 60% Lowest Qtr 2 69% 76% Qtr 3 Highest Female Male
| Mean | Median | |
|---|---|---|
| Hourly Pay | 5.8% | 7.1% |
| Bonus | (19.8%) | (70.9%) |
Did not receive a bonus
The charts below show our gender distribution across four evenly distributed quartiles, as prescribed by the reporting regulations:
The charts below show our gender distribution across four evenly distributed quartiles, as prescribed by the reporting regulations:
In January 2017, the Group appointed Andy Atkinson as the Chief Revenue Officer for Trinity Mirror Solutions. Andy joined the Group in 2014 as Sales Director of Trinity Mirror Solutions, with responsibility for leading the sales teams in London and Manchester. Prior to joining Trinity Mirror, Andy was Head of Trading at Google, and has also held senior roles at IDS and Channel 5.
In July 2017, Mike Pennington was appointed as Regionals Revenue Director being promoted from his role as Regional Managing Director for the North East Region. Mike joined the Group in September 2011 as Publisher for the Hull Daily Mail, he soon became Managing Director and took on the responsibility for several more regions within the UK prior to his promotion, including Grimsby, Scunthorpe, Lincoln and Newcastle.
We would like to thank all our colleagues for their contribution to the full year performance.
Trinity Mirror's people continue to be at the heart of all we do and their achievements were recognised externally through a number of industry awards in 2017 recognising editorial, commercial and corporate achievements.
Some of the main awards won were:
There is an ongoing process for the identification, evaluation and management of the principal risks faced by the Group
Appropriate mitigating actions are in place to minimise the impact of the risks and uncertainties which are identified as part of the risk process.
The principal risks and uncertainties, the risk appetite in relation to these risks, together with progress made during the year are set out on these pages. The Strategy and Revenue Loss risks have been merged into a single Strategy risk due to our strategy being the key mitigating action we are taking to deal with the structural challenges, including revenue loss, our business continues to face meaning its successful implementation is essential.
the fall in the value of sterling.
The overall strategy or elements of the strategy are inappropriate and the delivery of the strategy is badly executed. This results in accelerated revenue loss for existing products (print advertising/ newspaper sales) and a failure to attract new revenues quickly enough.
The Group is unable to support profits and cash flows and then grow revenue, profit and cash flow.
Uncertainty created by Britain exiting the European Union. Inflationary pressures, in particular newsprint prices, following
Pension deficits grow at such a rate so as to affect the viability of the Group itself or so that the annual funding costs consume a disproportionate level of cash flow.
Low discount rates. Increased mortality. Reduced returns and investments. Higher inflation. Government legislation. Increased funding.
Damage to our reputation arising from historical events, direct financial impact from legal claims and distraction of senior management time from delivering the strategy.
Potential financial exposures. Reputational damage for the Group and brands. Inability to attract people to the Group.
continued
During the prior year the Board undertook a review of the Group's appetite for risk and how this manifests itself in the way the Group conducts business. How the Group manages risks is set out on page 38 of the Corporate Governance Report.
There continues to be macroeconomic uncertainty created by the process of Britain exiting the European Union and political uncertainty following the General Election. The Group's pension deficit continues to be impacted by the reduction in gilt and bond yields and the weakening of sterling has increased newsprint costs. Considerations in relation to the uncertainty and these immediate impacts are included in the principal risks below. Whilst the impact of the uncertainty is hard to assess there is a risk that our revenues could be lower than expectations.
Trinity Mirror has the appetite for taking well balanced risks deemed necessary to develop the business where they are in line with our strategy and do not knowingly compromise our existing brands, reputation or the financial stability of the Group. We recognise the industry-wide trends around print revenue declines and are committed to addressing them through delivery of our strategy.
We seek to ensure the successful delivery of the strategy through robust ongoing monitoring systems and processes. We will only implement changes or invest in areas which are key to the delivery of our strategy and that do not compromise our existing brands, reputation or the financial stability of the Group.
We recognise that investment decisions taken may not always have the desired outcome and aim to create a high performing environment based on openness and integrity where potential issues are identified and remedied quickly to ensure we continue to move in the right direction.
Actions: Monthly review of specific strategic initiatives at Board meetings and, at least annually, a review of the overall strategy.
Update: There has been continued investment, in digital and in new revenue streams, to drive digital growth combined with minimising the decline in print revenues and tight management of the cost base.
The key objective of the strategy remains to deliver continued growth in digital (digital growth is not yet offsetting print declines) and new revenues from existing brands and from new businesses and to protect print while at the same time seeking out new strategic opportunities.
Trinity Mirror has no appetite for taking risks which inhibit financial flexibility in achieving our strategic aims alongside meeting over time our pension obligations.
We are fully aware of the challenges faced in meeting over time our pension funding obligations and our focus is on working with Trustees to deliver these in a manner which also enables us to respond to strategic challenges for the benefit of all our stakeholders. We continue to seek opportunities to de-risk our schemes without a material increase in funding obligations.
Actions: Regular reporting to the Board. Good relationship and regular meetings with Trustees. Review of options to de-risk pension liabilities.
Update: We remain committed to addressing our historical pension deficits and continue to make significant payments to the schemes.
The Group reached agreement with the Trustees on the 2016 triennial valuations in December 2017 and additional contributions agreed in connection with the acquisition of Northern & Shell's UK publishing assets.
Trinity Mirror has no appetite for past behaviours that constitute a breach of the criminal law. We take historical legal allegations very seriously and are committed to cooperating with relevant authorities as necessary and dealing with civil claims in the appropriate manner. The Board and management continue to give management attention to the historical legal issues.
Actions: Standing item on Board agenda. Independent consultant working with external lawyers on civil claims and related investigations.
Update: We continue to deal with the historical legal issues in a professional and efficient manner, and although the final outcome of the civil claims remains uncertain, good progress has been made during the year.
continued
The Strategic Report gives a review of the progress to date and the future expectations of the strategy.
An update on pensions is set out in the Our Business section of the Strategic Report on page 8 and in note 33 in the notes to the consolidated financial statements.
An update on historical legal issues is set out in the Our Business section of the Strategic Report on page 8 and in note 38 in the notes to the consolidated financial statements.
As there remains uncertainty in relation to how matters will develop, a contingent liability has been highlighted in note 38 in the notes to the consolidated financial statements. The Board remains confident that the exposures arising from these historical events are manageable and do not undermine the delivery of the Group's strategy.
Appropriate management actions are in place to minimise the impact of the other risks and uncertainties which are identified as part of the risk process.
Environmental and health and safety risks are set out opposite in the corporate responsibility section.
In accordance with the Corporate Governance Code 2016 (and Listing Rules), the Board has prepared statements on the Company's going concern and viability. Details can be found on pages 38 and 39 of the Corporate Governance Report.
Along with the overwhelming majority of publishers in the UK, we remain committed to our membership of The Independent Press Standards Organisation (IPSO) which regulates our journalism and enforces the Editors' Code Of Practice. Pursuant to our obligations, we submit an Annual Statement to IPSO, which is published on its website. The Statement sets out our record on editorial compliance during the previous year (including details of complaints upheld against us), our protocols for maintaining editorial standards, our complaints handling process and our training programmes for journalists.
Together with the majority of the UK Publishers we are very concerned about the future of press freedom and the costs that could be incurred by the Group should Section 40 of the Crime and Courts Act 2013 (Section 40) be activated by the Government. To this end, we advocated strongly for the repeal of Section 40 in our response to The Department Of Culture Media and Sport's Consultation on this issue, and the Government stated in the year it was committed to repealing Section 40.
The Company believes it has a minimal exposure to the risks contained within the human rights framework. In accordance with the Modern Slavery Act 2015 ('the Act') the Company has an Anti-Slavery Policy which is available to all staff, individuals and entities who perform services for or on behalf of the Group that details our zero-tolerance approach to slavery, child labour, bribery and corruption. The Anti-Slavery Policy details the signs that indicate slavery, servitude, forced or compulsory labour and human trafficking applicable to adults and children, the responsibilities of staff to look out for indications of modern slavery and how to report any suspicions. The Group evaluates new suppliers, via questionnaires and surveys, ensuring they are ethical and lawful. On the introduction of the Act, existing suppliers were contacted regarding their obligations under the Act and the Group's Terms and Conditions and Procurement Policy were updated in line with the new provisions.
The key risks associated with non-compliance of the Anti-Slavery Policy arise from failure of employees to comply with the policy and procedures instigated by the Group, and failure of controls when onboarding suppliers or during recruitment processes, including suppliers who complete questionnaires untruthfully.
Further details on transparency in supply chains can be found on page 63 of the Corporate Responsibility Report and the Company's Modern Slavery Statement can be found on our website www.trinitymirror.com.
The Company takes a zero-tolerance approach to bribery and corruption and is committed to implementing and enforcing effective systems to counter bribery and corruption in all forms. The Company has an embedded Anti-Bribery and Payments Policy, which is applicable to all staff across the Group that requires all suppliers, contractors and business partners to comply with the underlying principles of the policy. In relation to all new business relationships, the Group makes relevant enquiries to establish the third parties approach to compliance and corruption risks, including requesting and reviewing their existing anti-bribery policy and whether or not any bribery or corruption has previously taken place.
The Company supports equal opportunities and has in place policies that safeguard the wellbeing and welfare of all employees.
The Company does not restrict the freedom of expression of its journalists and size or influence does not inhibit diverse opinions in the Group's news reporting. We have a responsibility to ensure balanced news reporting and we are not unduly influenced by the Government or other organisations.
The Company believes all employees and the public have a right to privacy and aims to protect people against arbitrary, unreasonable or unlawful interference with their privacy, family, home or correspondence, as well as unlawful attacks on their honour and reputation.
continued
We have implemented Dignity at Work and Code of Conduct policies across the Group which strictly prohibits discrimination in the workplace. Within the UK, discrimination against employees with protected characteristics such as gender, race, disability, sexuality, religion or age is illegal and the Group is exposed to risks during all stages of the employment life cycle. We reduce potential exposure through communicating our policies to all employees, promoting awareness during recruitment, training managers and making policies accessible to all via our staff self-service platform. We also provide a confidential whistleblowing line and an employee assistance programme through which employees can confidentially report any breaches and seek advice.
We protect the human rights of our employees through ensuring all employees are issued with clear contracts of employment, that working hours as standard are set well within the working time directive maximum thresholds and committing that no employee will be forced to opt out of working time regulations. Our employees are paid for work undertaken and receive holidays and rest periods in line with regulations. We monitor employee's holiday usage to ensure they take statutory entitlements and reduce the risk of breaches of regulations by publishing employee entitlements. Under our contracts all our employees are paid above national minimum wage thresholds and no one is subject to forced labour. The Group does not have any zero hour contracts.
Our Disciplinary and Grievance processes ensure all employees have the right to be heard and a fair hearing in line with Human Rights Principles. The Group may be exposed to risks under employment regulations and data protection regulations were it to breach human rights principles in relation to privacy. The Group monitors employee's usage of emails, internet and phone systems but the Group minimises its risk through its data protection and security policies and control systems. Furthermore employees are informed of the potential for monitoring within their contracts of employment.
The Group's operations are predominantly in the UK and comprise light manufacturing, office based activities and business travel, and therefore environmental risks are relatively low.
The Group is exposed to the risk of failure by employees to comply with its environmental or health and safety policies. It is unlikely that a failure in these areas would be catastrophic.
Under our Environmental Policy we are committed to ensuring that our activities do not create pollution or otherwise damage the environment. The policy sets out our specific commitments in relation to the main areas where we have the potential to cause environmental impacts, such as paper sourcing, sustainable forestry and recycling, energy consumption and greenhouse gases, volatile organic compound emissions from print works, waste management and recycling and the purchase of contracted printing and product distribution services.
We systematically monitor the environmental legal requirements and other compliance obligations that apply to our business, including industry codes of practice. We take action to ensure that all parts of the Group remain compliant with the relevant obligations identified.
The policy has been adopted by the Board, who ensure that it is progressively implemented through a programme of annual targets and action plans. Progress against policy commitments is regularly audited, analysed and reported to ensure that our environmental management system arrangements continually improve and our environmental performance is enhanced.
In order to interact with the surrounding community, and promote the Group socially, we make direct cash donations to charities connected with or associated with the newspaper, printing or advertising industries, and to charities operating in the communities immediately surrounding the Group's offices and print sites. The charities that are likely to receive support are smaller community based charities where a modest donation will make a big impact. We take steps to ensure the charities receiving a donation are registered with The Charity Commission and that the funds are allocated appropriately, to reduce the risk of fraudulently claimed donations.
The Group's main exposure in the corporate responsibility area is one of reputational damage which is fundamental to its operations and is dependent upon the honesty and integrity of each and every employee. We acknowledge that the continuing development and well being of our employees depends upon maintaining the highest standards of integrity and personal conduct in all matters which involve the Group.
The procedure that the Group employs to control and manage these risks is through a regular review of its standards and systems and through training of relevant employees and managers. The Group's Standards of Business Conduct are embedded within the culture of the Group.
The Group has a whistleblowing charter in place where employees may report any concerns about the integrity of the business. This is hosted by an independent third party. The charter is reviewed by the Audit & Risk Committee on a regular basis.
Our Corporate Responsibility Report, on pages 61 to 66, sets out the Group's:
The Group is a UK tax payer and complies with all UK taxation requirements. The Group paid corporation tax of £13.9 million (2016: £12.2 million) and paid indirect employment taxes (employer and employee NI and employee PAYE) of £65.0 million (2016: £70.5 million) during the year.
The Group's main opportunity in the corporate responsibility area is also reputational. We believe that there are advantages to being seen as the employer of choice for those entering our industry, that decision having been made on an assessment, amongst many other things, of our corporate social responsibility programmes. Those programmes will also be key in the retention of staff. We believe that there are obvious commercial advantages from being seen as a socially responsible organisation.
| Statutory results | Adjusted results | ||||
|---|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
||
| Publishing | 578.5 | 660.0 | 578.5 | 660.0 | |
| 494.6 | 581.0 | 494.6 | 581.0 | ||
| Digital | 83.9 | 79.0 | 83.9 | 79.0 | |
| Printing | 31.6 | 36.2 | 31.6 | 36.2 | |
| Specialist Digital | 9.6 | 12.9 | 9.6 | 12.9 | |
| Central | 3.5 | 3.9 | 3.5 | 3.9 | |
| Revenue | 623.2 | 713.0 | 623.2 | 713.0 | |
| Costs | (525.7) | (620.2) | (499.3) | (576.6) | |
| Associates | 0.4 | 0.7 | 0.8 | 1.1 | |
| Operating profit | 97.9 | 93.5 | 124.7 | 137.5 | |
| Financing | (16.0) | (17.0) | (2.2) | (4.3) | |
| Profit before tax | 81.9 | 76.5 | 122.5 | 133.2 | |
| Tax | (19.1) | (7.0) | (24.0) | (27.0) | |
| Profit after tax | 62.8 | 69.5 | 98.5 | 106.2 | |
| Earnings per share | 23.0p | 24.9p | 36.1p | 38.1p |
The results have been prepared for the 52 weeks ended 31 December 2017 (2017) and the comparative period has been prepared for the 53 weeks ended 1 January 2017 (2016). The results are presented on a statutory and adjusted basis and revenue trends are presented on a statutory and like for like basis. Note 36 and note 37 in the notes to the consolidated financial statements respectively sets out the reconciliation between the statutory and adjusted results and the reconciliation between the statutory and like for like revenue.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Publishing Print | 494.6 | 581.0 |
| Circulation | 284.7 | 310.6 |
| Advertising | 177.6 | 236.6 |
| Other | 32.3 | 33.8 |
| Publishing Digital | 83.9 | 79.0 |
| Display and transactional | 68.7 | 58.4 |
| Classified | 15.2 | 20.6 |
| Printing | 31.6 | 36.2 |
| Specialist Digital | 9.6 | 12.9 |
| Central | 3.5 | 3.9 |
| Revenue | 623.2 | 713.0 |
Group revenue fell by 12.6% or £89.8 million to £623.2 million. The fall in revenue includes the impact of an additional week of trading in 2016, the cessation of the Independent print and distribution contract in April 2016, the sale of Rippleffect in August 2016 and the impact of handing back four Metros to DMGT in December 2016 and other portfolio changes in 2016 and 2017. On a like for like basis, Group revenue fell by 8.8% or £60.2 million.
Further details on the revenue trends for each division are shown in the Divisional Review.
continued
The graphs that follow show the quarterly year on year like for like revenue trends in print and digital during the year. Print revenue is all advertising, circulation, printing and other revenues generated from activities linked to the publishing and printing of newspapers. Digital revenue is all advertising and other revenue generated by the publishing digital activities and the revenue of the Specialist Digital businesses.
The graph above for print revenue trends has been prepared on a quarterly basis to highlight the overall volatility experienced in the year.
Total digital revenues showed growth during the year. Publishing digital revenues grew all year driven by the strong growth in digital display and transactional revenue as our strategy of building audience continued to deliver despite reductions in digital classified revenues.
| Statutory results | Adjusted results | ||||
|---|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
||
| Labour | (217.6) | (239.4) | (217.6) | (239.4) | |
| Newsprint | (56.5) | (67.4) | (56.5) | (67.4) | |
| Depreciation | (20.4) | (22.2) | (20.4) | (22.2) | |
| Other | (231.2) | (291.2) | (204.8) | (247.6) | |
| Operating adjusted items | (26.4) | (43.6) | – | – | |
| Other | (204.8) | (247.6) | (204.8) | (247.6) | |
| Costs | (525.7) | (620.2) | (499.3) | (576.6) |
continued
Statutory operating costs fell by £94.5 million or 15.2% to £525.7 million reflecting reduced adjusted operating costs and the benefit of a lower charge in respect of adjusted items compared to 2016 which together more than mitigated the challenging revenue environment.
Adjusted items included in 2017 operating costs related to restructuring charges in respect of cost reduction measures of £12.6 million (2016: £15.1 million), a £10.5 million increase in the provision for dealing with and resolving civil claims arising from phone hacking (2016: £11.5 million), pension administrative expenses of £1.0 million (2016: £2.2 million), amortisation of intangible assets of £0.3 million (2016: £0.3 million) and transaction costs relating to the acquisition of Northern & Shell's publishing assets of £2.2 million (2016: nil) partially offset by a gain on the sale of a property in Teesside of £0.2 million (2016: £0.2 million gain on sale of properties in Cardiff and Coventry). In 2016, adjusted items included in operating costs also included a £2.0 million charge against the carrying value of goodwill in our Specialist Digital division, a break fee of £2.0 million paid to Iliffe Print Cambridge Limited and £10.7 million of costs associated with closure of the printing site in Cardiff and a press line in Scotland (Cardonald) including the write off of fixed assets of £9.1 million.
Adjusted operating costs fell by £77.3 million or 13.4% to £499.3 million reflecting the benefit of the impact of an additional week of trading in 2016, the cessation of the Independent print and distribution contract in April 2016, the sale of Rippleffect in August 2016 and the impact of handing back four Metros to DMGT in December 2016 and other portfolio changes in 2016 and 2017 together with the benefit of structural cost savings and ongoing cost mitigation.
The Group has a 21.53% investment in PA Group Limited and a 50% investment in Brand Events TM Limited, accounted for as associated undertakings.
| Statutory results | Adjusted results | ||||
|---|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
||
| Result before operating adjusted items | 0.8 | 1.1 | 0.8 | 1.1 | |
| Operating adjusted items | (0.4) | (0.4) | – | – | |
| Share of results of associates | 0.4 | 0.7 | 0.8 | 1.1 |
The statutory and adjusted result for associates both fell by £0.3 million due to investment costs in Brand Events.
Operating profit (note 6)
| Statutory results | Adjusted results | ||||
|---|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
||
| Operating profit pre associates | 97.5 | 92.8 | 123.9 | 136.4 | |
| Associates | 0.4 | 0.7 | 0.8 | 1.1 | |
| Operating profit | 97.9 | 93.5 | 124.7 | 137.5 |
Statutory operating profit pre associates increased by £4.7 million or 5.1% to £97.5 million while adjusted operating profit pre associates fell by £12.5 million or 9.2% to £123.9 million.
Statutory operating profit increased by £4.4 million or 4.7% to £97.9 million while adjusted operating profit fell by £12.8 million or 9.3% to £124.7 million.
Statutory operating margin increased by 2.6 percentage points from 13.1% to 15.7% while adjusted operating margin increased by 0.7 percentage points from 19.3% to 20.0%.
continued
Financing costs include investment revenues, the pension finance charge, interest on bank overdrafts and borrowings, the change in derivative financial instruments and the changes on retranslation of foreign currency borrowings.
| Statutory results | Adjusted results | |||
|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
|
| Investment revenues | 0.1 | 0.6 | 0.1 | 0.6 |
| Pension finance charge | (11.9) | (10.4) | – | – |
| Finance costs | (4.2) | (7.2) | (2.3) | (4.9) |
| Interest on bank overdrafts and borrowings | (2.3) | (4.9) | (2.3) | (4.9) |
| Fair value (loss)/gain on derivative financial instruments | (3.8) | 11.3 | – | – |
| Foreign exchange gain/(loss) on retranslation of borrowings | 1.9 | (13.6) | – | – |
| Financing costs | (16.0) | (17.0) | (2.2) | (4.3) |
Statutory financing costs fell by £1.0 million to £16.0 million reflecting a fall in adjusted financing costs and a lower cost in relation to the derivative financial instruments and the foreign exchange changes on retranslation of foreign currency borrowings partially offset by a higher pension finance charge. In June 2017, the Group fully repaid the outstanding £68.3 million on the private placement loan notes and the associated cross-currency interest rate swaps matured. The Group's only outstanding borrowings are the drawings on the bank facility and the Group has no derivative financial instruments. Adjusted financing costs fell by £2.1 million to £2.2 million reflecting the benefit of the repayment of borrowings in 2017 and 2016.
| Statutory results | Adjusted results | |||
|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
|
| Profit before tax | 81.9 | 76.5 | 122.5 | 133.2 |
Statutory profit before tax increased by £5.4 million or 7.1% to £81.9 million whilst adjusted profit before tax decreased by £10.7 million or 8.0% to £122.5 million.
| Statutory results | Adjusted results | |||
|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
|
| Tax charge | (19.1) | (7.0) | (24.0) | (27.0) |
| Effective tax rate | (23.3%) | (9.2%) | (19.6%) | (20.3%) |
The statutory tax charge of £19.1 million (2016: £7.0 million) comprises a current tax charge of £17.8 million (2016: £19.2 million) and a deferred tax charge of £1.3 million (2016: £12.2 million credit).
The statutory effective tax rate is higher (2016: lower) than the standard rate of corporation tax for the reasons set out in the reconciliation below:
| Reconciliation of tax charge | 2017 % |
2016 % |
|---|---|---|
| Standard rate of corporation tax | (19.3) | (20.0) |
| Items not deductible in determining taxable profit (non-qualifying depreciation/costs) | (3.6) | (5.4) |
| Tax effect of items that are not taxable in determining taxable profit (property disposal/utilised losses) | – | 1.1 |
| Prior period adjustment (current and deferred tax) | (0.5) | 2.3 |
| Deferred tax rate change (from future reduction in corporation tax rate) | – | 12.6 |
| Tax effect of share of results of associates (brought in post-tax) | 0.1 | 0.2 |
| Tax charge rate | (23.3) | (9.2) |
The adjusted tax charge of £24.0 million (2016: £27.0 million) represents 19.6% (2016: 20.3%) of adjusted profit before tax. The rate is less than the statutory effective tax rate as the main items not deductible in determining taxable profit relate to certain adjusted items. In 2016, the rate was higher than the statutory effective tax rate due to the impact of the rate change.
The Board proposes a final dividend for 2017 of 3.55 pence per share. An interim dividend for 2017 of 2.25 pence per share was paid on 29 September 2017 bringing the total dividend in respect of 2017 to 5.80 pence per share. The 2017 final dividend payment is expected to amount to £10.5 million. The 2017 interim dividend payment amounted to £6.1 million.
On 4 May 2017 the final dividend proposed for 2016 of 3.35 pence per share was approved by shareholders at the Annual General Meeting and was paid on 9 June 2017. The 2016 final dividend payment amounted to £9.2 million.
continued
| Statutory results | Adjusted results | |||
|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
|
| Profit after tax | 62.8 | 69.5 | 98.5 | 106.2 |
| Weighted average number of shares (000s) | 272,730 | 278,895 | 272,730 | 278,895 |
| Earnings per share | 23.0p | 24.9p | 36.1p | 38.1p |
Statutory profit after tax fell by £6.7 million or 9.6% to £62.8 million while adjusted profit after tax fell by £7.7 million or 7.3% to £98.5 million. The fall in the weighted average number of shares year on year reflects the shares bought back as part of the share buyback programme. Statutory earnings per share fell by 1.9 pence or 7.6% to 23.0 pence reflecting the increased statutory tax charge more than offsetting the benefit of the share buyback. Adjusted earnings per share fell by 2.0 pence or 5.2% to 36.1 pence reflecting the impact of the falling revenues partially offset by tight cost management.
Cash flow (page 78)
| 2017 £m |
2016 £m |
|
|---|---|---|
| Adjusted operating profit | 124.7 | 137.5 |
| Depreciation | 20.4 | 22.2 |
| Adjusted EBITDA | 145.1 | 159.7 |
| Restructuring charges in respect of cost reduction measures | (13.6) | (15.4) |
| Historical legal issues | (17.9) | (29.7) |
| Pension deficit funding | (38.7) | (40.7) |
| Other including other working capital items | (6.8) | 17.6 |
| Cash generated from operations | 68.1 | 91.5 |
| Income tax paid | (13.9) | (12.2) |
| Net interest paid | (2.0) | (5.3) |
| Capital expenditure | (8.9) | (4.3) |
| Property disposals | 1.2 | 10.6 |
| Acquisition of associate undertaking | – | (0.8) |
| Disposal of subsidiary undertaking | – | 1.8 |
| Purchase of own shares | (7.7) | (2.3) |
| Purchase of shares for LTIP | – | (2.0) |
| Dividends paid | (15.3) | (14.6) |
| Net cash flow | 21.5 | 62.4 |
| Borrowings repaid | (68.3) | (80.0) |
| Draw down on bank facility | 25.0 | – |
| Net decrease in cash | (21.8) | (17.6) |
| Cash at start of period | 37.8 | 55.4 |
| Cash at end of period | 16.0 | 37.8 |
Other including other working capital items represent: working capital movements, the share of results of associates, the share-based payments charge, the write-off of fixed assets and the pension administrative expenses.
Income tax paid increased due to an increase in taxable income partially offset by a fall in the standard rate of corporation tax. Net interest paid comprised £2.1 million (2016: £4.8 million) interest paid on borrowings less £0.1 million (2016: £0.6 million) interest received. In 2016 £1.1 million was paid in refinancing fees.
Capital expenditure was £8.9 million (2016: £4.3 million) against depreciation of £20.4 million (2016: £22.2 million). Proceeds of £1.2 million (2016: £10.6 million) were received from the disposal of properties.
In 2016, the Group acquired a 50% interest in Brand Events TM Limited for £0.8 million and the Group disposed of its subsidiary undertaking, Rippleffect Limited, for net proceeds of £1.8 million.
The Group acquired 7.5 million shares for a consideration of £7.7 million (2016: 2.5 million shares for a consideration of £2.3 million) under the share buyback programme.
In 2016, the Group paid £2.0 million to the Trustees of the Group LTIP to enable the Trust to acquire 1.6 million shares. Dividend payments totalling £15.3 million (2016: £14.6 million) were paid to shareholders. The final dividend payment amounted to £9.2 million (2016: £8.8 million) and the interim dividend payment amounted to £6.1 million (2016: £5.6 million). Cash balances fell by £21.8 million during the year to £16.0 million following the repayment of borrowings.
continued
| 2017 £m |
2016 £m |
|
|---|---|---|
| Intangible assets | 901.2 | 901.5 |
| Property, plant and equipment | 247.7 | 262.1 |
| Investment in associates | 16.8 | 21.8 |
| Deferred tax assets | 66.4 | 81.5 |
| Non-current assets | 1,232.1 | 1,266.9 |
| Cash and cash equivalents | 16.0 | 37.8 |
| Short-term debt | (25.0) | (81.2) |
| Retirement benefit obligation | (377.6) | (466.0) |
| Deferred tax liabilities | (165.4) | (164.1) |
| Provisions | (20.3) | (31.5) |
| Net current other assets | 7.0 | 17.5 |
| Non-current liabilities and net current liabilities | (565.3) | (687.5) |
| Net assets | 666.8 | 579.4 |
| Share capital | (28.3) | (28.3) |
| Share premium account | (606.7) | (606.7) |
Merger reserve (37.9) (37.9)
| Intangible assets | 901.2 | 901.5 |
|---|---|---|
| Customer relationships and domain names | 0.3 | 0.6 |
| Publishing rights and titles | 798.9 | 798.9 |
| Goodwill | 102.0 | 102.0 |
| 2017 £m |
2016 £m |
Goodwill and publishing rights and titles remain unchanged.
Customer relationships and domain names have fallen by £0.3 million reflecting amortisation charged in the year.
The impairment review at the reporting date concluded that no impairment was required in respect of the intangible assets.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Land and buildings | 146.9 | 152.4 |
| Plant and equipment | 90.3 | 105.7 |
| Assets under construction | 10.5 | 4.0 |
| Property, plant and equipment | 247.7 | 262.1 |
The net book value of property, plant and equipment fell by £14.4 million to £247.7 million during the year. This relates to the depreciation charge of £20.4 million, asset write-offs of £1.9 million and asset disposal of £1.0 million partially offset by additions of £8.9 million.
continued
Investment in associates represents our 21.53% investment in PA Group Limited and 50% interest in Brand Events TM Limited.
The carrying value of our share in PA Group Limited fell by £4.8 million being the statutory share of results of the associate included in the consolidated income statement of £0.6 million less our share of losses of the associate included in the consolidated statement of comprehensive income of £5.4 million. In 2016, the investment in Brand Events TM Limited was £0.8 million. The carrying value of our share in Brand Events TM Limited fell by £0.2 million being the statutory share of results of the associate included in the consolidated income statement.
Deferred tax assets fell by £15.1 million from £81.5 million to £66.4 million due to the fall in the accounting pension deficit.
Deferred tax liabilities increased by £1.3 million from £164.1 million to £165.4 million due to the changes in short term timing differences.
There were no derivative financial instruments at the year end following the maturity of the cross-currency interest rate swap in June 2017.
The Group operates defined contribution pension schemes with contributions and associated costs charged to operating profit.
The defined benefit pension schemes operated by the Group were closed to future accrual in 2010.
The valuations of the defined benefit pension schemes as at 31 December 2016 were agreed in December 2017 whereby deficit funding contributions were agreed at £43.8 million per annum for 2018 to 2027. Additional contributions of £67.0 million over ten years were agreed in connection with the acquisition of Northern & Shell's publishing assets.
Payments in 2017 to the defined benefit pension schemes were £38.7 million (2016: £40.7 million) comprising £36.2 million of deficit funding and, alongside the share buyback programme, the Group paid to the defined benefit pension schemes an additional £2.5 million in April 2017 (2016: £35.7 million of deficit funding and, alongside the share buyback programme, the Group paid to the defined benefit pension schemes an additional £5.0 million in August 2016).
The accounting pension deficit fell by £88.4 million to £377.6 million (£311.4 million net of deferred tax) driven by strong asset returns and the benefit of a fall in future mortality improvements more than offsetting a further reduction in the discount rate. The fall in the accounting pension deficit does not have an immediate impact on the agreed funding commitments.
The Group maintains financial flexibility with net debt falling by £21.5 million to £9.0 million and adjusted EBITDA of £145.1 million. During the year, the Group repaid the final £68.3 million of the private placement loan notes in June 2017 and at year end there was a drawing of £25 million on the £100 million bank facility. The bank facility is committed until 2021 and the facility amortises over the term reducing to £50 million for the last year of the term. Following the repayment of the private placement loan notes net debt is the same on both a contracted and statutory basis.
Net debt of £9.0 million at the period end comprised the £25.0 million drawn on the bank facility and cash balances of £16.0 million.
Provisions fell by £11.2 million from £31.5 million to £20.3 million driven by the payments made in respect of dealing with and resolving civil claims arising from phone hacking and other provisions, partially offset by a £10.5 million increase in the provision for dealing with the historical legal issues.
Net current other assets include current assets excluding cash and cash equivalents, less trade and other payables and current tax liabilities. The decrease is driven by the timing of payments at the year end.
Equity at the year end was £666.8 million, an increase of £87.4 million from £579.4 million. This increase reflects the £47.1 million of other comprehensive income for the year, the profit for the year of £62.8 million and a credit to equity for equity-settled share-based payments of £0.5 million partially offset by dividends paid of £15.3 million and £7.7 million of spend in relation to the share buyback.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Called-up share capital | 28.3 | 28.3 |
| Share premium account | 606.7 | 606.7 |
| Merger reserve | 37.9 | 37.9 |
| Capital redemption reserve | 4.4 | 4.4 |
| Profit and loss account | 111.9 | 94.0 |
| Equity shareholders' funds | 789.2 | 771.3 |
The increase in profit and loss account reserves is due to management charges and dividends received from subsidiaries exceeding operating costs, interest and dividends paid to shareholders.
The Group has four operating segments, each of which is a division, that are regularly reviewed for the purposes of allocating resources and assessing performance. The divisional review that follows is presented on an adjusted basis and there is no difference between the operating profit by division and the segment result of each operating segment that is shown in note 4.
The operating segments are: Publishing which includes all of our newspapers and associated digital publishing; Printing which provides printing services to the Publishing segment and to third parties; Specialist Digital which includes our acquired digital classified recruitment and digital marketing services businesses; and Central which includes revenue and costs not allocated to the operational divisions and our share of results of associates.
The revenue and adjusted operating profit by operating segment is presented below:
| 2017 £m |
2016 £m |
Variance £m |
Variance % |
|
|---|---|---|---|---|
| Publishing | 578.5 | 660.0 | (81.5) | (12.3%) |
| Printing | 31.6 | 36.2 | (4.6) | (12.7%) |
| Specialist Digital | 9.6 | 12.9 | (3.3) | (25.6%) |
| Central | 3.5 | 3.9 | (0.4) | (10.3%) |
| Revenue | 623.2 | 713.0 | (89.8) | (12.6%) |
| Publishing | 133.2 | 148.4 | (15.2) | (10.2%) |
| Printing | – | – | – | – |
| Specialist Digital | 2.7 | 2.4 | 0.3 | 12.5% |
| Central | (11.2) | (13.3) | 2.1 | 15.8% |
| Adjusted operating profit | 124.7 | 137.5 | (12.8) | (9.3%) |
Revenue trends are impacted by a number of items in 2016 and 2017. In the divisional analysis revenue trends are presented on actual and a like for like basis. Operating profit is only marginally impacted by the like for like items.
The like for like revenue trends for 2017 exclude from 2017 the portfolio changes made in the year and excludes from the 2016 comparative: the extra week of trading in 2016, the Independent print and distribution contract which ceased in April 2016, Rippleffect which was sold in August 2016, the four Metros handed back to DMGT in December 2016 and other portfolio changes in 2016 and 2017. Note 37 in the notes to the consolidated financial statements sets out the reconciliation between the statutory and like for like revenue.
Publishing The Publishing division publishes paid-for national newspapers and paid-for and free regional newspapers and operates a portfolio of related digital products. Key brands include the Daily Mirror, the Sunday Mirror, the Sunday People, the Daily Record, the Sunday Mail and daily titles in a number of metropolitan cities. Following the handing back of two Metros at the end of 2017 and four at the end of 2016, we now publish two Metros. The Publishing division also holds events and exhibitions related to its publishing activities and undertakes contract publishing for football clubs and other sports organisations.
The revenue and adjusted operating profit for the Publishing division is as follows:
| 2017 £m |
2016 £m |
Variance £m |
Variance % |
|
|---|---|---|---|---|
| 494.6 | 581.0 | (86.4) | (14.9%) | |
| Circulation | 284.7 | 310.6 | (25.9) | (8.3%) |
| Advertising | 177.6 | 236.6 | (59.0) | (24.9%) |
| Other | 32.3 | 33.8 | (1.5) | (4.4%) |
| Digital | 83.9 | 79.0 | 4.9 | 6.2% |
| Display and transactional | 68.7 | 58.4 | 10.3 | 17.6% |
| Classified | 15.2 | 20.6 | (5.4) | (26.2%) |
| Revenue | 578.5 | 660.0 | (81.5) | (12.3%) |
| Costs | (445.3) | (511.6) | 66.3 | 13.0% |
| Adjusted operating profit | 133.2 | 148.4 | (15.2) | (10.2%) |
| Adjusted operating margin | 23.0% | 22.5% | 0.5% | n/a |
Revenue fell by 12.3% or £81.5 million to £578.5 million with print revenue falling by 14.9% and digital revenue growing by 6.2%. On a like for like basis revenue fell by 9.0% with print revenue declining by 11.3% and digital revenue growing by 7.0%.
Costs fell by 13.0% or £66.3 million to £445.3 million. This includes the benefit of the impact of an additional week of trading in 2016, the cessation of the Independent distribution contract in April 2016 and the impact of handing back four Metros to DMGT in December 2016 and other portfolio changes in 2016 and 2017 together with the benefit of structural cost savings and ongoing cost mitigation actions.
Operating profit fell by £15.2 million or 10.2% to £133.2 million with operating margin increasing by 0.5 percentage points from 22.5% to 23.0%.
continued
Print revenue fell by 14.9%. On a like for like basis print revenue fell by 11.3%.
Circulation revenue fell by 8.3%. On a like for like basis circulation revenues fell by 6.5% with volume declines partially mitigated by cover price increases. The circulation revenue decline has also been impacted by a change to how Spanish sales are made. In July 2017, these changed from a net sales basis to a royalty basis. This reduced circulation revenue by £1.1 million with a greater reduction achieved in costs. The circulation volume trends in the market have been impacted by cover price differentials, cover price discounting and increased sampling.
