Independent News & Media Regulatory News (INM)

PROFIT BEFORE TAX OF €24.1M, CLOSING CASH BALANCE OF €81.7M

Dublin and London 29 March 2019: Independent News & Media PLC (INM ID, INM LN) today announces its full year results for the 12 months ended 31 December 2018 and publishes its Annual Report and Notice of Annual General Meeting.

KEY HIGHLIGHTS

· Revenue reported under IFRS 15, no impact on net profit or net assets

· Profit before Tax2 of €24.1m ahead of expectations

· Net assets increase to €89.7m with a closing cash balance of €81.7m

· Continued diversification through two acquisitions

Murdoch MacLennan, Chairman, Independent News & Media PLC, said: "In 2018 we continued to make progress in implementing our new strategy with the full support of our new Board and our new Senior Executive Team. We have recorded a financial performance for 2018 ahead of market expectations and I can assure you that despite the challenges facing the industry the Board and Senior Executive Team of your Group are both determined and confident that we are heading in the right direction to build a sustainable business for the future and to create shareholder value."

· Impact of IFRS 15

The Group adopted IFRS 15 Revenue from Contracts with Customers ("IFRS 15") from 1 January 2018 and restated comparatives accordingly. The adoption of IFRS 15 has no impact on net profit and the net assets of the Group as it reduces both revenue and costs equally. This means that under IFRS 15 for the distribution of third party newspapers and magazines, the Group recognises its distribution fee only as revenue as opposed to the full selling price and the cost of sale of the item. The impact of this in the financial statements is a reduction in revenue and costs of €93.1m for the year (2017: a reduction of €98.0m) which is reflected in the figures reported above.

· Total revenue[1] of €191.0m, down 2.1%

Total revenue[1] of €191.0m was down 2.1% on the prior year. This was primarily driven by a decline in total advertising revenues of 8.8%, a decline in circulation revenues of 6.3% and a decline in commercial printing revenues of 6.2%. Within total advertising, publishing advertising revenues declined by 10.8% and digital advertising revenue declined by 1.7%. Distribution revenue increased by 26.5%, primarily driven by two acquisitions completed during 2018. Digital revenues decreased by 1.7% in 2018, which is largely attributable to the shift in the digital advertising model towards a lower yield programmatic selling one. However, the Group witnessed continued growth in its classified businesses, specifically CarsIreland.ie, for which revenues grew by 18.2%.

· Profit before tax2 of €24.1m, ahead of expectations

Profit before tax2, whilst ahead of expectations, decreased by 15.4% to €24.1m, primarily due to continued revenue declines. Earnings per share2 decreased during the year by 0.2c to 1.6c.

· Decrease in operating costs1,2

Total operating costs1,2 decreased by a net €0.1m in the year. This reflects a reduction in the Group's cost base largely offset by costs associated with two acquisitions and investment in strategy, GDPR and cyber-security costs.

· Exceptional items

The Group recorded a total net exceptional charge of €13.3m, which included:

Ø Impairment charges of €7.0m relating to both tangible and intangible assets in Northern Ireland;

Ø A charge of €4.1m relating to restructuring costs;

Ø A charge of €3.5m for exceptional legal costs;

Ø A gain of €0.8m arising from the re-measurement to fair value of the Group's pre-existing 50% interest in Reachmount DAC upon obtaining control; and

Ø A tax credit of €0.5m in respect of redundancy and other restructuring costs.

· Exceptional legal costs

A charge of €3.5m for exceptional legal costs which was primarily associated with the Company meeting its obligations towards the Office of the Director of Corporate Enforcement ("ODCE") and the Data Protection Commissioner ("DPC") in their respective investigations; the Company's and the ODCE's costs in relation to the application to the High Court for the appointment of inspectors; the Company's and the ODCE's costs in relation to the judicial review application made by the Company in relation to the ODCE's decision to apply to the High Court; the Company's costs in relation to the inspection; and, the Company's costs in complying with its statutory obligations towards certain individuals seeking information in relation to the 2014 data security incident.

The Company is co-operating with the inspectors and the DPC in their respective investigations.

· Balance sheet strengthened

The Group net assets of €89.7m as at 31 December 2018 have increased by €13.6m year on year.

