REG - Trinity Mirror PLC - Annual Results for 53 weeks ended 1 January 2017 <Origin Href="QuoteRef">TNI.L</Origin> - Part 3

ReachAnnouncement

27/02/2017 07:07

- Part 3: For the preceding part double click  ID:nRSa8869Xb 

£0.5 million. Alongside the share buyback programme, the
Group paid to the defined benefit pension schemes an additional £5.0 million
in August 2016 with up to a further £2.5 million payable in 2017. Payments
were £29.6 million (2015: £14.3 million) to the Mirror Schemes, £7.0 million
(2015: £3.7 million) to the Trinity Scheme and £4.1 million (2015: £2.0
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
2016 and these valuations, which are currently in progress, are required to be
completed by 31 March 2018. 
 
Although the funding commitments do not generally impact the IAS 19 position,
IFRIC 14 guides companies to consider for IAS19 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 the year
following the issuance of an Exposure Draft of changes to IFRIC14 which
provides more detailed guidance on this area. 
 
Risks 
 
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: 
 
·          Investment risk: a reduction in asset returns (or assumed future
asset returns); 
 
·          Inflation risk: an increase in benefit increases (or assumed future
increases); and 
 
·          Longevity risk: an increase in average life spans (or assumed life
expectancy). 
 
These risks are managed by: 
 
·          Investing in insured annuity policies: the income from these
policies exactly matches the benefit payments for the members covered,
removing all of the above risks. At the reporting date the insured annuity
policies covered 17% of total liabilities; 
 
·          Investing a proportion of assets in government and corporate bonds:
changes in the values of the bonds broadly match changes in the values of the
uninsured liabilities, reducing the investment risk, however some risk remains
as the durations of the bonds are typically shorter than that of the
liabilities and so the values may still move differently. At the reporting
date this amounted to 47% of assets excluding the insured annuity policies; 
 
·          Investing a proportion in equities: with the aim of achieving
outperformance and so reducing the deficits over the long term. At the
reporting date this amounted to 51% of assets excluding the insured annuity
policies; and 
 
·          The gradual sale of equities over time to purchase additional
annuity policies or bonds: to further reduce risk as the schemes, which are
closed to future accrual, mature. 
 
13.        Retirement benefit schemes (continued) 
 
Defined benefit pension schemes (continued) 
 
Pension scheme accounting deficits are snapshots at moments in time and are
not used by either the Company or Trustees to frame funding policy.  The
Company and Trustees are aligned in focusing on the long-term sustainability
of the funding policy which aims to balance the interests of the Company's
shareholders and members of the schemes.  The Company and Trustees are also
aligned in reducing pensions risk over the long term and at a pace which is
affordable to the Company. 
 
The Group is not exposed to any unusual, entity specific or scheme specific
risks. There were no plan amendments, settlements or curtailments in 2016 or
during 2015 which resulted in a pension cost. 
 
Actuarial projections at the 2016 year end showed removal of the accounting
deficit by 2024 due to scheduled contributions and asset returns at the
current target rate. 
 
Results 
 
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 1 January 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    (1,249.5)     (383.6)           (131.2)        (1,764.3)  
 Present value of insured scheme liabilities      (174.8)       (80.0)            (108.5)        (363.3)    
 Total present value of scheme liabilities        (1,424.3)     (463.6)           (239.7)        (2,127.6)  
 Invested and cash assets at fair value           855.4         365.3             77.6           1,298.3    
 Value of insurance contracts                     174.8         80.0              108.5          363.3      
 Total value of scheme assets                     1,030.2       445.3             186.1          1,661.6    
 Net scheme deficit                               (394.1)       (18.3)            (53.6)         (466.0)    
 
 
Based on actuarial advice, the assumptions used in calculating the scheme
liabilities and the actuarial value of those liabilities are: 
 
                                                                         2016  2015  
 Financial assumptions (nominal % pa)                                                
 Discount rate                                                           2.65  3.65  
 Retail price inflation rate                                             3.20  3.05  
 Consumer price inflation rate                                           2.00  1.85  
 Rate of pension increase in deferment                                   2.00  1.85  
 Rate of pension increases in payment                                    3.85  3.85  
 Mortality assumptions - future life expectancies from age 65 (years)                
 Male currently aged 65                                                  21.8  22.0  
 Female currently aged 65                                                23.9  24.0  
 Male currently aged 55                                                  22.7  22.9  
 Female currently aged 55                                                24.8  24.9  
 
 
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 onliabilities  Effect ondeficit  
                                            £m                    £m                
 Discount rate +/- 0.5% pa                  -188 / +219           -164 / +191       
 Retail price inflation rate +/- 0.5% pa    +30 / -28             +24 / -22         
 Consumer price inflation rate +/- 0.5% pa  +49 / -47             +49 / -47         
 Life expectancy at age 65 +/- 1 year       +82 / -80             +76 / -74         
 
 
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. 
 