Excluding the impact of sampling, the Daily Mirror volume fell by 12.9% compared to a 9.7% fall for the UK national daily tabloid market and the Daily Record fell by 10.8% against an overall Scottish daily tabloid market decline of 10.0%.
The Sunday Mirror and Sunday People volumes declined by 16.4% and 17.2% respectively in a UK national Sunday tabloid market that fell by 11.5% and the Sunday Mail declined by 13.3% against an overall Scottish Sunday tabloid market decline of 11.1%.
The average monthly circulation volumes of our national newspapers were as follows:
| 2017 Volume actuala 000 |
2016 Volume actuala 000 |
Change % |
|
|---|---|---|---|
| Daily Mirror | 633 | 727 | (12.9%) |
| Sunday Mirror | 545 | 652 | (16.4%) |
| Sunday People | 217 | 262 | (17.2%) |
| Daily Recordb | 141 | 158 | (10.8%) |
| Sunday Mailb | 148 | 171 | (13.3%) |
a Average ABC circulation excluding sampling for the 12 months to December 2017 and December 2016.
b Within Scottish market only.
The market for our regional titles remained challenging with declines of 12.9% for paid for dailies, 14.7% for paid for weeklies and 14.6% for paid for Sundays.
The circulation volumes for our key regional titles are set out below:
| 2017 Daily circulationa |
2016 Daily circulationa |
Change % |
|
|---|---|---|---|
| Manchester Evening News< | 39,422 | 47,052 | (16.2%) |
| Liverpool Echo | 38,474 | 44,427 | (13.4%) |
| Hull Daily Mail | 23,456 | 27,054 | (13.3%) |
| The Sentinel (Stoke) | 23,249 | 26,657 | (12.8%) |
| Leicester Mercury | 22,794 | 25,859 | (11.9%) |
| Evening Chronicle (Newcastle) | 22,401 | 26,811 | (16.4%) |
| Derby Telegraph | 18,106 | 18,903 | (4.2%) |
| South Wales Evening Post | 18,029 | 21,031 | (14.3%) |
| Evening Gazette (Teesside) | 17,557 | 21,174 | (17.1%) |
| Birmingham Mail | 16,626 | 19,200 | (13.4%) |
a Actual average ABC July to December 2017 and July to December 2016.
< Daily circulation (Monday – Saturday).
Print advertising revenue fell by 24.9% with display and other down by 23.6% and classified down by 26.2%. Like for like print advertising revenues fell by 19.3% with display and other down 14.8% and classified down 23.5%. Increased challenges in print advertising markets saw declines in display advertising across a number of sectors. The year on year trends have also been adversely impact by the strong advertising performance during June 2016 from the European Football Championship and in December from a stronger finish to 2016 than experienced in 2017. Most classified advertising categories also came under pressure, in particular recruitment and property, which experienced like for like declines of 38.4% and 33.1% respectively.
The Daily Mirror print advertising volume market share in the UK national daily tabloid market fell from 17.4% to 16.2%. The Sunday Mirror share fell from 16.2% to 14.8% and the Sunday People share fell from 10.9% to 10.0%. The Daily Record share improved from 16.8% to 19.5% and the Sunday Mail share fell from 30.5% to 28.4%. Our regional titles continue to experience difficult advertising markets, particularly display advertising in our metropolitan titles and classified across all titles.
Other print revenue fell by 4.4%. Like for like other revenues fell by 1.8% with declines in rental income and business enterprise revenue offset by improvements in Sport Media and syndication.
continued
Digital revenue grew by 6.2% with display and transactional revenue growing by 17.6% and classified revenue declining by 26.2%. Like for like digital revenue grew by 7.0% with strong growth from display and transactional revenue of 18.2% driven by an increase in audience, engagement, video and digital marketing services partly offset by classified revenue, which is predominantly upsold from print, which declined by 25.1%, primarily due to recruitment which fell by 35.8%.
Digital audience growth continues with average monthly page views in the period growing by 7% year on year to 682 million. Mobile page views were some two thirds of the page views and grew by 19% while desktop pages views fell by 15%. Three quarters of page views were UK page views which grew by 11% while non UK page views fell by 3%. Page view growth rates have been impacted by the removal of Streamo and Live Event page views as this functionality reduced the viewability of ads served due to the speed at which the pages were viewed by users. It is estimated to have impacted the reported growth in page views by over 8%.
Unique users and page views for our key websites are set out below:
| 2017 Unique users^ |
2016 Unique users^ |
Change % |
2017 Page views^ |
2016 Page views^ |
Change % |
|
|---|---|---|---|---|---|---|
| Mirror | 77,920,749 81,519,558 | (4%) 257,566,822 | 270,624,317 | (5%) | ||
| Daily Record | 7,644,841 | 7,070,632 | 8% | 35,547,017 | 32,867,748 | 8% |
| Irish Mirror | 3,891,933 | 3,749,741 | 4% | 14,047,666 | 12,946,179 | 9% |
| Belfast Live | 1,517,542 | 1,155,933 | 31% | 6,656,072 | 4,009,305 | 66% |
| Glasgow Live | 1,405,505 | 583,892 | 141% | 4,212,541 | 1,341,664 | 214% |
| Dublin Live | 1,121,241 | 459,069 | 144% | 2,938,774 | 1,023,788 | 187% |
| Manchester Evening News | 13,094,312 10,944,551 | 20% | 56,475,425 | 51,371,323 | 10% | |
| Liverpool Echo | 8,698,971 | 7,586,169 | 15% | 50,670,719 | 46,674,863 | 9% |
| Birmingham Mail | 6,774,668 | 3,929,981 | 72% | 24,378,190 | 17,295,036 | 41% |
| Wales Online | 6,320,730 | 5,580,814 | 13% | 27,015,986 | 22,894,042 | 18% |
| Chronicle Live | 4,103,304 | 3,421,030 | 20% | 20,843,972 | 19,839,461 | 5% |
| Bristol Post | 2,281,349 | 1,967,026 | 16% | 10,041,308 | 7,605,952 | 32% |
| Hull Daily Mail | 1,908,183 | 1,650,754 | 16% | 12,905,462 | 10,702,514 | 21% |
| Nottingham Post | 1,861,790 | 1,516,432 | 23% | 9,452,269 | 7,453,411 | 27% |
| Gazette Live | 1,673,056 | 1,522,545 | 10% | 9,922,852 | 9,863,435 | 1% |
| Plymouth Herald | 1,592,796 | 1,466,725 | 9% | 8,225,599 | 6,976,261 | 18% |
| Leicester Mercury | 1,547,848 | 1,344,274 | 15% | 7,811,365 | 6,729,085 | 16% |
| Derby Telegraph | 1,416,796 | 1,132,363 | 25% | 7,882,746 | 6,491,121 | 21% |
| Stoke Sentinel | 1,400,974 | 1,270,071 | 10% | 8,306,078 | 7,133,904 | 16% |
^ Omniture average monthly January to December 2017 verses January to December 2016. Page views excluding galleries.
The Printing division provides printing services to the Publishing division and to third parties. The division is the largest UK provider of newspaper contract printing services to third parties. The Publishing division accounts for the majority of the volumes for the Printing division with the balance being for third-party customers. The Printing division has a nil operating result as the net costs, being all external revenues less costs, are charged to the Publishing division.
The revenue and adjusted costs of the Printing division is as follows:
| 2017 £m |
2016 £m |
Variance £m |
Variance % |
|
|---|---|---|---|---|
| Contract printing | 21.3 | 25.4 | (4.1) | (16.1%) |
| Newsprint supply | 7.6 | 8.5 | (0.9) | (10.6%) |
| Other revenue | 2.7 | 2.3 | 0.4 | 17.4% |
| Revenue | 31.6 | 36.2 | (4.6) | (12.7%) |
| External costs | (131.2) | (147.9) | 16.7 | 11.3% |
| Publishing division recharge | 99.6 | 111.7 | (12.1) | (10.8%) |
| Adjusted operating result | – | – | – | – |
continued
Revenue fell by £4.6 million or 12.7% to £31.6 million. The fall in revenue includes the £1.3 million impact of the cessation of the Independent print contract in April 2016 and the £0.6 million impact of one week less of trading. On a like for like basis revenue fell by £2.7 million or 7.9% reflecting the impact of lower third party volumes and newsprint supply partially offset by an increase in newsprint and plate waste sales due to increased prices. External costs fell by £16.7 million or 11.3% to £131.2 million with the benefit of one week less of trading, cost reduction initiatives and the reduction in costs associated with falling volumes. The net cost recharged to the Publishing division was £99.6 million compared to £111.7 million in the prior year due to cost reductions exceeding the revenue decline.
The Specialist Digital division includes Trinity Mirror Digital Recruitment, our digital classified recruitment business and Communicator, our digital communications agency business. Trinity Mirror Digital Recruitment operates three specialist job boards: GAAPweb, TotallyLegal and SecsintheCity, each offering their clients access to high quality databases of job candidates within their specific niche areas of finance and accounting, legal and secretarial. Communicator is a digital communications agency which develops and manages digital communications across email, mobile, social and web enabling clients to send targeted customer communications on a global scale. Rippleffect, a digital marketing services agency, was sold in August 2016.
The revenue and adjusted operating profit of the Specialist Digital division is as follows:
| 2017 £m |
2016 £m |
Variance £m |
Variance % |
|
|---|---|---|---|---|
| Advertising | 4.7 | 4.8 | (0.1) | (2.1%) |
| Other | 4.9 | 8.1 | (3.2) | (39.5%) |
| Revenue | 9.6 | 12.9 | (3.3) | (25.6%) |
| Costs | (6.9) | (10.5) | 3.6 | 34.3% |
| Adjusted operating profit | 2.7 | 2.4 | 0.3 | 12.5% |
Rippleffect which was sold in August 2016 had revenues of £3.4 million and an operating loss of £0.1 million up to the date of disposal. Excluding the disposal, revenue grew by £0.1 million and operating profit grew by £0.2 million. Trinity Mirror Digital Recruitment advertising revenue fell by £0.1 million and operating profit fell by £0.1 million while Communicator Corp revenue increased by £0.2 million and operating profit improved by £0.3 million.
The Central division includes revenue and costs not allocated to the operational divisions and the share of results of associates. The revenue and adjusted operating loss of the Central division is as follows:
| 2017 £m |
2016 £m |
Variance £m |
Variance % |
|
|---|---|---|---|---|
| Revenue | 3.5 | 3.9 | (0.4) | (10.3%) |
| Costs | (15.5) | (18.3) | 2.8 | 15.3% |
| Associates | 0.8 | 1.1 | (0.3) | (27.3%) |
| Adjusted operating loss | (11.2) | (13.3) | 2.1 | 15.8% |
The Central division includes revenue and costs not allocated to the operational divisions and the share of results of associates. The result for the year was a loss of £11.2 million compared to a loss of £13.3 million in the prior year.
Revenue primarily relates to rental income from surplus office space at the Group's main office at Canary Wharf. Costs fell by £2.8 million from £18.3 million to £15.5 million reflecting the ongoing tight management of costs. Share of results from associates fell by £0.3 million from £1.1 million to £0.8 million.
By order of the Board
Chief Executive 5 March 2018
"I believe that the current makeup of the Board, coupled with a strong senior management team, provides us with the right balance of skills and experience to enable us to achieve effective corporate governance."
David Grigson, Chairman
On behalf of the Board, I am pleased to introduce our Corporate Governance Report, in which we explain how the Board and its Committees have operated during the year and describe the Company's compliance with the UK Corporate Governance Code (the 'Code'). The Board recognises the importance of effective stewardship and strong corporate values that contribute to the success of the Company. I believe that the values your Board believe in are demonstrably embedded throughout the organisation. As Chairman, I am responsible for ensuring that the Board operates effectively and efficiently and we remain committed to maintaining a strong momentum in our pursuit of excellence in the way our Company is governed.
The Board has overall responsibility for oversight of the Group's operations, and each year formally revisits its level of oversight and monitoring, ensuring a robust system of internal control and risk management is upheld, and determines the nature and extent of risks the Company is willing to take. More detail on the Company's principal risks and risk appetite is set out on pages 16 and 17.
I would like to welcome Nick Prettejohn to the Board, who will be appointed on 6 March 2018. Nick will be joining the Remuneration and Nomination Committees on his appointment, and will take over from me as Chairman on 3 May 2018, at the end of the Company's next Annual General Meeting, and will also take on the role of Nomination Committee chair from that date. Nick brings a breadth of skills and combines analytical rigour with a marked action orientation and a clear eye on value creation. I am absolutely delighted that Trinity Mirror has been able to attract someone of Nick's calibre to be its next Chairman. I will depart in May knowing that the Board and the Company are in good hands. More details of our succession process and the work of the Nomination Committee can be found on page 40.
During the year, Helen Stevenson stepped down as Remuneration Committee Chair, handing responsibility to David Kelly. Helen remains our Senior Independent Director and a key member of the Remuneration Committee and on behalf of the Board I would like to express my gratitude to her for her significant contribution to the Company in this role. David has a wealth of experience as Remuneration Chair and I would like to congratulate him on his appointment. You can read David's first Remuneration Report on pages 46 to 60.
We continually challenge ourselves as a Board to ensure that we are appropriately balanced. I believe that the current makeup of the Board, coupled with a strong senior management team, which presents regularly to the Board, provides us with a good balance of skills, experience and ability to enable us to achieve effective corporate governance. The Board's regular interaction with the senior management team ensures that good governance extends beyond the Boardroom.
As a Board, we take governance very seriously and we regularly discuss and review our ways of working to ensure we continue to improve our effectiveness. In light of the Chairman succession process, we took the view that the Board effectiveness evaluation held in December 2017 would be most appropriately conducted internally. We carried out a comprehensive internal review of our performance which built upon the Corporate Governance conclusions and action plans from our last external Board evaluation, held in 2014, and our internal evaluations to date. We are working through an action plan to build on our strong foundations and are confident that the Board continues to function effectively, with sound, skilled and knowledgeable contributions from all its members. More information on our board evaluation process is set out on pages 36 and 37.
As a premium listed company, Trinity Mirror plc is required to report on how it has applied the main principles of the UK Corporate Governance Code.
The Board considers that the Company complied in all material respects with the provisions of the Code for the whole of the 52 weeks ended 31 December 2017, and has explained appropriately any exceptions on page 36. A copy of the Code is available at www.frc.org.uk. We comply with the Corporate Governance Statement requirements pursuant to the Financial Conduct Authority ('FCA') Disclosure Guidance and Transparency Rules by virtue of the information included in this Corporate Governance section of the Annual Report together with information contained in the Shareholder Information section on pages 119 and 120.
I believe we enter 2018 with a strong Board well equipped with the skills, experience, independence and knowledge needed to deliver on the Company's strategy.
David Grigson Chairman 5 March 2018
Appointment date: May 2012 (Appointed as a non-executive director in January 2012)
1 2 3
Committee membership: N* R
Experience: David is a Chartered Accountant and was formerly the CFO of Emap plc, CFO of Reuters Group plc, non-executive Chairman of Creston plc, non-executive director of Carphone Warehouse Group PLC, Chairman of Anobii Limited and was non-executive director, member of the Risk and Capital and Nomination and Governance Committees, and Chairman of the Audit Committee at Standard Life plc. Most recently David was the Senior Independent Director and non-executive director at Ocado Group plc.
External appointments: David is non-executive Chairman of Investis Limited and director at the Dolma Impact Fund and Dolma Fund Management.
Simon Fox Chief Executive
Appointment date: September 2012
Experience: Simon was previously Chief Executive Officer of HMV Group plc. Prior to this, he was Chief Operating Officer for Kesa Electricals plc with responsibility for Kesa's subsidiaries in the UK and Continental Europe and its e-commerce businesses. Simon began his career as a graduate trainee at Security Pacific Bank and worked at Boston Consulting Group. Thereafter, he founded Office World, the UK's first out-of-town office supplies retailer. Simon was previously a non-executive director at Guardian Media Group plc.
External appointments: Non-executive director of PA Group Limited.
Appointment date: May 2003
Committee membership: None
Experience: Vijay is a Chartered Accountant and worked in private practice with Deloitte. He joined Mirror Group in 1994 as an Internal Auditor. He was subsequently Group Treasurer and then director of Accounting and Treasury. Vijay previously held the position of Independent Member of the Audit Committee of The Football Association.
External appointments: None.
3
Appointment date: January 2014 (Appointed as SID: December 2015) Committee membership: A N R
Experience: Helen was Chief Marketing Officer UK at Yell Group plc from 2006 to 2012 and prior to this she served as Lloyds TSB Group Marketing Director. Helen started her career with Mars Inc where she spent 19 years, culminating in her role as European Marketing Director, leading category strategy development across Europe. Helen has in the past served as a non-executive director on the main Board of the Department of Work and Pensions and Shirlaws Group.
External appointments: Helen is non-executive director of St Ives plc and the Skipton Building Society, and non-executive director and Chairman of One Smart Star. Helen also serves on the Strategic Advisory Board of Henley Business School and is a Governor of Wellington College.
R Member of the Remuneration Committee
A Member of the Audit & Risk Committee N Member of the Nomination Committee
* Denotes Committee Chairman
Key:
4
continued
Appointment date: December 2014 Committee membership: A N R*
Experience: David was Operations Director of Amazon, COO of lastminute.com, and COO and Vice President Operations of eBay Europe. He was subsequently founder and CEO of mydeco and Senior Vice-President and MD International of Rackspace Hosting. Up until recently David was a non-executive director of the Qliro Group and Chairman of Love Home Swap.
External appointments: David is Chairman of MBA & Company, Simply Business and Pure360. He is non-executive director and Remuneration Committee Chairman of On the Beach Group plc and independent nonexecutive director of The Gym Group plc. David is also a non-executive director of Holiday Extras and Camelot UK Lotteries Limited.
Lee Ginsberg Non-executive director
Appointment date: January 2014
Committee membership: A* N R
Experience: Lee is a Chartered Accountant by profession and was previously Chief Financial Officer of Domino's Pizza Group plc. Lee joined Domino's Pizza in 2004 and retired during April 2014. Prior to his role at Domino's Pizza, Lee held the post of Group Finance Director at Health Club Holdings Limited, formerly Holmes Place plc, where he also served for 18 months as Deputy Chief Executive. Previously, Lee held the position of Group Finance Director at Etam plc.
External appointments: Lee is non-executive director and Chairman of the Audit & Risk Committee of Mothercare plc, non-executive Chairman of Oriole Restaurants Limited, non-executive Deputy Chairman, Senior Independent Director and Chairman of the Audit Committee of Patisserie Valerie Holdings plc and non-executive director and Senior Independent Director of On the Beach Group plc and Softcat plc.
Appointment date: January 2016 Committee membership: A N R
Experience: Olivia was previously the Commercial Director of TalkTalk's Consumer Business. Until recently, Olivia was a Partner at Sir Charles Dunstone's investment vehicle Freston Ventures, and was an Associate Principal at McKinsey & Company, and a leader in McKinsey & Company's Consumer Retail practice.
External appointments: Olivia is the Managing Director, International of Flamingo Horticulture.
Non-executive director
Appointment date: December 2015
Committee membership: A N R
Experience: Prior to joining Facebook in 2014, Steve worked in Y&R, Omnicom and WPP where he spent 15 years, with his final role as CEO of MEC.
External appointments: Steve is the VP: Northern Europe of Facebook.
The Financial Reporting Council ('FRC') Code sets out specific principles and provisions on how a company should be directed and controlled in order to achieve standards of good corporate governance. The purpose of corporate governance is to facilitate effective, entrepreneurial and appropriate management that can deliver the long-term success of the company. The version of the Code applicable to the Company for the 52 weeks ended 31 December 2017 was published in April 2016. A copy of the Code is available at www.frc.org.uk. We are mindful of the upcoming changes to the Code which are currently in consultation and we endeavour to adopt best practice recommendations where appropriate.
The Board considers that the Company complied in all material respects with the Code for the whole 52 week period ended 31 December 2017, and has explained any exceptions appropriately, as set out in this report.
The Board has responsibility for promoting the long-term success of the Company and to provide leadership within a framework of prudent and effective controls that enable risk to be assessed and managed. The Board sets the Company's strategic aims and ensures that the necessary resources are in place to allow the Company's objectives to be met. Some of the Board's key roles include the establishment, monitoring and review of the Group's internal control systems, governance and risk management, management performance, succession planning and approval of major transactions. The Board establishes the Company's culture, values and ethics and it is important that the correct 'tone from the top' is set.
The Board has a formal schedule of matters reserved to it for decision. Other specific responsibilities are delegated to Board Committees, each of which has clear written terms of reference. The terms of reference for the Audit & Risk Committee, the Nomination Committee and the Remuneration Committee are available on the Company's website at www.trinitymirror.com. The Administration Committee consists of the executive directors, and it meets as necessary to deal with administrative matters of a day-to-day nature.
The current Board composition is six non-executive directors and two executive directors. The Company's governance framework is set out in the diagram below:
The roles of the Chairman and Chief Executive are separated. Their responsibilities are clearly defined, set out in writing and agreed by the Board. The clear and appropriate delineation of responsibility between Chairman and Chief Executive is considered annually as part of the Board's annual effectiveness review. It was agreed in respect of 2017 that these roles are clear and appropriate and that there exists a shared understanding of all Board and Committee roles and responsibilities.
The Chairman, David Grigson, is responsible for the leadership of the Board and ensures that the directors receive accurate, timely and clear information. He is responsible for cultivating a boardroom culture of honesty and openness which encourages debate, challenge where appropriate, and enables non-executive directors to make an effective contribution. The Chairman sets the Board's agenda and ensures sufficient time is allocated for the discussion of all agenda items. The Chairman also consults with the non-executive directors, in particular the Senior Independent Director, on matters of corporate governance, and ensures all directors are made aware of any major shareholders' issues and concerns.
During the year, an orderly process was conducted to identify a successor for David, and on 16 November 2017 the Board announced that Nick Prettejohn would join the Board as Chairman Designate. David will not seek re-election at the 2018 Annual General Meeting and Nick will assume the role of Chairman from the end of that meeting.
As Chief Executive, Simon Fox is responsible for the day-to-day leadership, operations, performance and management of the Company within the strategy and plans agreed by the Board. This is implemented through the Group Finance Director and Company Secretary and the senior management team.
The non-executive directors bring to the Board independence, along with a broad mix of business skills, knowledge and experience. They provide an external perspective to Board discussions and are responsible for the scrutiny of the executive management on behalf of shareholders. The non-executive directors constructively challenge Board discussions and help
a day-to-day nature.
develop proposals on strategy. The Board is satisfied that all of the non-executive directors meet the independence criteria as set by the Code.
The terms and conditions of each of their appointments are available for inspection at the registered office of the Company during normal business hours and at the Company's Annual General Meeting.
The non-executive directors, in conjunction with the Chairman, meet at least once annually in order to review the effectiveness of the Board. The details of the latest Board effectiveness review can be found on pages 36 and 37.
The Company Secretary, supported by the Company Secretarial department, ensures that effective communication flows between the Board and its Committees and between senior management and the non-executive directors. The Company Secretary also advises the Board on corporate governance matters and ensures that Board procedures are followed.
During the year, Vijay Vaghela acted as Company Secretary in addition to his executive duties, with the support of the Deputy Company Secretary. The Board has further considered the effect of Vijay's role as an executive director of the Company, and is satisfied that he is able to maintain independence where required. Where deemed appropriate, Vijay's Company Secretarial responsibilities are formally delegated to the Deputy Company Secretary, who attends all Board and Committee meetings by invitation of the respective Chairman.
Helen Stevenson has been Senior Independent Director since December 2015. Acting as a sounding board to the Chairman, the Senior Independent Director also serves as an intermediary for the other directors when necessary. The Senior Independent Director is available to shareholders to assist with addressing concerns that may arise. The Senior Independent Director meets with the non-executive directors at least once a year to review the performance of the Chairman. The outcome of this review is then discussed with the Chairman. During the year, Helen led the process for identifying a successor to the role of Chairman. The Board's tenure, composition and diversity as at the date of this report are set out below:
The Board recognises the importance of diversity, including gender, in the boardroom and seeks to recruit directors with varied backgrounds, skills and experience. Whilst recognising the importance of diversity in Board composition, it is the Board's policy that Board appointments are made on merit judged against objective criteria, taking account of the skills, experience and expertise of candidates rather than by the setting of specific targets.
The Board does not have its own policy on Diversity as the Group's policies on recruitment, dignity at work and equal opportunities, which cover diversity, apply to the Board.
The Group's recruitment process is designed to ensure the identification of the person with the appropriate attributes and experience best suited to the role irrespective of race, age, disability, sex, sexual orientation, gender reassignment, marriage or civil partnership, pregnancy, maternity, membership or nonmembership of a trade union, religion and belief.
The Group's policies aim to achieve a diverse and appropriately qualified Board and workforce, Group-wide, as well as at Board level.
The Board recognises the need for diversity at management level and supports the executive team to actively enable greater female participation in senior management positions within the Group, as a way of ensuring a steady flow of female talent at the top of the Company.
There were two female members of the Board throughout 2017 representing 25%. However, the appointment of Nick Prettejohn in March 2018 will mean female representation on the Board will fall to 22%, which is expected to revert once the current Chairman steps down at the 2018 Annual General Meeting. The Board hopes to retain or improve this level in the future. Our Board composition and size is kept under review in order to retain an appropriate balance of skills, experience, diversity and knowledge of the Group on the part of our non-executive directors.
Key areas of focus for the Board in 2017 included:
The Board expects that the areas of focus for 2018 will remain similar to 2017.
The Board has agreed that all non-executive directors, other than the Chairman, should serve as members of the Audit & Risk, Nomination and Remuneration Committees. The Committee members are deemed to have the appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their duties and responsibilities effectively. The Chairman chairs the Nomination Committee and is a member of the Remuneration Committee. He attends the Audit & Risk Committee meetings by invitation of its Chairman.
The Board believes that an increasing amount of work is undertaken by these Committees and that a non-executive director can only properly fulfil his or her responsibilities if they are present during Committee meetings and are able to follow the detail of discussion and debate held at those meetings. The executive directors attend Committee meetings by invitation of the Committee Chairman when necessary, and are not included in any votes taken by the Committees.
The number of Board and Committee meetings held during the year and directors' attendance was:
The Board meets sufficiently regularly to discharge its duties effectively. The Board held nine scheduled meetings in 2017, seven of which were held at the Company's registered office in London, one off site at the 2017 Annual General Meeting venue and one at the Company's Belfast office in conjunction with the Board's strategy day.
The number of Nomination Committee meetings increased from 2016, as additional meetings were held in conjunction with the Company's Chairman succession process.
The Board received presentations from senior management throughout the year and Board members have regular formal and informal meetings with senior staff. Where a director was unable to attend a meeting, they were provided with all the papers and information relating to that meeting and were able to discuss issues with the Chairman, Chief Executive and Group Finance Director where appropriate. Board meetings are structured to allow open discussion and all directors participate in the discussion of strategy, trading, financial performance and risk management. Board papers are circulated in sufficient time before a meeting to enable full and informed discussion. Members of the wider senior management team attend Board meetings by invitation and regularly make presentations.
The independence of non-executive directors is considered annually as part of the Board performance evaluation process.
The Board believes that all its non-executive directors continue to demonstrate independence in character and judgement and are independent as defined by section B.1.1 of the Code. The Board believes that the Chairman was independent at the date of his appointment. The Board is satisfied that his external roles do not detract from his ability to devote sufficient time to the Company to properly fulfil his responsibilities and be effective in his role.
The Board's performance and effectiveness is reviewed annually and the Company, although it is not currently a constituent of the FTSE 350, aims to comply with the Code's best practice recommendation of holding an externally facilitated Board evaluation every third year. However, in view of the changes to the Board, it was determined that the 2017 evaluation of the Board's effectiveness would be best served by being conducted internally, taking into account the principal themes raised in the 2014 externally facilitated evaluation and the 2015 and 2016 internal evaluations. The Board evaluation considers the balance of skills, experience, independence and knowledge of the Company on the Board, its diversity, how the Board works together as a unit and other factors relevant to its effectiveness.
| Director | Scheduled | Audit | Remuneration | Nomination |
|---|---|---|---|---|
| David Grigson | 9/9 | 6/6* | 6/6 | 3/3** |
| Simon Fox | 9/9 | 6/6* | 6/6* | 3/3** |
| Lee Ginsberg | 9/9 | 6/6 | 5/6 | 3/4 |
| Steve Hatch | 8/9 | 4/6 | 6/6 | 4/4 |
| David Kelly | 8/9 | 6/6 | 5/6*** | 4/4 |
| Helen Stevenson | 9/9 | 6/6 | 6/6 | 4/4 |
| Olivia Streatfeild | 9/9 | 6/6 | 6/6 | 4/4 |
| Vijay Vaghela | 9/9 | 6/6* | – | 2/2* |
* Attended meetings at the invitation of the Committee Chairman.
** David Grigson and Simon Fox were excused from the business of one Nomination Committee meeting during the year.
*** David Kelly was unable to attend one Remuneration Committee during the year, which was prior to his appointment as Remuneration Committee chair.
In respect of 2017, and looking forward to challenges in 2018, the Chairman, with assistance from the Deputy Company Secretary, prepared and circulated a detailed questionnaire in respect of the Board and Committees and followed this with an extensive discussion of the outcomes. The evaluation covered the following key topics and included forward-looking elements:
The Chairman discussed with the Board the strengths and weaknesses which appeared from the evaluation, concluding that the Board was functioning effectively and had the appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their responsibilities. As a result of the 2017 evaluation, the Board noted that knowledge of external regulatory developments was good and they were kept abreast of updates, and there was a clear understanding of the Company's strategic aims. The culture of the boardroom was deemed open, challenging and effective. The directors were positive about the current composition of the Board. All directors agreed on actions to be worked through in 2018, which included topics such as development of the agenda for 2018, senior management succession, and further engagement with senior management including offsite visits to key centres. The Board further concluded that items identified in the 2016 review had been completed, and no carried forward actions were identified as a result.
As part of the Chairman succession process, the Senior Independent Director reviewed the Chairman's performance with the other non-executive directors, taking into account the views of the executive directors. The Board concluded that the Chairman's leadership is effective.
Each directors' individual contribution to the Board and development priorities are considered as part of this exercise.
The appointment of new directors is led by the Nomination Committee who undertake a formal, rigorous and transparent procedure and subsequently make a recommendation to the Board. Further details of the appointments process can be found in the Nomination Committee Report on page 40 and biographies of our directors can be found on pages 32 and 33.
A full, formal and individually tailored induction programme is provided for all new directors upon appointment. This includes an assessment of their training requirements and provision of the appropriate training. New directors are provided with background reading about the Group to assist their understanding of the nature of the Group, its business and the markets in which it operates. Details of Board procedures and other governancerelated matters are also provided as part of the induction process.
Throughout their tenure, directors are given access to the Group's operations and staff and receive updates on relevant issues as appropriate, taking into account their individual qualifications and experience. This allows the directors to function effectively with appropriate knowledge of the Group. The Company
Secretary facilitates any other professional development that directors consider necessary to assist them in carrying out their duties. The Board participates in visits to key operational sites during the year to gain a deeper insight into the Group's operating environment.
The Board is satisfied that each director has sufficient time to devote to discharging his or her responsibilities as a director of the Company.
The directors may take independent professional advice, if necessary, at the Company's expense.
Details on how the directors promote the success of the Company can be found throughout this report with further details in the Directors Report on page 67.
The Board adopted a Conflicts Policy in October 2008 which provides a formal system for directors to declare conflicts to be considered for authorisation by those directors who have no interest in the matter. In deciding whether to authorise a potential or actual conflict, the non-conflicted directors are required to act in the way they consider would be most likely to promote the success of the Company and they may impose limits or conditions when giving authorisation or subsequently if appropriate.
The Board applied the Conflicts Policy throughout 2017 and the relevant procedures for authorisation of potential or actual conflicts were followed. The Board believes that there is currently no compromise to the independence of any director arising from an external appointment or any outside commercial interest. Where a potential or actual conflict arises, the director is excused from relevant items of business and does not receive papers or minutes in relation to that business.
In addition to the availability of the Register of Conflicts at each Board meeting, an annual review has been conducted and the Board will continue to monitor and review potential conflicts of interest on a regular basis.
As approved by shareholders at the 2008 Annual General Meeting, the directors have the benefit of an indemnity which is a qualifying third-party indemnity provision as defined by section 234 of the Companies Act 2006.
The Company maintains appropriate directors' and officers' liability insurance for its directors and officers which provides cover for any legal action brought against them.
Effective shareholder engagement is essential to the Board and we ensure continuous dialogue throughout the year by way of investor relation programmes through which the Chief Executive and Group Finance Director meet with major shareholders. Additionally the Chairman, Senior Independent Director, Remuneration Committee Chairman and executives meet with major shareholders as and when requested. In 2017, numerous investor meetings and events were held or attended; presentations were made at international conferences as well as at results presentations, which altogether provided for comprehensive and engaging dialogue with shareholders and potential investors. The non-executive directors regularly receive updates, through analyst and broker briefings, on shareholder
opinion and so are constantly developing their understanding of the views of the Company's major shareholders.
The Company's website, www.trinitymirror.com, is regularly updated and contains a wide range of information of interest to both institutional and private investors, including any announcements made by the Company to the London Stock Exchange as well as presentations of interim and annual results made to analysts.
The Board has overall responsibility for the Company's system of risk management and internal controls. The Board regularly reviews the Company's principal risks and its internal controls. The risk management process is supported by our internal audit function reviewing the effectiveness of internal controls.
Further information on internal controls and risk management can be found on pages 44 and 45 of the Audit & Risk Committee Report. The principal risks and uncertainties the Group faced during the year are set out on pages 16 and 17 of the Strategic Report.
The Code and Listing Rules require listed companies to include in their annual report and accounts a going concern and a viability statement. The Audit & Risk Committee reviewed and discussed a report from management and concluded that the financial statements can be prepared on a going concern basis and that there is a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next three years.
The directors have assessed the Group's prospects, both as a going concern and its longer term viability.
The directors consider it appropriate to adopt the going concern basis of accounting in the preparation of the Group's annual consolidated financial statements.
In accordance with LR 9.8.6(3) of the Listing Rules, and in determining whether the Group's annual consolidated financial statements can be prepared on a going concern basis, the directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowing facilities and the risks and uncertainties relating to its business activities.
The key factors considered by the directors were as follows:
The impact on our business of key customers being unable to meet their obligations for services provided by the Group;
The impact of the acquisition of Northern & Shell's publishing assets which was completed after the year end. The acquired businesses operate in the same sectors as those of the Group prior to the acquisition and all of the above factors have been considered in relation to the acquired businesses and their impact on the enlarged Group; and
Having considered all the factors impacting the Group's businesses, including downside sensitivities (relating to trading and cash flow), the directors are satisfied that the Group will be able to operate within the terms and conditions of the Group's financing facilities for the foreseeable future.
The directors have reasonable expectations that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group's annual consolidated financial statements.
The directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.
The UK Corporate Governance Code requires that the directors assess the prospects of the Group over an appropriate period of time selected by them.
The directors assessed the prospects of the Group over a three year period which reflects the budget and planning cycle adopted by the Group. A three year period is adopted as it enables the directors to consider the impact of declining print revenues, the investment required to drive growth in digital and to identify the extent to which costs need to be minimised to support profits and cash flows. The assessment took into account the Group's current position, the impact of the acquisition of Northern & Shell's publishing assets and the principal risks and uncertainties facing the Group included those that would threaten the business model, future performance, solvency or liquidity.
The director's strategic and budget planning for the Group comprises an annual budget and projections for the subsequent two years. The three year projections are reviewed by the Board at least two times a year and they also form part of the strategy review process. The first year of the projections reflect the annual budget which is approved by the Board. Having completed the acquisition, the acquired business will be integrated into the same strategic and budget planning cycle.
The annual budget for 2018, which provides greater detail and has been adjusted to reflect the impact of the acquisition, is used to set budget targets for the Group and is used by the Remuneration Committee to set targets for the annual incentive plan. The three year projections are also used for setting the cash flow target for the Long Term Incentive Plan. Whilst the subsequent two year
projections are less detailed, they provide a sensible planning tool against which strategic decisions are made.
A number of key assumptions are made in the three year projections. These are as follows:
These, and other matters considered by the Board during the year, form the basis of the Board's reasonable expectations that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year assessment period.
Also, this assessment was made recognising the principal risks and uncertainties that could have an impact on the future performance of the Group and also the financial risks described in the notes to the consolidated financial statements.
Sensitivity analysis is applied to the cash flows to model the potential effects should principal risks actually occur, individual or in unison. The Board also assessed the likely effectiveness of any proposed mitigating actions.
Such future assessments are subject to a level of uncertainty that increases with time and, therefore, future outcomes cannot be guaranteed or predicted with certainty.
Shareholders will have the opportunity to meet and put questions to the directors at the Company's Annual General Meeting (the 'AGM'), which will be held at the Museum of London Docklands, No.1 Warehouse, West India Dock Road, London E14 4AL on Thursday, 3 May 2018 at 11:30am.
A detailed explanation of each item of business to be considered at the AGM is included in the Notice of Meeting which will either be sent to the shareholders in advance of the AGM or will be available to download from the website www.trinitymirror.com/ investors. Shareholders who are unable to attend the AGM are encouraged to vote in advance of the meeting, either online at www.shareview.co.uk or by using the proxy card which will be sent to all shareholders.
Chairman 5 March 2018
David Grigson, Chairman of the Nomination Committee
I am pleased to present the report of the Nomination Committee (the 'Committee') for 2017. The Committee keeps under regular review the structure and composition of the Board and its Committees, and ensures that the Board has the appropriate balance of skills, expertise and experience in order to support the directors and the Company and that the appropriate corporate governance standards and practices are in place.
