REG - Trinity Mirror PLC - Half Yearly Report <Origin Href="QuoteRef">TNI.L</Origin> - Part 3
03/08/2015 07:01
- Part 3: For the preceding part double click ID:nRSC7896Ub
2015, contributions paid to the defined benefit
pension schemes were £9.9 million (52 weeks ended 28 December 2014: £18.2
million). Payments were £5.4 million (52 weeks ended 28 December 2014: £9.2
million) to the Past Service Scheme, £1.6 million (52 weeks ended 28 December
2014: £3.7 million) to the MGN Scheme, £1.9 million (52 weeks ended 28
December 2014: £2.7 million) to the Trinity Scheme and £1.0 million (52 weeks
ended 28 December 2014: £2.6 million) to the MIN Scheme. No payments were made
in the first half of 2014. In the second half of 2014, the Group pre-paid
deficit funding contributions of £17.0 million (£16.5 million in respect of
2015 and £0.5 million in respect of 2016) and other contributions of £1.2
million.
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 20% 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. At the reporting date
this amounted to 36% 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.
The Group is not exposed to any unusual, entity specific or scheme specific
risks. There were no plan amendments, settlements or curtailments in the first
half of 2015 or during 2014 which resulted in a pension cost.
Actuarial projections at the 2014 year end showed removal of the accounting
deficit by 2023 due to scheduled contributions and asset outperformance over
assumed investment returns.
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 28 June 2015.
Notes to the consolidated financial statements
for the 26 weeks ended 28 June 2015 (26 weeks ended 29 June 2014 and 52 weeks
ended 28 December 2014)
13. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
The assets and liabilities of the schemes as at the reporting date are:
Old Scheme/PastService Scheme£m MGN Scheme£m Trinity Scheme£m MIN Scheme £m
Present value of uninsured scheme liabilities (599.3) (488.5) (307.4) (100.7)
Present value of insured scheme liabilities (180.6) - (78.3) (104.0)
Total present value of scheme liabilities (779.9) (488.5) (385.7) (204.7)
Invested and cash assets at fair value 411.4 398.6 325.0 70.1
Value of insurance contracts 180.6 - 78.3 104.0
Total value of scheme assets 592.0 398.6 403.3 174.1
Net scheme (deficit)/surplus (187.9) (89.9) 17.6 (30.6)
Based on actuarial advice, the assumptions used in calculating the scheme
liabilities and the actuarial value of those liabilities are:
28 June 2015 29 June 2014 28 December 2014
Financial assumptions (nominal % pa)
Discount rate 3.80 4.25 3.70
Retail price inflation rate 3.20 3.25 3.05
Consumer price inflation rate 2.00 2.25 1.85
Rate of pension increase in deferment 2.00 2.25 1.85
Rate of pension increases in payment 3.90 3.90 3.85
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65 22.0 22.3 22.0
Female currently aged 65 23.9 24.4 23.9
Male currently aged 55 22.8 23.1 22.8
Female currently aged 55 24.8 25.4 24.8
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 -135/+148 -121/+133
Retail price inflation rate +/- 0.5% pa +25/-25 +18/-18
Consumer price inflation rate +/- 0.5% pa +43/-41 +43/-41
Life expectancy at age 65 +/- 1 year +71/-69 +64/-62
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:
Consolidated income statement 26 weeks ended 28 June2015 (unaudited)£m 26 weeks ended 29 June2014(unaudited)£m 52 weeks ended 28 December2014(audited)£m
Pension scheme administrative expenses (1.0) (2.1) (3.2)
Pension scheme finance charge (5.5) (5.5) (11.2)
Defined benefit cost recognised in income statement (6.5) (7.6) (14.4)
(14.4)
Notes to the consolidated financial statements
for the 26 weeks ended 28 June 2015 (26 weeks ended 29 June 2014 and 52 weeks
ended 28 December 2014)
13. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Consolidated statement of comprehensive income 26 weeks ended 28 June2015 (unaudited)£m 26 weeks ended 29 June2014(unaudited)£m 52 weeks ended 28 December2014(audited)£m