13.        Retirement benefit schemes (continued) 
 
Defined benefit pension schemes (continued) 
 
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: 
 
 Consolidated income statement                          2016£m  2015£m  
                                                                        
 Pension scheme administrative expenses                 (2.2)   (2.1)   
 Pension scheme finance charge                          (10.4)  (10.9)  
 Defined benefit cost recognised in income statement    (12.6)  (13.0)  
 
 
(13.0) 
 
 Consolidated statement of comprehensive income                2016£m   2015£m  
                                                                                
 Actuarial gain due to liability experience                    14.0     23.9    
 Actuarial loss due to liability assumption changes            (340.7)  (16.0)  
 Total liability actuarial (loss)/gain                         (326.7)  7.9     
 Returns on scheme assets greater/(less) than discount rate    137.8    (18.9)  
 Total loss recognised in statement of comprehensive income    (188.9)  (11.0)  
 
 
 Consolidated balance sheet                                   2016£m     2015£m     
                                                                                    
 Present value of uninsured scheme liabilities                (1,764.3)  (1,481.4)  
 Present value of insured scheme liabilities                  (363.3)    (352.2)    
 Total present value of scheme liabilities                    (2,127.6)  (1,833.6)  
 Invested and cash assets at fair value                       1,298.3    1,176.2    
 Value of insurance contracts                                 363.3      352.2      
 Total value of scheme assets                                 1,661.6    1,528.4    
 Net scheme deficit                                           (466.0)    (305.2)    
                                                                                    
 Non-current assets - retirement benefitassets                -          29.4       
 Non-currentliabilities - retirement benefit obligations      (466.0)    (334.6)    
 Net scheme deficit                                           (466.0)    (305.2)    
                                                                                    
 Net scheme deficit included in consolidated balance sheet    (466.0)    (305.2)    
 Deferred tax included in consolidated balance sheet          80.9       55.0       
 Net scheme deficit after deferred tax                        (385.1)    (250.2)    
 Movement in net scheme deficit                               2016£m     2015£m     
                                                                                    
 Opening net scheme deficit                                   (305.2)    (301.2)    
 Contributions                                                40.7       20.0       
 Consolidated income statement                                (12.6)     (13.0)     
 Consolidated statement of comprehensive income               (188.9)    (11.0)     
 Closing net scheme deficit                                   (466.0)    (305.2)    
 
 
 Changes in the present value of scheme liabilities           2016£m     2015£m     
                                                                                    
 Opening present value of scheme liabilities                  (1,833.6)  (1,863.2)  
 Interest cost                                                (65.3)     (67.5)     
 Actuarial gain - experience                                  14.0       23.9       
 Actuarial gain/(loss) - change to demographic assumptions    30.0       (4.5)      
 Actuarial loss - change to financial assumptions             (370.7)    (11.5)     
 Benefits paid                                                98.0       89.2       
 Closing present value of scheme liabilities                  (2,127.6)  (1,833.6)  
 
 
 Changes in the fair value of scheme assets                   2016£m   2015£m   
                                                                                
 Opening fair value of scheme assets                          1,528.4  1,562.0  
 Interest income                                              54.9     56.6     
 Actual return on assets greater/(less) than discount rate    137.8    (18.9)   
 Contributions by employer                                    40.7     20.0     
 Benefits paid                                                (98.0)   (89.2)   
 Administrative expenses                                      (2.2)    (2.1)    
 Closing fair value of scheme assets                          1,661.6  1,528.4  
 
 
13.        Retirement benefit schemes (continued) 
 
Defined benefit pension schemes (continued) 
 
 Fair value of scheme assets               2016£m   2015£m   
                                                             
 UK equities                               208.2    181.7    
 US equities                               217.2    192.8    
 Other overseas equities                   235.7    210.7    
 Property                                  26.9     20.4     
 Corporate bonds                           220.0    308.7    
 Fixed interest gilts                      196.8    70.9     
 Index linked gilts                        192.1    81.2     
 Cash and other                            1.4      109.8    
 Invested and cash assets at fair value    1,298.3  1,176.2  
 Value of insurance contracts              363.3    352.2    
 Fair value of scheme assets               1,661.6  1,528.4  
 
 
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. 
 
14.        Provisions 
 
                              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)   
 
 
(31.5) 
 
The provisions have been analysed between current and non-current as follows: 
 
                2016£m  2015£m  
                                
 Current        (27.9)  (43.5)  
 Non-current    (3.6)   (7.2)   
                (31.5)  (50.7)  
 
 
The share-based payments provision relates to National Insurance obligations
attached to the future crystallisation of awards. 
 