In 2017, the Committee's focus has been on reviewing and implementing the succession planning process and reviewing the composition of the Board, ensuring it is appropriate for the needs of the Group for the future. This included the search for and recommendation of our new Chairman Designate, Nick Prettejohn.
The role of the Committee is to:
The Committee has formal terms of reference which are available on the Company's website www.trinitymirror.com.
The Committee met four times during 2017 to consider:
Following the second report published by the Hampton-Alexander Review, which recommends a minimum of 33% of women represented on the Board by 2020, and 33% of women's representation across executive committees by 2020, the Committee is committed to reviewing talent pipelines within the Group during 2018.
The Committee is mindful of the Company's responsibilities as an employer in relation to Gender Pay Reporting, pursuant to the Equality Act 2010. Further details on Gender Pay Reporting can be found on pages 13 to 15 of the Strategic Report.
You can see details of female representation in our workforce within the Our People section on pages 13 to 15.
There is a formal and transparent procedure in place for making new appointments to the Board, and a process for identifying a successor for the role of Chairman was undertaken during 2017. This process was led by Helen Stevenson, Senior Independent Director, with assistance from Egon Zehnder, the executive search firm engaged to assist with the Chairman search, and overseen by the Committee. Helen, together with the Committee members, prepared a specification for the Chairmanship role. Each individual Committee member met with the Senior Independent Director to discuss their views on Chairman succession and objective criteria, taking into account the current skills, experience, independence, and balance on the Board, noting the benefits of diversity.
Following an orderly diligence process, the Committee recommended that Nick Prettejohn was the most suitable candidate and he will join the Board as Chairman Designate and non-executive director in March 2018.
All new Board members receive a full, formal and tailored induction programme. Nick's formal induction programme is designed to provide insight into all aspects of the Group's strategic pillars: Grow, Build, Protect and Consolidate. Nick's induction is facilitated through a series of in-depth group, one-to-one meetings and site visits across the UK with senior management, staff and other stakeholders. We look forward to Nick's contribution in 2018 and beyond.
Chairman of the Nomination Committee 5 March 2018
its review of the Group's appetite for risk and how this manifests itself in the way the Group conducts its business."
Lee Ginsberg, Chairman of the Audit & Risk Committee
I am pleased to present the report of the Audit & Risk Committee (the 'Committee') for 2017. In accordance with the Committee's terms of reference, the Chairman, Chief Executive and Group Finance Director are not members of the Committee but are invited to attend meetings of the Committee when appropriate.
All members of the Committee are non-executive directors, who are considered independent, and their biographical details are set out pages 32 and 33. The Board is satisfied that the members of the Committee have a wide range of commercial and financial experience which allows the Committee to fulfil its Terms of Reference. The Terms of Reference of the Committee are reviewed and revised as appropriate to reflect changes made to the Financial Reporting Council Code (the 'Code').
The Committee has identified me as the member having recent and relevant financial experience in accounting for the purposes of the Code, and the members of the Committee as a whole have competence relevant to the sector in which the Group operates as a result of their combined biographies.
The Code extends the Board's responsibilities to confirm that it has undertaken a thorough assessment of the principal risks associated with the Group's business model, future performance, solvency and liquidity; to provide a statement of the longer term prospects and viability of the Group; and to monitor the Company's risk management and internal control systems on a continuing basis. The Committee also notes the implementation of applicable regulatory requirements, such as the Market Abuse Regulation, and works closely with the Board and its external advisers to ensure that all requirements are implemented and observed.
The Terms of Reference are published on the Company website: www.trinitymirror.com.
In 2017, the Board held an evaluation of the Committee's performance. The same areas were reviewed as for the Board performance evaluation, found on pages 36 and 37. The evalution concluded that the roles and responsibilities of the Committee were clear, papers were of a high standard and preparations would be made to meet the challenges of 2018. All actions will be reviewed throughout 2018 to ensure the Committee runs efficiently. It was deemed that the Committee's composition continues to remain appropriate and the Committee is functioning effectively.
I conduct regular meetings with the Group Finance Director, the Head of Risk and Audit and the Company's external auditor, Deloitte LLP. Meetings of the Committee are also attended by the executive directors, the Chairman, the Head of Risk and Audit and representatives from the Company's external auditor, Deloitte LLP.
The Committee's principal responsibilities are:
The Board's responsibility for the assessment of risk is delegated to the Committee.
The Terms of Reference authorise the Committee to obtain independent legal or other professional advice at the Company's expense.
The Committee receives any required information from management in a timely manner and in formats which are comprehensible and sufficient to fulfil its responsibilities to shareholders and potential investors alike.
continued
The Committee had six scheduled meetings in 2017. Items reviewed at the Committee meetings in 2017 were:
In 2018, to date, the Committee has focused on the 2017 year end.
The Committee has undertaken a review and assessment of the Annual Report in order to determine whether it can advise the Board that, taken as a whole, the Annual Report is fair, balanced and understandable and provides shareholders with the information they need to assess the Company's position, performance, business model and strategy as required by provision C.1.1 of the Code.
The Committee has:
Accordingly, the Committee has concluded that the Annual Report, taken as a whole, is fair, balanced and understandable and that it can advise the Board as required by the Code.
The Code and Listing Rules require listed companies to include in their annual report and accounts a going concern and a viability statement. The Committee reviewed and discussed reports from management and concluded that the financial statements can be prepared on a going concern basis and that there is a reasonable
Specific
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next three years.
The directors assessed the prospects of the Group over a threeyear period which reflects the budget and planning cycle adopted by the Group. A three-year period is adopted as it enables the directors to consider the impact of declining print revenues, the investment required to drive growth in digital and to identify the extent to which costs need to be minimised to support profits and cash flows. The assessment of the Group's prospects, together with the Group's going concern statement and viability statement, are set out on pages 38 and 39 of the Corporate Governance Report.
The Committee assesses whether suitable accounting policies have been adopted and whether management have made appropriate estimates and judgements. The Committee reviews accounting papers prepared by management which provide details on the main financial reporting judgements.
The Committee also reviews reports by the external auditor on the annual and half year results which highlight any issues with respect to the work undertaken.
The Committee considered the following significant issues in relation to the 2017 financial statements:
Each year a detailed impairment review is undertaken to compare the carrying value of assets held on the consolidated balance sheet and the parent company balance sheet to their value in use. The value in use is calculated using a discounted cash flow model and there are a number of judgements made in setting the assumptions that underpin the model. A detailed paper summarising the conclusions of the review is presented to the Committee. The external auditor also undertakes a very detailed review of the assumptions and of the model supporting the review.
Both the Committee and external auditor challenge the conclusions of the review and consider any external factors which may change the conclusions of the review.
The key assumptions underpinning the model are as follows:
The conclusions of the review highlighted the reduced headroom. The key factors causing this and the sensitivity of the review to changes in the key assumptions are fully disclosed in the notes to the consolidated and parent company financial statements and in the auditor's report.
Impairment is not considered a principal risk for the Group, as identified on pages 16 and 17 of the Strategic Report, as it relates to historical transactions with no future cash impact nor is there any impact on the financial covenants for the Group's debt facilities.
continued
The impairment review in respect of the 2017 year end concluded that no impairment was required to the carrying value of assets held in the consolidated balance sheet and that no impairment was required to the carrying value of investments held in the parent company balance sheet. Disclosure of the impairment reviews and key sensitivities are in notes 14 and 15 in the notes to the consolidated financial statements and note 4 in the notes to the parent company financial statements.
At each year end the Group's actuaries, Willis Towers Watson, undertake a detailed calculation of the IAS 19 valuation of the Group's defined benefit pension schemes and of the specific financial disclosures in the financial statements. A detailed report prepared by Willis Towers Watson setting out the judgements, assumptions and conclusions is presented to the Committee for review. Full disclosure of the Group's pension schemes is in note 33 in the notes to the consolidated financial statements.
The assumptions are agreed by management after taking advice from Willis Towers Watson. This includes external benchmarking of the key assumptions by Willis Towers Watson.
The external auditor performs a detailed review of the report prepared by Willis Towers Watson and of the key assumptions used for the valuation, including external benchmarking.
The assumptions regarding the discount rate, inflation rates and mortality rates are given particular attention and challenged by the Committee members and external auditor. Disclosure of the valuation and the sensitivity of the valuation to changes in the key assumptions are disclosed in note 33 in the notes to the consolidated financial statements.
Pension schemes are one of the Group's three principal risks that are set out in the risks and uncertainties section on pages 16 and 17 of the Strategic Report. This sets out the risk and the management action to mitigate the risk.
The Group is exposed to civil claims from individuals in relation to phone hacking. One of the Group's three principal risks relates to historical legal issues. Management action to mitigate the associated risks and also the disclosure relating to the latest position are set out in the risks and uncertainties section on pages 16 and 17 of the Strategic Report.
This is a standing item on the Board agenda and therefore is not specifically an agenda item for the Committee. The Committee does assess the appropriateness of any provisions in relation to these matters and other implications on the consolidated financial statements and that the Annual Report contains sufficient disclosure of such matters. The external auditor's year end report details the procedures undertaken by them and their discussions with management and this is discussed in detail by the Committee.
In December 2016, the Company received a letter from the Conduct Committee of the FRC, giving advance notice of the FRC's planned thematic review of pension disclosures in the Annual Report. The purpose of the monitoring activity is to drive continuous improvement in the quality of corporate reporting. The Company received a letter in September 2017 in which the FRC stated that it had no substantive issues. The FRC review only covered the specific disclosures relating to the thematic review and provides no assurance that our report and accounts are correct in all material respects.
The Committee has primary responsibility for making recommendations on the appointment, reappointment and removal of the external auditor. The Committee should also maintain an appropriate relationship with the Company's auditors. There are no contractual obligations that restrict the Company's choice of external auditor.
Following the annual external audit effectiveness review, the Committee recommended the reappointment of Deloitte LLP as external auditor. The review examined auditor independence, the audit planning process, audit approach and delivery, audit team expertise and experience, resources, responsiveness and communication. The review took the form of an extensive questionnaire which was sent to directors and senior managers across the Group. The results were analysed and a full report was submitted for review by the Committee. The report as a whole was discussed with the external auditor and, in the absence of any adverse findings, the Committee concluded that the audit process was fit for purpose.
Private meetings were held with Deloitte LLP to ensure there were no restrictions on the scope of their audit and to discuss any items that the external auditor did not wish to raise with the executive directors present.
The Committee reviews and agrees the engagement letter from Deloitte LLP and verifies their independence and objectivity. It also reviews the scope of non-audit services provided by Deloitte LLP to ensure that their objectivity was not impaired.
The Committee is satisfied that the level of fees payable in respect of audit services is appropriate for a group of its size and that an effective audit was conducted during 2017. Further details concerning external audit fees can be found in note 6 in the notes to the consolidated financial statements.
The Committee is satisfied that there are no relationships between the Company and the external auditor, its employees or its affiliates that may reasonably be thought to impair the external auditor's objectivity and independence.
In 2014 the European Union ('EU') approved regulation that requires all EU public interest entities to mandatorily rotate their external audit every 10 years. If Member States choose to allow it, the period can be extended to a maximum of 20 years if the appointment is tendered after 10 years. This regulation came into force for the 2017 year end and the UK took the extension.
The Competition and Markets Authority published their final Order in 2014, effective from 1 January 2015, requiring mandatory tendering every 10 years for FTSE 350 companies.
The Company is not currently a constituent of the FTSE 350 but intends to follow best practice. In this respect, it is the Committee's current intention to put the external audit out to competitive tender at the expiry of the current audit partner's tenure (after the year ended 31 December 2018).
continued
Deloitte LLP audits all of the Group's subsidiaries and they have been the Company's external auditor since 1999. In accordance with the Auditing Practices Board standards, the Lead Audit Partner is rotated every five years and the Company's Lead Audit Partner was changed for the 2014 audit.
The Group has a formal policy on the engagement and supply of non-audit services to protect the objectivity and independence of the external auditor and to avoid a conflict of interest. Generally, the external auditor will not be engaged to provide any additional services other than audit related services, including the review of the interim financial information. There may, however, be circumstances where it could be in the Company's and shareholders' interests if the external auditor were engaged. Such circumstances are likely to relate to either exceptional transactions or those deemed not to be of a material nature. In all cases, the engagement of the external auditor for non-audit work must be approved in advance by the Committee Chairman.
In 2017, the approved non-audit fee items provided by Deloitte LLP related to covenant compliance , an interim review under IAS 34 and project fees in connection with the acquisition of Northern & Shell's publishing assets. The spend in relation to these services was £6,000, £52,000 and £251,000 respectively, totalling 30% of the overall audit spend. The Committee was satisfied that the nonaudit services purchased were in the interests of the Company.
The Board has overall responsibility for the Company's system of risk management and internal controls. In accordance with the Code, the Committee carries out a robust assessment of the principal risks and reviews the effectiveness of the Company's internal control systems, covering all material controls including financial, operational and compliance controls.
The Committee's assessment includes a review of the risk management process, a review of the principal risks and uncertainties, significant risks, and the risk map.
The Committee reviews reports from management, the internal audit department and the external auditor to provide reasonable assurance that internal control procedures are in place and are being followed. Formal procedures have been established for instituting appropriate action to correct weaknesses identified from the above reports.
The reviews did not identify any significant failings or weaknesses in the system of risk management and internal control. The Committee confirms that necessary actions have been or are being taken, where failings or weaknesses were identified that were not of a material nature. The principal risks and uncertainties are set out on pages 16 and 17 of the Strategic Report. The Committee has considered that the appropriate systems are robust, in place, adequate and are operating properly.
The Committee believes that the Company's remuneration policy is adequate for a group of this size and nature and that compensation policies and practices are appropriate for maintaining a robust control environment and do not put the Company at risk.
An ongoing process for identifying, evaluating and managing the significant risks faced by the Company has remained in place throughout 2017 and up to the date of approval of this report. The process is subject to regular review by the Board directly and by the Committee. The process accords with the Financial Reporting Council's Internal Control: Guidance to Directors for directors, as applicable for this accounting period.
The Committee reviews the risk map at each meeting which details a description of the risks, an assessment of the impact on the business, probability of occurrence, management accountability, applicable policies, sources of assurance, risk factors and associated actions. It is a valuable source of information for reference and is regularly reviewed. During 2017, principal risks were identified, assessed and reviewed by impact and probability and the Board reconfirmed its review of the Group's appetite for risk and how this manifests itself in the way the Group conducts its business.
The directors are responsible for the Group's established system of internal control and for reviewing its effectiveness. The directors confirm that the actions it considers necessary have been or are being taken to remedy any failings or weaknesses identified from its review of the system of internal control. This has involved considering the matters reported to it and developing plans and programmes that it considers are reasonable in the circumstances. The Board also confirms that it has not been advised of material weaknesses in the part of the internal control system that relates to financial reporting. No system of internal control can provide absolute assurance against material misstatement or loss. Such a system is designed to provide the directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately.
Although the Board's overall responsibility for internal control is recognised, the positive contribution made by senior management to the establishment and ongoing development of internal controls within the Group is acknowledged. In reviewing the effectiveness of our system of internal control, the Board has taken into consideration a number of key elements, which include financial controls, investment controls, management reporting and the various review, steering, policy and Board Committees. The key procedures that have been established and designed to provide effective internal financial control are:
Part of the comprehensive management reporting discipline involves the preparation of detailed annual budgets by all operating units. These budgets are carefully examined by the executive directors and are then summarised and submitted to the Board for approval. Weekly revenue and profit forecasts are received from all operating units followed by monthly management accounts, which are prepared promptly and reported against the approved budget. Consolidated monthly management accounts, including detailed profit analysis with comparisons to budget, latest forecasts and prior year are prepared providing relevant, reliable and up to date financial and other information to the Board. Profit and cash flow forecasts for the current year together with a treasury report (including comparison to our financial covenants) were prepared and submitted to the Board twice during the year.
continued
The Company has a clearly defined framework for capital expenditure which is controlled centrally. Appropriate authorisation levels and limits beyond which such expenditure requires the prior approval of the executive directors, or in certain circumstances, the Board, are clearly established. There is a prescribed format for capital expenditure applications which places a high emphasis on the overall Group strategy or support for the expenditure and requires a comprehensive and justified financial appraisal of the business case being put forward. All significant corporate acquisitions or investments are controlled by the Board or a Board sub-committee, and are subject to detailed investment appraisal and performance of due diligence procedures prior to approval by the Board.
The most significant capital expenditure approved by the Board was during 2016 for the finance system transformation project, which has continued throughout 2017. The Finance Transformation Team has continued to develop and build the project with expected savings to be realised after completion.
A number of our key functions, including treasury, taxation, internal audit, risk management, litigation, IT strategy and development, environmental issues and insurance are dealt with centrally. Each of these functions reports to the Board on a regular basis, through the Chief Executive or Group Finance Director as appropriate. The treasury function operates within the terms of clearly defined policy statements. The policy statements exist to ensure that we are not exposed to any unnecessary risk and that where appropriate there is hedging against foreign currency and interest rate risks.
The following illustrate how the risk management process and the system of internal control operated during 2017:
The internal audit function focuses on enhancing the Group's internal controls. It has an annual plan based on a rolling programme and specific risk based audits which is approved by the Committee annually.
The Head of Risk and Audit is a Chartered Accountant with many years of internal audit experience at the Company. He oversees an internal audit programme using the services of external service providers as necessary. The internal audit plan being risk based, has a focus on those areas which are deemed critical to the achievement of business objectives.
The role of the Committee includes the review, update and approval of the annual internal audit plan, direction to the internal audit function, to external auditors and to management in the review of internal controls.
The Risk Management Group is formed of the executive directors together with invited senior executives across the key Group functions. The Chief Executive co-ordinates the risk management activities of the Risk Management Group working closely with the Head of Risk and Audit.
The agreed objectives for the risk management framework have been achieved during 2017 and all significant risks have been reviewed. A risk map has been developed and regularly updated to show the actions taken to minimise risks throughout the Group, the policies in force and the other sources of assurance upon which reliance is placed to mitigate risk.
To enable consistent and focused monitoring, reporting, evaluation and management of significant Group risks, the executive director owner of each key risk and the relevant senior managers have reviewed the plans, actions and initiatives which have taken place or are underway and documented them in the risk map.
A formal process exists for year end risk management compliance reporting, requiring senior operating company, divisional and Group executive management to confirm their responsibilities for risk management and internal control. Ultimate compliance reporting is required of each and every Board member.
Steps have been taken to embed internal control and risk management further into the operations of the business and to deal with areas for improvement which come to the attention of management and the Board.
The Group's systems of internal control are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.
Chairman of the Audit & Risk Committee 5 March 2018
"The executive directors' remuneration is designed to promote the long-term success of the Company, and the performance related elements are transparent, stretching and rigorously applied."
David Kelly, Chairman of the Remuneration Committee
On behalf of the Board, I am pleased to present to you the Remuneration Report for 2017.
This Report is split into three parts: this Annual Statement which includes a foreword from me and our 'at a glance' summary on page 47, the Policy Report and the Annual Report on Remuneration. As our remuneration policy for directors of the Group was approved by shareholders at the 2017 Annual General Meeting (AGM), we have provided an abbreviated Policy Report to give context to the decisions taken by the Committee during the year. The full Policy Report, as approved by shareholders, can be found in our 2016 Annual Report available on our website.
This was my first year leading the Committee, taking over from Helen Stevenson in June 2017. I would like to take this opportunity to thank Helen for her strong leadership of the Committee over the past three years.
In light of the 2017 performance, executive directors will each receive bonuses of 29.8% of their respective base salaries (out of a maximum of 75% of salary). This outcome reflects solid operating profit performance, albeit with there being no payment for publishing digital revenue growth as the stretching targets were not met. A summary of actual performance against the targets set is included on page 53.
The Annual Report on Remuneration gives details of LTIP awards granted in 2015 which are due to vest in March 2018, subject to achievement of the performance conditions. The 2015 award introduced Net Cash Flow with a 40% weighting into the LTIP to complement absolute Total Shareholder Return (TSR), which continues to be the primary performance measure of our LTIP. Across the two metrics, the Committee determined that a vesting of 40% was warranted. Details of 2015 LTIP awards are set out on page 53.
For 2018, the Committee has increased the salaries of the Chief Executive and Group Finance Director by £1,500 (0.29% and 0.34% respectively) effective 1 March 2018 in light of their continued good performance. The average salary increase in the 2018 annual pay reviews for all other management and staff across the Group was 2%. On variable incentives, the structure of the annual bonus scheme will be unchanged for 2018, with performance assessed 70% on Group operating profit, 15% on
growth in publishing digital revenue and 15% on achievement of strategic objectives. As in previous years, 2018 LTIP awards will continue to be based on a blend of absolute TSR and Net Cash Flow, representing 60% and 40% of the awards respectively. More information on the proposed implementation of our policy for 2018 is set out on page 57.
As set out in last year's report, the Committee undertook a full review of the Remuneration Policy to ensure that it continues to reinforce the business strategy, enables us to attract, motivate and retain highcalibre executives, provides alignment with shareholder interests and aids simplicity over the next three years. The culmination of this exercise resulted in us presenting a revised policy to shareholders at the 2017 AGM, held in May 2017, at which we received the support of over 79% of shareholders.
While we were pleased that a majority of shareholders voted for our remuneration policy, and that over 98% of shareholders voted in favour of our remuneration report, the Committee and the Board of directors noted the proportion of votes cast against the remuneration policy. Further to our statement in the 2017 AGM results announcement, we published an interim statement on our website in November 2017, and our final statement in relation to this matter is set out below.
The Committee would reiterate that in finalising the remuneration policy, it consulted with, and took onboard feedback from, institutional shareholders holding c.60% of the Company's issued share capital. In light of feedback received from shareholders, the Committee made some modifications to the shape of the proposals, and was pleased that all shareholders consulted were supportive of the final proposals to revise the policy.
In its report on the 2017 AGM, Institutional Shareholder Services ('ISS') recommended a vote against the remuneration policy due to the potential increase in incentive opportunities in combination with the fixed pay of the current executive team. The Committee stated its expectation that incentive opportunities for the current executive directors would remain unchanged, and that any proposed increase would be subject to prior shareholder consultation.
We have considered the revised principles of the Code 2016 as they relate to remuneration. We consider that the executive directors remuneration is designed to promote the long-term success of the Company, and that performance related elements, as set out in this report, are transparent, stretching and rigorously applied. The Committee is mindful of the ongoing Financial Reporting Council consultation on revisions to the Code, and will consider the outcomes of this – as well as other developments in corporate governance and market practice – during the year.
The Board is committed to ongoing dialogue with shareholders, and I hope the work of the Committee continues to receive your support at the forthcoming AGM.
Chairman of the Remuneration Committee 5 March 2018
continued
| Overview of policy | Remuneration in respect of 2017 | Implementation of policy in 2018 | |
|---|---|---|---|
| Base salary | − Reviewed annually, taking into account individual performance, market competitiveness, the experience of each executive director, and salary increases across the Group See page 48 |
− Salaries increased by £1,000 effective 1 March 2017, as follows: • Chief Executive, Simon Fox = £518,650 • Finance Director, Vijay Vaghela = £446,179 See page 53 |
− Salaries increased by £1,500 effective 1 March 2018, as follows: • Chief Executive, Simon Fox = £520,150 • Finance Director, Vijay Vaghela =£447,679 See page 57 |
| Pension, benefits | − Pension contributions of up to 15% of salary or an equivalent cash allowance in lieu for new hires; cash supplements for deferred members in DB pension arrangements based on legacy scheme − Benefits typically consist the provision of a company car or car allowance and fuel allowance, private medical cover, permanent health insurance and life assurance |
− In line with policy | − No change to pension contribution rates or benefits for 2018 |
| See page 48 | See page 53 | See page 57 | |
| Annual bonus | − Maximum annual bonus opportunity for all Executive Directors of 100% of salary − Based on financial/business performance, with financial measures (to include Group operating profit) representing the majority of the total bonus opportunity − Any bonus up to 50% of salary is paid in cash, with the remainder delivered in the form of restricted share awards vesting after 3 years − Malus and clawback provisions apply |
− Annual bonuses of 29.8% of salary for each Executive Director (39.7% of maximum opportunity) based on: • 2017 Group operating profit performance just above target warranting 32.2% out of the 70% maximum for this element; and • 7.5% out of 15% for the achievement of key strategic objectives − Bonuses to be paid in cash in early 2018 |
− Maximum annual bonus opportunities to remain at 75% of salary − As in 2017, payments will be based 70% on stretching Group operating targets, with the remaining 30% split equally between publishing digital revenue growth targets and the achievement of key strategic objectives (15% of maximum each) |
| See page 49 | See page 53 | See page 57 | |
| LTIP | − Maximum award size for all Executive Directors of 150% of salary in normal circumstances − Awards vest subject to performance over a 3-year period. Vested shares are typically subject to an additional 2-year holding period |
− 2015 LTIP vested at 40% based on: • 3-year cumulative Net Cash Flow of £244m being above the stretch target for this element (£227m); and • Nil vesting under the absolute TSR element against a target range of 225 pence to 300 pence |
− Awards of 144% / 120% of salary to be made to the CEO / Finance Director later in 2018 − Performance to be measured over the period 1 January 2018 to 31 December 2020 against absolute TSR and cumulative Net Cash Flow targets − Two-year holding period will apply to vested shares |
| See page 50 | See page 53 | See page 57 |
| 2017 Single total figure of remuneration for current Executive Directors (£000) | |||||||
|---|---|---|---|---|---|---|---|
| Salary | Pension benefits |
Taxable benefits |
Single-year variable |
Multiple-year variable |
Total | ||
| Simon Fox | 518 | 78 | 22 | 154 | 121 | 893 | |
| Vijay Vaghela | 437 | 115 | 12 | 133 | 87 | 784 |
| Measure | Weight | Threshold | Target | Stretch | Actual | Vest (% element) |
Total |
|---|---|---|---|---|---|---|---|
| No payment | £124.2m | £134.2m | |||||
| Group operating profit | 70% | below target | (30%) | (70%) | £124.7m | 32.2% | |
| £93.5m | £98.4m | ||||||
| Publishing digital revenue | 15% | (0%) | (15%) | £83.9m | 0% | 39.7% | |
| Based on Committee assessment of achievement | |||||||
| Strategic objectives | 15% | against objectives set at start of the year | 7.5% |
| Targets | ||||||
|---|---|---|---|---|---|---|
| Measure | Weight | Threshold 0% vest |
Stretch 100% vest |
Actual | % vest | Overall % vest |
| Absolute TSR (Q4 2017) | 60% | 225p | 300p | 87.2p | 0% | |
| Cumulative Net Cash Flow (2015-2017) | 40% | £196m | £227m | £244m | 100% | 40% |
continued
This Remuneration Report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The report meets the requirements of the FCA Listing Rules and the Disclosure Guidance and Transparency Rules. In this report we describe how the principles of good governance relating to directors' remuneration, as set out in the Code, are applied in practice. The Committee confirms that throughout 2017 the Company has complied with these governance rules and best practice provisions.
The Remuneration Policy was approved by shareholders at the AGM on 4 May 2017, and took effect from that date. We have published an extract of the Policy table from the 2016 Remuneration Report to give context to decisions taken by the Committee during the year. The full Policy Report, as approved by shareholders, can be found in the 2016 Annual Report available on our website.
To attract and retain talent by ensuring base salaries are competitive in the relevant talent market.
Base salaries are reviewed annually, taking into account individual performance, market competitiveness1 , the experience of each executive director, and salary increases across the Group.
Any base salary increases are applied in line with the outcome of the review.
Percentage salary increases for executive directors will not normally exceed those of the wider workforce on an annualised basis over the period over which this policy will apply. Increases may be above this level if there is an increase in the scale, scope, market comparability or responsibilities of the role. Where increases are awarded in excess of the wider employee population, the Committee will provide an explanation in the relevant year's Annual Report on Remuneration.
Individual and business performance are considerations in setting base salary.
1 Companies used to assess market pay competitiveness have historically included media comparators and UK-listed companies of similar revenue and market capitalisation. The Committee reviews comparator companies periodically to ensure they remain appropriate and retains the discretion to adjust the reference groups or companies as appropriate.
To provide post-retirement benefits for participants in a cost-efficient manner.
Executive directors participate in the Company's defined contribution scheme or receive a cash allowance in lieu.
Employees who joined the Group prior to 2003 may be deferred members in defined benefit pension arrangements, which were closed to future accrual on 31 March 2010.
Up to 15% of base salary for new hires.
Cash supplements for deferred members in defined benefit pension arrangements vary based on the legacy scheme, in which the executive participated and individual circumstances. Further details are provided on page 55.
None.
To provide non-cash benefits, which are competitive in the market in which the executive is employed.
Benefits typically include the provision of a company car or car allowance and fuel allowance, private medical cover, permanent health insurance and life assurance. Where appropriate, other benefits may be offered including, but not limited to, allowances for accommodation, travel, relocation and participation in all-employee share schemes.
Benefits vary by role and individual circumstances; eligibility and cost are reviewed periodically.
Performance metrics None.
continued
To focus executives on delivering the business priorities for the financial year.
The Restricted Share Plan ('RSP') is designed to provide further alignment with the interests of shareholders by deferring an element of the annual bonus and delivering it in the form of restricted share awards over Company shares.
Performance measures, targets and weightings are set at the start of the year. At the end of the year, the Committee determines the extent to which the targets have been achieved.
For executive directors, any bonus earned over 50% of salary is delivered in the form of restricted share awards.
Restricted shares may not normally be transferred or otherwise disposed of by a participant for a period of three years from the date of grant. Executive directors are required to retain all of the shares released to them, after the sale of sufficient shares to meet any income tax or national insurance payments obligations of the executive director, until such time that minimum shareholding guidelines are met (see notes to the policy table).
Restricted shares are subject to a malus provision which allows the Committee to determine that some or all of the shares may not be released to a participant at the end of the three-year period if during the three-year restricted period: there has been a significant deterioration in the underlying financial health of the Company; a material restatement of the Company's accounts; a participant's gross misconduct; a participant has deliberately misled the Company, the market or shareholders regarding the Company's financial performance; or a participant's actions have caused harm to the Company's reputation.
Clawback provisions also apply on cash bonuses earned from 2017.
For directors, the maximum annual bonus opportunity under the Policy is 100% of base salary. 2018 annual bonus opportunities remain at 75% of salary and any bonus earned above 50% of salary will be deferred in restricted shares.
For on-target performance, the bonus opportunity is typically up to 50% of maximum.
For threshold performance, the bonus opportunity is typically up to 20% of maximum.
Additional shares representing reinvested dividends may be released following the vesting of any restricted share award.
Performance is assessed annually based on challenging targets for financial/business performance.
The measures selected may vary each year depending on business context and strategy, and will be weighted appropriately according to business priorities.
Financial measures will represent the majority of the total bonus opportunity and will include, but not be limited to, Group operating profit. The bonus structure since 2014 has incorporated an element on growth in publishing digital revenue. From the 2017 financial year, the bonus has also included an element relating to achievement of strategic objectives. Further details are provided on page 53. The Committee has discretion in exceptional circumstances to adjust the formulaic bonus outcomes within the limits of the plan to ensure alignment of pay with the underlying performance of the business and to ensure fairness to both shareholders and participants. When assessing whether to exercise its discretion, the Committee will take into account factors including but not limited to strategy execution, revenues, free cash flow and change in net debt over the period.
The Committee also has discretion, in exceptional circumstances, to withhold bonus from an individual if his or her conduct was such that it was detrimental to the customers or reputation of the Group.
continued
To align the interests of executives with shareholders in growing the value of the business over the long term.
Awards of Performance Shares may be granted annually with vesting subject to performance over at least three years.
For awards granted in 2014 onwards, the Committee retained a three-year performance period and introduced a two-year holding period on vested LTIP shares, with clawback/malus provisions to provide additional alignment with shareholders.
Executive directors are required to retain 100% of shares vesting, after the sale of sufficient shares to meet any income tax or national insurance obligations of the executive director, until such time that minimum shareholding guidelines are met (see notes to the policy table).
Performance conditions are reviewed before each award cycle to ensure they are appropriate and targets are set to be appropriately stretching over the performance period.
The LTIP provides for awards of up to 200% of base salary; however, the Committee intends that this limit will be used only in exceptional circumstances.
LTIP awards in normal circumstances are up to 150% of salary.
2018 LTIP awards are anticipated to be 144% of salary for the Chief Executive and 120% of salary for the Group Finance Director (as per 2017 awards).
Additional shares representing reinvested dividends may be released following the end of the holding period.
Vesting of LTIP awards is subject to continued employment and the Company's performance over a three-year performance period. If no entitlement has been earned at the end of the relevant performance period, awards will lapse.
Since 2012, awards have vested on the achievement of stretching absolute TSR targets underpinned by Committee discretion taking into account relative TSR and key financial metrics. 2015 LTIP awards onwards have incorporated a second internal financial performance measure and this will be continued for the 2018 LTIP awards. Further details are provided in the Annual Report on Remuneration. TSR is anticipated to be the primary performance measure for the term of this Policy.
Threshold performance typically results in up to 20% of LTIP awards vesting, with stretch performance warranting full vesting. There is no provision for retesting.
As mentioned above, for LTIP awards to vest, the Committee must be satisfied that the Company's absolute TSR performance is a genuine reflection of the underlying business performance of the Company over the performance period. When assessing this, the Committee will take into account factors including but not limited to relative TSR, revenues, free cash flow and change in net debt over the period.
Executive directors are eligible to receive payments from awards made prior to the approval and implementation of the remuneration policy detailed in this report. Such payments may not be within the scope of this policy. Details of these awards, if applicable, are disclosed in the Annual Report on Remuneration.
The measures used under the annual bonus plan are selected annually to reflect the Company's key strategic priorities for the year and to reinforce financial performance. When setting targets for the annual bonus, the Committee is conscious that the Group operates in a challenging sector which is in transition as a result of disruptive technology. Targets are set to reflect the need to support profits and cash flows in the short term while making progress towards achievement of the Group's strategic objectives.
The Committee considers that absolute TSR and net cash flow (used in the LTIP) help align executives with shareholder interests, and provide objective and transparent measures of the Company's performance and shareholder value.
Targets applying to the annual bonus and LTIP are reviewed annually, based on a number of internal and external reference points. Performance targets are set to be stretching but achievable, with regard to the particular strategic priorities and economic environment in a given year.
The Committee continues to recognise the importance of executive directors aligning their interests with shareholders through building up a significant shareholding in the Company. The minimum shareholding guideline is 200% of base salary for both the executive directors. Executive directors are encouraged to achieve the guidelines within five years of appointment. Until the relevant shareholding levels are acquired, executive directors are required to retain 100% of shares vesting, after the sale of sufficient shares to meet any income tax or national insurance obligations of the executive director, under the LTIP and RSP.
continued
Similarly, the Board expects that non-executive directors will acquire shares in the Company equal in value to one times their annual fee during a period of three years from the date of their appointment.
Details of the executive directors' current personal shareholdings are provided in the Annual Report on Remuneration on page 58.
The Company's approach to annual salary reviews is consistent across the Group. All employees are eligible to participate in an annual bonus scheme with similar metrics to those used for the executive directors. Opportunities vary by organisational level with business area-specific metrics incorporated where relevant.
Participation in the LTIP is limited to those individuals who can influence long-term Group performance. Performance conditions are consistent for all participants.
The Committee does not currently consult with employees specifically on the effectiveness and appropriateness of the executive remuneration policy and framework. However, the Company seeks to promote and maintain good relationships with employee representative bodies, including trade unions and staff forums, as part of its employee engagement strategy and consults on matters affecting employees and business performance as required in each case by law and regulation in the jurisdictions in which the Company operates. The Committee is mindful of the salary increases applying across the Group when considering salary increases for the executive directors.
The Committee considers shareholder views received during the year and at the AGM each year, as well as guidance from shareholder representative bodies more broadly, in shaping remuneration policy. The Committee continues to keep its remuneration arrangements under regular review, to ensure it continues to reinforce the Company's long-term strategy and align closely with shareholders' interests. We will consult shareholders before making any significant changes to our remuneration policy.
Non-executive directors do not have service agreements, but are engaged on the basis of a letter of appointment. In line with the UK Corporate Governance Code, all directors are subject to re-election annually at the AGM. It is the policy of the Board that non-executive directors are not eligible to participate in any of the Company's bonus, long-term incentive or pension schemes.
Details of the policy on fees paid to our non-executive directors are set out in the table below:
To attract and retain non-executive directors of the highest calibre with broad commercial and other experience relevant to the Company and sector.
Fee levels are reviewed annually, with any adjustments generally effective 1 January in the year following review. The fees paid to the Chairman are determined by the Committee and the fees paid to the non-executive directors are determined by the Board. Additional fees are payable for additional Board responsibilities such as acting as Senior Independent Director and as Chairman of the Audit & Risk and Remuneration Committees. When reviewing fee levels, time commitment, responsibilities and the market positioning of fees against sector comparators and FTSE-listed companies of similar size and complexity, are taken into account. Nonexecutive directors do not participate in any incentive schemes, nor do they receive any pension contributions or benefits (other than nominal expenses).
Non-executive director fee increases are applied in line with the outcome of the annual fee review. There is no prescribed maximum. Fees for the year commencing 1 January 2018 are set out in the Annual Report on Remuneration. The maximum aggregate annual fee for all non-executive directors provided in the Company's Articles of Association is £700,000.
Performance metrics None.
continued
The following section provides details of how our Remuneration Policy was implemented during 2017.
As at the date of this report, the Committee comprised six non-executive directors.
The Committee is a committee of the Board of directors and has been established with formal terms of reference approved by the Board. The Committee's purpose is to assist the Board in fulfilling its oversight responsibility by ensuring that remuneration policy and practices reward fairly and responsibly; are linked to corporate and individual performance; and take account of the generally accepted principles of good governance. A copy of the terms of reference is available on the Company's website: www.trinitymirror.com.
