REG - Trinity Mirror PLC - Half-yearly Report <Origin Href="QuoteRef">TNI.L</Origin> - Part 3
01/08/2016 07:08
- Part 3: For the preceding part double click ID:nRSA7907Fb
(2.2)
Charge for share-based payments 0.5 0.6 1.5
Gain on deemed disposal of Local World associate interest - - (33.6)
Write-off of fixed assets 0.4 1.0 4.0
Pension administrative expenses 1.0 1.0 2.1
Pension deficit funding payments (17.9) (9.9) (20.0)
Operating cash flow before movements in working capital 50.9 23.1 58.2
Decrease in inventories 0.1 1.3 1.1
Decrease in receivables 16.3 2.5 13.7
(Decrease)/increase in payables (0.5) 15.1 (10.4)
Cash flow from operating activities 66.8 42.0 62.6
12. Net debt
The statutory net debt for the Group is as follows:
27 December 2015(audited)£m Cashflow£m Derivative financial instruments*£m Foreign exchange*£m Loan repaid£m Transfer to current£m 3 July 2016(unaudited)£m
Non-current liabilities
Loan notes (67.6) - - (8.3) - 75.9 -
Term loan (65.0) - - - - 6.0 (59.0)
(132.6) - - (8.3) - 81.9 (59.0)
Current liabilities
Loan notes - - - - - (75.9) (75.9)
Term loan (15.0) - - - 15.0 (6.0) (6.0)
(15.0) - - - 15.0 (81.9) (81.9)
Non-current assets
Derivative financial instruments 3.5 - 7.3 - - (10.8) -
3.5 - 7.3 - - (10.8) -
Current assets
Cash and cash equivalents 55.4 44.9 - - (15.0) - 85.3
Derivative financial instruments - - - - - 10.8 10.8
55.4 44.9 - - (15.0) 10.8 96.1
Net debt (88.7) 44.9 7.3 (8.3) - - (44.8)
* 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 7.
The Group has 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 is calculated using discounted cash flows
based upon forward rates available to the Group. The cross-currency interest
rate swap is 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.
12. Net debt (continued)
The contracted net debt for the Group, assuming that the private placement
loan notes and the cross-currency interest rate swaps are not terminated prior
to maturity, is as follows:
27 December 2015(audited)£m Cashflow£m Loanrepaid£m Transfer to current£m 3 July 2016(unaudited)£m
Non-current liabilities
Loan notes (68.3) - - 68.3 -
Term loan (65.0) - - 6.0 (59.0)
(133.3) - - 74.3 (59.0)
Current liabilities
Loan notes - - - (68.3) (68.3)
Term loan (15.0) - 15.0 (6.0) (6.0)
(15.0) - 15.0 (74.3) (74.3)
Current assets
Cash and cash equivalents 55.4 44.9 (15.0) - 85.3
55.4 44.9 (15.0) - 85.3
Net debt (92.9) 44.9 - - (48.0)
The statutory net debt reconciles to the contracted net debt as follows:
3 July 2016(unaudited)£m 27 December 2015(audited)£m
Statutory net debt (44.8) (88.7)
Loan notes at period end exchange rate 75.9 67.6
Loan notes at swapped exchange rate (68.3) (68.3)
Cross-currency interest rate swaps (10.8) (3.5)
Contracted net debt (48.0) (92.9)
13. Retirement benefit schemes
Defined contribution pension schemes
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 TMPP Scheme has three sections, one for members
who elected to join prior to 1 May 2013 which is now closed to new members,
one for members who elect to join from 1 May 2013 and one for members from 1
July 2013 who are auto enrolled. Local World operates a Group Personal Pension
Plan (the 'LW Plan'), which is a defined contribution pension scheme for
qualifying employees where employees hold a personal pension policy directly
with Scottish Widows.
The Group implemented the Auto Enrolment legislation from 1 July 2013. Local
World will implement the Auto Enrolment legislation in 2017.
The current service cost charged to the consolidated income statement of £6.9
million (26 weeks ended 28 June 2015: £6.6 million and 52 weeks ended 27
December 2015: £13.3 million) represents contributions of £6.2 million (26
weeks ended 28 June 2015: £6.6 million and 52 weeks ended 27 December
2015:£13.1 million) paid to the TMPP Scheme by the Group at rates specified in
the scheme rules and contributions of £0.7 million (26 weeks ended 28 June
2015: £nil and 52 weeks ended 27 December 2015:£0.2 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.