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. 
 
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 expected to be utilised within the next year. 
 
15.        Share capital and reserves 
 
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 buy-back
programmes. 
 
Cumulative goodwill written off to retained earnings and other reserves in
respect of continuing businesses acquired prior to 1998 is £25.9 million
(2015: £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. 
 
Shares purchased by the Trinity Mirror Employee Benefit Trust (the 'Trust')
are included in retained earnings and other reserves at £5.5 million (2015:
£3.7 million). During the year the Trust purchased 1,600,000 shares (2015:
nil) for a cash consideration of £2.0 million (2015: £nil). The Trust received
a payment of £2.0 million from the Company to purchase these shares. During
the year, 138,634 shares were released relating to grants made in prior years
(2015: 5,929,939). During the year 859,794 awards were granted to Executive
Directors on a discretionary basis under the Long Term Incentive Plan (2015:
665,287). 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
year 1,494,019 awards were granted to senior managers on a discretionary basis
under the Senior Management Incentive Plan (2015: 893,873). 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 year 82,699 awards
were granted to Executive Directors under the Restricted Share Plan (2015:
120,543). The awards vest after three years. 
 
The Board approved a share buyback programme of up to £10 million which
commenced in August 2016.  At the year end the Group had acquired 2,505,366
shares for £2.3 million. The shares are held as Treasury shares. 
 
16.        Acquisition of associate undertaking 
 
In October 2016, the Group acquired a 50% equity interest in Brand Events 1
Limited (renamed Brand Events TM Limited) for a cash consideration of £0.8
million. 
 
17.        Disposal of subsidiary undertaking 
 
In August 2016, the Group disposed of Rippleffect Limited. The net assets at
the date of disposal were as follows: 
 
                                £m     
                                       
 Goodwill                       0.5    
 Trade and other receivables    2.3    
 Trade and other payables       (1.0)  
 Net assets                     1.8    
 Profit on disposal             -      
 Total consideration            1.8    
 
 
 Satisfied by:                         
 Cash consideration received    2.0    
 Transactions costs             (0.2)  
 Total consideration            1.8    
 
 
 Net cash flow arising on disposal:                
 Cash consideration less transaction costs    1.8  
 Net cash inflow                              1.8  
 
 
18.        Reconciliation of statutory results to adjusted results 
 
53 weeks ended 1 January 2017 
 
                    Statutoryresults£m  Non-recurring items(a)£m  Amortisation(b)£m  Pensioncharges(c)£m  Restructuring charges (d) £m  Finance costs(e)£m  Taxitems(f)£m  Adjustedresults £m  
 Revenue            713.0               -                         -                  -                    -                             -                   -              713.0               
 Operating profit   93.5                26.1                      0.6                2.2                  15.1                          -                   -              137.5               
 Profit before tax  76.5                26.1                      0.6                12.6                 15.1                          2.3                 -              133.2               
 Profit after tax   69.5                22.0                      0.5                10.1                 12.1                          1.8                 (9.8)          106.2               
 Basic EPS (p)      24.9                8.0                       0.2                3.6                  4.3                           0.6                 (3.5)          38.1                
 
 
52 weeks ended 27 December 2015 
 
                    Statutoryresults£m  Non-recurring items(a)£m  Amortisation(b)£m  Pensioncharges(c)£m  Restructuring charges (d) £m  Finance costs(e)£m  Taxitems(f)£m  Adjustedresults £m  
 Revenue            592.7               -                         -                  -                    -                             -                   -              592.7               
 Operating profit   82.2                5.7                       4.3                2.1                  15.3                          -                   -              109.6               
 Profit before tax  67.2                5.7                       4.3                13.0                 15.3                          2.0                 -              107.5               
 Profit after tax   77.0                (1.5)                     3.9                10.4                 12.2                          1.6                 (17.2)         86.4                
 Basic EPS (p)      30.2                (0.6)                     1.5                4.1                  4.8                           0.6                 (6.7)          33.9                
 
 
(a)       Non-recurring items relate to the items charged or credited to
operating profit as set out in note 5. 
 
(b)       Amortisation of the Group's intangible assets and amortisation
included in share of results of associates. 
 
(c)       Pension finance charge and pension administrative expenses relating
to the defined benefit pension schemes as set out in note 13. 
 
(d)       Restructuring charges in respect of cost reduction measures as set
out in note 14. 
 
(e)       Impact of the translation of foreign currency borrowings and fair
value changes on derivative financial instruments as set out in note 7. 
 
(f)        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 8. 
 
19.        Contingent liabilities 
 
There is 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. 
 
This information is provided by RNS
The company news service from the London Stock Exchange