The Committee has authority to determine the appropriate remuneration, benefits and employment conditions for the executive directors. The Committee also monitors the level and structure of remuneration for senior management. The Committee sets the remuneration of the Chairman (the Chairman does not participate in any discussion of his remuneration), and leads the Board's discussion of remuneration issues for all staff more generally.
The Committee fulfils its duties with a combination of both formal meetings and informal consultation with relevant parties internally, including the Chief Executive and Group Finance Director. During the year under review, the Committee, where appropriate, sought advice and assistance from the Chief Executive, Group Finance Director and the HR Director in connection with carrying out its duties.
The Chairman of the Board, together with the Chief Executive, is responsible for evaluating and making recommendations to the Board on the remuneration of the non-executive directors. Members of the Committee and any person attending its meetings do not participate in any discussion or decision on their own remuneration.
The Committee met six times during the year and details of members' attendance at meetings are provided on page 36 of the Corporate Governance Report.
Kepler Associates, a brand of Mercer ('Kepler'), was originally appointed by the Committee in 2010 following a competitive tender process, and was retained during 2017. The Committee evaluates the support provided by its advisers annually and is comfortable that Kepler provides independent remuneration advice to the Committee and does not have any connections with the Company that may impair its independence. The Committee retains the responsibility for appointing any consultants in respect of executive director remuneration. Kepler is a founding member and signatory of the Code of Conduct for Remuneration Consultants, details of which can be found at www.remunerationconsultantsgroup.com. Kepler does not advise the Company on any other matters. Their total fees for the provision of remuneration services to the Committee in 2017 were £69,250 on the basis of time and materials.
The following table shows the results of the binding vote (1) on the 2016 Policy Report and the advisory vote (2) on the 2016 Remuneration Report at the 2017 AGM:
| Resolution text | Votes for | % for | Votes against | % against | Total votes cast | Votes withheld |
|---|---|---|---|---|---|---|
| (1) Approve the directors' Remuneration Policy | 170,757,366 | 79.01 | 45,354,296 | 20.99 | 216,111,662 | 15,989,177 |
| (2) Approval of Annual Report on Remuneration | 228,769,899 | 98.61 | 3,220,695 | 1.39 | 231,990,594 | 110,245 |
continued
The table below sets out a single figure for the total remuneration received by each executive director for 2017 and 2016:
| Salary1 £'000 |
Pension benefit2 £'000 |
Taxable benefits3 £'000 |
Single-year variable4 £'000 |
Multiple-year variable5 £'000 |
Total £'000 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Executive | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
| Simon Fox | 518 | 516 | 78 | 77 | 22 | 22 | 154 | 134 | 121 | – | 893 | 749 |
| Vijay Vaghela | 437 | 435 | 115 | 115 | 12 | 12 | 133 | 116 | 87 | – | 784 | 678 |
1 Vijay Vaghela's base salary excludes amount of salary sacrificed for pension contributions.
2 Includes the value of cash supplements received by directors in lieu of pension contributions, the value of any salary sacrificed for pension contributions and the value of contributions made by the Company on behalf of the director direct to the pension scheme.
3 Incorporates the value of all tax assessable benefits arising from employment with the Company and relate to the provision of car and fuel allowance and healthcare cover.
4 Annual bonus paid for performance over the relevant financial year. For 2016, annual bonus was paid 50% in cash and 50% in restricted shares under the RSP. Restricted shares must be held for three years and are subject to forfeiture provisions. Awards may be reduced if the malus rules apply, i.e. in the event of a significant deterioration in the underlying financial health of the Company, conduct harmful to the Company's reputation, fraud or material misstatement of results. Further details on performance criteria, achievement and resulting awards can be found on page 54, and future annual bonus policy is set out on page 57.
5 Reflects the value of LTIP awards which vested on performance to the relevant financial year end. For 2017, there was 40% vesting of 2015 LTIP awards and for 2016, there was nil vesting of 2014 LTIP awards. In line with regulations, the market value of the 2015 LTIP awards is estimated using the average market value of the shares over the final quarter of the 2017 financial year which is 78.2 pence per share. This value will be amended to reflect the share price on the date of vesting of 13 March 2018, in next year's Annual Report. Further details on performance criteria, achievement and resulting awards can be found on pages 53 and 54.
In 2017, executive directors' bonuses were based 70% on adjusted Group operating profit,15% on publishing digital revenue growth and the remaining 15% based on the achievement of key strategic objectives to help reinforce the Company's business strategy. Bonuses of up to 75% of base salary were available for delivering stretch performance.
Based on adjusted Group operating profit, publishing digital revenue growth, achievement of strategic objectives, and taking into account factors such as the underlying trading performance of the Group and progress against strategy, the Committee made annual bonus awards of 29.8% of base salary (39.7% of maximum opportunity) to each of the executive directors payable in cash.
For adjusted Group operating profit, 70% of potential was payable on a sliding scale from 30% at target of £124.2 million to 70% at stretch of £134.2 million. Actual performance of £124.7 million had been achieved, which warranted 32.2% of maximum bonus for this element. For publishing digital revenue, 15% of potential was payable on a straight-line sliding scale from 0% at threshold of £93.5 million, to 15% payable at stretch of £98.4 million. Actual performance of £83.9 million was below threshold. For achievement of key strategic objectives, with reference to success of new products and revenue initiatives and their potential for scale-up, the Committee made a bonus award of 50% of the maximum opportunity.
The performance period for the 2015 LTIP awards ended on 31 December 2017. Vesting of the LTIP awards was dependent on the achievement of absolute TSR and cumulative Net Cash Flow targets, as follows:
| Closing three-month average adjusted share price at end of performance period | % of award which can be exercised |
|---|---|
| 300 pence (or above) | 60% |
| Between 225 pence and 300 pence | Straight-line vesting between 60% and 0% |
| 225 pence or below | 0% |
Satisfaction of the performance condition was determined by reference to the Company's volume-weighted average share price over the final quarter of the performance period in 2017 which was 87.2 pence and warranted nil vesting of the TSR shares. The share price for these purposes includes dividends reinvested over the performance period.
| Cumulative adjusted Net Cash Flow over the performance period | % of award which can be exercised |
|---|---|
| £227 million (or above) | 40% |
| Between £196 million and £227 million | Straight-line vesting between 40% and 0% |
| £196 million or below | 0% |
Net cash flow for the 2015 award is defined as the net cash flows generated by the business before the payment of dividends, and before any cash outflows that have been treated as non-recurring in the financial statements. In assessing the Net Cash Flow, the Committee may if appropriate, include or exclude other payments, for example, pension payments over and above the agreed funding plan to better reflect underlying business performance.
Satisfaction of the performance condition was determined by reference to the Net Cash Flow as set out above, which was £244 million and warranted 100% vesting of the Net Cash Flow Shares. In total, 40% of the 2015 award will vest in March 2018.
continued
The table below sets out a single figure for the total remuneration received by each non-executive director for the 52 weeks ended 31 December 2017 and the prior period:
| Base fee £'000 |
Other fees £'000 |
Total £'000 |
||||
|---|---|---|---|---|---|---|
| Non-executive | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
| David Grigson | 180 | 183 | – | – | 180 | 183 |
| Lee Ginsberg | 45 | 44 | 13 | 13 | 58 | 57 |
| Steve Hatch | 45 | 44 | – | – | 45 | 44 |
| David Kelly1 | 45 | 44 | 7 | – | 52 | 44 |
| Helen Stevenson2 | 45 | 44 | 18 | 27 | 63 | 71 |
| Olivia Streatfeild3 | 45 | 42 | – | – | 45 | 42 |
1 The fees payable to David Kelly reflect his appointment as Remuneration Committee Chairman on 1 June 2017.
2 The fees paid to Helen Stevenson reflect her appointment as Senior Independent Director from 28 December 2015 and resignation as Remuneration Committee Chairman on 1 June 2017.
3 The fees paid to Olivia Streatfeild reflect her appointment from 15 January 2016.
The below non-executive director fee rates were in place throughout 2017:
| From 1 Jan 2017 | |
|---|---|
| Chairman base fee | £180,000 |
| Non-executive director base fee | £45,000 |
| Additional fee for Senior Independent Director | £12,500 |
| Additional fee for chairing Audit & Risk Committee | £12,500 |
| Additional fee for chairing Remuneration Committee | £12,500 |
In June 2017, executive directors were granted awards under the 2012 LTIP in the form of Performance Shares. The three-year period over which performance will be measured will end on the last day of the 2019 financial year. To the extent that performance conditions are met, awards will vest on 2 June 2020.
| Shares over which awards |
||||
|---|---|---|---|---|
| Date of grant | granted1 | £ | % of salary2 | |
| Simon Fox | 2 June 2017 | 710,142 | £746,856 | 144 |
| Vijay Vaghela | 2 June 2017 | 509,095 | £535,415 | 120 |
1 The base price for calculating the level of awards was 105.17 pence, the average three-day closing price between 8 to 10 March 2017.
2 Based on 2017 base salaries.
Vesting of LTIP awards granted in 2017 is subject to two performance conditions; absolute TSR, accounting for 60% of each award, and cumulative adjusted Net Cash Flow, accounting for the remaining 40%. Further details of the targets applying to these awards are included in the tables below and on the next page.
| Closing three-month average adjusted share price at end of performance period | % of total award which can be exercised |
|---|---|
| 230 pence (or above) | 60% |
| Between 145 pence and 230 pence | Straight-line vesting between 0% and 60% |
| 145 pence or below | 0% |
Satisfaction of the absolute TSR performance condition will be determined by reference to the Company's volume-weighted average share price over the final quarter of the performance period in 2019. The share price for these purposes includes dividends reinvested over the performance period.
In addition, for this part of an award to become exercisable, the Committee must be satisfied that the Company's share price performance is a genuine reflection of the underlying business performance of the Company over the performance period.
When assessing whether they are satisfied that the Company's share price performance is a genuine reflection of the Company's business performance the Committee will take into account factors including revenues, free cash flow and change in net debt as well as the Company's relative TSR performance over the period. The Committee will be guided in its assessment by a review of performance against these metrics, based on the audited results, which it will undertake prior to vesting. The Committee will consider both a quantitative and qualitative analysis of the performance and will take account of any relevant internal and external factors to help ensure that unexpected events during the period are considered properly.
continued
| Cumulative adjusted Net Cash Flow over the performance period | % of total award which can be exercised |
|---|---|
| £300 million or above | 40% |
| Between £260 million and £300 million | Straight-line vesting between 40% and 0% |
| £260 million or below | 0% |
Net Cash Flow for the 2017 award is defined as the net cash flows generated by the business before the payment of dividends, and before any cash outflows in relation to items that have been treated as non-recurring in the financial statements. In assessing the Net Cash Flow, the Committee may, if appropriate include or exclude other payments, for example, pension payments over and above the agreed funding plan to better reflect underlying business performance.
The Committee may adjust the Net Cash Flow Condition as it considers appropriate including but not limited to where the Company or Group has bought or sold businesses or companies to maintain the same level of difficulty, and for items which are wholly outside management control.
A two-year holding period applies on vested shares (net of tax) with clawback/malus provisions. The clawback/malus provision allows the Committee to determine that some or all of the shares may not be released to a participant at the end of the two-year holding period if during the holding period: there has been a significant deterioration in the underlying financial health of the Company; there has been a material restatement of the Company's accounts as a result of a participant's conduct; a participant has deliberately misled the Company, the market or shareholders regarding the Company's financial performance; or a participant's actions have caused harm to the Company's reputation.
Simon Fox received an annual cash sum to use for pension purposes equivalent to 15% of base salary.
Vijay Vaghela participated in the contributory MGN Pension Scheme, and accrued pension at the rate of 1/60th per year of service on salary up to the earnings cap until it closed to future accrual on 31 March 2010. The normal retirement date for Vijay Vaghela is 65 years. Pension entitlements are as follows:
| Accrued pension at | Accrued pension at | |
|---|---|---|
| 31 December 2017 | 1 January 2017 | |
| Director | £'000 | £'000 |
| Vijay Vaghela | 37 | 37 |
1 Pension accruals shown are the amounts which would be paid annually on retirement based on service to 31 March 2010.
The figure for Vijay Vaghela gives the accrued pension to which he would have been entitled based on pensionable service and salary as at 31 March 2010, but assuming he left service at the end of 2017. Vijay Vaghela's spouse is also entitled to a spouse's pension.
From 1 April 2010 until 31 March 2011, Vijay Vaghela participated in the Trinity Mirror Pension Plan (a defined contribution plan) to which he contributed 9% and the Company contributed 10% of his salary up to the earnings cap referred to below. From 1 April 2011, his contributions to the Plan are made under the terms of a salary sacrifice arrangement that was introduced from that date. Since then, contributions have been reduced in accordance with the rules of the scheme. Following 'A' day on 6 April 2006, the earnings cap applying to the pension benefits of Vijay Vaghela has been maintained by amending the rules of the pension scheme in which he participates. The cap, currently £123,600, is normally reviewed every 6 April and may be increased at the discretion of the Company by reference to an appropriate index. Contributions are subject to the earnings cap, and therefore an annual cash sum equivalent to 30% of salary in excess of the cap is paid.
Simon Fox and Vijay Vaghela are covered for lump sum death benefits equivalent to four times base salary.
The table below shows the percentage change in CEO remuneration from the prior year, compared to the average percentage change in remuneration for all other employees.
| Total | 694 | 672 | 3.3% | 3.1% |
|---|---|---|---|---|
| Annual bonus | 154 | 134 | 14.9% | 8.2% |
| Taxable benefits | 22 | 22 | 0.0% | 13.4% |
| Base salary | 518 | 516 | 0.4% | 2.7% |
| CEO 2017 £'000 |
CEO 2016 £'000 |
CEO % change 2016–2017 |
All other employees % change 2016–2017 |
The CEO's remuneration includes, base salary at 31 December 2017, taxable benefits and annual bonus. The base salary and taxable benefits for all other employees is calculated using the increase in the earnings of employees taken from salary as at 31 December 2017 and 31 December 2016 and P11D data from tax years 2016 and 2017 and is based on a consistent set of employees i.e. the same individuals appear in the 2016 and 2017 populations. The annual bonus is the amount payable in respect of 2017 compared to the amount paid in respect of 2016. The base salary data for part-time employees has been prorated up to the full time equivalent.
continued
The following graph illustrates the Company's performance compared to the FTSE All-Share Index, which is considered the most appropriate form of 'broad equity market index' against which the Company's performance should be measured, and to the FTSE 350 Media Index as the main comparator group for the Company's shares. Performance, as required by legislation, is measured by TSR.
The table below details the Chief Executive's single figure of remuneration over the same nine-year period:
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |
|---|---|---|---|---|---|---|---|---|---|
| Simon Fox | |||||||||
| Single figure of remuneration (£'000) |
186 | 710 | 1,678 | 2,260 | 749 | 893 | |||
| Annual bonus outcome (% of maximum) |
0% | 30.0% | 45.8% | 34.6% | 34.6% | 39.7% | |||
| (£'000) | – | 113 | 172 | 132 | 134 | 154 | |||
| LTIP vesting (% of maximum) |
n/a | n/a | 62.6% | 25.3% | 0% | 40% | |||
| (£'000) | n/a | n/a | 909 | 238 | – | 121 | |||
| Joining LTIP vesting (% of maximum) |
n/a | n/a | n/a | 59.4% | n/a | n/a | |||
| (£'000) | n/a | n/a | n/a | 1,293 | n/a | n/a | |||
| Sly Bailey | |||||||||
| Single figure of remuneration (£'000) |
1,935 | 2,052 | 1,391 | 1,354 | |||||
| Annual bonus outcome (% of maximum) |
81% | 80% | 30% | 0% | |||||
| (£'000) | 939 | 1,056 | 396 | – | |||||
| LTIP vesting (% of maximum) |
0% | 0% | 0% | 0% | |||||
| (£'000) | – | – | – | – |
Vijay Vaghela acted as CEO on an interim basis between June 2012 and August 2012 and received £35k in respect of this service.
continued
The table below shows shareholder distributions (dividends and share buybacks) and total employee pay expenditure for 2016 and 2017, along with the percentage change in both.
| 2017 £'000 |
2016 £'000 |
% change 2016–2017 |
|
|---|---|---|---|
| Shareholder distributions (dividends and share buyback)1 | 23,000 | 16,900 | 36% |
| Total employee expenditure | 217,109 | 237,900 | (9%) |
1 The Company commenced a share repurchase programme in August 2016, which was completed in November 2017.
2 The decrease in total employee expenditure is due to structural cost savings.
There were no exit payments made to executive directors in the year.
As disclosed in last year's Remuneration Report, Mark Hollinshead ceased to be a director of the Company on 12 December 2014, with the treatment of his outstanding share-based incentive awards in line with the relevant incentive plan rules. During the year, Mr Hollinshead's outstanding interests under the 2014 RSP (20,540 shares) were released to him on 19 March 2017. Mr Hollinshead retains interests under the RSP which are due to vest in March 2018.
As similarly disclosed last year, Paul Vickers stood down as a director and Company Secretary with effect from 17 November 2014. Mr Vickers left by reason of redundancy, and as such was treated as a good leaver for the purposes of the Company's incentive plans. During the year, Mr Vickers' outstanding interests under the 2014 RSP (20,540 shares) were released to him on 19 March 2017.
Base salaries are reviewed taking into account competitive practice for similar roles at sector comparators and at UK-listed companies of similar revenue and market capitalisation. Following its review, the Committee increased the salaries of the Chief Executive and Group Finance Director by £1,500 from 1 March 2018. The basic salaries of the executive directors are as follows:
| Base salary at: | ||||
|---|---|---|---|---|
| 1 March 2018 | 1 March 2017 | Increase | ||
| Simon Fox | £520,150 | £518,650 | 0.29% | |
| Vijay Vaghela | £447,679 | £446,179 | 0.34% |
For context, the average salary increase in 2018 annual pay reviews for management and staff across the Group is 2%.
No changes in pension contribution rates or benefit provision.
For 2018, the maximum annual bonus opportunity will continue to be 75% of salary for executive directors. The majority of the bonus (70% weighting) will continue to be based on adjusted Group operating profit, with the remaining 30% split equally between publishing digital revenue growth (15% weighting) and the achievement of key strategic objectives (15% weighting) to help reinforce the Company's business strategy. It is intended that performance against targets will be disclosed in next year's Annual Report on Remuneration, if no longer deemed by the directors to be commercially sensitive. Any bonus earned in excess of 50% of salary will be deferred in shares under the RSP for three years. Malus and clawback provisions apply.
As in recent years, 2018 LTIP awards will be based 60% on absolute TSR and 40% on cumulative Net Cash Flow. Award sizes are anticipated to be 144% of salary for the Chief Executive and 120% for the Group Finance Director.
The LTIP will continue to have a three-year performance period plus a two-year holding period on vested shares with clawback/malus provisions. Vesting of LTIP awards will be underpinned by Committee discretion taking into account relative TSR and key financial metrics. Absolute TSR and Net Cash Flow targets will be reviewed in advance of grant to ensure they are appropriately stretching over the performance period and will be disclosed at the time of grant, as well as in next year's Annual Report on Remuneration.
The fees for the Chairman and non-executive directors are expected to remain at the levels as set out on page 54 for 2018.
continued
A table setting out the beneficial interests of the directors and their families in the share capital of the Company as at 31 December 2017 is set out below. None of the directors has a beneficial interest in the shares of any other Group company. Since 31 December 2017, there have been no changes in the directors' interests in shares.
As beneficiaries under the TIH Employee Benefit Trust, the directors are deemed to be interested in 90,855 ordinary shares held by the trust at 31 December 2017.
The lowest price of the shares during the year was 67.0 pence as at 27 November 2017 and the highest price was 121.0 pence as at 10 May 2017. The share price as at 31 December 2017 (29 December 2017 being the last market date for the financial year) was 79.5 pence.
| Director | Ordinary shares at 31 December 2017 |
Ordinary shares at 1 January 2017 |
|---|---|---|
| Simon Fox | 949,148 | 829,106 |
| Vijay Vaghela | 527,873 | 527,873 |
| Lee Ginsberg | 10,000 | 10,000 |
| David Grigson | 220,000 | 220,000 |
| Steve Hatch | – | – |
| David Kelly | 10,000 | 10,000 |
| Helen Stevenson | 35,000 | 35,000 |
| Olivia Streatfeild | – | – |
The minimum shareholding guideline is 200% of base salary for the Chief Executive and Group Finance Director. Executive directors are encouraged to achieve the guidelines within five years of appointment. Until the relevant shareholding levels are attained, executive directors are required to retain 100% of shares vesting, after the sale of sufficient shares to meet any income tax or national insurance obligations of the executive director, under the LTIPs and RSP.
The Board expects that non-executive directors will acquire shares equal in value to one times their annual fee during a period of three years from the date of their appointment.
The Committee has kept these guidelines under review and has determined that the relevant value to take into consideration when assessing whether the guideline has been achieved is the higher of the current market price and the price at the point of purchase or vesting. The table below shows the aggregate value of each current director's shares for guideline purposes, and their respective shareholding requirement, as at 31 December 2017.
| Shares held | |||||||
|---|---|---|---|---|---|---|---|
| Owned outright |
Unvested and subject to performance conditions |
Unvested but subject to other conditions2 |
Value of shares owned outright |
Shareholding requirement |
Current shareholding (% salary/fee) |
Requirement met |
|
| Simon Fox | 949,148 | 1,598,539 | 149,882 | £1,445,714 | 200 | 279 | Y |
| Vijay Vaghela | 527,873 | 1,145,779 | 128,899 | £917,512 | 200 | 207 | Y |
| Lee Ginsberg | 10,000 | – | – | £15,800 | 100 | 27 | N |
| David Grigson | 220,000 | – | – | £205,600 | 100 | 114 | Y |
| Steve Hatch | – | – | – | Requirement not effective until Dec 18 |
– | N/A | |
| David Kelly | 10,000 | – | – | £15,800 | 100 | 27 | N |
| Helen Stevenson | 35,000 | – | – | £59,871 | 100 | 104 | Y |
| Olivia Streatfeild | – | – | – | – | Requirement not effective until Dec 18 |
– | N/A |
1 On 31 December 2017, the mid-market closing price of each Trinity Mirror Share was 79.50 pence.
2 Shares awarded under the RSP are subject to a malus provision.
continued
| Director | Date of grant | Share price at date of grant |
At 1 January 2017 |
Granted | Exercised | Lapsed | At 31 December 2017 |
Performance period |
Exercise period (holding period) |
|---|---|---|---|---|---|---|---|---|---|
| Simon Fox | |||||||||
| LTIP | 17.05.13 | £1.0500 | 199,518 | – | (199,518) | – | – | 31.12.12– 27.12.15 |
17.05.16– 17.05.171 |
| 19.03.14 | £2.1675 | 322,581 | – | – | (322,581) | – | 30.12.13– 01.01.17 |
19.03.17– 19.06.19 (19.03.17– 19.03.19) |
|
| 13.03.15 | £1.895 | 387,546 | – | – | – | 387,546 | 29.12.14– 31.12.17 |
13.03.18– 13.06.20 (13.03.18– 13.03.20) |
|
| 11.03.16 | £1.4883 | 500,851 | – | – | – | 500,851 | 28.12.15– 30.12.18 |
11.03.19– 11.06.21 (11.03.19– 11.03.21) |
|
| 02.06.17 | £1.0517 | – | 710,142 | – | – | 710,142 | 02.01.17– 29.12.19 |
02.06.20– 02.09.22 (02.06.20– 02.06.22) |
|
| RSP | 19.03.14 | £2.1675 | 25,202 | – | (25,202) | – | – | – | restricted until 19.03.17 |
| 13.03.15 | £1.895 | 45,317 | – | – | – | 45,317 | – | restricted until 13.03.18 |
|
| 11.03.16 | £1.4883 | 44,462 | – | – | – | 44,462 | – | restricted until 11.03.19 |
|
| 17.03.17 | £1.1175 | – | 60,103 | – | – | 60,103 | – | restricted until 17.03.20 |
|
| Vijay Vaghela | |||||||||
| LTIP | 17.05.13 | £1.0500 | 142,988 | – | (142,988) | – | – | 31.12.12– 27.12.15 |
17.05.16– 17.05.171 |
| 19.03.14 | £2.1675 | 231,183 | – | – | (231,183) | – | 30.12.13– 01.01.17 |
19.03.17– 19.06.19 (19.03.17– 19.03.19) |
|
| 13.03.15 | £1.895 | 277,741 | – | – | – | 277,741 | 29.12.14– 31.12.17 |
13.03.18– 13.06.20 (13.03.18– 13.03.20) |
|
| 11.03.16 | £1.4883 | 358,943 | – | – | – | 358,943 | 28.12.15– 30.12.18 |
11.03.19– 11.06.21 (11.03.19– 11.03.21) |
|
| 02.06.17 | £1.0517 | – | 509,095 | – | – | 509,095 | 02.01.17– 29.12.19 |
02.06.20– 02.09.22 (02.06.20– 02.06.22) |
|
| RSP | 19.03.14 | £2.1675 | 21,673 | – | (21,673) | – | – | – | restricted until 19.03.17 |
| 13.03.15 | £1.895 | 38,973 | – | – | – | 38,973 | – | restricted until 13.03.18 |
|
| 11.03.16 | £1.4883 | 38,237 | – | – | – | 38,237 | – | restricted until 11.03.19 |
|
| 17.03.17 | £1.1175 | – | 51,689 | – | – | 51,689 | – | restricted until 17.03.20 |
1 Due to the Company being in a closed period, the Remuneration Committee resolved to extend the exercise period to 17 May 2017 in respect of this award.
continued
Vesting of LTIP awards is subject to continued employment and the Company's performance over a three-year performance period. If no entitlement has been earned at the end of the relevant performance period, awards will lapse. There is a two-year holding period on vested LTIP shares, with clawback/malus provisions.
| Absolute TSR targets | ||||||
|---|---|---|---|---|---|---|
| Plan | Weighting | Threshold | Full vesting (100% vesting) |
Weighting | Threshold | Full vesting (100% vesting) |
| 225p | £196m | |||||
| 2015 LTIP | 60% | (0% vesting) | 300p | 40% | (0% vesting) | £227m |
| 180p | £205m | |||||
| 2016 LTIP | 60% | (0% vesting) | 280p | 40% | (0% vesting) | £240m |
| 145p | £260m | |||||
| 2017 LTIP | 60% | (20% vesting) | 230p | 40% | (20% vesting) | £300m |
On 19 January 2017, the Board approved the renewal of the rules of the Restricted Share Plan, which were originally approved by shareholders on 4 May 2006 and expired on 4 May 2016. The renewal of the RSP was approved by shareholders at the Company's 2017 AGM.
Restricted shares may not be transferred or otherwise disposed of by a participant for the period of three years from the date of grant subject to malus or forfeiture restrictions summarised below.
Participants beneficially own the restricted shares from the date of grant. Legal title is held by the RSP trustees until the restricted shares are released into the participant's name. Additional shares representing reinvested dividends may be released following the vesting of share awards.
Restrictions on the shares end on the third anniversary of the grant and the shares will be released into the participant's name unless in the three-year period from grant there has been: a significant deterioration in the underlying financial health of the Company; a material restatement of the Company's accounts as a result of the participant's conduct; a participant has deliberately misled the Company, the market or shareholders regarding the Company's financial performance; or a participant's actions have caused harm to the Company's reputation in which case either the award may lapse or the number of shares transferred to a participant may be reduced.
If cessation of employment is by reason of gross misconduct or resignation to a competitor, awards would be forfeited immediately and the participant would have no further interest in or claim to the restricted shares but if cessation of employment is for any other reason, the participant would retain the restricted shares and they would vest in accordance with normal vesting provisions.
"We delivered on the targets we set ourselves in 2017 and have set ourselves challenging targets for 2018."
Simon Fox, Chief Executive
I am pleased to present our Corporate Responsibility Report, which is an area where the Group's commitment to integrity and sustainability becomes quite evident. This year the Company maintained its inclusion in the FTSE4Good Index, which measures the quality and transparency of our environmental, social and ethical disclosures.
In respect of our environmental impact, all our print and core publishing sites maintained their ISO 14001 Environmental Management status through strengthening the management of environmental issues in line with the new ISO 14001:2015 standard, which is a testament to the hard work and commitment of our Management, Environmental and Facilities teams especially as the new standard has a far wider business approach than before. We delivered on the targets we set ourselves in 2017; in particular energy reduction, and have set ourselves challenging targets for 2018, which are detailed on page 64.
We have applied rigorous health and safety standards across our business and information on these is on pages 65 and 66.
We continue to care for the communities in which we publish and where our businesses operate and we have tried to give a flavour of the many examples of us doing this in the report that follows. You can read more about our social and community work on page 66.
The Daily Mirror's annual Pride of Britain Awards was produced in partnership with TSB Bank plc. This was the 19th year of the Pride of Britain awards and we are, as ever, delighted to have the opportunity to celebrate brave and extraordinary achievements.
I am proud of our engagement with the communities in which we work and our role in raising awareness of the many good causes they support and look forward to doing more of this in the year ahead.
Chief Executive 5 March 2018
Trinity Mirror aims to manage its business to minimise environmental impacts. The commitments in the Group Environmental Policy seek to reduce our impacts in the areas of: paper sourcing; energy consumption and emissions; volatile organic compound (VOC) emissions; waste and the environmental impacts of our suppliers of contracted printing and distribution. The Company recognises that climate change, triggered by greenhouse gases from burning fossil fuels, poses a threat to the world's environment, and is committed to publishing an emissions reduction target in 2019. The Environmental Steering Committee, chaired by the Group Finance Director, has oversight of the group environmental programme, ensuring that it continues to deliver against the Company's Environmental Policy objectives, considering the context that the Group is operating in. On an annual basis, the Environmental Steering Group oversees a review of the environmental risks to the business and approves any necessary changes arising from this.
During 2017 all our key environmental targets were met or on track for completion in 2019.
Our focus now is to continue to integrate the core Local World sites that were acquired in 2015 into our publishing environmental management system, and to ensure they are certified by the end of 2019.
A summary of performance against 2017 Group targets can be found on page 64, together with our targets for 2018. The Environmental Policy can be found at: http://www.trinitymirror.com/environmental-policy
There were no prosecutions or compliance notices for breaches of environmental legislation during 2017.
The electricity consumption of our in-house printing facilities and publishing centres fell by 13% compared with 2016. This is the ninth successive year that we have been able to report reductions in our main source of energy consumption.
Overall, the greenhouse gas emissions associated with the activities under our direct management control (Scope 1 and 2 emissions) fell by 24% in absolute terms and by 7% on a normalised basis (per million printed pages).
The Company has continued to participate in Phase 2 of the Carbon Reduction Commitment ('CRC') Energy Efficiency Scheme and comply with the Climate Change Agreements (Eligible Facilities) Regulations.
A breakdown of the Group's energy consumption and associated greenhouse gas emissions during 2017 is set out in the table on page 62, in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, and following the UK Government's Environmental Reporting Guidance.
The data reported for Scope 1 and 2 include all of the operations that we managed in 2017.
In 2017, for the sixth year running, we continued to report voluntarily on our greenhouse gas emissions data through the international Carbon Disclosure Project. In 2017 we also sought an independent review of our submission to identify areas for increased disclosure in future, and we intend to continue to work to increase transparency of our reporting in this area.
continued
Energy consumption and greenhouse gas emissions (CO2 equivalent)
| Consumption | GHG conversion factor (kgCO2e) |
GHG emissions (Tonnes CO2e)4 | |||
|---|---|---|---|---|---|
| 2017 | 20178 | 20168 | 2015 | ||
| SCOPE 11 | |||||
| 18,017,593 | |||||
| Gas combustion (heating, all Trinity Mirror premises) | kWh | 0.18416 | 3,318 | 3,293 | 3,184 |
| 154,177 | |||||
| Oil combustion (electricity generation, all Trinity Mirror premises) | litres | Various | 412 | 332 | 131 |
| Refrigerant gas loss (all Trinity Mirror premises) | 121 kg | Various | 221 | 735 | 1,082 |
| Commercial vehicles (all Trinity Mirror owned vehicles) | 321,709 km | 0.25749 | 83 | 107 | 135 |
| Total SCOPE 1 | 4,034 | 4,467 | 4,532 | ||
| Total SCOPE 1 per million pages printed | 0.05 | 0.05 | 0.05 | ||
| SCOPE 22 | |||||
| 54,689,338 | |||||
| Generation of Grid electricity used (all Trinity Mirror premises) | kWh | 0.35156 | 19,227 | 26,032 | 31,107 |
| Total SCOPE 2 | 19,227 | 26,032 | 31,107 | ||
| Total SCOPE 2 per million pages printed | 0.25 | 0.29 | 0.32 | ||
| SCOPE 33 | |||||
| Transmission and distribution of Grid electricity used | 54,689,338 | ||||
| (all Trinity Mirror premises) | kWh | 0.03287 | 1,798 | 2,355 | 2,568 |
| 12,291,704 | |||||
| Business travel (road, not involving company vehicles) | km | 0.19490 | 2,396 | 2,531 | 1,442 |
| Business travel (rail)5 | 3,441,734 km |
0.04678 | 161 | 131 | 108 |
| 3,600,110 | |||||
| Business travel (air)6 | km | Various | 717 | 924 | 1,639 |
| Electricity for contracted printing (generation, transmission and | 4,052,056 | ||||
| distribution)7 | kWh | 0.38443 | 1,558 | 2,656 | 1,836 |
| 1,828,809 | |||||
| Gas for contracted printing7 | kWh | 0.18416 | 337 | 727 | 929 |
| Vehicle fuel for contracted distribution – long haul7 | 1,873,981 litres |
2.60016 | 4,873 | 5,991 | 4,907 |
| Total SCOPE 3 | 11,840 | 15,315 | 13,429 | ||
| Total SCOPE 3 per million pages printed | 0.15 | 0.17 | 0.14 | ||
| Overall Total SCOPE 1, 2 and 3 | 35,101 | 45,814 | 49,068 | ||
| Overall Total SCOPE 1, 2 and 3 per million pages printed | 0.45 | 0.51 | 0.50 |
Notes:
Scope 1 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent from emission sources that are under the operational control of Trinity Mirror.
Scope 2 covers the annual quantity of emissions in tonnes of carbon dioxide equivalent resulting from the purchase of electricity by Trinity Mirror for its own use. Scope 2 emissions in this table have been calculated using the location-based method (ref: Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard – Revised Edition). Scope 2 emissions calculated using the market-based method are 20,700 TCO2e. Emission factors used for this are from the websites of our electricity providers.
Scope 3 covers other indirect greenhouse gas emissions, i.e. where the emissions are from sources that are not owned by Trinity Mirror and where Trinity Mirror does not have operational control.
GHG emissions have been calculated in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 and in line with Defra's Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance (June 2013) and using the UK Government's Greenhouse gas reporting: conversion factors 2017.
Rail travel for 2016 included only six months for Local World. For 2017 rail travel is complete.
Due to improved data availability, the 2016 GHG emissions have been restated for Business travel (air).
Consumption figures are provided by external contractors.
2017 and 2016 data includes Local world (except for six months of rail data see note 5). Local world is not included in 2015 data as it was acquired in November 2015.
continued
We continue our programme to review water efficiency across our property portfolio where possible. In Scotland we have agreed a new water contract, and our supplier will be working with us to improve efficiency.
| 2017 | 2016 | 2015 | |
|---|---|---|---|
| Total water consumption at all print and core publishing sites (m3 ) |
51,539 | 61,713 | 62,098 |
Trinity Mirror remains committed to maximising the use of graphic paper that is produced from recycled fibre, or fibre from forests that have been independently certified as sustainable. In 2017 we sourced 92% of all of our graphic paper for Trinity Mirror own products from recycled or certified fibre, against our target of 80%.
Trinity Mirror takes account of environmental standards when awarding contracts for the printing of magazine supplements and the road distribution of printed products. Key contractors measure and report the energy consumption and carbon emissions associated with the work they undertake on our behalf.
We are committed to ensuring that there is no slavery or human trafficking within our supply chains or in any part of our business. We expect our suppliers to adhere to the requirements of the Modern Slavery Act 2015, and we will undertake all reasonable and practical steps to ensure that these standards are implemented within our supply chain. Our annual modern slavery statement will be published on our website, www.trinitymirror.com, within six months of the financial year end.
We are committed to reducing the waste we produce, and maximising the recycling and reuse of waste.