The strengthened balance sheet was mainly driven by a decrease in the retirement benefit obligations of €26.9m, an increase in intangible assets of €4.1m (impacted by two new acquisitions), partly offset by a decrease in cash and cash equivalents of €9.8m year on year, and by a decrease in tangible assets of €6.5m primarily due to an impairment of property, plant and equipment in the Newry print facility.

· Pensions

In December 2018, the Group and the Trustees of the Belfast Telegraph Pension Scheme reached agreement on a recovery plan to address the actuarial funding deficit of €25.6m by 2024. Ongoing contributions from the Company will continue to be made to the scheme to meet the Company's obligations. The agreement will ensure that the pension scheme is on track to meet the needs of its members based on the actuarial valuation as at 31 December 2016.

In addition, the Group continued to meet its circa €7.4m annual pension obligations in respect of its Republic of Ireland pension schemes.

· Closing cash balance of €81.7m

The Group ended the year with a cash balance of €81.7m with continued cash generation offset by once-off cash outflows related to retirement benefit obligations and acquisitions.

· New strategy

INM's new strategic plan, entitled INM@21, involves optimising revenues, reducing costs and building the capability to respond to the changing needs of the Group's audience. In order to arrive at a new publishing model, one that is fit for purpose in a changing world, the Group is increasing its investment in technology and digital capability to ensure it has the resources required to deliver its strategy. This investment will amount to approximately €5m in the first phase.

Key appointments were made to the Senior Executive Team during 2018 to deliver the strategy and build a sustainable future for the Group.

· Acquisitions

In line with INM's new strategy, the Group's distribution subsidiary, Reach Group, concluded the acquisition of the trading business and certain assets of Hegadon Limited (trading as Supreme Stationary) in January 2018. In addition, in May 2018, Reach Group acquired the remaining 50% stake in Reachmount DAC, trading as Reach Retail Services, one of Ireland's leading innovative packaging companies. Post-acquisition revenues and profits, for both acquisitions, are trading in line with expectations.

· Dividend

The Directors are not proposing a dividend for 2018.

STATEMENTS

Murdoch MacLennan, Chairman, Independent News & Media PLC, said: "Over the past year your Group has made significant progress in identifying the key issues we need to address to ensure that our new strategy will succeed in stabilising and repositioning our business.

Of course, we will continue to confront the many challenges currently dominating our industry's wide agenda, including the unfettered advance of the global technology platforms such as Google and Facebook, the inexorable rise of fake news and the cold climate for consolidation in the Irish market as a result of inadequacies in the competition approval process, not to mention our outdated libel and legal regime.

We face a tough journey over the next few years through a rapidly-changing media landscape, but we are determined to succeed in achieving our vision of a successful INM that delivers for all of our many stakeholders.

In 2018 we continued to make progress in implementing our new strategy with the full support of our new Board and our new Senior Executive Team. We have recorded a financial performance for 2018 ahead of market expectations and I can assure you that despite the challenges facing the industry the Board and Senior Executive Team of your Group are both determined and confident that we are heading in the right direction to build a sustainable business for the future and to create shareholder value."

Michael Doorly, Group Chief Executive Officer, Independent News & Media PLC, said: "Our results for 2018 clearly illustrate the rapid change taking place in our industry and the significant and unique challenges facing our Group. Despite the many difficulties we faced throughout 2018, the Group recorded profits before tax2 of €24.1m for the year, while our cash balance remained strong at €81.7m at year end.

While change is happening right across our sector, which is facing the challenges of digital disruption, changing consumer behaviours and economic shifts, I am pleased to report that we are moving forward in reshaping our business to better meet the needs of our print and online readers and customers.

Producing quality content remains essential to the future of our business and to that end the calibre of our editorial team is unmatched in the Irish market. I would like to thank all of my colleagues in INM for their continued commitment and resolve in delivering to date on our new strategy."

Outlook

While our industry will continue to face strong headwinds, the Group remains confident that the implementation of our strategy will continue to deliver real progress across all of our operations, thereby enabling us to identify and pursue new opportunities to create shareholder value.