Actuarial loss due to liability experience - (0.3) (7.9)
Actuarial loss due to liability assumption changes (1.1) (22.9) (90.6)
Total liability actuarial loss (1.1) (23.2) (98.5)
Returns on scheme assets greater than discount rate 8.1 10.9 45.7
Total gain/(loss) recognised in statement of comprehensive income 7.0 (12.3) (52.8)
Consolidated balance sheet 28 June2015 (unaudited)£m 29 June2014(unaudited)£m 28 December2014(audited)£m
Present value of uninsured scheme liabilities (1,495.9) (1,419.8) (1,492.4)
Present value of insured scheme liabilities (362.9) (385.5) (370.8)
Total present value of scheme liabilities (1,858.8) (1,805.3) (1,863.2)
Invested and cash assets at fair value 1,205.1 1,147.7 1,191.2
Value of insurance contracts 362.9 385.5 370.8
Total value of scheme assets 1,568.0 1,533.2 1,562.0
Net scheme deficit (290.8) (272.1) (301.2)
Non-current assets - retirement benefitassets 17.6 12.9 17.8
Non-currentliabilities - retirement benefit obligations (308.4) (285.0) (319.0)
Net scheme deficit (290.8) (272.1) (301.2)
Net scheme deficit included in consolidated balance sheet (290.8) (272.1) (301.2)
Deferred tax included in consolidated balance sheet 58.2 54.4 60.2
Net scheme deficit after deferred tax (232.6) (217.7) (241.0)
Movement in net scheme deficit 28 June2015 (unaudited)£m 29 June2014(unaudited)£m 28 December2014(audited)£m
Opening net scheme deficit (301.2) (252.2) (252.2)
Contributions 9.9 - 18.2
Consolidated income statement (6.5) (7.6) (14.4)
Consolidated statement of comprehensive income 7.0 (12.3) (52.8)
Closing net scheme deficit (290.8) (272.1) (301.2)
Changes in the present value of scheme liabilities 28 June2015 (unaudited)£m 29 June2014(unaudited)£m 28 December2014(audited)£m
Opening present value of scheme liabilities (1,863.2) (1,816.1) (1,816.1)
Interest cost (33.8) (38.4) (76.5)
Actuarial loss - experience - (0.3) (7.9)
Actuarial (loss)/gain - change to demographic assumptions (5.3) - 41.6
Actuarial gain/(loss) - change to financial assumptions 4.2 (22.9) (132.2)
Benefits paid 39.3 37.2 79.7
Buy-out - 35.2 48.2
Closing present value of scheme liabilities (1,858.8) (1,805.3) (1,863.2)
Notes to the consolidated financial statements
for the 26 weeks ended 28 June 2015 (26 weeks ended 29 June 2014 and 52 weeks
ended 28 December 2014)
13. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Changes in the fair value of scheme assets 28 June2015 (unaudited)£m 29 June2014(unaudited)£m 28 December2014(audited)£m
Opening fair value of scheme assets 1,562.0 1,563.9 1,563.9
Interest income 28.3 32.9 65.3
Actual return on assets greater than discount rate 8.1 10.9 45.7
Contributions by employer 9.9 - 18.2
Benefits paid (39.3) (37.2) (79.7)
Administrative expenses (1.0) (2.1) (3.2)
Buy-out - (35.2) (48.2)
Closing fair value of scheme assets 1,568.0 1,533.2 1,562.0
Fair value of scheme assets 28 June2015 (unaudited)£m 29 June2014(unaudited)£m 28 December2014(audited)£m
UK equities 196.8 220.7 219.6
US equities 192.0 158.2 189.3
Other overseas equities 224.2 242.4 251.2
Property 19.8 29.8 26.8
Corporate bonds 303.8 273.7 248.7
Fixed interest gilts 62.9 55.6 56.3
Index linked gilts 69.4 72.0 79.0
Cash and other 136.2 95.3 120.3
Invested and cash assets at fair value 1,205.1 1,147.7 1,191.2
Value of insurance contracts 362.9 385.5 370.8
Fair value of scheme assets 1,568.0 1,533.2 1,562.0
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 28 December 2014 (1.4) (9.0) (3.6) (16.2) (30.2)
Charged to income statement - - (7.3) (16.4) (23.7)
Utilisation of provision 0.3 1.6 5.7 5.7 13.3
At 28 June 2015 (1.1) (7.4) (5.2) (26.9) (40.6)
(40.6)
The provisions have been analysed between current and non-current as follows:
28 June2015 (unaudited)£m 29 June2014(unaudited)£m 28 December2014(audited)£m
Current (28.8) (15.1) (23.3)
Non-current (11.8) (12.5) (6.9)
(40.6) (27.6) (30.2)
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 and other matters.