During 2017 we met our targets to maximise the reuse or recycling of paper waste and hazardous wastes from our print sites. We also met our target that 100% of waste electrical and electronic equipment ('WEEE') from all Trinity Mirror sites be either refurbished and reused, or processed for materials recycling.
| 2017 | 2016 | 2015 | |
|---|---|---|---|
| % hazardous waste at print sites to landfill | 1.9% | 2.1% | 2.2% |
| % WEEE from publishing sites reused or recycled | 100% | 100% | 100% |
continued
Targets and Performance
| 2017 Targets | Action | 2018 Target |
|---|---|---|
| Environmental management | ||
| Maintain ISO certification for publishing and print sites by progressively implementing the actions necessary (during the three year certification period) to meet the requirements of ISO 14001:2015 at all certified sites. |
All legacy in-house printing facilities and core publishing sites certified to ISO 14001:2015. |
Maintain ISO 14001:2015 certification for publishing (including digital) and print sites. |
| Integrate major publishing sites acquired from Local World into Trinity Mirror's ISO 14001 environmental management system by the end of 2019. |
On schedule for completion in 2019. | Integrate major publishing sites acquired from Local World into Trinity Mirror's environmental management system and ensure they are certified to ISO 14001:2015 by end 2019. |
| Energy and emissions | ||
| Reduce kWh of electricity consumed at all sites in FY 2017 by 0.5% compared with 2016. |
Achieved 13% reduction in electricity consumption. |
Reduce kWh of electricity consumed at all sites in FY 2018 by 0.5% compared with 2017. |
| Plan to review a transition process replacing a percentage electricity reduction target with a carbon emissions reduction target by the end of 2019. |
On schedule for completion in 2019. | Publish a carbon emissions reduction target by the end of 2019. |
| Actively reduce UK/domestic business travel. Note: Overseas travel is excluded because the requirement to cover news events fluctuates year-on-year and is outside the company's control. |
The total km of UK/domestic business travel increased by 2%. However, this increase was as a result of more journeys taking place on rail, shifting travel away from road and air, so the GHG emissions have reduced by 4%. |
Aim to maintain current levels of UK/ domestic business travel. Note: Overseas travel is excluded because the requirement to cover news events fluctuates year-on-year and is outside the company's control. |
| Water consumption | ||
| Undertake a water efficiency survey at the Watford print site and review other current publishing sites for further water efficiency opportunities. |
New water contract in Scotland includes plans to improve efficiency. |
We will maintain or reduce current water usage at sites under our control. |
| Supply chain | ||
| Continue to use a minimum of 80% graphic paper (all newsprint and magazine paper grades) manufactured from fibre using recycled materials or wood from certified sustainable forests. |
We have continued to work with our suppliers on this issue. In 2017 we sourced 92% of our graphic paper from recycled or certified fibre. |
Increase our target to use a minimum of 85% graphic paper (all newsprint and magazine paper grades) manufactured from fibre using recycled materials or wood from certified sustainable forests. |
| Waste management and recycling | ||
| Continue to recycle 100% of all non hazardous paper waste from print sites under our ownership. |
Achieved 100% in 2017. | Continue to recycle 100% of all non hazardous paper waste from print sites under our ownership. |
| Maximum of 3% of hazardous wastes generated at print sites under our ownership to go to landfill. |
1.9% of hazardous wastes generated at print sites went to landfill during 2017. |
Maximum of 3% of hazardous wastes generated at print sites under our ownership to go to landfill. |
| All Trinity Mirror sites to divert 100% WEEE waste away from landfill by 2018. |
100% of redundant IT and other electrical and electronic wastes were reused or recycled in 2017. |
Maintain our record of diverting 100% WEEE waste away from landfill. |
continued
In 2017 the Company again recorded a low number of workplace accidents. This was an excellent achievement given the increase in incident reporting awareness across the regional businesses as a result of implementing a common approach to health, safety and welfare.
In recognition of the high standards achieved, the Company was awarded the RoSPA President's Award for 13 years of outstanding performance in Health and Safety.
Throughout 2017 the print businesses again retained continuous certification in the OHSAS 18001 health and safety standard, and continue to achieve improvement objectives. The use of in-house trainers improved flexibility and increased the number of courses completed.
During 2017 the Health and Safety team worked closely with the Facilities department to ensure health and safety compliance during eight office relocation projects and the removal of chillers from the Cardiff print site for reuse at the Birmingham print site.
Progress continued with the process of implementing a common approach to health, safety and welfare arrangements in the publishing businesses. Initiatives included a health and safety briefing for executives and directors of the regional businesses by a recognised leading figure in health and safety, the roll out of policy and procedural arrangements for the management of risk, setting up of health and safety information portals, and training in planning events from small to large outdoor functions.
The tables below provide statistics for health and safety in 2017, with a comparison to the previous year. There was an increase in the number of accidents reportable under RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013). These have been thoroughly investigated and action taken to resolve any issues identified.
A more detailed breakdown is given in the following tables.
| Health and safety performance indicator | 2017 | 2016 |
|---|---|---|
| Fatalities | 0 | 0 |
| RIDDOR specified injuries1 | 2 | 0 |
| RIDDOR over seven day injuries | 5 | 2 |
| RIDDOR occupational ill health/diseases/conditions | 0 | 0 |
| RIDDOR dangerous occurrences | 0 | 0 |
| Total number of accidents | 74 | 73 |
| RIDDOR events frequency rate2 | 0.07 | 0.02 |
| All accidents frequency rate | 0.8 | 0.8 |
| Total days lost due to accidents | 241 | 56 |
1 RIDDOR - the Regulations include a list of 'specified injuries' to workers that require immediate notification to HSE.
2 Frequency Rate = number of accidents per 100,000 hours worked.
| Breakdown of accidents by type of event | RIDDOR accidents 2017 (%) |
RIDDOR accidents 2016 (%) |
All accidents 2017 (%) |
All accidents 2016 (%) |
|---|---|---|---|---|
| Slips and falls (same level) | 21 | 12 | 43 | 0 |
| Lifting and handling of materials | 14 | 8 | 29 | 50 |
| Contact with machinery | 15 | 4 | 14 | 50 |
| Falls from a height | 4 | 2 | 0 | 0 |
| Stepping on or striking fixed object | 13 | 25 | 0 | 0 |
| Struck by moving vehicle | 1 | 3 | 0 | 0 |
| Contact with sharp/abrasive material | 4 | 11 | 0 | 0 |
| Struck by flying or falling object | 11 | 11 | 14 | 0 |
| Contact with hazardous substance | 3 | 6 | 0 | 0 |
| Contact with hot materials/substance | 4 | 1 | 0 | 0 |
| Object collapsing or overturning | 0 | 1 | 0 | 0 |
| Use of hand tools | 3 | 4 | 0 | 0 |
| Contact with electricity | 0 | 0 | 0 | 0 |
| Others | 7 | 12 | 0 | 0 |
| Total | 100 | 100 | 100 | 100 |
All percentages rounded to the nearest half decimal point.
continued
There was no health and safety enforcement action taken at any of the Group businesses during 2017.
To promote and maintain further improvement in 2018 the Group intends to:
Trinity Mirror supports communities across the UK through its editorial work, raising awareness, publicising charities, running campaigns and organising fundraising appeals across all of its national and regional titles.
This year the Company maintained its inclusion in the FTSE4Good Index, which measures the quality and transparency of our environmental, social and ethical disclosures. During 2017 we achieved all of our key environmental targets. Highlights included maintaining the high proportion of sustainable paper we use and further reducing our electricity consumption and associated greenhouse gas emissions.
Our readers are drawn to our strong social conscience, and our transparency. We are delighted to be a launch partner of The Trust Project, an international initiative to make it easier for readers to find out more about the organisations and the people providing them with news, and to support quality journalism.
The Daily Mirror's campaign for a change in organ donation laws received a major boost in October 2017 when the Prime Minister announced she would introduce an Opt Out system for England, and the end of February, MPs agreed to change organ donation law (so-called "deemed consent" legislation). The proposed move, which was discussed in the House of Commons, comes after a two-year campaign by the Daily Mirror to change the organ donor system, which could save hundreds of lives a year.
After an explosion killed 22 at a pop concert in Manchester, The Manchester Evening News launched an appeal to support victims' families via JustGiving. Generous readers and businesses came forward in their thousands to raise more than £2.5 million for those affected by the terrorist attack in Manchester on 22 May 2017.
The reaction of the city's daily newspaper demonstrated the vital role of local journalism. Manchester Evening News was a trusted source of information during those critical hours when the city's residents needed somewhere to turn, and shone a light on local heroes who rushed to the scene to help during those dreadful hours.
The directors present their report together with the audited consolidated financial statements for the 52 weeks ended 31 December 2017.
Company law requires the directors to prepare financial statements for each financial year. The directors are required to prepare the consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). The Company has adopted FRS 101, a reduced disclosure regime, for its parent company financial statements, which is one of the bases of preparation permitted by the Financial Reporting Council.
Under company law, the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group or Company and of the profit or loss of the Group or Company for that period
In preparing the consolidated financial statements, International Accounting Standard 1 requires that directors:
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the parent company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors have a duty to promote the success of the Company for the benefit of its members as a whole. The Board understands the need to act fairly as between the members of the Company when assessing the consequences of a decision over the longer term.
The Group's key stakeholders are our shareholders, employees, pension schemes and finance providers.
Details of meetings with shareholders can be found on pages 37 and 38.
The Group aims to maintain a high reputation for high standards of business conduct and does this by understanding the interests of the Company's employees, and ensuring relationships with suppliers and customers are fostered.
The profit for the period attributable to equity holders of the parent company was £40.4 million (2016: £39.0 million). Dividend payments amounting to £15.3 million were made during the 52 weeks ended 31 December 2017 (2016: £14.6 million). After dividends, retained profit for the period was £25.1 million (2016: £24.4 million).
The Board proposes a final dividend for 2017 of 3.55 pence per share (2016: 3.35 pence per share) which, subject to shareholder approval, will be payable on 8 June 2018 to shareholders on the register on 11 May 2018. The proposed final dividend together with the interim dividend of 2.25 pence per share (2016: 2.10 pence per share) results in a total dividend for 2017 of 5.80 pence per share (2016: 5.45 pence per share).
On 1 August 2016 the Group announced a Share Repurchase Programme of the Company's 10p Ordinary Shares, up to a maximum consideration of £10 million. The purpose of the Share Repurchase Programme was to reduce the Company's share capital, with the repurchased shares being held in Treasury. The Share Repurchase Programme, which completed on 14 November 2017, repurchased 10,017,620 10p Ordinary shares with an aggregate nominal value of £1,001,762, representing 3.53% of the issued share capital of the Company.
Treasury shares do not receive dividends and are not included when calculating the total voting rights in the Company. The Company, if deemed fit, can sell the shares for cash or transfer the shares for use in an employee share scheme. The Company intends to hold the repurchased shares in Treasury for the foreseeable future.
As the Group continues to manage the business through the structural challenges facing print media the Board has adopted a progressive dividend policy that is aligned to free cash generation of the business. The free cash generation for the purposes of assessing the dividend is the net cash flow generated by the Group before the repayment of debt, dividend payments, other capital returns to shareholders and additional contributions made to the defined benefit pension schemes as a result of a substantial increase in dividends and/or capital returns to shareholders. When setting the level of dividends the Board will ensure that the Group maintains adequate headroom for investment and any unexpected cash flow requirements for historical events or to fund further restructuring. Based on the Board's expectation of future cash flows the Board expects dividends to increase by at least 5% per annum.
The Company will also continue to consider, if appropriate, the return of capital to shareholders through a share buyback if it has generated surplus cash and sees an opportunity to enhance earnings per share and therefore shareholder value. Prior to initiating a share buyback programme the Company will carefully consider the cash generation of the business and the Group's obligations to the Group's defined benefit pension schemes.
The risks associated with the delivery of the dividend policy are as follows:
There is a waiver in place in respect of all or any future right to dividend payments on shares held in the Trinity Mirror Employees' Benefit Trust (3,860,038 shares as at 31 December 2017), shares held in TIH Employee Benefit Trust (90,855 shares as at 31 December 2017) and shares held in Treasury (10,017,620 shares as at 31 December 2017).
For the purposes of compliance with LR 9.8.4R of the Listing Rules, the following information is included by reference within the Directors' Report:
| LR 9.8.4R | Location |
|---|---|
| Directors' remuneration | Directors' Remuneration Report, pages 46 to 60 |
| Waiver or agreed waiver of dividends by a shareholder | Directors' Report, page 68 |
| Details of Long-Term Incentive Schemes | Directors' Remuneration Report, pages 46 to 60 |
At the Company's Annual General Meeting held on 4 May 2017, the Company and its subsidiaries received authority from shareholders under the Companies Act 2006 to make donations to political parties of up to £75,000 in aggregate per annum. No political donations were made during the 52 weeks ended 31 December 2017 (2016: nil).
The disclosure in respect of the greenhouse gas emissions of the Company that are attributable to human activity in tonnes of carbon dioxide equivalent for all six greenhouse gases are set out in the Corporate Responsibility Report on page 62.
continued
The Company is committed to increasing the service quality, profitability and efficiency of the Company by attracting and recruiting the people who are best suited to meet the standards for the role and the Company without regard to race, creed, colour, nationality (subject to legal eligibility), ethnic origin, religion, gender, age, sex change, sexual orientation, marital status, connections with a national minority, membership or non-membership of a trade union or, unless justifiable, disability.
We pursue a policy of equal opportunities for all employees and potential employees. We have continued our policy of giving fair consideration to applications for employment made by disabled persons bearing in mind the requirements for skills and aptitude for the job. In the areas of planned employee training and career development, we strive to ensure that disabled employees receive equal treatment on all possible benefits, including opportunities for promotion. Every effort is made to ensure that continuing employment and opportunities are also provided for employees who become disabled, where reasonably practical to do so. Within the limitations of commercial confidentiality and security, it is the policy of the Company to take views of employees into account in making decisions and wherever possible, to encourage the involvement of employees in the Group's performance.
Group companies operate to a mix of Group standard advisory policies as well as evolving their own variations to standard policies as appropriate to the market places in which they operate. Methods of communication used within the Group include staff forums, advisory committee meetings, newsletters, bulletins, pension trustee reports, management briefings and staff surveys.
Simon Fox, Chief Executive, is the executive director with Human Resource responsibility.
Further information about our employees is set out on pages 12 to 15 of the Strategic Report.
As at 31 December 2017 the Company's issued share capital comprised 283,459,571 ordinary shares with voting rights and a nominal value of 10 pence each. The Company held 10,017,620 ordinary shares in Treasury. Therefore, the total number of voting rights in the Company was 273,441,951.
As at 31 December 2017, the Trinity Mirror Employees' Benefit Trust held 3,860,038 shares (2016: 4,307,155). At the same date the TIH Employee Benefit Trust held 90,855 shares (2016: 90,855).
On 28 February 2018, the Company issued 25,826,746 ordinary shares to Northern & Shell Media Group Limited in connection with the acquisition of Northern & Shell's UK publishing assets.
Details of the authorised and issued share capital, share premium account and treasury shares can be found in notes 30 and 31 in the notes to the consolidated financial statements.
As at 31 December 2017, the Company had been notified of the following beneficial interests in its ordinary shares:
| Name | Number of shares |
Percentage of issued share capital |
|---|---|---|
| Aberforth Partners | 35,983,891 | 13.16 |
| Schroder Investment Mgt | 32,716,589 | 11.96 |
| Majedie Asset Mgt | 23,294,056 | 8.52 |
| Aberdeen Standard Investments (Standard Life) | 21,668,595 | 7.92 |
| Dimensional Fund Advisors | 14,120,567 | 5.16 |
| Premier Fund Mgt | 13,631,107 | 4.99 |
| JPMorgan Asset Mgt | 11,822,497 | 4.32 |
| Aviva Investors | 9,718,955 | 3.55 |
| River & Mercantile Asset Mgt | 9,716,186 | 3.55 |
| LSV Asset Mgrs | 8,838,294 | 3.23 |
From 31 December 2017 to 28 February 2018, the Company was notified of the following changes to the above beneficial interests:
| Name | Number of shares |
Percentage of issued share capital |
|---|---|---|
| Aviva Investors | 6,779,582 | 2.49 |
On 28 February 2018, the Company issued 25,826,746 ordinary shares to Northern & Shell Media Group Limited in connection with the acquisition of Northern & Shell's UK publishing assets. From 28 February 2018 to the date of this report, the Company was notified of the following changes to the above beneficial interests:
| Name | Number of shares |
Percentage of issued share capital |
|---|---|---|
| Schroder Investment Mgt | 33,430,352 | 11.17 |
continued
The directors of the Company who served during the period, unless stated otherwise, are listed below:
Executive
Simon Fox Vijay Vaghela
Non-executive
David Grigson Lee Ginsberg David Kelly Helen Stevenson
Steve Hatch
Olivia Streatfeild
Details of directors' remuneration, including details of the beneficial and non-beneficial interests in shares, can be found in the Annual Report on Remuneration on pages 52 to 60. Details in respect of directors' indemnity and insurance are included on page 37 of the Corporate Governance Report.
Biographical details of each of the directors seeking re-election at the Annual General Meeting can be found on pages 32 and 33.
The Company's Articles of Association may only be amended by a special resolution at a general meeting of the shareholders.
At the Company's Annual General Meeting on 4 May 2017, shareholders approved an authority for the Company to make market purchases of its own shares up to a maximum of 27,968,253 shares (being 10% of the issued share capital at that time) at prices not less than the nominal value of each share (being 10 pence each) and not exceeding 105% of the average mid-market price for the preceding five business days. Use was made of this authority during the period and details can be found on pages 67 and 68.
Each of the persons who are a director at the date of approval of this Annual Report confirms that:
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Deloitte LLP have expressed their willingness to continue in office as auditor of the Company and their reappointment will be put to shareholders at the next Annual General Meeting.
The directors confirm to the best of their knowledge:
The Board confirms that the Annual Report, taken as a whole, is fair, balanced and understandable and it provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy. By order of the Board
Vijay Vaghela Company Secretary 5 March 2018
In our opinion:
We have audited the financial statements of Trinity Mirror plc (the 'Parent Company') and its subsidiaries (the 'Group') which comprise:
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 101 "Reduced Disclosure Framework".
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council's (FRC's) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the nonaudit services prohibited by the FRC's Ethical Standard were not provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
| Key audit matters | The key audit matters that we identified in the current and prior period are: – Carrying value of goodwill and other intangible assets in the consolidated balance sheet and fixed asset investments in the parent company balance sheet – the assessment of the carrying value of goodwill and intangible assets such as the Group's publishing rights and titles, involves considerable judgement particularly in accurately forecasting future cash flows given the market environment for publishers; – Provision for historical legal issues – the Group faces a number of civil claims in relation to suspected phone hacking arising in the past. The calculation of the provision requires significant judgement based on an assessment of the facts and a range of possible outcomes; and – Accounting for pension obligations – there is significant judgement involved in the valuation of the retirement benefit obligations particularly in determining the key assumptions underlying the valuation such as the discount rate. |
|---|---|
| Materiality | The materiality that we used for the Group financial statements was £5.2m which was determined on the basis of 5% of statutory profit before taxation adjusted for the increase in the historical legal provision, fees incurred in connection with the acquisition of Northern & Shell's publishing assets, profit on disposal of freehold property, IAS 19 pension finance costs and IAS 39 finance costs. |
| Scoping | Our Group audit scope focuses on all the active entities of the Group. This accounts for all of the Group's revenue and operating profit and over 99% of total assets. |
| Significant changes in our approach | There have been no significant changes in our approach in the current period. |
continued
We have reviewed the directors' statement in note 3 to the consolidated financial statements, and in the Corporate Governance Report on page 38 about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the Group's and Company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements.
We are required to state whether we have anything material to add or draw attention to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit.
Based solely on reading the directors' statements and considering whether they were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the directors' assessment of the Group's and the Company's ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to:
We are also required to report whether the directors' statement relating to the prospects of the Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The carrying value of goodwill and other intangible assets is £901.2 million in the consolidated balance sheet and fixed asset investments are £811.8 million in the Parent Company balance sheet.
The assessment of the carrying value of goodwill and other intangible assets such as the Group's publishing rights and titles, as described in notes 14 and 15 to the consolidated financial statements, involves considerable judgement particularly in accurately forecasting future cash flows given the market environment for publishers. External market data and market commentators are, on the whole, uncertain about the future growth in the newspaper sector and, in general, there is greater uncertainty about the prospects for regional newspapers. Taking the prevailing environment into account, it is critical to management's assessment that the Group grow digital revenues at sufficient speed, and to sufficient scale, to offset the long-term decline in print revenues. In the short-term, this is supported by the ability to take out costs to mitigate print revenue declines and thus improve operating margins. In the absence of this being achieved, a significant impairment will arise in the future.
Key assumptions in management's analysis include:
The Audit & Risk Committee have presented their assessment of the key assumptions and conclusion with respect to this key audit matter in their report on pages 42 and 43.
Similar judgement is required in assessing the carrying value of investments held by Trinity Mirror plc (note 4 to the Parent Company financial statements).
continued
We tested management's assumptions used in their impairment assessment of the Group's goodwill and other intangible assets in the consolidated balance sheet and the carrying value of investments in the Parent Company balance sheet. Our procedures included:
In addition, we evaluated the appropriateness of the "reasonable possible change" and other disclosures included in notes 14 and 15 to the consolidated financial statements by reference to the audit procedures outlined above.
As described in note 15 to the consolidated financial statements, the impairment review is sensitive to reasonably possible changes and although headroom exists in management's impairment analysis, it is limited, notably in the Regionals CGU where it is marginal. Based on our procedures performed we conclude that the assumptions applied by management are acceptable although we did make the following further key observations:
The Group faces a number of civil claims in relation to suspected phone hacking arising in the past.
As this matter has developed the consideration of the latest information, such as new claims or experience from settling claims, has led to a reappraisal of the amounts provided.
During the period, management reconsidered the sufficiency of the provision held and an additional £10.5 million has been charged to the consolidated income statement for dealing with and resolving these civil claims. The outstanding provision of £10.7 million held at 31 December 2017 is disclosed within the provisions note (note 22) to the consolidated financial statements.
This is recognised as a key source of estimation uncertainty and a contingent liability in notes 3 and 38 to the consolidated financial statements respectively.
The Audit & Risk Committee have highlighted this key audit matter as a significant financial issue in their report on page 43.
continued
The audit procedures we performed in respect of this risk included:
With the majority of damages settled, we determine that there is sufficient evidence to support the basis for management's best estimate and the principal reason for the increase is the notable increase in the amount required to settle claimant's costs based on the most recent experience.
However, whilst from our procedures performed we concur that the overall provision recognised by management is appropriate, based on experience to date we believe that there could be additional legal costs and claims, and therefore a further increase in the provision may be necessary, although this will depend on how existing claims are settled. We support the additional contingent liability disclosure as there continues to be uncertainty as to how outstanding matters will progress and be resolved.
The net pension deficit (pre deferred tax) on the consolidated balance sheet is £377.6 million and the gross liability in note 33 to the consolidated financial statements is £1,929.2 million. There is significant judgement involved in the valuation of the retirement benefit obligations, particularly in relation to determining the assumptions, including discount rate, inflation rates and demographic assumptions (disclosed in note 33 to the consolidated financial statements) underlying the valuation of the liabilities of the schemes.
Management include this as a key source of estimation uncertainty in note 3 to the consolidated financial statements.
The Audit & Risk Committee have highlighted this key audit matter as a significant financial issue their report on page 43.
The audit procedures we performed in respect of this risk included:
We are satisfied that all assumptions applied by the Group in respect to the valuation of scheme liabilities are appropriate. The Group's assumptions fall within the middle of our expected range based on a relevant comparator group.
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
| Materiality | We determined materiality for the Group to be £5.2 million (2016: £5.3 million). We determined materiality for the Parent Company to be £2.1 million (2016: £2.7 million). |
|---|---|
| Basis for determining materiality | This equates to 5% of statutory profit before tax adjusted for the increase in the historical legal provisions, fees incurred in connection with the acquisition of Northern & Shell's publishing assets, profit on disposal of freehold property, IAS 19 pension finance costs and IAS 39 finance costs. The method used to determine materiality, including the adjustments made, is consistent with 2016. It is also below 1% (2016: 1%) of both revenue and equity and equates to 6.8% (2016: 6.9%) of statutory profit before tax. Parent Company materiality was less than 3% of net assets of the Company. |
continued
| Rationale for the benchmark applied | This has been based on professional judgement. We believe profit before tax adjusted for the increase in the historical legal provisions, fees incurred in connection with the acquisition of Northern & Shell's publishing assets, profit on disposal of freehold property, IAS 19 pension finance costs and IAS 39 finance costs to be the financial measure most relevant to users of the financial statements. |
|---|---|
| The Parent Company has limited trading and holds significant investments in subsidiaries of the Group therefore equity was used as an appropriate benchmark. |
We agreed with the Audit & Risk Committee that we would report to the Committee all audit differences in excess of £0.2 million (2016: £0.2 million) for the Group, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit & Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level.
Our Group audit scope focused on all active entities of the Group (excluding those which are clearly immaterial to the Group), which account for all of the Group's revenue and profit before tax and over 99% of the Group's total assets. Our audit work at all audit locations was executed at a local component materiality level between £2.0 million and £3.8 million, determined by reference to the scale of the business concerned, with all entities using materiality lower than Group materiality. At the Parent Company level we also tested the consolidation process. For the single entity not subject to detailed audit work, we carried out analytical procedures to confirm our conclusion there were no material misstatements in the aggregated financial information.
The Group audit team continued to follow a programme of planned visits that has been designed so that the Senior Statutory Auditor or a senior member of the Group audit team visits each of the principal locations where the Group audit scope is performed each period to understand the key issues and audit findings at these locations, attend the component close meetings and review formal reporting from the component auditors. The Senior Statutory Auditor or a senior member of the audit team visited all significant components and met with senior management of all locations as part of the audit process to plan the audit and understand financial performance and key judgements. Senior members of the Group audit team held regular interactions with component teams throughout the audit to ensure that the Group audit work was sufficiently supervised and instructions were understood and executed.
The directors are responsible for the other information. The other information comprises the information included in the Annual Report other than the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that:
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
continued
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC's website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor's report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
In our opinion the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
In the light of the knowledge and understanding of the Group and of the Parent Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors' report.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors' remuneration have not been made or the part of the directors' remuneration report to be audited is not in agreement with the accounting records and returns.
Deloitte LLP (or its predecessor firms) were appointed as external auditor on the formation of Trinity Mirror plc in 1999. The period of total uninterrupted engagement including previous renewals and reappointments of the firm therefore, covers the years from 1999 to 2017.
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
for and on behalf of Deloitte LLP Statutory Auditor London, UK 5 March 2018
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| notes | 2017 £m |
2016 £m |
|
|---|---|---|---|
| Revenue | 4,5 | 623.2 | 713.0 |
| Cost of sales | (308.2) | (342.1) | |
| Gross profit | 315.0 | 370.9 | |
| Distribution costs | (63.7) | (76.0) | |
| Administrative expenses: | |||
| Operating adjusted items | 8 | (26.4) | (43.6) |
| Other administrative expenses | (127.4) | (158.5) | |
| Share of results of associates: | 17 | ||
| Results before operating adjusted items | 0.8 | 1.1 | |
| Operating adjusted items | (0.4) | (0.4) | |
| Operating profit | 97.9 | 93.5 | |
| Investment revenues | 9 | 0.1 | 0.6 |
| Pension finance charge | 33 | (11.9) | (10.4) |
| Finance costs | 10 | (4.2) | (7.2) |
| Profit before tax | 81.9 | 76.5 | |
| Tax charge | 11 | (19.1) | (7.0) |
| Profit for the period attributable to equity holders of the parent | 62.8 | 69.5 | |
| Statutory earnings per share | 2017 Pence |
2016 Pence |
|
| Earnings per share – basic | 13 | 23.0 | 24.9 |
| Earnings per share – diluted | 13 | 22.9 | 24.8 |
| Adjusted* earnings per share | 2017 Pence |
2016 Pence |
|
| Earnings per share – basic | 13 | 36.1 | 38.1 |
| Earnings per share – diluted | 13 | 35.9 | 37.8 |
* Set out in note 36 is the reconciliation between the statutory and adjusted results.
| 2017 | 2016 | ||
|---|---|---|---|
| notes | £m | £m | |
| Profit for the period | 62.8 | 69.5 | |
| Items that will not be reclassified to profit and loss: | |||
| Actuarial gain/(losses) on defined benefit pension schemes | 33 | 62.6 | (188.9) |
| Tax on actuarial gain/(losses) on defined benefit pension schemes | 11 | (10.5) | 32.1 |
| Deferred tax credit/(charge) including the future change in tax rate | 11 | 0.4 | (0.6) |
| Share of items recognised by associates | 17 | (5.4) | 1.1 |
| Other comprehensive income/(costs) for the period | 47.1 | (156.3) | |
| Total comprehensive income/(costs) for the period | 109.9 | (86.8) |
| notes | 2017 £m |
2016 £m |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Cash generated from operations | 24 | 68.1 | 91.5 |
| Income tax paid | (13.9) | (12.2) | |
| Net cash inflow from operating activities | 54.2 | 79.3 | |
| Investing activities | |||
| Interest received | 0.1 | 0.6 | |
| Proceeds on disposal of property, plant and equipment | 1.2 | 10.6 | |
| Purchases of property, plant and equipment | (8.9) | (4.3) | |
| Proceeds on disposal of subsidiary undertaking | – | 1.8 | |
| Acquisition of associate undertaking | – | (0.8) | |
| Net cash (used in)/received from investing activities | (7.6) | 7.9 | |
| Financing activities | |||
| Dividends paid | 12 | (15.3) | (14.6) |
| Interest paid on borrowings | (2.1) | (5.9) | |
| Repayment of borrowings | (68.3) | (80.0) | |
| Purchase of own shares | (7.7) | (2.3) | |
| Purchase of shares for LTIP | – | (2.0) | |
| Draw down on bank facility | 25.0 | – | |
| Net cash used in financing activities | (68.4) | (104.8) | |
| Net decrease in cash and cash equivalents | (21.8) | (17.6) | |
| Cash and cash equivalents at the beginning of the period | 19 | 37.8 | 55.4 |
| Cash and cash equivalents at the end of the period | 19 | 16.0 | 37.8 |
| Share capital £m |
Share premium account £m |
Merger reserve £m |
Capital redemption reserve £m |
Retained earnings and other reserves £m |
Total £m |
|
|---|---|---|---|---|---|---|
| At 27 December 2015 | (28.3) | (606.7) | (37.9) | (4.4) | (6.3) | (683.6) |
| Profit for the period | – | – | – | – | (69.5) | (69.5) |
| Other comprehensive costs for the period | – | – | – | – | 156.3 | 156.3 |
| Total comprehensive costs for the period | – | – | – | – | 86.8 | 86.8 |
| Credit to equity for equity-settled share-based payments | – | – | – | – | (1.5) | (1.5) |
| Purchase of shares for LTIP | – | – | – | – | 2.0 | 2.0 |
| Purchase of own shares | – | – | – | – | 2.3 | 2.3 |
| Dividends paid | – | – | – | – | 14.6 | 14.6 |
| At 1 January 2017 | (28.3) | (606.7) | (37.9) | (4.4) | 97.9 | (579.4) |
| Profit for the period | – | – | – | – | (62.8) | (62.8) |
| Other comprehensive income for the period | – | – | – | – | (47.1) | (47.1) |
| Total comprehensive income for the period | – | – | – | – | (109.9) | (109.9) |
| Credit to equity for equity-settled share-based payments | – | – | – | – | (0.5) | (0.5) |
| Purchase of own shares | – | – | – | – | 7.7 | 7.7 |
| Dividends paid | – | – | – | – | 15.3 | 15.3 |
| At 31 December 2017 | (28.3) | (606.7) | (37.9) | (4.4) | 10.5 | (666.8) |
at 31 December 2017 (at 1 January 2017)
| notes | 2017 £m |
2016 £m |
|
|---|---|---|---|
| Non-current assets | |||
| Goodwill | 14 | 102.0 | 102.0 |
| Other intangible assets | 15 | 799.2 | 799.5 |
| Property, plant and equipment | 16 | 247.7 | 262.1 |
| Investment in associates | 17 | 16.8 | 21.8 |
| Deferred tax assets | 21 | 66.4 | 81.5 |
| 1,232.1 | 1,266.9 | ||
| Current assets | |||
| Inventories | 18 | 4.9 | 5.8 |
| Trade and other receivables | 19 | 89.9 | 89.8 |
| Derivative financial instruments | 26 | – | 14.8 |
| Cash and cash equivalents | 19 | 16.0 | 37.8 |
| 110.8 | 148.2 | ||
| Total assets | 1,342.9 | 1,415.1 | |
| Non-current liabilities | |||
| Retirement benefit obligations | 33 | (377.6) | (466.0) |
| Deferred tax liabilities | 21 | (165.4) | (164.1) |
| Provisions | 22 | (3.7) | (3.6) |
| (546.7) | (633.7) | ||
| Current liabilities | |||
| Trade and other payables | 20 | (80.1) | (83.1) |
| Borrowings | 25 | (25.0) | (81.2) |
| Current tax liabilities | 11 | (7.7) | (9.8) |
| Provisions | 22 | (16.6) | (27.9) |
| (129.4) | (202.0) | ||
| Total liabilities | (676.1) | (835.7) | |
| Net assets | 666.8 | 579.4 | |
| Equity | |||
| Share capital | 29,30 | (28.3) | (28.3) |
| Share premium account | 29,31 | (606.7) | (606.7) |
| Merger reserve | 29 | (37.9) | (37.9) |
| Capital redemption reserve | 29 | (4.4) | (4.4) |
| Retained earnings and other reserves | 29 | 10.5 | 97.9 |
| Total equity attributable to equity holders of the parent | (666.8) | (579.4) |
These consolidated financial statements were approved by the Board of directors and authorised for issue on 5 March 2018. They were signed on its behalf by:
Simon Fox Vijay Vaghela
Chief Executive Group Finance Director
Trinity Mirror plc is a company incorporated in England and Wales and listed on the London Stock Exchange. The Company's registered number is 82548. The address of the registered office is One Canada Square, Canary Wharf, London E14 5AP. The principal activities of the Group are discussed in the Strategic Report on pages 1 to 30.
These consolidated financial statements were approved for issue by the Board of directors on 5 March 2018. The 2017 Annual Report will be available on the Company's website at www.trinitymirror.com and at the Company's registered office at One Canada Square, Canary Wharf, London E14 5AP on 5 March 2018 and will be sent to shareholders who have elected to receive a hard copy with the documents for the Annual General Meeting to be held on 3 May 2018.
The Company presents the results on a statutory and adjusted basis and revenue trends on a statutory and like for like basis as described in the in summary section on page 1 of the Strategic Report.
The Group has adopted the following standards during the current financial period which have had no material impact on the Group:
The following standards and interpretations (* denotes not yet endorsed for use in the EU), which have not been applied and when adopted are not expected to have a material impact on the Group, were in issue and will be effective for periods beginning on or after 1 January 2018 unless stated below:
The assessment of the impact of IFRS 9 (Amended) 'Financial Instruments' and IFRS 15 (Issued) 'Revenue from Contracts with Customers' (both effective for periods beginning on or after 1 January 2018) revealed that, when adopted, these standards will have no material impact on the Group.
The initial assessment of the impact of IFRS 16 (Issued) 'Leases' (effective for periods beginning on or after 1 January 2019) revealed that, when adopted based on the operating leases at the reporting date, fixed assets and lease obligations of around £20 million would be recognised on the consolidated balance sheet with no material impact on operating profit as operating lease costs would be replaced with an equivalent depreciation charge in the income statement.
The Group has adopted standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations as adopted by the European Union (EU). Individual standards and interpretations have to be adopted by the EU and the process leads to a delay between the issue and adoption of new standards and interpretations and in some cases amendments by the EU.
The parent company financial statements of Trinity Mirror plc for the 52 weeks ended 31 December 2017, prepared in accordance with applicable law and UK Accounting Practice, including FRS 101 'Reduced Disclosure Framework', are presented on pages 112 to 116.
These consolidated financial statements have been prepared on a going concern basis as set out on page 38 of the Corporate Governance Report.
For administrative convenience, the consolidated financial statements are made up to a suitable date near the end of the calendar year. These consolidated financial statements have been prepared for the 52 weeks ended 31 December 2017 and the comparative period has been prepared for the 53 weeks ended 1 January 2017.
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented.
These consolidated financial statements have been prepared in accordance with IFRS standards and IFRIC interpretations as adopted by the EU and with those parts of the Companies Act 2006 applicable to groups reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of freehold properties which on transition to IFRS were deemed to be the cost of the asset and for derivative financial instruments and shared-based payments that have been measured at fair value. A summary of the more important Group accounting policies is set out on pages 81 to 84.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The consolidated financial statements incorporate the financial statements of Trinity Mirror plc and all entities controlled by it for the 52 weeks ended 31 December 2017. Control is achieved where the Company has the power to govern the financial and operating policies of the investee entity, has the rights to variable returns from its involvement with the investee and has the ability to use its power to affect its returns. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
On the acquisition of a business, including an interest in an associated undertaking or a joint venture, fair values are attributed to the Group's share of the identifiable assets and liabilities of the business existing at the date of acquisition and reflecting the conditions as at that date. Where necessary, adjustments are made to the financial statements of businesses acquired to bring their accounting policies in line with those used in the preparation of the consolidated financial statements. Results of businesses are included in the consolidated income statement from the effective date of acquisition and in respect of disposals up to the effective date of relinquishing control.
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair value at the acquisition date of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the profit or loss account as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in fair value of contingent consideration classified as an asset or liability are accounted for in accordance with the relevant IFRS. Changes in the fair value of contingent consideration classified as equity are not recognised.
Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of the entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Negative goodwill arising on an acquisition is recognised directly in the consolidated income statement upon acquisition. On disposal of a subsidiary or associate, the remaining amount of goodwill is included in the determination of the profit or loss on disposal.
Goodwill is reviewed for impairment either annually or more frequently if events or changes in circumstances indicate a possible decline in the carrying value. For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit, pro-rated on the basis of the carrying amount of each asset in the unit, but subject to not reducing any asset below its recoverable amount. An impairment loss recognised for goodwill is not reversed in a subsequent period.
Other intangible assets comprise acquired publishing rights and titles in respect of print publishing activities and other intangible assets in respect of online activities. On acquisition, the fair value of other intangible assets is calculated based on forecast discounted cash flows. On disposal, the carrying amount of the related other intangible asset is de-recognised and the gain or loss arising from derecognition, determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is recognised in the consolidated income statement.
Publishing rights and titles are initially recognised as an asset at fair value with an indefinite economic life. They are not subject to amortisation. For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. Where the asset does not generate cash flows that are independent from other assets, value in use estimates are made based on the cash flows of the cash-generating unit to which the asset belongs. The publishing rights and titles are reviewed for impairment either at each reporting date or more frequently when there is an indication that the recoverable amount is less than the carrying amount. Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use the estimated future cash flows of the cash-generating unit relating to the asset are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset for which estimates of future cash flows have not been adjusted. If the recoverable amount of a cash-generating unit is estimated to be less than its carrying amount, the carrying value of the cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised in the consolidated income statement in the period in which it occurs and may be reversed in subsequent periods.