SUBSEQUENT EVENTS

In January 2019, Ms. Kate Marsh was appointed to the Board as an independent non-executive director.

The former Chief Financial Officer, Mr. Ryan Preston, departed the Group by mutual consent at the end of January 2019. INM is currently engaged in a process to appoint a successor to Mr. Ryan Preston and this appointment will be announced in due course.

There were no other events since the year end that would require disclosure or adjustment in the financial statements.

PUBLICATION AND FILING OF ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING

The Annual Report for the year ended 31 December 2018 has been published and is available on the Company's website at www.inmplc.com. The Notice of Annual General Meeting has also been issued to shareholders and is available on the Company's website. The Annual General Meeting of the Company will be held at 11.00 a.m. on 30 April 2019 at The Westbury Hotel, Grafton Street, Dublin 2, Ireland.

The Annual Report is also available to view directly via the Regulatory News Service at the following link: http://www.rns-pdf.londonstockexchange.com/rns/3990U_1-2019-3-28.pdf

The Annual Report and the Notice of Annual General Meeting have been submitted to the Irish Stock Exchange trading as Euronext Dublin and the UK's National Storage Mechanism, and will shortly be available for inspection as follows:

Company Announcements Office,

Euronext Dublin,

28 Anglesea Street,

Dublin 2,

Ireland.

Tel: + 353 1 6174200

and

http://www.morningstar.co.uk/uk/NSM

 - Ends -

For further information, contact:

INDEPENDENT NEWS & MEDIA PLC

GROUP INCOME STATEMENT

* See note 4.

** See note 1 for further details on the transition to IFRS 15 'Revenue from Contracts with Customers' which became effective on 1 January 2018.

GROUP STATEMENT OF COMPREHENSIVE INCOME

* Relates to a charge of €0.1m (2017: €0.1m) due to cashflow hedges maturing during the year offset by a credit of €nil (2017: €0.1m) relating to cashflow hedges outstanding at the end of the year.

GROUP STATEMENT OF FINANCIAL POSITION

GROUP STATEMENT OF CHANGES IN EQUITY

* Other equity reserve at 31 December 2018 related to a put option over the non-controlling interest on a 51% owned subsidiary (see note 17 for further detail).

**Loss for the year in 2018 for non-controlling interests of €0.1m (2017: €nil) relates to a loss of €0.1m attributable to the non-controlling interest in a 70% owned subsidiary.

*** Details can be found in the Group Statement of Comprehensive Income.

GROUP CASH FLOW STATEMENT

* Comprises €15.3m of deficit repair payments in respect of defined benefit pension schemes and €6.6m of special contributions in respect of defined contribution pension schemes.

NOTES TO THE FINANCIAL INFORMATION 

1. Basis of Preparation of Financial Information under IFRS

Reporting Entity and Basis of Accounting

Independent News & Media PLC ('the Company') is a public limited company limited by shares and incorporated, domiciled and registered in Ireland. The registered number of the Company is 2936 and the address of its registered office is Independent House, 27-32 Talbot Street, Dublin 1. These condensed Group financial statements as at and for the twelve months ended 31 December 2018 comprise the financial statements of the Company and its subsidiaries (together referred to as 'the Group') and the Group's interest in associates and joint ventures.

In accordance with EU Regulations, the Group financial statements for the year ended 31 December 2018 have been prepared in accordance with EU adopted International Financial Reporting Standards ('IFRS'), and with those parts of the Companies Acts 2014, and Article 4 of the IAS Regulation, applicable to companies reporting under IFRS.

This financial information has been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due during the 12 months from the date of the approval of the 2018 Annual Report, the time period that the Directors have considered in evaluating the appropriateness of the going concern basis.

Financial Information

The financial information in this announcement does not constitute the statutory financial statements of the Company and the Group, a copy of which is required to be annexed to the Company's annual return to the Companies Registration Office in Ireland. A copy of the statutory financial statements in respect of the year ended 31 December 2018 will be annexed to the Company's annual return for 2018. The annual report and financial statements were approved by the Board of Directors on 28 March 2019. A copy of the statutory financial statements required to be annexed to the Company's annual return in respect of the year ended 31 December 2017 has been annexed to the Company's annual return for 2017 to the Companies Registration Office. The audit opinion on these financial statements was unqualified.