Notes to the consolidated financial statements
for the 26 weeks ended 28 June 2015 (26 weeks ended 29 June 2014 and 52 weeks
ended 28 December 2014)
15. Share capital and reserves
The share capital comprises 257,690,520 allotted, called-up and fully paid
ordinary shares of 10p each. The share premium account reflects the premium on
issued ordinary shares. The Group obtained court approval at the end of April
2014 for a reduction in the share premium account of £514.8 million to
eliminate the deficit on the Company's profit and loss account reserve. Profit
generated by the Company after 30 April 2014 is available for distribution to
shareholders.
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 (29
June 2014: £25.9 million and 28 December 2014: £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 £8.6 million (29 June
2014: £12.8 million and 28 December 2014: £11.4 million). During the prior
year the Trust purchased 1,391,550 shares for a cash consideration of £2.2
million and received a payment of £2.2 million from the Company to purchase
these shares. During the period, 2,119,839 shares were released to senior
managers relating to grants made in prior years (26 weeks ended 29 June 2014:
2,271,355 and 52 weeks ended 28 December 2014: 3,408,484).
During the period 665,287 awards were granted to senior managers on a
discretionary basis under the Long Term Incentive Plan (26 weeks ended 29 June
2014 and 52 weeks ended 28 December 2014: 935,709). 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 893,873 awards were granted to senior managers on a
discretionary basis under the Senior Management Incentive Plan (26 weeks
ending 29 June 2014 and 52 weeks ended 28 December 2014: nil). 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 120,543 awards were granted to senior managers under the
Restricted Share Plan (26 weeks ended 29 June 2014 and 52 weeks ended 28
December 2014: 96,245). The awards vest after three years, subject to the
continued employment of the participant.
16. Reconciliation of statutory results to adjusted results
26 weeks ended28 June 2015 (unaudited) Statutoryresults£m Non-recurring items(a)£m Amortisation(b)£m Pensioncharges(c)£m Restructuring charges (d) £m Finance costs(e)£m Adjustedresults £m
Revenue 288.5 - - - - - 288.5
Operating profit 19.6 17.5 2.5 1.0 7.3 - 47.9
Profit before tax 12.1 17.5 2.5 6.5 7.3 1.1 47.0
Profit after tax 9.9 13.9 2.3 5.2 5.8 0.9 38.0
Basic EPS (p) 4.0 5.6 0.9 2.1 2.3 0.4 15.3
26 weeks ended 29 June 2014 (unaudited)
Revenue 324.2 - - - - - 324.2
Operating profit 60.0 (23.6) 2.5 2.1 9.3 - 50.3
Profit before tax 50.5 (23.6) 2.5 7.6 9.3 1.9 48.2
Profit after tax 45.6 (24.4) 2.3 6.1 7.3 1.5 38.4
Basic EPS (p) 18.4 (9.8) 0.9 2.5 2.9 0.6 15.5
52 weeks ended 28 December 2014 (audited)
Revenue 636.3 - - - - - 636.3
Operating profit 98.6 (15.2) 4.9 3.2 14.0 - 105.5
Profit before tax 81.6 (15.2) 4.9 14.4 14.0 2.6 102.3
Profit after tax 69.8 (17.6) 4.5 11.5 11.0 2.1 81.3
Basic EPS (p) 28.1 (6.9) 1.8 4.6 4.4 0.8 32.8
(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 other 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.
(e) Impact of the translation of foreign currency borrowings and fair
value changes on derivative financial instruments as set out in note 7.
17. 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.
INDEPENDENT REVIEW REPORT TO TRINITY MIRROR PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 28 June
2015 which comprises the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in
equity, the consolidated cash flow statement, the consolidated balance sheet
and related notes 1 to 17. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity'
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the Company those matters we are required to state to it in
an independent review 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, for our review work, for this report, or for the conclusions
we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with IFRS as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 weeks ended 28 June 2015 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
3 August 2015
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