Defined benefit pension schemes
Background
The defined benefit pension schemes operated by the Group were closed to
future accrual in 2010. The Group now has five defined benefit pension schemes
following the securing of members' benefits of the five smaller schemes by way
of a buy-out with insurance companies without further contributions from the
Group. As part of the winding up of these schemes, surplus assets have been
transferred to one of the remaining schemes.
The remaining schemes are the Mirror Group Pension Scheme (the 'Old Scheme'),
the MGN Past Service Pension Scheme (the 'Past Service Scheme'), 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').
The Old Scheme and the Past Service Scheme cover the liabilities for service
up to 13 February 1992 for employees and former employees who worked regularly
on the production and distribution of Mirror Group's newspapers. The Old
Scheme was closed on 13 February 1992 and the Past Service Scheme was
established to meet any liabilities which are not satisfied by payments from
the Old Scheme and the Maxwell Communications Pension Plan. No contributions
have been paid to the Old Scheme since 1992. The disclosures contained in this
note in respect of these two schemes are combined (the 'Old Scheme/Past
Service Scheme').
13. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Characteristics
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 half of the remaining Trustees nominated by the members and half by the
Group.
Maturity profile and cash flow
Across the schemes, the invested assets at the prior year end were expected to
be sufficient to pay the uninsured benefits due up to 2044, based on the
reporting date assumptions. The remaining uninsured benefit payments, payable
from 2045, were due to be funded by a combination of asset outperformance and
the deficit contributions currently scheduled to be paid by 2025. The
liabilities related 50% to current pensioners and their spouses or dependants
and 50% related to deferred pensioners. The average term from the prior year
end to payment of the remaining benefits was around 16 years. Uninsured
benefit payments in 2015, excluding transfer value payments, were £44 million,
projected to rise to an annual peak in 2039 of £82 million and reducing
thereafter.
Funding arrangements
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 2013 were completed on 9
December 2014. The valuations showed deficits of £216.0 million for the Old
Scheme/Past Service Scheme, £120.7 million for the MGN Scheme, £31.9 million
for the Trinity Scheme and £26.7 million for the MIN Scheme. The next
valuation date of the schemes is due as at 31 December 2016 with the
valuations required to be completed by 31 March 2018.
As part of the agreement of the valuations, deficit funding contributions were
agreed at £36.2 million for 2015, 2016 and 2017. Contributions remain at
around £36 million from 2018 to 2023 and then reduce to around £21 million for
2024 and 2025 after which contributions are due to cease. The combined deficit
was 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 2015,
2016 and 2017 that additional contributions would be paid at 50% of the excess
if dividends in 2015 were above 5 pence per share. For 2016 and 2017 the
threshold increases in line with the increase in dividends capped at 10% per
annum. In conjunction with the £10 million share buyback announced today the
Group has agreed additional funding of up to £7.5 million (including a minimum
payment of £5 million), representing 75% of the share buyback.
During the first half of 2016, contributions paid to the defined benefit
pension schemes were £17.9 million (26 weeks ended 28 June 2015: £9.9 million
and 52 weeks ended 27 December 2015: £20.0 million). Payments were £10.0
million (26 weeks ended 28 June 2015: £5.4 million and 52 weeks ended 27
December 2015: £11.0 million) to the Past Service Scheme, £3.0 million (26
weeks ended 28 June 2015: £1.6 million and 52 weeks ended 27 December 2015:
£3.3 million) to the MGN Scheme, £3.1 million (26 weeks ended 28 June 2015:
£1.9 million and 52 weeks ended 27 December 2015: £3.7 million) to the Trinity
Scheme and £1.8 million (26 weeks ended 28 June 2015: £1.0 million and 52
weeks ended 27 December 2015: £2.0 million) to the MIN Scheme.
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 18% 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 39% 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 48% 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)
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 prior year end showed removal of the accounting
deficit by 2024 due to scheduled contributions and asset 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 3 July 2016.