The 2018 Annual Report is available on the Company's website inmplc.com as of 29 March 2019. Consistent with prior years, the full financial statements for the year ended 31 December 2018 and the audit report thereon will be completed and available to all shareholders at least 20 working days before the AGM.

General Information

This financial information comprises the Group Statement of Financial Position, Group Income Statement, Group Cash Flow Statement, Group Statement of Comprehensive Income, Group Statement of Changes in Equity and selected notes for the years ended 31 December 2018 and 31 December 2017. This financial information for the years ended 31 December 2018 and 31 December 2017 has been prepared in accordance with the Listing Rules of Euronext Dublin.

Measurement of Fair Values

A number of the Group's accounting policies and disclosures require the measurement at fair value of both financial and non-financial assets and liabilities.

The Group regularly reviews significant unobservable inputs and valuation adjustments.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

- Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

NOTES TO THE FINANCIAL INFORMATION (continued)

1. Basis of Preparation of Financial Information under IFRS (continued)

Measurement of Fair Values (continued)

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

- Note 5 - financial instruments (fair value);

- Note 16 - share based payment arrangements; and

- Note 17 - acquisitions.

The accounting policies and methods of computation and presentation adopted in the preparation of this financial information are consistent with those applied in the Annual Report for the year ended 31 December 2018 and are described in those financial statements on pages 121 to 146.

Except for the changes outlined below, the Group has consistently applied its accounting policies to all years presented in these consolidated financial statements.

The following new and amended standards and interpretations are effective for the Group for the first time for the financial year beginning 1 January 2018:

• Revenue from Contracts with Customers (IFRS 15)

• Financial Instruments (IFRS 9)

Other new standards and amendments effective for the current period did not have a material effect on the Group's financial statements.

IFRS 15

The Group adopted IFRS 15 Revenue from Contracts with Customers ("IFRS 15") from 1 January 2018 and restated comparatives accordingly. IFRS 15 establishes a comprehensive framework for determining whether, how much, and when revenue is recognised. It replaced existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction contracts and IFRIC 13 Customer Loyalty Programmes. See revenue recognition accounting policy in note 1 of the Annual Report.

The key impact on the Group of the adoption of IFRS 15 is to change the presentation of the revenue from distribution of third party news and magazine titles from a gross presentation to a net presentation, as the Group does not control the product and is performing a service on a commission fee basis under IFRS 15. The adoption of IFRS 15 has no impact on net profit and the net assets of the Group, as it reduces both revenue and costs equally. The impact of this adjustment is outlined as follows:

^ All figures are post exceptional items.

NOTES TO THE FINANCIAL INFORMATION (continued)

1. Basis of Preparation of Financial Information under IFRS (continued)

IFRS 9

The newly effective requirements for IFRS 9 Financial Instruments ("IFRS 9") did not have a material impact on the Group.

The following new IFRS 9 requirements are effective for the Group for the first time for the financial year beginning 1 January 2018. The Group has adopted the cumulative effect transition approach and there is no restatement of comparatives.

IFRS 9 sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The principal impact on the Group of the adoption of IFRS 9 is:

• Equity instruments classified as available for sale have been designated as measured at fair value through other comprehensive income ("FVOCI"). Consequently, all fair value gains and losses will be reported in other comprehensive income ("OCI"), no impairment losses will be recognised in profit or loss and no gains and losses will be reclassified to profit or loss on disposal; and

• The lifetime expected credit loss ("Lifetime ECL") model replaces the "incurred loss" model in IAS 39 for financial assets at amortised cost.

Risks and Uncertainties

(i) Market Disruption

Maintaining profitability is increasingly challenging due to market disruption (i.e. shift from print media to digital/mobile) negatively affecting newspaper circulation and publishing and digital advertising revenues giving rise to the need for cost reduction and the development of new revenue and profit streams.

Advertising revenue and circulation volumes are closely monitored against budgets and industry benchmarks by senior management during weekly management meetings. Cost containment and reduction activity is in place across all areas of the business, as evidenced in the recent restructuring plans, in order to generate sufficient cash to cover our commitments. This remains a key priority of the Group and is monitored closely by senior management and Finance. Development of new revenue streams is the subject of a detailed programme - see strategy implementation below.