Other intangible assets in respect of online activities are amortised using the straight-line method over the expected life over which those assets will generate revenues and profits for the Group and are tested for impairment at each reporting date or more frequently where there is an indication that the recoverable amount is less than the carrying amount.
Costs incurred in the development of websites are only capitalised if the criteria specified in IAS 38 are met.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Associates are all entities over which the Group has significant influence but not control and are accounted for by the equity method of accounting, initially recognised at cost. The Group's share of associates post-acquisition profits or losses after tax is recognised in the consolidated income statement and its share of other comprehensive income are recognised in the consolidated statement of comprehensive income.
Revenue is measured at the fair value of the consideration received, net of applicable discounts and value added tax. Advertising revenue is recognised upon publication. Circulation revenue is recognised at the time of sale. Printing revenue is recognised when the service is provided. Digital revenue is recognised over the period of the online campaign. Other revenue including leaflets and events revenue is recognised at the time of sale or provision of service. Rentals receivable under operating leases are credited to the consolidated income statement on a straight-line basis over the lease term. Interest income from bank deposits is recognised on an accruals basis. Dividend income from investments is recognised when the shareholders' rights to receive payment have been established.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the Group. All other leases are classified as operating leases. Assets held under finance leases are recognised at their fair value at the inception of the lease or, if lower, the present value of the minimum lease payments. The asset is recognised within property, plant and equipment and the corresponding liability to the lessor is included within obligations under finance leases. Lease payments are apportioned between finance charges which are charged to the consolidated income statement and reductions in the lease obligation. Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the lease term. Benefits received as incentives to enter into the agreement are spread on a straight-line basis over the lease term.
Transactions denominated in foreign currencies are translated at the rates of exchange prevailing on the date of the transactions. At each reporting date, items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Exchange differences arising on settlement and on retranslation are included in the consolidated income statement for the period.
The Group operates a number of defined benefit pension schemes, all of which have been set up under trusts that hold their financial assets independently from those of the Group and are controlled by trustees. The amount recognised in the balance sheet in respect of defined benefit pension schemes is the present value of the defined benefit obligation at the reporting date less the fair value of scheme assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The resultant liability or asset of each scheme is included in non-current liabilities or non-current assets as appropriate. Any surplus recognised is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions. The defined benefit obligation is calculated at each reporting date by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds approximating to the terms of the related pension liability.
The Group operates a defined contribution pension scheme which has been set up under a trust that holds the financial assets independently from those of the Group and is controlled by Trustees. The Group also operates Group Personal Pension Plans which are defined contribution pension schemes where employees hold a personal policy directly with the policy provider. Payments to defined contribution pension schemes are charged as an expense as they fall due.
The tax expense represents the sum of the corporation tax currently payable and deferred tax.
The corporation tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the consolidated income statement except when it relates to items charged or credited in the consolidated statement of comprehensive income or items charged or credited directly to equity in which case the deferred tax is also dealt with in the consolidated statement of comprehensive income and equity respectively.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Property, plant and equipment are stated in the consolidated balance sheet at cost less accumulated depreciation and impairment losses. Cost includes the purchase price and all directly attributable costs of bringing the asset to its location and condition necessary to operate as intended.
Depreciation is charged so as to write-off the cost, other than freehold land and assets under construction which are not depreciated, using the straight-line method over the estimated useful lives of buildings (15–67 years) and plant and machinery (3–25 years). Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation commences when the assets are ready for their intended use.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the consolidated income statement.
Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first in first out method.
Financial assets and financial liabilities are recognised in the consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Trade receivables do not carry any interest. Conversion to a readily known amount of cash occurs over a short period and is subject to an insignificant risk of changes in value. Therefore balances are initially recognised at fair value and reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and cash equivalents comprise cash in hand and short-term bank deposits with an original maturity of one week or less.
Sterling interest bearing loans and bank overdrafts are recorded at the proceeds received, net of direct issue costs. Foreign currency interest bearing loans are recorded at the exchange rate at the reporting date. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the consolidated income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. All other borrowing costs are recognised in the consolidated income statement in the period in which they are incurred.
The Group uses derivative financial instruments, including currency swaps, cross-currency interest rate swaps, interest rate swaps and other hedging instruments to minimise exposure to the financial risks of changes in foreign currency exchange rates and interest rates. The Group does not use derivative financial instruments for speculative purposes. The Group has elected not to apply hedge accounting.
Derivative financial instruments are separately recognised at fair value in the consolidated financial statements. Changes in the fair value of derivative financial instruments are recognised immediately in the consolidated income statement.
Derivatives embedded in commercial contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the underlying contract, with unrealised gains or losses reported in the consolidated income statement.
Trade payables are not interest bearing. Payments occur over a short period and are subject to an insignificant risk of changes in value. Therefore balances are stated at their nominal value.
The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the consolidated balance sheet are net of allowances for doubtful receivables, estimated based on prior experience and assessment of the current economic environment.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material. Provisions are made for legal and other costs in respect of historical litigation and other matters in progress and for estimated damages where it is judged probable that damages will be payable.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The Group issues equity-settled benefits to certain employees. These equity-settled share-based payments are measured at fair value at the date of grant taking advice from third party experts. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured by use of a stochastic (Monte-Carlo binomial) model. The expected life used in the model has been adjusted, based on the directors' best estimates, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax.
Where the Group's own shares are purchased, the consideration paid including any directly attributable incremental costs, net of income taxes, is deducted from equity attributable to the Group's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are cancelled, the nominal value of shares cancelled is shown in the capital redemption reserve. Where such shares are subsequently reissued or disposed of, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Group's equity holders.
Dividend distributions to the Company's shareholders are recognised as a liability in the consolidated financial statements in the period in which the dividends are approved.
The key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:
There is uncertainty as to liabilities arising from the outcome or resolution of the ongoing historical legal issues and in addition there is uncertainty as to the amount of expenditure that may be tax deductible and additional tax liabilities may fall due in relation to earlier years. Provisions are measured at the best estimate of the expenditure required to settle the obligation based on the assessment of the related facts and circumstances at each reporting date.
Actuarial assumptions adopted and external factors can significantly impact the surplus or deficit of defined benefit pension schemes. Valuations for funding and accounting purposes are based on assumptions about future economic and demographic variables. This results in risk of a volatile valuation deficit and the risk that the ultimate cost of paying benefits is higher than the current assessed liability value. Advice is sourced from independent and qualified actuaries in selecting suitable assumptions at each reporting date.
There is uncertainty in the value in use calculation. The most significant area of uncertainty relates to expected future cash flows for each cash-generating unit. Determining whether goodwill and other intangible assets are impaired requires an estimation of the value in use of the cash-generating unit to which these have been allocated. It also requires assessment of the appropriateness of the cashgenerating unit at each reporting date. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Projections are based on both internal and external market information and reflect past experience. The discount rate reflects a long-term equity and debt mix based on the period end enterprise value assuming a long-term debt to EBITDA ratio of 2.5 times.
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board and chief operating decision maker (Executive Directors) to allocate resources to the segments and to assess their performance. The accounting policies used in the preparation of each segment's revenue and results are the same as the Group's accounting policies. The Board and chief operating decision maker are not provided with an amount for total assets by segment. The Group's operations are primarily located in the UK and the Group is not subject to significant seasonality during the year.
The Group has four operating segments that are regularly reviewed by the Board and chief operating decision maker.
The operating segments are: Publishing which includes all of our newspapers and associated digital publishing; Printing which provides printing services to the Publishing segment and to third parties; Specialist Digital which includes our acquired digital classified recruitment and digital marketing services businesses; and Central which includes revenue and costs not allocated to the operational divisions and our share of results of associates.
Segment revenue and results:
| Specialist | |||||
|---|---|---|---|---|---|
| Publishing | Printing | Digital | Central | Total | |
| 2017 | 2017 | 2017 | 2017 | 2017 | |
| 52 weeks ended 1 January 2017 | £m | £m | £m | £m | £m |
| Segment sales | 578.5 | 131.2 | 10.0 | 3.5 | 723.2 |
| Inter-segment sales | – | (99.6) | (0.4) | – | (100.0) |
| Total revenue | 578.5 | 31.6 | 9.6 | 3.5 | 623.2 |
| Segment result | 133.2 | – | 2.7 | (11.2) | 124.7 |
| Operating adjusted items | (26.8) | ||||
| Operating profit | 97.9 | ||||
| Investment revenues | 0.1 | ||||
| Pension finance charge | (11.9) | ||||
| Finance costs | (4.2) | ||||
| Profit before tax | 81.9 | ||||
| Tax charge | (19.1) | ||||
| Profit for the period | 62.8 | ||||
| 53 weeks ended 1 January 2017 | Publishing 2016 £m |
Printing 2016 £m |
Specialist Digital 2016 £m |
Central 2016 £m |
Total 2016 £m |
|---|---|---|---|---|---|
| Segment sales | 660.0 | 147.9 | 13.3 | 3.9 | 825.1 |
| Inter-segment sales | – | (111.7) | (0.4) | – | (112.1) |
| Total revenue | 660.0 | 36.2 | 12.9 | 3.9 | 713.0 |
| Segment result | 148.4 | – | 2.4 | (13.3) | 137.5 |
| Operating adjusted items | (44.0) | ||||
| Operating profit | 93.5 | ||||
| Investment revenues | 0.6 | ||||
| Pension finance charge | (10.4) | ||||
| Finance costs | (7.2) | ||||
| Profit before tax | 76.5 | ||||
| Tax charge | (7.0) | ||||
| Profit for the period | 69.5 |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| 2017 £m |
2016 £m |
|---|---|
| Publishing Print 494.6 |
581.0 |
| Circulation 284.7 |
310.6 |
| Advertising 177.6 |
236.6 |
| Other 32.3 |
33.8 |
| Publishing Digital 83.9 |
79.0 |
| Display and transactional 68.7 |
58.4 |
| Classified 15.2 |
20.6 |
| Printing 31.6 |
36.2 |
| Specialist Digital 9.6 |
12.9 |
| Central 3.5 |
3.9 |
| Total revenue 623.2 |
713.0 |
The Group's operations are located primarily in the UK. The Group's revenue by location of customers is set out below:
| 2017 £m |
2016 £m |
|
|---|---|---|
| UK and Republic of Ireland | 621.5 | 709.9 |
| Continental Europe | 1.6 | 2.8 |
| Rest of World | 0.1 | 0.3 |
| Total revenue | 623.2 | 713.0 |
| 2017 £m |
2016 £m |
|
|---|---|---|
| Operating profit for the period is arrived at after (charging)/crediting: | ||
| Staff costs (note 7) | (217.6) | (239.4) |
| Cost of inventories recognised as cost of sales | (67.8) | (80.6) |
| Depreciation of property, plant and equipment | (20.4) | (22.2) |
| Write-off of fixed assets | (1.9) | (9.6) |
| Operating lease rentals payable: | ||
| – property | (6.7) | (6.0) |
| – vehicles, plant and equipment | (2.7) | (3.6) |
| Trade receivables impairment | (0.7) | (1.2) |
| Net foreign exchange gain | – | 0.3 |
| Operating adjusted items (note 8) | ||
| – excluding associates | (26.4) | (43.6) |
| – share of associates | (0.4) | (0.4) |
| Auditor's remuneration: | ||
| Fees payable to the Company's auditor for the audit of the Company's annual accounts | (0.3) | (0.3) |
| Fees payable to the Company's auditor for the other services to the Group: | ||
| – the audit of the Company's subsidiaries | (0.4) | (0.4) |
| Total audit fees | (0.7) | (0.7) |
| Non-audit fees payable to the Company's auditors for: | ||
| – audit-related assurance services | (0.1) | (0.1) |
| – transaction-related assurance services | (0.2) | – |
| Total non-audit fees | (0.3) | (0.1) |
| Total fees | (1.0) | (0.8) |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Fees payable to Deloitte LLP for non-audit services to the Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.
A description of the work of the Audit & Risk Committee is set out in the Audit & Risk Committee Report on pages 41 to 45 and includes an explanation of how the objectivity and independence of the auditor is safeguarded when non-audit services are provided by the auditor.
Total administrative expenses included in operating profit amounted to £153.8 million (2016: £202.1 million) including operating adjusted items amounting to a charge of £26.4 million (2016: £43.6 million).
Total share of results of associates amounted to a profit of £0.4 million (2016: £0.7 million) comprising share of profit before operating adjusted items and of £0.8 million (2016: £1.1 million), and operating adjusted items of £0.4 million (2016: £0.4 million).
Total foreign exchange gains were £1.9 million (2016: losses were £13.3 million) comprising a gain on the retranslation of borrowings of £1.9 million included in finance costs and a net foreign exchange gain of nil included in operating profit (2016: comprising a loss on the retranslation of borrowings of £13.6 million included in finance costs and a net foreign exchange gain of £0.3 million included in operating profit).
The average number of persons, including executive directors, employed by the Group in the period was:
| 2017 Number |
2016 Number |
|
|---|---|---|
| Production and editorial | 2,977 | 3,134 |
| Sales and distribution | 1,319 | 1,779 |
| Administration | 771 | 845 |
| Total | 5,067 | 5,758 |
All employees are primarily employed in the UK. The above excludes casual employees working for the Group during the period due to the impracticality of determining an average. The 2016 comparative split has been restated to be consistent with 2017.
Staff costs, including directors' emoluments, incurred during the period were:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Wages and salaries | (183.9) | (203.4) |
| Social security costs | (19.6) | (20.9) |
| Share-based payments charge in the period (note 32) | (0.5) | (1.5) |
| Pension costs relating to defined contribution pension schemes (note 33) | (13.6) | (13.6) |
| Total | (217.6) | (239.4) |
Wages and salaries include bonuses payable in the period. Disclosure of individual directors' remuneration, share awards, long-term incentive schemes, pension contributions and pension entitlements required by the Companies Act 2006 and those elements specified for audit by the Financial Conduct Authority are shown in the tables in the Remuneration Report on pages 46 to 60 and form part of these consolidated financial statements.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Restructuring charges in respect of cost reduction measures (note 22) | (12.6) | (15.1) |
| Provision for historical legal issues (note 22) | (10.5) | (11.5) |
| Pension administrative expenses (note 33) | (1.0) | (2.2) |
| Amortisation of intangible assets (note 15) | (0.3) | (0.3) |
| Profit on disposal of land and buildings(a) | 0.2 | 0.2 |
| Transaction costs(b) | (2.2) | – |
| Impairment of goodwill(c) | – | (2.0) |
| Contract termination fee(d) | – | (2.0) |
| Closure of print sites and press line(e) | – | (10.7) |
| Operating adjusted items included in administrative expenses | (26.4) | (43.6) |
| Operating adjusted items included in share of results of associates(f) | (0.4) | (0.4) |
| Total operating adjusted items | (26.8) | (44.0) |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
(a) Profit on disposal of Teesside property with net proceeds of £1.2 million less carrying value of £1.0 million (2016: profit on disposal of Cardiff and Coventry properties with net proceeds of £10.6 million less carrying value of £10.4 million).
(b) Transaction costs incurred in the year relating to the acquisition of Northern & Shell's publishing assets.
(c) In 2016, a £2.0 million charge against the carrying value of goodwill in our Specialist Digital division was required.
(d) In 2016, a break fee of £2.0 million was paid to Iliffe Print Cambridge Limited.
(e) In 2016, costs associated with closure of the printing site in Cardiff and a press line in Scotland (Cardonald) of £10.7 million including the write off of fixed assets of £9.1 million.
(f) Group's share of restructuring costs and amortisation incurred by PA Group.
| 2017 | 2016 | |
|---|---|---|
| £m | £m | |
| Interest income on bank deposits and other interest receipts | 0.1 | 0.6 |
| Finance costs | (4.2) | (7.2) |
|---|---|---|
| Foreign exchange gain/(loss) on retranslation of borrowings | 1.9 | (13.6) |
| Fair value (loss)/gain on derivative financial instruments | (3.8) | 11.3 |
| Total interest expense | (2.3) | (4.9) |
| Interest on bank overdrafts and borrowings | (2.3) | (4.9) |
| 2017 £m |
2016 £m |
| 2017 £m |
2016 £m |
|
|---|---|---|
| UK corporation tax charge for the period | (17.4) | (20.4) |
| Prior period adjustment | (0.4) | 1.2 |
| Current tax charge | (17.8) | (19.2) |
| Deferred tax (charge)/credit for the period | (1.2) | 1.8 |
| Prior period adjustment | (0.1) | 0.6 |
| Deferred tax rate change | – | 9.8 |
| Deferred tax (charge)/credit | (1.3) | 12.2 |
| Tax charge | (19.1) | (7.0) |
| Reconciliation of tax charge | 2017 % |
2016 % |
|---|---|---|
| Standard rate of corporation tax | (19.3) | (20.0) |
| Tax effect of items that are not deductible in determining taxable profit | (3.6) | (5.4) |
| Tax effect of items that are not taxable in determining taxable profit | – | 1.1 |
| Prior period adjustment | (0.5) | 2.3 |
| Deferred tax rate change | – | 12.6 |
| Tax effect of share of results of associates | 0.1 | 0.2 |
| Tax charge | (23.3) | (9.2) |
The standard rate of corporation tax reduced from 20% to 19% on 1 April 2017. The blended rate for the accounting year is 19.25% being a mix of 20% up to 31 March 2017 and 19% from 1 April 2017 (2016: 20%). The tax effect of items that are not deductible in determining taxable profit includes certain costs where there is uncertainty as to their deductibility. The current tax liabilities amounted to £7.7 million (2016: £9.8 million) at the reporting date and include net provisions of £3.2 million (2016: £3.4 million). At the reporting date the maximum tax exposure relating to uncertain tax items is some £7 million.
The opening deferred tax position is recalculated in the period in which a change in the standard rate of corporation tax has been enacted or substantively enacted by parliament. The change in rate from 18% to 17% in 2020 was accounted for in the prior year resulting in £9.8 million credit in the consolidated income statement and a £4.4 million charge in the consolidated statement of comprehensive income.
The tax on actuarial gains/(losses) on defined benefit pension schemes taken to the consolidated statement of comprehensive income is a charge of £10.5 million comprising a deferred tax charge of £15.5 million and a current tax credit of £5.0 million (2016: credit of £32.1 million comprising a deferred tax credit of £26.5 million and a current tax credit of £5.6 million). The deferred tax credit resulting from the future change in tax rate of £0.4 million (2016: charge of £0.6 million) comprised a credit of £0.4 million (2016: £3.8 million) from a change in the expected reversal of timing differences and nil (2016: charge of £4.4 million) from the change in future tax rates.
| 2017 Pence |
2016 Pence |
|
|---|---|---|
| Dividends paid per share and recognised as distributions to equity holders in the period | 5.60 | 5.25 |
| Dividend proposed per share but not paid nor included in the accounting records | 3.55 | 3.35 |
The Board proposes a final dividend for 2017 of 3.55 pence per share. An interim dividend for 2017 of 2.25 pence per share was paid on 29 September 2017 bringing the total dividend in respect of 2017 to 5.80 pence per share. The 2017 final dividend payment is expected to amount to £10.5 million. The 2017 interim dividend payment amounted to £6.1 million.
On 4 May 2017 the final dividend proposed for 2016 of 3.35 pence per share was approved by shareholders at the Annual General Meeting and was paid on 9 June 2017. The 2016 final dividend payment amounted to £9.2 million.
Basic earnings per share is calculated by dividing profit for the period attributable to equity holders of the parent by the weighted average number of ordinary shares during the period and diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all potentially dilutive ordinary shares.
| Weighted average number of ordinary shares | 2017 Thousand |
2016 Thousand |
|---|---|---|
| Weighted average number of ordinary shares for basic earnings per share | 272,730 | 278,895 |
| Effect of potential dilutive ordinary shares in respect of share awards | 1,481 | 1,864 |
| Weighted average number of ordinary shares for diluted earnings per share | 274,211 | 280,759 |
| The weighted average number of potentially dilutive ordinary shares not currently dilutive was 3,201,611 (2016: 2,805,385). |
| Statutory earnings per share | 2017 Pence |
2016 Pence |
|---|---|---|
| Earnings per share – basic | 23.0 | 24.9 |
| Earnings per share – diluted | 22.9 | 24.8 |
| Adjusted* earnings per share | 2017 Pence |
2016 Pence |
|---|---|---|
| Earnings per share – basic | 36.1 | 38.1 |
| Earnings per share – diluted | 35.9 | 37.8 |
* Set out in note 36 is the reconciliation between the statutory and adjusted results.
On 28 February 2018, the Company issued 25,826,746 ordinary shares in connection with the acquisition of Northern & Shell's UK publishing assets (note 39).
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| Total £m |
|
|---|---|
| Cost | |
| At 27 December 2015 | 159.9 |
| Disposal | (2.5) |
| At 1 January 2017 and 31 December 2017 | 157.4 |
| Accumulated impairment | |
| At 27 December 2015 | (55.4) |
| Impairment | (2.0) |
| Disposal | 2.0 |
| At 1 January 2017 and 31 December 2017 | (55.4) |
| Carrying amount | |
| At 1 January 2017 and 31 December 2017 | 102.0 |
At the reporting date the Publishing division comprises two cash-generating units (Nationals and Regionals) and the Specialist Digital division comprises two cash-generating units (TMDR and Communicator). Goodwill is allocated to cash-generating units as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Publishing (Regionals £92.5 million) | 92.5 | 92.5 |
| Specialist Digital (TMDR £6.1 million, Communicator £3.4 million) | 9.5 | 9.5 |
| 102.0 | 102.0 |
Note 15 sets out the results of the impairment review performed at the reporting date which resulted in no impairment (2016: £2.0 million).
| Publishing rights and titles £m |
Customer relationships and domain names £m |
Total £m |
|
|---|---|---|---|
| Cost | |||
| At 27 December 2015 | 1,985.5 | 37.1 | 2,022.6 |
| Disposal | – | (1.8) | (1.8) |
| At 1 January 2017 and 31 December 2017 | 1,985.5 | 35.3 | 2,020.8 |
| Accumulated amortisation | |||
| At 27 December 2015 | (1,186.6) | (36.2) | (1,222.8) |
| Amortisation | – | (0.3) | (0.3) |
| Disposal | – | 1.8 | 1.8 |
| At 1 January 2017 | (1,186.6) | (34.7) | (1,221.3) |
| Amortisation | – | (0.3) | (0.3) |
| At 31 December 2017 | (1,186.6) | (35.0) | (1,221.6) |
| Carrying amount | |||
| At 1 January 2017 | 798.9 | 0.6 | 799.5 |
| At 31 December 2017 | 798.9 | 0.3 | 799.2 |
At the reporting date the Publishing division comprises two cash-generating units (Nationals and Regionals) and the Specialist Digital division comprises two cash-generating units (TMDR and Communicator). Other intangible assets are allocated to cash-generating units as follows:
| Publishing rights and titles £m |
Customer relationships and domain names £m |
Total 2017 £m |
Publishing rights and titles £m |
Customer relationships and domain names £m |
2016 £m |
|
|---|---|---|---|---|---|---|
| Publishing (Nationals £544.3 million, Regionals £254.6 million) | 798.9 | – | 798.9 | 798.9 | – | 798.9 |
| Specialist Digital (Communicator £0.3 million) | – | 0.3 | 0.3 | – | 0.6 | 0.6 |
| 798.9 | 0.3 | 799.2 | 798.9 | 0.6 | 799.5 |
The impairment review of the carrying value of intangible assets performed at the reporting date resulted in no impairment (2016: nil).
The directors consider publishing rights and titles have indefinite economic lives due to the longevity of the brands and the ability to evolve the brands in an ever changing media landscape. It is not practicable to review individual publishing rights and titles due to the interdependencies of revenues and cash inflow within the cash-generating units. The customer relationships and domain names have estimated useful lives of between four and ten years.
The Group tests the carrying value of assets at the cash-generating unit level for impairment at each reporting date or more frequently if there are indications that assets might be impaired. The review is undertaken by assessing whether the carrying value of assets is supported by their value in use which is calculated as the net present value of future cash flows derived from those assets, using cash flow projections. If an impairment charge is required this is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the cash-generating unit but subject to not reducing any asset below its recoverable amount.
The Group prepared cash flow projections for a cash-generating unit using the Board approved budget for 2018 and the projections for 2019 and 2020. The growth rates for the three-year period are internal projections based on both internal and external market information and reflect past experience of and the risk associated with each asset. Cash flow projections beyond 2020 are extrapolated based on estimated growth rates which do not exceed the average long-term growth rates for the relevant markets. The growth rates for Publishing are Nationals 0% (2016: 0%) and Regionals –1% (2016: 0%) and for Specialist Digital are TMDR 0% (2016: 0%) and Communicator 0% (2016: 0%). These are based on the Board's view of the cash-generating unit's market position and maturity of the relevant market. The post-tax discount rate used at the period end reporting date in respect of all cash-generating units was 10.5% (2016: 10.0%) reflecting a long-term equity and debt mix based on the period end enterprise value assuming a long-term debt to EBITDA ratio of 2.5 times. The equivalent pre-tax discount rate is 12.8% (2016: 12.2%).
In the impairment review of the carrying value of assets performed at the reporting date relating to the Publishing cash-generating units, there has been a reduction in the headroom of value in use over the carrying value of assets from the impairment review performed at the prior year reporting date. This reflects the 2017 performance and latest projections together with the current assessment of the medium to long-term forecasts and the discount rate. The headroom of value in use over the carrying value of assets is £11.7 million or 4% for the Regionals cash-generating unit and £60.2 million or 9% for the Nationals cash-generating unit.
The impairment review is therefore highly sensitive to reasonably possible changes in key assumptions used in the value in use calculations:
A combination of reasonably possible changes in key assumptions relating to the Publishing cash-generating units, such as print revenue declining at a faster rate than projected, digital revenue growth being significantly lower than projected, or the scale of cost saving initiatives being delivered in the short-term being lower than forecast, could lead to a future impairment.
For the Specialist Digital cash-generating units the change to remove the headroom is an increase of 25 percentage points in the discount rate or a decrease of 25 percentage points in the growth rate.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| Land and buildings | |||||
|---|---|---|---|---|---|
| Freehold £m |
Leasehold £m |
Plant and equipment £m |
Asset under construction £m |
Total £m |
|
| Cost | |||||
| At 27 December 2015 | 214.8 | 15.6 | 330.3 | 4.9 | 565.6 |
| Additions | – | – | 1.3 | 2.9 | 4.2 |
| Disposals | – | (13.8) | (5.9) | – | (19.7) |
| Reclassification | 1.8 | (1.8) | 3.8 | (3.8) | – |
| Write-off of assets | (4.0) | – | (6.9) | – | (10.9) |
| At 1 January 2017 | 212.6 | – | 322.6 | 4.0 | 539.2 |
| Additions | – | – | 0.3 | 8.6 | 8.9 |
| Disposals | (1.9) | – | – | – | (1.9) |
| Reclassification | – | – | 2.1 | (2.1) | – |
| Write-off of assets | – | – | (10.0) | – | (10.0) |
| At 31 December 2017 | 210.7 | – | 315.0 | 10.5 | 536.2 |
| Accumulated depreciation and impairment | |||||
| At 27 December 2015 | (55.2) | (3.6) | (206.7) | – | (265.5) |
| Charge for the period | (4.6) | (0.2) | (17.4) | – | (22.2) |
| Disposals | – | 3.4 | 5.9 | – | 9.3 |
| Reclassification | (0.4) | 0.4 | – | – | – |
| Write-off of assets | – | – | 1.3 | – | 1.3 |
| At 1 January 2017 | (60.2) | – | (216.9) | – | (277.1) |
| Charge for the period | (4.5) | – | (15.9) | – | (20.4) |
| Disposals | 0.9 | – | – | – | 0.9 |
| Write-off of assets | – | – | 8.1 | – | 8.1 |
| At 31 December 2017 | (63.8) | – | (224.7) | – | (288.5) |
| Carrying amount | |||||
| At 1 January 2017 | 152.4 | – | 105.7 | 4.0 | 262.1 |
| At 31 December 2017 | 146.9 | – | 90.3 | 10.5 | 247.7 |
| 2017 | 2016 |
| £m | £m | |
|---|---|---|
| Capital commitments | ||
| Expenditure contracted for but not provided in the consolidated financial statements | 1.2 | 0.6 |
The Group owns 21.53% (of which 2.26% is owned by the Company) of PA Group Limited a news agency incorporated and principally operating in England and Wales (2016: 21.53%). The Group acquired a 50% interest in Brand Events TM Limited (renamed from Brand Events 1 Limited), an event organiser incorporated and principally operating in England and Wales, in October 2016 for an investment of £750,000 (of which nil is owned by the Company) and the Group has agreed to provide a revolving credit facility of £1.0 million of which £0.9 million was drawn at the reporting date.
| PA Group Limited £m |
Brand Events TM Limited £m |
Total £m |
|
|---|---|---|---|
| At 27 December 2015 | 19.2 | – | 19.2 |
| Share of results: | |||
| Investment in Brand Events TM Limited | – | 0.8 | 0.8 |
| Operating adjusted items | (0.4) | – | (0.4) |
| Results before operating adjusted items | 1.1 | – | 1.1 |
| Share of other comprehensive income | 1.1 | – | 1.1 |
| At 1 January 2017 | 21.0 | 0.8 | 21.8 |
| Share of results: | |||
| Operating adjusted items | (0.4) | – | (0.4) |
| Results before operating adjusted items | 1.0 | (0.2) | 0.8 |
| Share of other comprehensive income | (5.4) | – | (5.4) |
| At 31 December 2017 | 16.2 | 0.6 | 16.8 |
| PA Group Limited | 2017 £m |
2016 £m |
|
| Non-current assets | 41.5 | 29.8 | |
| Current assets | 62.4 | 79.0 | |
| Total assets | 103.9 | 108.8 | |
| Non-current liabilities | (7.8) | – | |
| Current liabilities | (20.7) | (11.3) | |
| Total liabilities | (28.5) | (11.3) | |
| Net assets | 75.4 | 97.5 | |
| Group's share of net assets | 16.2 | 21.0 | |
| Revenue | 62.3 | 57.9 | |
| Profit for the period | 2.8 | 3.3 | |
| Group's share of results for the period | 0.6 | 0.7 |
The financial statements of PA Group Limited are made up to 31 December each year. For the purposes of applying the equity method of accounting, the audited financial statements of PA Group Limited for the year ended 31 December 2016 together with the management accounts up to the end of December 2017 have been used with appropriate year end adjustments made. Included in the share of operating adjusted items of associates was a £0.1 million loss on our share of the after tax restructuring charges (2016: £0.1 million) and a £0.3 million after tax amortisation charge (2016: £0.3 million). The share of other comprehensive income relates to changes in pension liabilities.
| Brand Events TM Limited | 2017 £m |
2016 £m |
|---|---|---|
| Current assets | 1.6 | 1.0 |
| Current liabilities | (2.0) | (1.1) |
| Net assets | (0.4) | (0.1) |
| Group's share of net assets | (0.2) | – |
| Goodwill | 0.8 | 0.8 |
| Group share of interest in associate | 0.6 | 0.8 |
| Revenue | 2.4 | – |
| Loss for the period | (0.4) | – |
| Group's share of loss for the period | (0.2) | – |
The non-audited financial statements of Brand Events TM Limited are made up to 31 December each year. For the purpose of applying the equity method of accounting, the management accounts up to the end of December 2017 have been used with appropriate year end adjustments made.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| 2017 | 2016 | |
|---|---|---|
| £m | £m | |
| Raw materials and consumables | 4.9 | 5.8 |
| Trade and other receivables | 2017 £m |
2016 £m |
|---|---|---|
| Gross trade receivables | 67.4 | 72.2 |
| Allowances for doubtful receivables | (3.4) | (3.5) |
| Net trade receivables | 64.0 | 68.7 |
| Prepayments | 12.4 | 13.0 |
| Accrued income | 8.7 | 6.4 |
| Other receivables | 4.8 | 1.7 |
| 89.9 | 89.8 |
Trade receivables net of allowances for doubtful receivables at the reporting date amounted to £64.0 million (2016: £68.7 million). The average credit period taken on sales of goods is 39 days (2016: 37 days). No interest is charged on the receivables. The Group has provided fully for all receivables over 120 days because historical experience is such that these receivables are generally not recoverable. Trade receivables less than 120 days are provided for based on specific circumstances and by reference to past default experience.
Before accepting any new customers, the Group, where appropriate, uses an external credit scoring system to assess the potential customer's credit quality and defines credit limits by customer. Limits attributed to customers are reviewed during the period where appropriate. There are two (2016: two) customers who individually represent more than 10% of net trade receivables.
Included in the net trade receivables balance are debtors with a carrying amount of £1.6 million (2016: £0.8 million) which are past their due date at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 75 days (2016: 75 days).
| Ageing of past due but not impaired receivables | 2017 £m |
2016 £m |
|---|---|---|
| 60–90 days | 1.6 | 0.8 |
| 90–120 days | – | – |
| 1.6 | 0.8 | |
| Movement in allowance for doubtful debts | 2017 £m |
2016 £m |
| Opening balance | 3.5 | 4.7 |
| Impairment losses recognised | 0.7 | 1.2 |
| Recovery of bad debt | – | 0.5 |
| Release of provision | – | (2.1) |
| Utilisation of provision | (0.8) | (0.7) |
| Disposal of subsidiary | – | (0.1) |
| Closing balance | 3.4 | 3.5 |
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, there is no further credit provision required in excess of the allowance for doubtful debts.
There are no significant amounts included in the allowance for doubtful debts relating to impaired trade receivables which have been placed under liquidation. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the expected liquidation proceeds. The Group does not hold any collateral over these balances.
| Ageing of impaired receivables | 2017 £m |
2016 £m |
|---|---|---|
| 60–90 days | 0.5 | 1.4 |
| 90–120 days | 1.2 | 0.7 |
| 120+ days | 1.7 | 1.4 |
| 3.4 | 3.5 |
The carrying amount of trade and other receivables approximates their fair value.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| Cash and cash equivalents | 2017 £m |
2016 £m |
|---|---|---|
| Cash and cash equivalents | 16.0 | 37.8 |
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of one week or less. The carrying amount of these assets approximates their fair value.
| Trade and other payables | 2017 £m |
2016 £m |
|---|---|---|
| Trade payables | (9.2) | (11.2) |
| Social security and other taxes | (5.6) | (6.8) |
| Accruals and deferred income | (55.3) | (56.8) |
| Other payables | (10.0) | (8.3) |
| (80.1) | (83.1) |
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 38 days (2016: 36 days). For most suppliers no interest is charged on the trade payables for the first 60 days from the date of the invoice. Thereafter, interest is charged on the outstanding balances at various interest rates. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. The carrying amount of trade payables approximates to their fair value.
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon:
| Accelerated tax depreciation £m |
Other short-term timing £m |
Rolled-over and held-over gains £m |
Intangibles £m |
Retirement benefit obligations £m |
Share-based payments £m |
Total £m |
|
|---|---|---|---|---|---|---|---|
| At 27 December 2015 | (36.8) | (0.2) | (0.8) | (138.1) | 55.0 | 0.2 | (120.7) |
| Change of tax rate applying to deferred tax: | |||||||
| Credit to income | 1.7 | – | 0.1 | 8.0 | – | – | 9.8 |
| Charge to equity | – | – | – | – | (4.4) | – | (4.4) |
| At 27 December 2015 (at 19%/17%) | (35.1) | (0.2) | (0.7) | (130.1) | 50.6 | 0.2 | (115.3) |
| Credit/(charge) to consolidated income statement | 4.1 | 0.6 | 0.7 | (3.0) | – | – | 2.4 |
| Credit to equity | – | – | – | – | 30.3 | – | 30.3 |
| At 1 January 2017 | (31.0) | 0.4 | – | (133.1) | 80.9 | 0.2 | (82.6) |
| Credit/(charge) to consolidated income statement | 1.7 | (0.6) | – | (2.8) | 0.4 | – | (1.3) |
| Charge to equity | – | – | – | – | (15.1) | – | (15.1) |
| At 31 December 2017 | (29.3) | (0.2) | – | (135.9) | 66.2 | 0.2 | (99.0) |
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances in the consolidated balance sheet:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Deferred tax liabilities | (165.4) | (164.1) |
| Deferred tax assets | 66.4 | 81.5 |
| (99.0) | (82.6) |
The Group has unrecognised capital losses of £36.0 million (2016: £36.0 million) at the reporting date.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| Share-based payments £m |
Property £m |
Restructuring £m |
Other £m |
Total £m |
|
|---|---|---|---|---|---|
| At 27 December 2015 | (0.3) | (9.6) | (3.7) | (37.1) | (50.7) |
| Charged to income statement | – | (2.5) | (15.1) | (13.4) | (31.0) |
| Utilisation of provision | – | 4.0 | 15.4 | 30.8 | 50.2 |
| At 1 January 2017 | (0.3) | (8.1) | (3.4) | (19.7) | (31.5) |
| Charged to income statement | – | (1.0) | (12.6) | (11.6) | (25.2) |
| Utilisation of provision | 0.1 | 2.9 | 13.6 | 19.8 | 36.4 |
| At 31 December 2017 | (0.2) | (6.2) | (2.4) | (11.5) | (20.3) |
The provisions have been analysed between current and non-current as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Current | (16.6) | (27.9) |
| Non-current | (3.7) | (3.6) |
| (20.3) | (31.5) |
The share-based payments provision relates to National Insurance obligations attached to the future crystallisation of awards. This provision will be utilised over the next three years.
The property provision relates to onerous property leases and future committed costs related to occupied, let and vacant properties. This provision will be utilised over the remaining term of the leases or expected period of vacancy.
The restructuring provision relates to restructuring charges incurred in the delivery of cost reduction measures. This provision is expected to be utilised within the next year.
The other provision relates to legal and other costs relating to historical litigation and is expected to be utilised within the next year. The costs associated with the settlement of civil claims in relation to phone hacking have been higher than expected, in particular the legal fees of the claimant's lawyers and the general court process. Therefore, the provision for settling these historical claims was increased by £10.5 million during the year. £10.7 million of the provision remains outstanding at the year end. It remains uncertain as to how these matters will progress, whether further allegations or claims will be made, and their financial impact. Due to this uncertainty a contingent liability has been highlighted in note 38.