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 (662.6) (552.9) (344.4) (114.5)
Present value of insured scheme liabilities (178.1) - (78.6) (106.2)
Total present value of scheme liabilities (840.7) (552.9) (423.0) (220.7)
Invested and cash assets at fair value 403.9 419.0 353.9 71.6
Value of liability matching insurance contracts 178.1 - 78.6 106.2
Total fair value of scheme assets 582.0 419.0 432.5 177.8
Net scheme (deficit)/surplus (258.7) (133.9) 9.5 (42.9)
Based on actuarial advice, the assumptions used in calculating the scheme
liabilities and the actuarial value of those liabilities are:
3 July 2016 28 June 2015 27 December 2015
Financial assumptions (nominal % pa)
Discount rate 2.80 3.80 3.65
Retail price inflation rate 2.75 3.20 3.05
Consumer price inflation rate 1.55 2.00 1.85
Rate of pension increase in deferment 1.55 2.00 1.85
Rate of pension increases in payment 3.75 3.90 3.85
Mortality assumptions - future life expectancies from age 65 (years)
Male currently aged 65 21.8 22.0 22.0
Female currently aged 65 23.8 23.9 24.0
Male currently aged 55 22.6 22.8 22.9
Female currently aged 55 24.7 24.8 24.9
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 -180/+209 -155/+181
Retail price inflation rate +/- 0.5% pa +28/-28 +20/-20
Consumer price inflation rate +/- 0.5% pa +48/-46 +48/-46
Life expectancy at age 65 +/- 1 year +79/-77 +71/-69
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 27 weeks ended 3 July2016 (unaudited)£m 26 weeks ended 28 June2015(unaudited)£m 52 weeks ended 27 December2015(audited)£m
Pension administrative expenses (1.0) (1.0) (2.1)
Pension finance charge (5.2) (5.5) (10.9)
Defined benefit cost recognised in income statement (6.2) (6.5) (13.0)
Consolidated statement of comprehensive income 27 weeks ended 3 July2016 (unaudited)£m 26 weeks ended 28 June2015(unaudited)£m 52 weeks ended 27 December2015(audited)£m
Actuarial gain due to liability experience 0.6 - 23.9
Actuarial loss due to liability assumption changes (215.6) (1.1) (16.0)
Total liability actuarial (loss)/gain (215.0) (1.1) 7.9
Returns on scheme assets greater/(less) than discount rate 82.5 8.1 (18.9)
Total (loss)/gain recognised in statement of comprehensive income (132.5) 7.0 (11.0)
Consolidated balance sheet 3 July2016 (unaudited)£m 28 June2015(unaudited)£m 27 December2015(audited)£m
Present value of uninsured scheme liabilities (1,674.4) (1,495.9) (1,481.4)
Present value of insured scheme liabilities (362.9) (362.9) (352.2)
Total present value of scheme liabilities (2,037.3) (1,858.8) (1,833.6)
Invested and cash assets at fair value 1,248.4 1,205.1 1,176.2
Value of liability matching insurance contracts 362.9 362.9 352.2
Total fair value of scheme assets 1,611.3 1,568.0 1,528.4
Net scheme deficit (426.0) (290.8) (305.2)
Non-current assets - retirement benefitassets 9.5 17.6 29.4
Non-currentliabilities - retirement benefit obligations (435.5) (308.4) (334.6)
Net scheme deficit (426.0) (290.8) (305.2)
Net scheme deficit included in consolidated balance sheet (426.0) (290.8) (305.2)
Deferred tax included in consolidated balance sheet 76.5 58.2 55.0
Net scheme deficit after deferred tax (349.5) (232.6) (250.2)
Movement in net scheme deficit 3 July2016 (unaudited)£m 28 June2015(unaudited)£m 27 December2015(audited)£m
Opening net scheme deficit (305.2) (301.2) (301.2)
Contributions 17.9 9.9 20.0
Consolidated income statement (6.2) (6.5) (13.0)
Consolidated statement of comprehensive income (132.5) 7.0 (11.0)
Closing net scheme deficit (426.0) (290.8) (305.2)
Changes in the present value of scheme liabilities 3 July2016 (unaudited)£m 28 June2015(unaudited)£m 27 December2015(audited)£m
Opening present value of scheme liabilities (1,833.6) (1,863.2) (1,863.2)
Interest cost (32.7) (33.8) (67.5)
Actuarial gain - experience 0.6 - 23.9
Actuarial gain/(loss) - change to demographic assumptions 28.5 (5.3) (4.5)
Actuarial (loss)/gain - change to financial assumptions (244.1) 4.2 (11.5)
Benefits paid 44.0 39.3 89.2
Closing present value of scheme liabilities (2,037.3) (1,858.8) (1,833.6)
13. Retirement benefit schemes (continued)
Defined benefit pension schemes (continued)
Changes in the fair value of scheme assets 3 July2016 (unaudited)£m 28 June2015(unaudited)£m 27 December2015(audited)£m
Opening fair value of scheme assets 1,528.4 1,562.0 1,562.0
Interest income 27.5 28.3 56.6
Actual return on assets greater/(less) than discount rate 82.5 8.1 (18.9)
Contributions by employer 17.9 9.9 20.0
Benefits paid (44.0) (39.3) (89.2)
Administrative expenses (1.0) (1.0) (2.1)
Closing fair value of scheme assets 1,611.3 1,568.0 1,528.4
Fair value of scheme assets 3 July2016 (unaudited)£m 28 June2015(unaudited)£m 27 December2015(audited)£m
UK equities 183.3 196.8 181.7
US equities 206.3 192.0 192.8
Other overseas equities 215.2 224.2 210.7
Property 20.9 19.8 20.4
Corporate bonds 316.7 303.8 308.7
Fixed interest gilts 75.9 62.9 70.9
Index linked gilts 98.6 69.4 81.2
Cash and other 131.5 136.2 109.8
Invested and cash assets at fair value 1,248.4 1,205.1 1,176.2
Value of insurance contracts 362.9 362.9 352.2
Fair value of scheme assets 1,611.3 1,568.0 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 - - (10.1) (0.7) (10.8)
Utilisation of provision - 1.9 9.3 5.9 17.1
At 3 July 2016 (0.3) (7.7) (4.5) (31.9) (44.4)
(44.4)
The provisions have been analysed between current and non-current as follows:
3 July2016 (unaudited)£m 28 June2015(unaudited)£m 27 December2015(audited)£m
Current (39.1) (28.8) (43.5)
Non-current (5.3) (11.8) (7.2)
(44.4) (40.6) (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. In 2015, the Company placed 22,398,041 shares (at
158.0 pence) and issued 3,371,010 shares (at 174.3 pence) relating to the
acquisition of Local World. 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. 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.
Cumulative goodwill written off to retained earnings and other reserves in
respect of continuing businesses acquired prior to 1998 is £25.9 million (28
June 2015: £25.9 million and 27 December 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 £5.6 million (28 June
2015: £8.6 million and 27 December 2015: £3.7 million). During the period 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 period, 60,759 shares were
released relating to grants made in prior years (26 weeks ended 28 June 2015:
2,119,839 and 52 weeks ended 27 December 2015: 5,929,939).
During the period 859,794 awards were granted to Executive Directors on a
discretionary basis under the Long Term Incentive Plan (26 weeks ended 28 June
2015 and 52 weeks ended 27 December 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 period 1,431,028 awards were granted to senior
managers on a discretionary basis under the Senior Management Incentive Plan
(26 weeks ending 27 June 2015 and 52 weeks ended 27 December 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 period 82,699 awards were granted to Executive
Directors under the Restricted Share Plan (26 weeks ended 28 June 2015 and 52
weeks ended 27 December 2015: 120,543). The awards vest after three years.
16. Reconciliation of statutory results to adjusted results
27 weeks ended 3 July 2016 (unaudited)
Statutoryresults£m Non-recurring items(a)£m Amortisation(b)£m Pensioncharges(c)£m Restructuring charges (d) £m Finance costs(e)£m Tax items(f)£m Adjustedresults £m
Revenue 374.7 - - - - - - 374.7
Operating profit 53.6 4.1 0.3 1.0 10.1 - - 69.1
Profit before tax 45.2 4.1 0.3 6.2 10.1 1.0 - 66.9
Profit after tax 36.0 3.2 0.3 5.0 8.1 0.8 - 53.4
Basic EPS (p) 12.8 1.2 0.1 1.8 2.9 0.3 - 19.1
26 weeks ended 28 June 2015 (unaudited)
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
52 weeks ended 27 December 2015 (audited)
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 as set out in note 8.
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.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the 27 weeks ended 3 July
2016 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 27 weeks ended 3 July 2016 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
1 August 2016
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