A list of the subsidiary undertakings, all of which have been consolidated, is on pages 117 to 118.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Operating profit | 97.9 | 93.5 |
| Depreciation of property, plant and equipment | 20.4 | 22.2 |
| Amortisation of intangible assets | 0.3 | 0.3 |
| Impairment of goodwill | – | 2.0 |
| Share of results of associates | (0.4) | (0.7) |
| Charge for share-based payments | 0.5 | 1.5 |
| Profit on disposal of land and buildings | (0.2) | (0.2) |
| Research and development tax credit | (1.0) | – |
| Write-off of fixed assets | 1.9 | 9.6 |
| Pension administrative expenses | 1.0 | 2.2 |
| Pension deficit funding payments | (38.7) | (40.7) |
| Operating cash flows before movements in working capital | 81.7 | 89.7 |
| Decrease in inventories | 0.9 | 0.4 |
| Decrease in receivables | – | 29.7 |
| Decrease in payables | (14.5) | (28.3) |
| Cash flows from operating activities | 68.1 | 91.5 |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| 2017 £m |
2016 £m |
|
|---|---|---|
| Loan notes | – | (81.2) |
| Bank facility | (25.0) | – |
| (25.0) | (81.2) | |
| The borrowings are repayable as follows: | ||
| On demand or within one year | (25.0) | (81.2) |
| (25.0) | (81.2) | |
| The borrowings are included in the consolidated balance sheet as follows: | ||
| Amount included in current liabilities | (25.0) | (81.2) |
| (25.0) | (81.2) |
The amount included in current liabilities represents borrowings of £25.0 million (2016: £81.2 million). In 2016 current assets included £14.8 million relating to derivative financial instruments which are included in statutory net debt in note 27.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Loan notes movements in the period: | ||
| Opening balance | (81.2) | (147.6) |
| Loan notes repaid | 79.3 | – |
| Term loan repaid | – | 80.0 |
| Foreign exchange loss on retranslation | 1.9 | (13.6) |
| Closing balance | – | (81.2) |
| Composition of loan notes: |
US\$100 million loan notes – (81.2)
Private placement loan notes totalling US\$602 million and £32 million were issued in 2001 (US\$350 million and £22 million) and 2002 (US\$252 million and £10 million). On the issue date the capital repayments and fixed rate interest on the US\$ denominated loan notes were swapped into floating rate sterling through the use of cross-currency interest rate swaps. As hedge accounting under IAS 39 has not been applied, the loan notes and cross-currency interest rate swaps are shown separately in accordance with IAS 39. The loan notes are disclosed at amortised cost and translated into sterling at the reporting date exchange rate and the cross-currency interest rate swaps are disclosed at fair value at the reporting date. These values do not represent the amounts required to repay the loan notes or cancel the related cross-currency interest rate swaps. At the reporting date there were no amounts outstanding in respect of the loan notes and the cross-currency interest rate swaps had all matured.
The Group repaid the £80 million Acquisition Term Loan and replaced the undrawn £60 million bank facility with a new amortising £110 million Revolving Credit Facility which is committed until December 2021. The bank facility reduced to £100 million on 19 December 2017 and reduced by £8.333 million in each June and December of 2018, 2019 and 2020, being £50 million in 2021, the last year of the facility. At the reporting date £25.0 million was drawn on the bank facility.
All borrowings are denominated in sterling unless otherwise indicated and are unsecured.
The effective interest rates at the reporting date are as follows:
| 2017 % |
2016 % |
|
|---|---|---|
| Loan notes | – | 7.42 |
| Bank facility | 2.89 | – |
The fair value of the Group's borrowings is estimated by discounting their future cash flows at the market rate. The estimate at the reporting date is as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Loan notes | – | (81.2) |
| Bank facility | (25.0) | – |
In estimating the fair value the future cash flows have been discounted using an appropriate discount factor that includes credit risk. The fair value of other financial assets and liabilities, excluding derivative financial instruments in note 26, are not materially different from the book values and are not repeated in this analysis.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The Group had a cross-currency interest rate swap to manage its exposure to foreign exchange movements and interest rate movements on the private placement loan notes. Fair value was calculated using discounted cash flows based upon forward rates available to the Group. The cross-currency interest rate swap was classed in level two of the financial instruments hierarchy. Level two fair value measurements are those derived from inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
The movement in the derivative financial instruments is as follows:
| Closing asset | – | 14.8 |
|---|---|---|
| Repayment | (11.0) | – |
| Movement in fair value | (3.8) | 11.3 |
| Opening asset | 14.8 | 3.5 |
| 2017 £m |
2016 £m |
The derivative financial instruments are included in the consolidated balance sheet as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Current assets | – | 14.8 |
| Closing asset | – | 14.8 |
The statutory net debt for the Group is as follows:
| 1 January 2017 £m |
Cash flow £m |
Derivative financial instruments* £m |
Foreign exchange* £m |
Loan repaid £m |
Loan drawn £m |
31 December 2017 £m |
|
|---|---|---|---|---|---|---|---|
| Current liabilities | |||||||
| Loan notes | (81.2) | – | – | 1.9 | 79.3 | – | – |
| Bank facility | – | – | – | – | – | (25.0) | (25.0) |
| (81.2) | – | – | 1.9 | 79.3 | (25.0) | (25.0) | |
| Current assets | |||||||
| Derivative financial instruments | 14.8 | – | (3.8) | – | (11.0) | – | – |
| Cash and cash equivalents | 37.8 | 21.5 | – | – | (68.3) | 25.0 | 16.0 |
| 52.6 | 21.5 | (3.8) | – | (79.3) | 25.0 | 16.0 | |
| Net debt | (28.6) | 21.5 | (3.8) | 1.9 | – | – | (9.0) |
* The impact on the loan notes of translation into sterling at the settlement date or at the reporting date exchange rate and the impact on the derivative financial instruments of being stated at fair value at the settlement date or at the reporting date are included in the consolidated income statement within finance costs as set out in note 10.
The Group had a cross-currency interest rate swap to manage its exposure to foreign exchange movements and interest rate movements on the private placement loan notes. Fair value was calculated using discounted cash flows based upon forward rates available to the Group. The cross-currency interest rate swap was classed in level two of the financial instruments hierarchy. Level two fair value measurements are those derived from inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
The contracted net debt for the Group, assuming at 1 January 2017 that the private placement loan notes and the cross-currency interest rate swaps were not terminated prior to maturity, is as follows:
| 1 January 2017 £m |
Cash flow £m |
Loan repaid £m |
Loan drawn £m |
31 December 2017 £m |
|
|---|---|---|---|---|---|
| Current liabilities | |||||
| Loan notes | (68.3) | – | 68.3 | – | – |
| Bank facility | – | – | – | (25.0) | (25.0) |
| (68.3) | – | 68.3 | (25.0) | (25.0) | |
| Current assets | |||||
| Cash and cash equivalents | 37.8 | 21.5 | (68.3) | 25.0 | 16.0 |
| 37.8 | 21.5 | (68.3) | 25.0 | 16.0 | |
| Net debt | (30.5) | 21.5 | – | – | (9.0) |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The statutory net debt reconciles to the contracted net debt as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Statutory net debt | (9.0) | (28.6) |
| Loan notes at period end exchange rate | – | 81.2 |
| Loan notes at swapped exchange rate | – | (68.3) |
| Cross-currency interest rate swap | – | (14.8) |
| Contracted net debt | (9.0) | (30.5) |
Following repayment of the private placement loan notes and maturity of the associated cross-currency interest rate swaps on 20 June 2017, net debt is the same on a statutory and contracted basis.
Total commitments under non-cancellable operating leases:
| Vehicles, plant and equipment 2017 £m |
Property 2017 £m |
Vehicles, plant and equipment 2016 £m |
Property 2016 £m |
|
|---|---|---|---|---|
| Within one year | (2.2) | (7.4) | (2.7) | (9.6) |
| Greater than one and less than five years | (1.8) | (16.3) | (5.0) | (14.8) |
| Greater than five years | – | (14.4) | – | (17.0) |
| (4.0) | (38.1) | (7.7) | (41.4) |
Total future minimum lease payments with tenants under non-cancellable property operating leases:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Within one year | 1.1 | 2.4 |
| Greater than one and less than five years | 0.6 | 1.7 |
| 1.7 | 4.1 |
| Share capital £m |
Share premium account £m |
Merger reserve £m |
Capital redemption reserve £m |
Retained earnings and other reserves £m |
Total £m |
|
|---|---|---|---|---|---|---|
| At 27 December 2015 | (28.3) | (606.7) | (37.9) | (4.4) | (6.3) | (683.6) |
| Total comprehensive costs for the period | – | – | – | – | 86.8 | 86.8 |
| Credit to equity for equity-settled share-based payments | – | – | – | – | (1.5) | (1.5) |
| Purchase of shares for LTIP | – | – | – | – | 2.0 | 2.0 |
| Purchase of own shares | – | – | – | – | 2.3 | 2.3 |
| Dividends paid | – | – | – | – | 14.6 | 14.6 |
| At 1 January 2017 | (28.3) | (606.7) | (37.9) | (4.4) | 97.9 | (579.4) |
| Total comprehensive income for the period | – | – | – | – | (109.9) | (109.9) |
| Credit to equity for equity-settled share-based payments | – | – | – | – | (0.5) | (0.5) |
| Purchase of own shares | – | – | – | – | 7.7 | 7.7 |
| Dividends paid | – | – | – | – | 15.3 | 15.3 |
| At 31 December 2017 | (28.3) | (606.7) | (37.9) | (4.4) | 10.5 | (666.8) |
The share capital comprises 283,459,571 allotted, called-up and fully paid ordinary shares of 10p each. The share premium account reflects the premium on issued ordinary shares. The merger reserve comprises the premium on the shares allotted in relation to the acquisition of Local World net of £0.8 million of issue costs. The capital redemption reserve represents the nominal value of the shares purchased and subsequently cancelled under share buyback programmes.
Cumulative goodwill written off to retained earnings and other reserves in respect of continuing businesses acquired prior to 1998 is £25.9 million (2016: £25.9 million). On transition to IFRS, the revalued amounts of freehold properties were deemed to be the cost of the asset and the revaluation reserve has been transferred to retained earnings and other reserves.
£m
Shares purchased by the Trinity Mirror Employee Benefit Trust (the 'Trust') are included in retained earnings and other reserves at £4.9 million (2016: £5.5 million). During the period, 447,096 shares were released relating to grants made in prior years (2016: 138,634). During the prior year, the Trust purchased 1,600,000 shares for a cash consideration of £2.0 million and received a payment of £2.0 million from the Company to purchase these shares.
During the period, 1,219,327 awards were granted to Executive Directors on a discretionary basis under the Long Term Incentive Plan (2016: 859,794). The exercise price of the granted awards is £1 for each block of awards granted. The awards vest after three years, subject to the continued employment of the participant and satisfaction of certain performance conditions and are required to be held for a further two years.
During the period, 1,242,316 awards were granted to senior managers on a discretionary basis under the Senior Management Incentive Plan (2016: 1,494,019). The exercise price of the granted awards is £1 for each block of awards granted. The awards vest after three years, subject to the continued employment of the participant and satisfaction of certain performance conditions.
During the period, 111,792 awards were granted to Executive Directors under the Restricted Share Plan (2016: 82,699). The awards vest after three years.
The Board approved a share buyback programme of up to £10 million which commenced in August 2016. The share buyback was completed in November 2017. At the year end, the Company had acquired 10,017,620 shares (2016: 2,505,366) for £10.0 million (2016: £2.3 million). The shares are held as Treasury shares.
On 28 February 2018, the Company issued 25,826,746 ordinary shares in connection with the acquisition of Northern & Shell's UK publishing assets (note 39).
| 2017 Number |
2017 £m |
2016 Number |
2016 £m |
|
|---|---|---|---|---|
| Authorised | ||||
| Ordinary shares of 10 pence each | 450,000,000 | (45.0) | 450,000,000 | (45.0) |
| Opening and closing balance | 283,459,571 | (28.3) | 283,459,571 | (28.3) | |||
|---|---|---|---|---|---|---|---|
The Company has one class of share capital, being ordinary shares with a nominal value of 10 pence each. The Company's ordinary shares give the shareholders equal rights to vote, receive dividends and to the repayment of capital. There are no restrictions on these shares in relation to the distribution of dividends and the repayment of capital.
The lowest closing price of the shares during the year was 67.0 pence (2016: 73.5 pence) and the highest closing price was 121.0 pence (2016: 170.0 pence). The closing share price as at the reporting date was 79.5 pence (2016: 106.0 pence).
On 28 February 2018, the Company issued 25,826,746 ordinary shares in connection with the acquisition of Northern & Shell's UK publishing assets (note 39).
The Trinity Mirror Employees' Benefit Trust ('the Trust') is established in Jersey and is administered by the trustee Estera Trust (Jersey) Limted (formerly Appleby Trust (Jersey) Limited). The Trust holds shares of the Company for subsequent transfer to employees under the terms of the Group's share plans.
At the reporting date, the Trust held 3,860,038 shares (2016: 4,307,155 shares) with a carrying value of £4,935,804 (2016: £5,507,530) and a market value of £3,068,730 (2016: £4,565,584). In addition, the Trust holds cash to purchase future shares of £6,144 (2016: £6,635). The costs associated with the Trust are included in the consolidated income statement as they accrue. Shares held by the Trust have been excluded from the weighted average number of shares used in the calculation of earnings per share.
An employee benefit trust administered by the trustee Zedra Trust Company (Guernsey) Limited (formerly known as Barclays Wealth Trustees (Guernsey) Limited) holds shares of the Company for subsequent transfer to employees under a restricted share plan. At 31 December 2017 90,855 shares (2016: 90,855 shares) were held with a carrying value of £445,523 (2016: £445,523) and a market value of £72,230 (2016: £96,306), none of which (2016: none) had options granted over them under the restricted share plan. Dividends on the shares are payable at an amount of 0.01 pence (2016: 0.01 pence) per share in the event that the Group declares any dividends. Shares held have been excluded from the weighted average number of shares used in the calculation of earnings per share.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Opening and closing balance | (606.7) | (606.7) |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The charge related to share-based payments during the period was £0.5 million (2016: £1.5 million).
Under these schemes, the Remuneration Committee can recommend the grant of awards of shares to an eligible employee. Full details of how the schemes operate are explained in the Remuneration Report on pages 46 to 60.
The vesting period is three years and is subject to continued employment of the participant. The Performance Shares granted in 2016 and 2017 vest if targets measuring the Company's share price and Net Cash Flow are met.
| 2017 Performance Shares |
2016 Performance Shares |
|
|---|---|---|
| Awards outstanding at start of period | 4,541,657 | 3,944,945 |
| Granted during the period | 2,461,553 | 2,353,813 |
| Lapsed during the period | (1,348,313) | (1,618,467) |
| Exercised during the period | (342,506) | (138,634) |
| Awards outstanding at end of period | 5,312,391 | 4,541,657 |
The share price at the date of grant for the Performance Shares was 104.5 pence (2016: 146.75 pence).
The weighted average share price at the date of lapse for awards lapsed during the period was 104.4 pence (2016: 118.7 pence). The weighted average share price at the date of exercise for awards exercised during the period was 107.5 pence (2016: 101.8 pence). The estimated fair values at the date of grant of the shares awarded are as follows:
| Awarded in | Awarded in | Awarded in | Awarded in | Awarded in | |
|---|---|---|---|---|---|
| 2017 | 2016 | 2015 | 2014 | 2013 | |
| £ | £ | £ | £ | £ | |
| Performance Shares | 1,531,086 | 2,243,184 | 2,044,059 | 1,080,744 | 1,148,113 |
The fair values for the Performance Shares were calculated using a stochastic (Monte-Carlo binomial) model at the date of grant. The inputs to the model for awards from 2013 were as follows:
| Performance award 2017 |
Performance award 2016 |
Performance award 2015 |
Performance award 2014 |
Performance award 2013 |
|
|---|---|---|---|---|---|
| Expected volatility (%) | 42.0 | 45.0 | 47.0 | 50.0 | 60.0 |
| Expected life (years) | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| Risk-free (%) | 0.1 | 0.6 | 0.7 | 0.9 | 0.4 |
Expected volatility has been determined by calculating the historical volatility of the Company's share price over the three-year period prior to the grant date. The exercise price used in the model is nil as the exercise price of the granted awards is £1 for each block of awards granted.
In 2017, 111,792 (2016: 82,699) Restricted Shares were awarded based on the 2016 bonus award (2016: 2015 bonus award) for certain executives. The award was based on the average share price over the three days prior to the date of the award of 111.8 pence (2016: 148.8 pence).
The Group operates the Trinity Mirror Pension Plan (the 'TMPP Scheme'), which is a defined contribution pension scheme for qualifying employees. The assets of the TMPP Scheme are held separately from those of the Group in funds under the control of Trustees. The Local World Group Personal Pension Plan (the 'LW Plan'), which was a defined contribution pension scheme for qualifying employees where employees held a personal pension policy directly with Scottish Widows, was closed to future contribution from 30 June 2017.
The TMPP Scheme has five sections. Three of the sections are closed to new members: one for members who elected to join prior to 1 May 2013, one for members who elect to join from 1 May 2013 to 30 June 2017 and one for members who were previously members of the LW Plan. Two of the sections are open to new members: one for members who elect to join from 1 July 2017 and one for members who from 1 July 2013 are auto enrolled. The Group first implemented the Auto Enrolment legislation from 1 July 2013 and from 1 July 2017 this now includes Local World.
The current service cost charged to the consolidated income statement of £13.6 million (2016: £13.6 million) represents contributions of £13.0 million (2016: £12.3 million) paid to the TMPP Scheme by the Group at rates specified in the scheme rules and contributions of £0.6 million (2016: £1.3 million) paid into the LW Plan by the Group at rates specified in the scheme rules. All amounts that were due have been paid over to the schemes at all reporting dates.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The defined benefit pension schemes operated by the Group were closed to future accrual in 2010. The Group has three defined benefit pension schemes: the MGN Pension Scheme (the 'MGN Scheme'), the Trinity Retirement Benefit Scheme (the 'Trinity Scheme') and the Midland Independent Newspapers Pension Scheme (the 'MIN Scheme'). On 30 December 2016, the Mirror Group Pension Scheme and the MGN Past Service Pension Scheme were merged into the MGN Pension Scheme (collectively referred to as the Mirror Schemes). Following the merger the bulk annuity policy held by the Mirror Group Pension Scheme was shattered with individual policies issued to members and both the Mirror Group Pension Scheme and the MGN Past Service Pension Scheme were wound up.
The defined benefit pension schemes provide pensions to members, which are based on the final salary pension payable, normally from age 65 plus surviving spouses or dependents benefits following a member's death. Benefits increase both before and after retirement either in line with statutory requirements or in accordance with the scheme rules. Such increases are either at fixed rates or in line with retail or consumer prices but subject to upper and lower limits. All of the schemes are independent of the Group with assets held independently of the Group. They are governed by Trustees who administer benefits in accordance with the scheme rules and appropriate UK legislation. The schemes each have a professional independent trustee as their chairman with generally half of the remaining Trustees nominated by the members and half by the Group.
Across the schemes the invested assets are expected to be sufficient to pay the uninsured benefits due up to 2048, based on the reporting data assumptions. The remaining uninsured benefit payments, payable from 2049, are due to be funded by a combination of asset outperformance and the deficit contributions currently scheduled to be paid by 2027. The liabilities related 55% to current pensioners and their spouses or dependants and 45% related to deferred pensioners. The average term from the period end to payment of the remaining uninsured benefits is expected to be around 20 years. Uninsured pension payments in 2017, excluding lump sums and transfer value payments, were £43 million and these are projected to rise to an annual peak in 2039 of £73 million and reducing thereafter.
The funding of the Group's schemes is subject to UK pension legislation as well as the guidance and codes of practice issued by the Pensions Regulator. Funding targets are agreed between the Trustees and the Group and are reviewed and revised usually every three years. The funding targets must include a margin for prudence above the expected cost of paying the benefits and so are different to the liability value for IAS 19 purposes. The funding deficits revealed by these triennial valuations are removed over time in accordance with an agreed recovery plan and schedule of contributions for each scheme.
The valuations of the schemes as at 31 December 2016 were agreed in December 2017 and finalised in January 2018. The valuations showed deficits of £476.0 million for the MGN Scheme, £78.0 million for the Trinity Scheme and £68.2 million for the MIN Scheme.
As part of the agreement of the valuations, deficit funding contributions were agreed at £43.8 million for 2018 to 2027 after which contributions are due to cease. The deficits are expected to be eradicated by 2027 by a combination of the contributions and asset returns. In addition, the Group agreed that in respect of dividend payments in 2018, 2019 and 2020 that additional contributions would be paid at 50% of the excess if dividends in 2018 are above 6.16 pence per share. For 2019 and 2020 the threshold increases in line with the increase in dividends capped at 10% per annum. As set out in note 39, in connection with the acquisition of Northern & Shell's UK publishing assets, the schedule of contributions and the dividend sharing arrangements have been revised.
Payments in the year were £38.7 million (2016: £40.7 million) comprising £36.2 million (2016: £35.7 million) of deficit funding and £2.5 million (2016: £5.0 million) in connection with the share buyback. Payments were £27.8 million (2016: £29.6 million) to the Mirror Schemes, £6.6 million (2016: £7.0 million) to the Trinity Scheme and £4.3 million (2016: £4.1 million) to the MIN Scheme.
The future deficit funding commitments are linked to the three-yearly actuarial valuations. There is no link to the IAS 19 valuations which use different actuarial assumptions and are updated at each reporting date. The next funding valuation of the schemes has an effective date of 31 December 2019 and these valuations are required to be completed by 31 March 2021.
Although the funding commitments do not generally impact the IAS 19 position, IFRIC 14 guides companies to consider for IAS 19 disclosures whether any surplus can be recognised as a balance sheet asset and whether any future funding commitments in excess of the IAS 19 liability should be provisioned for. Based on the interpretation of the rules for each of the defined benefit pension schemes, the Group considers that it has an unconditional right to any potential surplus on the ultimate wind-up of each scheme after all benefits to members have been paid. Under IFRIC 14 it is therefore appropriate to recognise any IAS 19 surpluses which may emerge in future, and not to recognise any potential additional liabilities in respect of future funding commitments. This conclusion was reconsidered and reconfirmed during 2016 following the issuance of an Exposure Draft of changes to IFRIC14 which provided more detailed guidance on this area.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Valuations for funding and accounting purposes are based on assumptions about future economic and demographic variables. This results in risk of a volatile valuation deficit and the risk that the ultimate cost of paying benefits is higher than the current assessed liability value.
The main sources of risk are:
These risks are managed by:
Pension scheme accounting deficits are snapshots at moments in time and are not used by either the Group or Trustees to frame funding policy. The Group and Trustees are aligned in focusing on the long-term sustainability of the funding policy which aims to balance the interests of the Group's shareholders and members of the schemes. The Group and Trustees are also aligned in reducing pensions risk over the long term and at a pace which is affordable to the Group.
The Group is not exposed to any unusual, entity specific or scheme specific risks. There were no plan amendments, settlements or curtailments in 2017 or 2016 which resulted in a pension cost. The annuity policy held by the Mirror Group Pension Scheme was shattered on 30 March 2017 which led to an equal reduction to the assets and liabilities of £173.3 million.
Actuarial projections at the reporting date show removal of the accounting deficit by 2024 due to scheduled contributions and asset returns at the current target rate based on the schemes' current expected asset allocations.
For the purposes of the Group's consolidated financial statements, valuations have been performed in accordance with the requirements of IAS 19 with scheme liabilities calculated using a consistent projected unit valuation method and compared to the estimated value of the scheme assets at 31 December 2017.
The assets and liabilities of the schemes as at the reporting date are:
| MGN Scheme £m |
Trinity Scheme £m |
MIN Scheme £m |
Total £m |
|
|---|---|---|---|---|
| Present value of uninsured scheme liabilities | (1,236.7) | (378.4) | (132.0) | (1,747.1) |
| Present value of insured scheme liabilities | – | (76.7) | (105.4) | (182.1) |
| Total present value of scheme liabilities | (1,236.7) | (455.1) | (237.4) | (1,929.2) |
| Invested and cash assets at fair value | 914.1 | 370.9 | 84.5 | 1,369.5 |
| Value of liability matching insurance contracts | – | 76.7 | 105.4 | 182.1 |
| Total value of scheme assets | 914.1 | 447.6 | 189.9 | 1,551.6 |
| Net scheme deficit | (322.6) | (7.5) | (47.5) | (377.6) |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Based on actuarial advice, the assumptions used in calculating the scheme liabilities and the actuarial value of those liabilities are:
| 2017 | 2016 | |
|---|---|---|
| Financial assumptions (nominal % pa) | ||
| Discount rate | 2.50 | 2.65 |
| Retail price inflation rate | 3.15 | 3.20 |
| Consumer price inflation rate | 1.95 | 2.00 |
| Rate of pension increase in deferment | 1.95 | 2.00 |
| Rate of pension increases in payment (weighted average across the scheme's) | 3.70 | 3.85 |
| Mortality assumptions – future life expectancies from age 65 (years) | ||
| Male currently aged 65 | 21.7 | 21.8 |
| Female currently aged 65 | 23.6 | 23.9 |
| Male currently aged 55 | 22.4 | 22.7 |
| Female currently aged 55 | 24.4 | 24.8 |
The fair values of the insurance policies have been taken as equal to the present values of the liabilities that they insure against and by using the same assumptions as those used to value the liabilities.
The estimated impact on the IAS 19 liabilities and on the IAS 19 deficit at the reporting date, due to a reasonably possible change in key assumptions over the next year, are set out in the table below:
| Effect on liabilities £m |
Effect on deficit £m |
|
|---|---|---|
| Discount rate +/- 0.5% pa | -170/+188 -160/+177 | |
| Retail price inflation rate +/- 0.5% pa | +32/-30 | +24/-23 |
| Consumer price inflation rate +/- 0.5% pa | +45/-43 | +45/-43 |
| Life expectancy at age 65 +/- 1 year | +78/-76 | +75/-73 |
The RPI sensitivity impacts the rate of increases in payment for the Trinity Scheme and the MIN Scheme. The CPI sensitivity impacts the rate of increases in deferment for all three schemes and the rate of increases in payment for post-1997 benefits in the MGN Scheme.
The effect on the deficit is usually lower than the effect on the liabilities due to the matching impact on the value of the insurance contracts held in respect of some of the liabilities. Each assumption variation represents a reasonably possible change in the assumption over the next year but might not represent the actual effect because assumption changes are unlikely to happen in isolation.
The estimated impact of the assumption variations make no allowance for changes in the values of invested assets that would arise if market conditions were to change in order to give rise to the assumption variation. If allowance were made, the estimated impact would likely be lower as the values of invested assets would normally change in the same directions as the liability values.
The amount included in the consolidated income statement, consolidated statement of comprehensive income and consolidated balance sheet arising from the Group's obligations in respect of its defined benefit pension schemes is as follows:
| 2017 £m |
2016 £m |
|---|---|
| (1.0) | (2.2) |
| (11.9) | (10.4) |
| (12.9) | (12.6) |
| Consolidated statement of comprehensive income | 2017 £m |
2016 £m |
|---|---|---|
| Actuarial (loss)/gain due to liability experience | (6.0) | 14.0 |
| Actuarial loss due to liability assumption changes | (12.6) | (340.7) |
| Total liability actuarial loss | (18.6) | (326.7) |
| Returns on scheme assets greater than discount rate | 81.2 | 137.8 |
| Total gain/(loss) recognised in statement of comprehensive income | 62.6 | (188.9) |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Defined benefit pension schemes continued
| Results continued | ||
|---|---|---|
| Consolidated balance sheet | 2017 £m |
2016 £m |
| Present value of uninsured scheme liabilities | (1,747.1) | (1,764.3) |
| Present value of insured scheme liabilities | (182.1) | (363.3) |
| Total present value of scheme liabilities | (1,929.2) | (2,127.6) |
| Invested and cash assets at fair value | 1,369.5 | 1,298.3 |
| Value of liability matching insurance contracts | 182.1 | 363.3 |
| Total value of scheme assets | 1,551.6 | 1,661.6 |
| Net scheme deficit | (377.6) | (466.0) |
| Non-current assets – retirement benefit assets | – | – |
| Non-current liabilities – retirement benefit obligations | (377.6) | (466.0) |
| Net scheme deficit | (377.6) | (466.0) |
| Net scheme deficit included in consolidated balance sheet | (377.6) | (466.0) |
| Deferred tax included in consolidated balance sheet | 66.2 | 80.9 |
| Net scheme deficit after deferred tax | (311.4) | (385.1) |
| Movement in net scheme deficit | 2017 £m |
2016 £m |
| Opening net scheme deficit | (466.0) | (305.2) |
| Contributions | 38.7 | 40.7 |
| Consolidated income statement | (12.9) | (12.6) |
| Consolidated statement of comprehensive income | 62.6 | (188.9) |
| Closing net scheme deficit | (377.6) | (466.0) |
|---|---|---|
| Changes in the present value of scheme liabilities | 2017 £m |
2016 £m |
|---|---|---|
| Opening present value of scheme liabilities | (2,127.6) | (1,833.6) |
| Interest cost | (51.8) | (65.3) |
| Actuarial (loss)/gain – experience | (6.0) | 14.0 |
| Actuarial gain – change to demographic assumptions | 26.7 | 30.0 |
| Actuarial loss – change to financial assumptions | (39.3) | (370.7) |
| Benefits paid | 95.5 | 98.0 |
| Bulk transfer due to buyout | 173.3 | – |
| Closing present value of scheme liabilities | (1,929.2) | (2,127.6) |
| Changes in the fair value of scheme assets | 2017 £m |
2016 £m |
|---|---|---|
| Opening fair value of scheme assets | 1,661.6 | 1,528.4 |
| Interest income | 39.9 | 54.9 |
| Actual return on assets greater than discount rate | 81.2 | 137.8 |
| Contributions by employer | 38.7 | 40.7 |
| Benefits paid | (95.5) | (98.0) |
| Administrative expenses | (1.0) | (2.2) |
| Bulk transfer due to buyout | (173.3) | – |
| Closing fair value of scheme assets | 1,551.6 | 1,661.6 |
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Defined benefit pension schemes continued
| Fair value of scheme assets | 2017 £m |
2016 £m |
|---|---|---|
| UK equities | 66.1 | 208.2 |
| US equities | 218.3 | 217.2 |
| Other overseas equities | 279.1 | 235.7 |
| Property | 24.6 | 26.9 |
| Corporate bonds | 240.5 | 220.0 |
| Fixed interest gilts | 60.0 | 77.5 |
| Index linked gilts | 24.8 | 30.2 |
| Liability driven investment | 148.9 | 71.2 |
| Cash and other | 307.2 | 211.4 |
| Invested and cash assets at fair value | 1,369.5 | 1,298.3 |
| Value of liability matching insurance contracts | 182.1 | 363.3 |
| Fair value of scheme assets | 1,551.6 | 1,661.6 |
On 30 March 2017, the Trustees of the Mirror Schemes converted the insurance policy held by the Mirror Group Pension Scheme to a buyout policy. This reduced assets and liabilities by £173.3 million on that date. As there was an equal reduction to the assets and liabilities there was no effect on the deficit.
All of the scheme assets have quoted prices in active markets. Scheme assets include neither direct investments in the Company's ordinary shares nor any property assets occupied nor other assets used by the Group.
The acquired entities operate two defined contribution pension schemes where employees hold a personal pension policy directly with Legal and General.
The entities have three defined benefit pension schemes where the assets of the schemes are held separately from those of the entities in funds under the control of Trustees, which were closed to future accrual in 2008 (two schemes) and 2010 (one scheme). The net deficit of the schemes at the last valuations was £63.6 million and the latest available IAS19 deficit at 31 December 2016 was £31.3 million. Set out in note 39 are the agreed future payments and dividend sharing arrangements in relation to these defined benefit pension schemes and to the Group's existing defined benefit pension schemes.
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through an optimal balance of debt and equity. The capital structure of the Group consists of debt, which includes the borrowings (note 25), cash and cash equivalents (note 19) and equity attributable to equity holders of the parent comprising share capital and reserves (note 29).
The Board reviews the capital structure, including the level of gearing and interest cover, as required. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital.
The gearing ratio and interest cover at the reporting date were as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Contracted net debt (note 27) | (9.0) | (30.5) |
| EBITDA | 145.1 | 159.7 |
| Net debt to EBITDA | 0.1 | 0.2 |
| Adjusted operating profit (note 36) | 124.7 | 137.5 |
| Total interest expense (note 10) | (2.3) | (4.9) |
| Interest cover | 54.2 | 28.1 |
Contracted net debt is defined as long-term and short-term borrowings excluding derivative financial instruments less cash and cash equivalents. EBITDA and operating profit is before operating adjusted items. Total interest expense is interest on bank overdrafts and borrowing.
For the period from 2 January 2017 to 31 December 2017, the financial covenants attached to the £110 million revolving credit facility (which reduced to £100 million on 19 December 2017) were a minimum interest cover of 5.0 times and a maximum net debt to EBITDA ratio of 2.0 times.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The Group is subject to externally imposed capital requirements based on financial covenants under the revolving credit facility.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in note 3.
The Group's significant financial assets are cash and trade and other receivables which are classified as loans and receivables and are accordingly held at amortised cost. Trade and other payables, bank overdrafts, bank borrowings and loan notes are all designated as other financial liabilities and held at amortised cost. The Group's derivative financial instruments are classified as fair value through the consolidated income statement.
The Group's Treasury function provides services to the business, co-ordinates access to domestic and international financial markets and monitors and manages the financial risks relating to the operations of the Group through regular meetings with the Group Finance Director and by analysing exposures by degree and magnitude of risk. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
The Group seeks to minimise the effects of these risks by using derivative financial instruments where appropriate to hedge these exposures. The use of financial derivatives is governed by policies approved by the Board, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Group's Treasury function provides regular updates to the Board covering compliance with covenants and other Treasury related matters.
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group had entered into specific derivative financial instruments to manage its exposure to interest rate and foreign currency risk primarily in respect of the private placement loan notes which were repaid in full during the year and as set out in notes 25 and 26.
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward exchange contracts where appropriate.
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
| Liabilities | Assets | ||||
|---|---|---|---|---|---|
| 2017 £m |
2016 £m |
2017 £m |
2016 £m |
||
| Euro | – | – | 0.7 | 0.7 | |
| US\$ | – | (66.5) | 0.7 | 0.6 |
The Group is mainly exposed to the Euro and US\$.
The Euro exposure arises on sales of newspapers in Europe. The Euro sales represent less than 1% (2016: 1%) of Group revenue. Euro balances are kept on deposit and used to fund Euro costs. When Euros on deposit build to a target balance they are converted into sterling. The Group does not hedge the Euro income or deposits because the risk of foreign exchange movements is not deemed to be significant.
The US\$ exposure arose primarily on the private placement loan notes most of which were US\$ denominated and fixed interest. At the time of the private placement loan notes issue, the Group entered into cross-currency interest rate swaps to change the US\$ principal and US\$ fixed interest profile of the debt to sterling principal and sterling floating interest. The swaps matured at the time the private placement loan notes were repaid during the year.
The Group's sensitivity to a 10% increase and decrease in the sterling rate against the Euro and US\$ impacts profit by £0.1 million (2016: £0.1 million) and equity by nil (2016: nil). A 10% movement in exchange rates based on the level of foreign currency denominated monetary assets and liabilities represent the assessment of a reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items including external loans that are unhedged.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
It is the policy of the Group to enter into forward foreign exchange contracts only to cover specific foreign currency payments such as significant capital expenditure. During the current and prior period no contracts were entered into.
The Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, by the use of interest rate swap contracts and forward interest rate contracts.
Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite; ensuring optimal hedging strategies are applied, by either positioning the balance sheet or protecting interest expense through interest rate cycles.
The Group's exposures to interest rates on the financial assets and liabilities are detailed in the liquidity risk management section of this note.
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared using the Group's monthly cash forecasting model. A 1% increase in interest rates has been used and represents the assessment of a reasonably possible change.
If interest rates had been 1% higher/lower and all other variables were held constant, the Group's profit for the period would decrease/ increase by £0.1 million (2016: £0.8 million). This is mainly attributable to the Group's exposure to interest rates on its variable rate borrowings.
The Group has no significant listed equity investments and is not directly exposed to equity price risk. The Group has indirect exposure through its defined benefit pension schemes.
Credit risk refers to the risk that a counter-party with the Group will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties, with the exception of exceptional circumstances, such as the financial crisis in the past, the Group only transacts with financial institutions that are rated the equivalent to investment grade and above. This information is supplied by independent rating agencies where available and, if not, the Group uses other publicly available financial information and its own trading records to rate its major customers. The Group's exposure and credit ratings of its counterparties are reviewed by the Group Finance Director and where material the Board at appropriate times and the aggregate value of transactions concluded is spread amongst approved counterparties.
Trade receivables consist of a large number of customers spread across diverse sectors. Ongoing credit evaluation is performed on the financial condition of trade receivables. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are connected entities. Concentration of credit risk with a single counterparty is limited by reference to the long-term credit ratings assigned for that counterparty by Standard and Poor's.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk.
The table below shows the internal credit limit and amount on deposit with the Group's major counterparties at the reporting date using the Standard & Poor's credit rating symbols:
| 2017 Credit limit |
2017 Balance |
2016 Credit limit |
2016 Balance |
|||
|---|---|---|---|---|---|---|
| Financial institution | Location | Rating | £m | £m | £m | £m |
| Santander UK | London | A | 5.0 | – | 5.0 | 10.1 |
| Lloyds Bank plc | London | A | 5.0 | 8.4 | 5.0 | 7.4 |
| National Westminster Bank plc | London | BBB+ | – | 6.4 | – | 10.4 |
| Royal Bank of Scotland plc | London | BBB+ | – | 0.4 | – | 4.7 |
| Banco de Sabadell (UK) | London | BBB- | – | – | – | 5.0 |
| Ulster Bank plc | Dublin | BBB+ | – | 0.4 | – | 0.2 |
The Board has agreed that due to the risk profile of and the substantial Government shareholding in Royal Bank of Scotland plc/National Westminster Bank plc/Ulster Bank plc that the Group can hold surplus cash in these banks, subject to continued review. The Board has also agreed that the Group can hold surplus cash with Lloyds Bank plc/Santander UK/Banco de Sabadell (UK) as they are the Group's lending banks.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
Liquidity risk results from having insufficient financial resources to meet day-to-day fluctuations in working capital and cash flow. Ultimate responsibility for liquidity risk management rests with the Board. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.
The following tables detail the Group's remaining contractual maturity for its non-derivative and derivative financial instruments. The tables have been drawn up based on undiscounted cash flows of financial liabilities based on the earliest date on which the Group could be required to pay. The table includes both principal and interest cash flows. Where the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest and foreign currency rates as illustrated by the yield curves existing at the reporting date.
| Less than 1 year | 2017 £m |
2016 £m |
|---|---|---|
| Non-derivative financial instruments: | ||
| Sterling fixed interest rate | – | – |
| Non-sterling fixed interest rate | – | (83.9) |
| Derivative financial instruments: | ||
| Financial assets | – | 83.9 |
| Financial liabilities | – | (81.8) |
The non-derivative financial instruments included the private placement loan notes. The non-sterling fixed interest rate liabilities arose on the private placement loan notes. The related swap is shown under derivative instruments. As mentioned above the private placement loan notes were repaid in full during the year and the related swaps matured at the same time.
At the reporting date the Group has a £25 million sterling variable interest rate bank drawing and has access to financial facilities of which the total unused amount is £75 million (2016: £110 million). The facility amortises over the term and expires on 19 December 2021.
The Group expects to meet its obligations from cash held on deposit, operating cash flows and its committed financing facilities.
The immediate parent and controlling party of the Group is Trinity Mirror plc. Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Transactions with the retirement benefit schemes are disclosed in note 33. Details of other related party transactions are disclosed below.
The Group traded with the following associated undertakings: PA Group Limited and Brand Events TM Limited.
The Group earned revenue of nil (2016: nil) and the Group incurred charges for services received of £1.9 million (2016: £1.9 million). The amount outstanding at the reporting date amounted to £0.1 million (2016: nil) owed to PA Group Limited.
In 2017 the Group earned no revenue and the Group incurred no charges for services received. The Group has agreed to provide a revolving credit facility of £1.0 million of which £0.9 million was drawn at the reporting date.
Sales of goods and services to related parties would be made at the Group's usual list prices less average volume discounts. Purchases were made at market prices discounted to reflect volume purchase and the relationship between the parties. Any outstanding amounts will be settled by cash payment.
Key management includes the non-executive directors, the executive directors and the direct reports of the Chief Executive.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Short-term employee benefits | (5.3) | (4.6) |
| Retirement benefits | (0.3) | (0.4) |
| Share-based payments in the period | (0.6) | (1.4) |
| Compensation for loss of office | (0.4) | – |
| (6.6) | (6.4) |
The remuneration of directors and other key executives is determined by the Remuneration Committee having regard to competitive market position and performance of individuals. Further information regarding the remuneration of individual directors is provided in the Remuneration Report on pages 46 to 60.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
For the 52 weeks ended 31 December 2017
| Statutory results £m |
Operating adjusted items(a) £m |
Finance costs(b) £m |
Pension finance charge(c) £m |
Tax items(d) £m |
Adjusted results £m |
|
|---|---|---|---|---|---|---|
| Revenue | 623.2 | – | – | – | – | 623.2 |
| Operating profit | 97.9 | 26.8 | – | – | – | 124.7 |
| Profit before tax | 81.9 | 26.8 | 1.9 | 11.9 | – | 122.5 |
| Profit after tax | 62.8 | 24.1 | 1.5 | 9.6 | 0.5 | 98.5 |
| Basic EPS (p) | 23.0 | 8.9 | 0.5 | 3.5 | 0.2 | 36.1 |
For the 53 weeks ended 1 January 2017
| Statutory results £m |
Operating adjusted items(a) £m |
Finance costs(b) £m |
Pension finance charge(c) £m |
Tax items(d) £m |
Adjusted results £m |
|
|---|---|---|---|---|---|---|
| Revenue | 713.0 | – | – | – | – | 713.0 |
| Operating profit | 93.5 | 44.0 | – | – | – | 137.5 |
| Profit before tax | 76.5 | 44.0 | 2.3 | 10.4 | – | 133.2 |
| Profit after tax | 69.5 | 38.2 | 1.8 | 8.3 | (11.6) | 106.2 |
| Basic EPS (p) | 24.9 | 13.8 | 0.6 | 3.0 | (4.2) | 38.1 |
(a) Operating adjusted items relate to the items charged or credited to operating profit as set out in note 8.
(b) Impact of the translation of foreign currency borrowings and fair value changes on derivative financial instruments as set out in note 10.
(c) Pension finance charge relating to the defined benefit pension schemes as set out in note 33.
(d) Tax items relate to the impact of tax legislation changes due to the change in the future corporation tax rate on the opening deferred tax position and prior year tax adjustments included in the taxation credit or charge as set out in note 11.
| 52 weeks ended 31 December 2017 £m |
(a) £m |
52 weeks ended 31 December 2017 (like for like) £m |
53 weeks ended 1 January 2017 £m |
(a) £m |
(b) £m |
(c) £m |
52 weeks ended 1 January 2017 (like for like) £m |
|
|---|---|---|---|---|---|---|---|---|
| Publishing Print | 494.6 | (0.7) | 493.9 | 581.0 | (15.4) | (8.9) | (0.1) | 556.6 |
| Circulation | 284.7 | – | 284.7 | 310.6 | (0.4) | (5.8) | – | 304.4 |
| Advertising | 177.6 | (0.7) | 176.9 | 236.6 | (14.7) | (2.6) | – | 219.3 |
| Other | 32.3 | – | 32.3 | 33.8 | (0.3) | (0.5) | (0.1) | 32.9 |
| Publishing Digital | 83.9 | – | 83.9 | 79.0 | – | (0.6) | – | 78.4 |
| Display and transactional | 68.7 | – | 68.7 | 58.4 | – | (0.3) | – | 58.1 |
| Classified | 15.2 | – | 15.2 | 20.6 | – | (0.3) | – | 20.3 |
| Printing | 31.6 | – | 31.6 | 36.2 | – | (0.6) | (1.3) | 34.3 |
| Specialist Digital | 9.6 | – | 9.6 | 12.9 | – | – | (3.4) | 9.5 |
| Central | 3.5 | – | 3.5 | 3.9 | – | – | – | 3.9 |
| Total revenue | 623.2 | (0.7) | 622.5 | 713.0 | (15.4) | (10.1) | (4.8) | 682.7 |
(a) Metros handed back to DMGT in December 2016 and other portfolio changes in 2016 and 2017.
(b) Extra week of trading in 2016.
(c) Independent print and distribution contract which ceased in April 2016 and Rippleffect which was sold in August 2016.
There is a potential for further liabilities to arise from the outcome or resolution of the ongoing historical legal issues. Due to the present uncertainty in respect of the nature, timing or measurement of any such liabilities it is too soon to be able to reliably estimate how these matters will proceed and their financial impact.
The Group announced the proposed acquisition of Northern & Shell's publishing assets on 9 February 2018 which was subsequently approved at the General Meeting held on 27 February 2018.
On 28 February 2018, the Group completed the acquisition of 100% of the equity in Northern & Shell Network Limited (renamed Trinity Mirror Network Limited) and its subsidiaries for a cash consideration of £42.7 million and the issue of 25,826,746 shares at 77.44 pence per share and with deferred consideration of £59.0 million payable as £18.9 million, £16.0 million, £17.1 million and £7.0 million on the second, third, fourth and fifth anniversaries respectively of the acquisition. A new £75 million amortising term loan ('Acquisition Term Loan') was procured to partially fund the acquisition and £70 million has been drawn.
The acquisition of the 50% equity interest in Independent Star Limited for £4.5 million and 100% of the equity in International Distribution 2018 Limited for £0.5 million is subject to clearance by the competition authorities in the Republic of Ireland. The remaining £5 million under the Acquisition Term Loan will be drawn on completion of these acquisitions.
The Group has agreed to make an upfront payment of £41.2 million to the defined benefit pension schemes of subsidiaries of Trinity Mirror Network Limited and has entered into recovery plans amounting to £29.2 million over the period 2018 to 2027 (£1.9 million per annum 2018 to 2020, £4.1 million per annum 2021 to 2023, £3.3 million per annum 2024 to 2026 and £1.3 million in 2027). The Group also revised the schedule of contributions for the Group's existing defined benefit pension schemes amounting to an increase of £67.0 million over the period 2018 to 2027 (£3.2 million per annum 2018 to 2020 and £8.2 million per annum 2021 to 2027). In addition, the Group agreed to increase from 50% to 75%, the additional contributions that would be paid to the defined benefit pension schemes if dividends increased by more than 10% in 2018, 2019 and 2020.
Northern & Shell's publishing assets comprise national newspapers and magazines together with associated websites and a print plant in Luton. The acquisition is consistent with the Group's fourth area of strategic focus: "Consolidate – seek out strategic opportunities that drive value". As well as driving value for shareholders the increased scale of the enlarged Group is anticipated to provide increased financial flexibility in the medium term for investment and meeting the enlarged Group's pension obligations.
The initial accounting for the acquisition which completed on 28 February 2018 is incomplete at the date of approval of the consolidated financial statements as the acquisition only completed on 28 February 2018 and the completion accounts as at the date of acquisition have yet to be prepared. The fair value of the consideration is estimated to be £121.7 million. Estimated transactions costs are £7 million of which £2.2 million has been recognised in the consolidated income statement at the reporting date. The acquired balance sheet will contain fixed assets, working capital and defined benefit pension scheme obligations and the acquisition is on a debt free and cash free basis. The fair value of assets acquired and liabilities assumed will be calculated at the same time as the preparation of the completion balance sheet. This exercise will also identify any goodwill or bargain purchase and any intangible assets that do not qualify for separate recognition. No contingent liabilities are expected to be identified.
at 31 December 2017 (at 1 January 2017) Company registration number 82548
| notes | 2017 £m |
2016 £m |
|
|---|---|---|---|
| Fixed assets | |||
| Investments in subsidiary undertakings | 4 | 811.8 | 811.8 |
| 811.8 | 811.8 | ||
| Current assets | |||
| Debtors | |||
| – due within one year | 5 | 3.2 | 21.8 |
| Cash at bank and in hand | 0.7 | 20.1 | |
| 3.9 | 41.9 | ||
| Creditors: amounts falling due within one year | |||
| Borrowings | 7 | (25.0) | (81.2) |
| Other creditors | 8 | (1.5) | (0.9) |
| (26.5) | (82.1) | ||
| Net current liabilities | (22.6) | (40.2) | |
| Total assets less current liabilities | 789.2 | 771.6 | |
| Creditors: amounts falling due after more than one year | |||
| Deferred tax liabilities | 6 | – | (0.3) |
| – | (0.3) | ||
| Net assets | 789.2 | 771.3 | |
| Equity capital and reserves | |||
| Called-up share capital | 9 | 28.3 | 28.3 |
| Share premium account | 10 | 606.7 | 606.7 |
| Merger reserve | 11 | 37.9 | 37.9 |
Capital redemption reserve 11 4.4 4.4 Profit and loss account 11 111.9 94.0 Equity shareholders' funds 789.2 771.3
The Company reported a retained profit for the period after dividends of £25.1 million (2016: £24.4 million). These parent company financial statements were approved by the Board of directors and authorised for issue on 5 March 2018. They were signed on its behalf by:
Simon Fox Vijay Vaghela
Chief Executive Group Finance Director
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| Called-up share capital £m |
Share premium account £m |
Merger reserve £m |
Capital redemption reserve £m |
Profit and loss account £m |
Total £m |
|
|---|---|---|---|---|---|---|
| At 27 December 2015 | 28.3 | 606.7 | 37.9 | 4.4 | 72.4 | 749.7 |
| Profit for the period | – | – | – | – | 39.0 | 39.0 |
| Credit to equity for equity-settled share-based payments | – | – | – | – | 1.5 | 1.5 |
| Purchase of shares for LTIP | – | – | – | – | (2.0) | (2.0) |
| Purchase of own shares | – | – | – | – | (2.3) | (2.3) |
| Dividends paid | – | – | – | – | (14.6) | (14.6) |
| At 1 January 2017 | 28.3 | 606.7 | 37.9 | 4.4 | 94.0 | 771.3 |
| Profit for the period | – | – | – | – | 40.4 | 40.4 |
| Credit to equity for equity-settled share-based payments | – | – | – | – | 0.5 | 0.5 |
| Purchase of own shares | – | – | – | – | (7.7) | (7.7) |
| Dividends paid | – | – | – | – | (15.3) | (15.3) |
| At 31 December 2017 | 28.3 | 606.7 | 37.9 | 4.4 | 111.9 | 789.2 |
The financial statements of Trinity Mirror plc have been prepared in accordance with Financial Reporting Standard 101, 'Reduced Disclosure Framework' (FRS 101). The financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 2006. The preparation of financial statements in conformity with FRS 101 requires the use of certain key accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies.
As permitted by section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss account for the period. The Company reported a retained profit for the period after dividends of £25.1 million (2016: £24.4 million). The audit fees relating to the Company are disclosed in note 6 in the notes to the consolidated financial statements and are borne by another Group company.
The Company has applied the exemption available under FRS 101 in relation to paragraphs 30 and 31 of IAS 8 'Accounting policies, changes in accounting estimates and errors' (requirement for the disclosure of information when an entity has not applied a new IFRS that has been issued and is not yet effective).
Fixed asset investments are stated at cost less provision for any impairment. An impairment review is undertaken at each reporting date or more frequently when there is an indication that the recoverable amount is less than the carrying amount. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use the estimated future cash flows of the cash-generating units relating to the investment are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset for which estimates of future cash flows have not been adjusted. If the recoverable amount of the cash-generating units relating to the investment is estimated to be less than its carrying amount, the carrying value of the investment is reduced to its recoverable amount. An impairment loss is recognised in the profit and loss account in the period in which it occurs and may be reversed in subsequent periods.
Transactions denominated in foreign currencies are translated at the rates of exchange prevailing on the date of the transactions. At each reporting date, items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Exchange differences arising on settlement and on retranslation are included in the profit and loss account for the period.
Corporation tax payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the parent company's financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account except when it relates to items charged or items charged or credited directly to equity in which case the deferred tax is also dealt with in equity. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Financial assets and financial liabilities are recognised in the parent company balance sheet when the Company becomes a party to the contractual provisions of the instrument.
Cash and cash equivalents comprise cash in hand and short-term bank deposits.
The Company uses derivative financial instruments, including currency swaps, cross-currency interest rate swaps, interest rate swaps and other hedging instruments to minimise exposure to the financial risks of changes in foreign currency exchange rates and interest rates. The Company does not use derivative financial instruments for speculative purposes. The Company has elected not to apply hedge accounting. Derivative financial instruments are separately recognised at fair value in the parent company financial statements. Changes in the fair value of derivative financial instruments are recognised immediately in the profit and loss account. Derivatives embedded in commercial contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the underlying contract, with unrealised gains or losses reported in the profit and loss account.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
The Company issues equity-settled benefits to certain employees. These equity-settled share-based payments are measured at fair value at the date of grant taking advice from third party experts. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions. Fair value is measured by use of a stochastic (Monte-Carlo binomial) model. The expected life used in the model has been adjusted, based on the directors' best estimates, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax. Where the Company's own shares are purchased, the consideration paid including any directly attributable incremental costs, net of income taxes, is deducted from equity attributable to the Company's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are cancelled, the nominal value of shares cancelled is shown in the capital redemption reserve. Where such shares are subsequently reissued or disposed of, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the Company. All other leases are classified as operating leases. Rentals payable under operating leases are charged to the profit and loss account on a straight-line basis over the lease term. Benefits received as incentives to enter into the agreement are spread on a straight-line basis over the lease term.
The Company has taken advantage of the FRS101 exemption for IFRS 7 'Financial Instruments: Disclosures' and included disclosures relating to financial instruments in the notes to the consolidated financial statements.
The Company has utilised the FRS101 exemption for IAS 7 'Statement of Cash Flows' and has not presented a cash flow statement. A consolidated cash flow statement has been presented in the consolidated financial statements.
The Company have taken advantage of the FRS101 exemption for IAS 24 'Related Party Disclosures' and included disclosures relating to related parties in the notes to the consolidated financial statements.
The key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:
There is uncertainty in the value in use calculation. The most significant area of uncertainty relates to expected future cash flows for each cash-generating unit. Determining whether investments are impaired requires an estimation of the value in use of the cashgenerating unit to which these have been allocated. It also requires assessment of the appropriateness of the cash-generating unit at each reporting date. The value in use calculation requires the Company to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Projections are based on both internal and external market information and reflect past experience. The discount rate reflects a long-term equity and debt mix based on the period end enterprise value assuming a long-term debt to EBITDA ratio of 2.5 times.
The average number of persons, including directors, employed by and charged to the Company in the period was:
| 2017 Number |
2016 Number |
|
|---|---|---|
| Administration | 8 | 8 |
A number of employees (not directors) who have contracts of employment with the Company are charged to other Group companies and their staff costs are disclosed in those companies' statutory accounts.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
All employees are employed in the UK.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Staff costs, including directors' emoluments, incurred during the period were: | ||
| Wages and salaries | 1.6 | 1.5 |
| Social security costs | 0.3 | 0.2 |
| Share-based payments charge | 0.5 | 1.5 |
| Pension benefits | 0.2 | 0.2 |
| 2.6 | 3.4 |
Disclosure of individual directors' remuneration, share options, long-term incentive schemes, pension contributions and pension entitlements required by the Companies Act 2006 and those elements specified for audit by the Financial Conduct Authority are shown in the tables in the Remuneration Report on pages 46 to 60 and form part of these parent company financial statements. Further details of share-based payments are contained in note 32 in the notes to the consolidated financial statements.
| Shares in subsidiary undertakings £m |
|
|---|---|
| Cost at beginning and end of period | 1,511.8 |
| Provision for impairment at beginning and end of period | (700.0) |
| Net book value at beginning and end of period | 811.8 |
At the period end reporting date an impairment review was undertaken which indicated that no impairment in the investments held by the Company was required (2016: nil). The impairment review was performed using the same assumptions used in the impairment review performed in relation to the Group's assets which are disclosed in note 15 in the notes to the consolidated financial statements.
A combination of reasonably possible changes in key assumptions, such as print revenue declining at a faster rate than forecast or digital revenue growth being significantly lower than forecast, could lead to a future impairment. An increase of 1.1 percentage points in the discount rate or a decrease of 1.1 percentage points in the growth rate would remove the headroom.
Details of the Company's subsidiary undertakings at 31 December 2017 are set out on pages 117 and 118.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Amounts falling due within one year: | ||
| Amounts owed by subsidiary undertakings | 2.5 | – |
| Other debtors | 0.7 | 7.0 |
| Derivative financial instruments | – | 14.8 |
| 3.2 | 21.8 |
The details of the Company's derivative financial instruments are the same as those of the Group and are disclosed in note 26 in the notes to the consolidated financial statements.
| 2017 £m |
2016 £m |
|
|---|---|---|
| Opening liability | (0.3) | (0.6) |
| Tax credit | 0.3 | 0.3 |
| Closing liability | – | (0.3) |
The details of the Company's borrowings are the same as those of the Group and are disclosed in note 25 in the notes to the consolidated financial statements.
for the 52 weeks ended 31 December 2017 (53 weeks ended 1 January 2017)
| 2017 £m |
2016 £m |
|
|---|---|---|
| Amounts owed to subsidiary undertakings | – | (0.4) |
| Share-based payments | (0.2) | (0.3) |
| Accruals and deferred income | (1.3) | (0.2) |
| (1.5) | (0.9) |
The share-based payments provision relates to National Insurance obligations attached to the future crystallisation of awards.
The details of the Company's called-up share capital and dividends are disclosed in notes 30 and 12 respectively in the notes to the consolidated financial statements.
The details of the Company's share premium account are disclosed in note 31 in the notes to the consolidated financial statements.
| Merger reserve £m |
Capital redemption reserve £m |
Profit and loss account £m |
|
|---|---|---|---|
| Opening balance | 37.9 | 4.4 | 94.0 |
| Transfer of retained profit for the period before dividends | – | – | 40.4 |
| Purchase of own shares | – | – | (7.7) |
| Share-based payments credit | – | – | 0.5 |
| Dividends paid | – | – | (15.3) |
| Closing balance | 37.9 | 4.4 | 111.9 |
The merger reserve comprises the premium on the shares allotted in relation to the acquisition of Local World net of £0.8 million of issue costs. The capital redemption reserve represents the nominal value of the shares purchased and subsequently cancelled as part of share buyback programmes. The profit and loss account reserves are all distributable.
The Company has total commitments under non-cancellable operating leases in respect of land and buildings as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Within one year | 4.7 | 7.0 |
| Greater than one and less than five years | 10.3 | 12.0 |
| Greater than five years | 14.3 | 17.0 |
| 29.3 | 36.0 |
The Company has total future minimum lease payments with tenants under non-cancellable property operating leases as follows:
| 2017 £m |
2016 £m |
|
|---|---|---|
| Within one year | 0.8 | 2.2 |
| Greater than one and less than five years | – | 1.0 |
| 0.8 | 3.2 |
Details of subsequent events are disclosed in note 39 in the notes to the consolidated financial statements.
The following subsidiary undertakings are 100% owned (all share classes) and incorporated in the UK, with a registered office at One Canada Square, Canary Wharf, London E14 5AP.
| Subsidiary name | Internet Recruitment Solutions Limited |
|---|---|
| 0800 Recruit Limited | Isle of Wight Newspapers Limited |
| 08000 Recruit Limited | Job Search Limited |
| Ad-Mag (North East) Limited | Jobsfinancial Limited |
| Advertiser North London Group | Jobsin Limited |
| (Holdings) Limited | JobsinHRSolutions Limited |
| Advertiser North London Limited | Jobsinlaw Limited |
| AMRA Limited | JobsinUK Limited |
| Arrow Interactive Limited | Joseph Woodhead & Sons Limited |
| Birmingham Live Limited | Just London Jobs Limited |
| Birmingham Post & Mail (Exhibitions) | Kennyhill Limited |
| Limited | Kent Regional Newspapers Limited |
| Birmingham Post & Mail Trustees Limited | Lancashire & Cheshire County Newspapers |
| Blackmore Vale Publishing Company Limited |
Limited |
| BPM Media (Midlands) Limited | Legionstyle Limited |
| Buy Sell Limited | Live TV Limited |
| Camberry Limited | Liverpool Web Offset Limited |
| CDE Services Limited | Liverpool Weekly Newspaper Group Limited |
| Century Communications Ltd. | |
| Channel One Liverpool Limited | Llandudno Advertiser Limited |
| Chargestake Limited | Local World Holdings Limited |
| Charles Elphick Limited | Local World Limited |
| City Television Network Limited | London and Westminster Newspapers Limited |
| Community Magazines Limited | London Newspaper Group Limited |
| Conrad & Partners Limited | Mainjoy Limited |
| Coventry Newspapers Limited | Manchester Morning News Limited |
| Daily Post Investments Limited | Markstead Limited |
| Daily Post Overseas Limited | Mayfair Celebs Limited |
| Denitz Investments Limited | Midland Weekly Media Limited |
| Echo Press (1983) Limited | Midland Weekly Newspapers Limited |
| Enterprise Magazines Limited | Mirror Colour Print (London No. 1 Plant) |
| Examiner News & Information Services | Limited |
| Limited | Mirror Colour Print (London) Limited |
| Financial Jobs Online Limited | Mirror Colour Print (North) Limited |
| Fish4 Limited | Mirror Colour Print Services (London) |
| Fish4 Trading Limited | Limited |
| Fish4Cars Limited | Mirror Colour Print Services Limited |
| Fish4Homes Limited | Mirror Financial Services Limited |
| Fish4Jobs Limited | Mirror Group Music Limited |
| Gazette Media Company Limited | Mirror Group Newspapers Limited |
| Gimmejobs Limited | Mirror Group Newspapers North (1986) Limited |
| Gisajob Limited | Mirror Projects Limited |
| High Street Direct Limited | Media Wales Limited |
| Hot Exchange Limited | Medpress Limited |
| Hot Flats Limited | Meilin Limited |
| Hot Flights Limited | MEN Investment Limited |
| Hotrecruit Limited | |
| Huddersfield Examiner Limited | MEN Media Limited |
| Huddersfield Newspapers Limited | Mercury Distribution Services Limited |
| I.T. Trade Publishing Limited Informer Publications Limited |
Merseymart Limited |
| MG Estates Limited |
| MG Guarantee Co Limited |
|---|
| MG6 Limited |
| MGL2 Limited |
| MGN (86) Limited |
| MGN (AW) Limited |
| MGN (Canada Square) Limited |
| MGN (Services) Ltd |
| MGN Limited |
| MGN Pension Trustees Limited |
| MGN Property Developments Limited |
| Micromart (UK) Limited |
| Middlesex County Press Limited |
| Midland Independent Magazines Limited |
| Midland Independent Newspaper & Media Sales Limited |
| Midland Independent Weekly Newspapers Limited |
| Midland Leaflet Services Limited |
| Midland Newspapers Limited |
| Midland Newspapers Pension Trustees Limited |
| Midland Newspapers Printers Limited |
| Midland United Newspapers Limited |
| Midland Weekly Media (Birmingham) Limited |
| Midland Weekly Media (Wolverhampton) |
| Limited |
| MirrorAd Limited |
| Mirrorair Limited |
| Mirrorgroup Limited |
| MirrorNews Limited |
| MirrorTel Limited |
| NCJ Media Limited |
| Net Recruit UK Limited |
| Newcastle Chronicle and Journal Limited |
| North Eastern Evening Gazette Limited |
| North Wales Independent Press Limited |
| North Wales Weekly News |
| Nunews Limited |
| Odhams Newspapers Limited |
| Official Starting Prices Ltd. |
| Parkside Accountancy Limited |
| Parkside Consulting Limited |
| Planet Recruitment Limited |
| Planetrecruit Limited |
| Quids-In (North West) Limited |
| R.E. Jones & Bros. Limited |
| R.E. Jones Graphic Services Limited |
| R.E. Jones Newspaper Group Limited |
| Reliant Distributors Limited |
| RH1 Limited Scene Magazines Limited |
as at 31 December 2017
| Subsidiary name | TIH (Cardiff) Limited | Trinity Mirror Printing (Newcastle) Limited |
|---|---|---|
| Scene Newspapers Limited | TIH (Chester) Limited | Trinity Mirror Printing (Oldham) Limited |
| Scene Printing (Midlands) Limited | TIH (Newcastle) Limited | Trinity Mirror Printing (Teesside) Limited |
| Scene Printing Web Offset Limited | TIH (Properties) Limited | Trinity Mirror Printing (Watford) Limited |
| Smart Media Services Limited | TIH (Teesside) Limited | Trinity Mirror Printing Limited |
| Southnews Trustees Limited | TIH (Trustee) Limited | Trinity Mirror Publishing Limited |
| Sunday Brands Limited | TM Mobile Solutions Limited | Trinity Mirror Regional Newspapers Limited |
| Sunday People Limited | TM Regional New Media Limited | Trinity Mirror Regionals Limited |
| Surrey & Berkshire Media Limited | Totallyfinancial.com Ltd | Trinity Mirror Shared Services Limited |
| Syndication International (1986) Limited | Totallylegal.com Limited | Trinity Mirror Southern Limited |
| Syndication International Limited | Trinity 100 Limited | Trinity Mirror Subsidiary 100 Limited |
| T M Directors Limited | Trinity 102 Limited | Trinity Newspaper Group Limited |
| T M S Pension Trustee Limited | Trinity Limited | Trinity Newspapers Southern Limited |
| T M Secretaries Limited | Trinity Mirror (L I) Limited | Trinity Publications Limited |
| The Adscene Group Limited | Trinity Mirror Acquisitions (2) Limited | Trinity Retirement Benefit Scheme Limited |
| The Advertiser Limited | Trinity Mirror Acquisitions Limited | Trinity Shared Services Limited |
| The Associated Catholic Newspapers | Trinity Mirror Cheshire Limited | Trinity Weekly Newspapers Limited |
| (1912) Limited | Trinity Mirror Digital Limited | Vectis Innovations Limited |
| The Birmingham Boat Shows Limited | Trinity Mirror Digital Media Limited | Vibrant Limited |
| The Birmingham Post & Mail Limited | Trinity Mirror Digital Recruitment Limited | Vivid Group Limited |
| The Career Engineer Limited | Trinity Mirror Distributors Limited | |
| The Chester Chronicle and Associated | Trinity Mirror Group Limited | Vivid Limited |
| Newspapers Limited | Trinity Mirror Huddersfield Limited | Wandsworth Independent Limited |
| The Communicator Corporation Limited | Trinity Mirror Marketing Direct Limited | Websalvo.com Limited |
| The Daily Mirror Newspapers Limited | Trinity Mirror Merseyside Limited | Welsh Universal Holdings Limited |
| The Echo Press Limited | Trinity Mirror Midlands Limited | Welshpool Web-Offset Co. Limited |
| The Graduate Group Ltd | Trinity Mirror North Wales Limited | Western Mail & Echo Limited |
| The Hinckley Times Limited | Trinity Mirror North West & North Wales | Whitbread Walker Limited |
| The Hotgroup Limited | Limited | Wire TV Limited |
| The Liverpool Daily Post And Echo Limited | Trinity Mirror Pension Trustees Limited | Wirral Newspapers Limited |
| The People Limited | Trinity Mirror Printing (Cardiff) Limited | Wood Lane One Limited |
| This Is Britain Limited | Trinity Mirror Printing (Liverpool) Limited | Wood Lane Two Limited |
| TIH (Belfast) (Nominees) Limited | Trinity Mirror Printing (Midlands) Limited | Workthing Limited |
The following subsidiary undertakings are 100% owned (all share classes) and incorporated in Scotland, with a registered office at One Central Quay, Glasgow G3 8DA.
| Subsidiary name | Insider Publications Limited | Scottish Daily Record and Sunday Mail | |||
|---|---|---|---|---|---|
| Aberdonian Publications Limited | Media Scotland Limited | ||||
| Anderston Quay Printers Limited | Metropolitan Free Newspapers Limited | Limited | |||
| Dundonian Publications Limited | Newsday Limited | ||||
| First Press Publishing Limited | Northern Print Services Limited | The Edinburgh and Lothians Post Limited | |||
| Glaswegian Publications Limited | Saltire Press Limited | Trinity Mirror Printing (Blantyre) Limited | |||
| icScotland Limited | Scotfree Limited | ||||
| Insider Group Limited | Scottish and Universal Newspapers Limited | Trinity Mirror Printing (Saltire) Limited | |||
The following subsidiary undertaking is 100% owned (all share classes) and incorporated in Ireland, with a registered office at 40 Upper Mount Street, Dublin 2.
Northpoint Consulting Limited
One Canada Square Canary Wharf, London E14 5AP, United Kingdom Telephone: +44 (0) 207 293 3000 Company website: www.trinitymirror.com
Registered in England and Wales No. 82548
The Notice of Meeting sets out the resolutions being proposed at the Annual General Meeting which will be held at 11.30 am on Thursday 3 May 2018 at the Museum of Docklands, No.1 Warehouse, West India Dock Road, London E14 4AL.
Deloitte LLP 2 New Street Square, London EC4A 3BZ
Equiniti Limited Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA Telephone: 0371 384 2235* For overseas shareholders: +44(0) 121 415 7047 * Lines are open from 8.30 am to 5.30 pm, Monday to Friday, excluding UK bank holidays. If you have any queries regarding your shareholding, please contact the Registrar.
As well as using the Trinity Mirror website to view details of the current and historical share price, shareholders can find share prices listed in most national newspapers. For a real-time buying or selling price, you should contact a stockbroker.
Trinity Mirror encourages its shareholders to consider receiving shareholder information electronically. Electing to receive shareholder communications in this way allows shareholders to access information quickly and securely. It also reduces company costs by decreasing the amount of paper it needs to use and minimises its environmental impact.
The Company's shares can be traded through most banks, building societies and stockbrokers. Additionally, shareholders can buy and sell shares through a telephone and internet service provided by the Company's Registrar, Equiniti.
Shareview, a website operated by Equiniti, allows shareholders to view the details of their shareholding, register for e-communications and send voting instructions electronically if they have received a voting form with an electronic reference or signed up for Shareview. For more information about both services log on to www.shareview.co.uk or call 03456 037037** for Shareview Dealing.
** Lines are open Monday to Friday from 8.00 am to 4.30 pm for Shareview Dealing and until 6.00 pm for any other Shareview Dealing enquiries.
Trinity Mirror has a sponsored Level 1 American Depositary Receipt (ADR) programme for which BNY Mellon acts as Depositary. Each ADR is equivalent to two Trinity Mirror Group ordinary shares. Dividends are paid in US dollars via the Depositary. Details of the ADR programme are as follows:
Exchange: OTC (Over-The-Counter) Symbol: TNMRY, CUSIP: 89653Q105, Ratio (ADR: Ord) 1:2
For more information, contact: BNY Mellon Shareholder Services P.O. Box 358516 Pittsburgh PA 15252-8516 USA Toll free for US domestic callers: 1–888–BNY–ADRs International: 1–201–680–6825 Email: [email protected]
In recent years, many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based 'brokers' who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. These operations are commonly known as 'boiler rooms'. These 'brokers' can be very persistent and extremely persuasive. A 2006 survey by the Financial Services Authority reported that the average amount lost by investors is around £20,000.
It is not just the novice investor that has been duped in this way; many of the victims had been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.
If you are approached about an investment scam you should tell the FCA using the share fraud reporting form at www.fca.org.uk/scams, where you can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040.
Details of any share dealing facilities that the Company endorses will be included in Company mailings.
As at 31 December 2017, there were 12,364 holders of ordinary shares whose shareholdings are analysed below:
| Range | Total number of holdings |
Percentage of total holders |
Total number of shares |
Percentage of ordinary shares |
|---|---|---|---|---|
| 1–50 | 398 | 3.22% | 11,563 | 0.00% |
| 51–100 | 4,602 | 37.22% | 341,978 | 0.12% |
| 101–500 | 5,324 | 43.06% | 1,123,952 | 0.40% |
| 501–1,000 | 783 | 6.33% | 569,214 | 0.20% |
| 1,001–10,000 | 967 | 7.82% | 2,725,947 | 0.96% |
| 10,001–50,000 | 120 | 0.97% | 2,491,967 | 0.88% |
| 50,001–100,000 | 38 | 0.31% | 2,681,950 | 0.95% |
| 100,001–500,000 | 69 | 0.56% | 16,384,836 | 5.78% |
| 500,001–1,000,000 | 25 | 0.20% | 18,251,216 | 6.44% |
| 1,000,001+ | 38 | 0.31% | 238,876,948 | 84.27% |
| Totals | 12,364 | 100.00% | 283,459,571 | 100.00% |
We communicate with the financial community on a regular and ongoing basis to support our stakeholders in their investment decision process. While the investor relations programme is driven by statutory reporting requirements, it also contains a strong element of additional communication in the form of meetings and presentations.
| Adjusted | 2017 £m |
2016 £m |
2015 £m |
2014 £m |
2013 £m |
|---|---|---|---|---|---|
| Income statement | |||||
| Revenue | 623 | 713 | 593 | 636 | 664 |
| Operating profit | 125 | 138 | 110 | 106 | 108 |
| Finance costs net of investment revenues | (2) | (5) | (2) | (4) | (7) |
| Profit before tax | 123 | 133 | 108 | 102 | 101 |
| Tax charge | (24) | (27) | (22) | (21) | (22) |
| Profit for the period | 99 | 106 | 86 | 81 | 79 |
| Basic earnings per share | 36.1p | 38.1p | 33.9p | 32.8p | 32.0p |
| Statutory | 2017 £m |
2016 £m |
2015 £m |
2014 £m |
2013 £m |
| Income statement | |||||
| Revenue | 623 | 713 | 593 | 636 | 664 |
| Operating profit/(loss) | 98 | 94 | 82 | 99 | (135) |
| Pension finance charge | (12) | (10) | (11) | (11) | (13) |
| Finance costs net of investment revenues | (4) | (7) | (4) | (6) | (13) |
| Profit/(loss) before tax | 82 | 77 | 67 | 82 | (161) |
| Tax (charge)/credit | (19) | (7) | 10 | (12) | 65 |
| Profit/(loss) for the period | 63 | 70 | 77 | 70 | (96) |
| Basic earnings/(loss) per share | 23.0p | 24.9p | 30.2p | 28.1p | (39.0)p |
| 2017 £m |
2016 £m |
2015 £m |
2014 £m |
2013 £m |
|
| Balance sheet | |||||
| Intangible assets | 901 | 902 | 904 | 681 | 683 |
| Property, plant and equipment | 248 | 262 | 300 | 318 | 338 |
| Other assets and liabilities | (473) | (554) | (427) | (391) | (361) |
| 676 | 610 | 777 | 608 | 660 | |
| Net debt | (9) | (31) | (93) | (13) | (88) |
| Net assets | 667 | 579 | 684 | 595 | 572 |
| Total equity | (667) | (579) | (684) | (595) | (572) |
|---|---|---|---|---|---|
Registered office: One Canada Square Canary Wharf London E14 5AP +44 (0)20 7293 3000 www.trinitymirror.com
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.