(ii) Strategy Implementation

Failure to complete implementation of Corporate Strategy including Organisational Change under three strategic pillars: Protect the Core, Expand and Develop Customer-Centric Offerings and Enable the Future could impact on profit targets and impede the strategic development of the Group.

Maximise revenue through continuous innovation to deliver best in class products across all platforms. Achieve and maintain the most efficient operating model, not conflicting with longer term strategy. Consolidate print distribution and protect the network. Leverage INM's existing reach and brand, and monetise through a range of digital offerings. Develop paid for membership content models. Consolidate existing position and further expand into targeted verticals. Build and diversify Reach Group while maintaining critical route to market for publishing. Invest in customer-centric systems enabling us to put the customer at the core of the business. Implement future proof organisational structure. Invest in IT and data analytics to enable data driven decision making. Invest in our culture and people to transform our business.

(iii) Cyber and Information Security

Maintaining adequate IT systems to secure Business and Customer data and protect from accidental exposure or deliberate theft of sensitive information, loss of service or system availability & cybercrime.

Cyber security reviews, including penetration testing and vulnerability assessments are performed throughout the year by specialist third party technical experts to provide independent assurance.

IT Transition programme currently being implemented including the appointment of a new IT Security Manager and a specific InfoSecurity project. IT standards and policies are subject to internal audit and external reviews annually to ensure they are in line with appropriate best practices.

NOTES TO THE FINANCIAL INFORMATION (continued)

1. Basis of Preparation of Financial Information under IFRS (continued)

Risks and Uncertainties (continued)

(iv) Corporate Culture & Reputation

A failure to create and maintain a strong culture of corporate governance, editorial independence, openness and innovation, could significantly impact the near and long term profit targets and the strategic development of the group.

Implement a Tone from the Top Culture. Invest in our culture and people to transform our business, New HR Programme to develop HR capabilities, measure performance and enhancing employee journey. Audit, Risk and Compliance Function ("ARC") established, and its charter specifies responsibilities within this area.

(v) Business Continuity

A significant loss of production capability during a disaster scenario could severely impact revenue and lead to increased costs.

Business Continuity Plans ("BCP") and IT Disaster Recovery plans ("DRP") are in place and tested throughout the year. These plans are subject to review on an annual basis by external specialists. Contingency arrangements for recovery of specific systems/operations within targeted timeframes have been defined and tested and back-up systems can be provided by contracted 3rd parties. Individual plans are in place for individual businesses and locations where appropriate. These individual plans and testing feed into the overall Group plan.

(vi) Talent Management / Succession Planning

A failure to attract, retain or develop high calibre talent and management throughout the Group could impact on the attainment of objectives.

The Group maintains a constant focus on talent management with structured succession planning, people/management development and remuneration programmes in place.

New SET members recently appointed. Their objectives include addressing succession dependencies and identifying talent requirements within their remit. New HR Programme to develop HR capabilities, measure performance and enhancing employee journey. People initiatives are reviewed regularly by Group Human Resources, the Group Chief Executive Officer and the Board.

(vii) Compliance with laws and regulations

Increasing regulation, including in the areas of Corporate Governance such as directors' duties and directors' compliance statement requires more focus and resources to ensure the Group is compliant with all applicable laws and regulations.

A number of processes are in place to assess and address any compliance requirements these include: The Risk and Control Assurance Statement, The Directors Compliance Statement and ARC function activity. Separately the Company Secretary also carries out compliance activity including Board and Sub-Committee assessment exercises against best practice. ARC facilitate a number of initiatives with Group Legal, Company Secretary and Editorial to address compliance awareness. All the above mitigation activity is subject to review and challenge by the Audit and Risk Committee.

(viii) Litigation

Libel action or other types of litigation taken against the INM Group or producing published content that lacks trust and credibility could result in financial loss or reputational damage.

Libel action claims are actively managed by Editorial senior management in conjunction with legal support. Collaborative reviews of articles prior to publishing between journalists and outsourced legal support functions (pre and post publication) ensure the Editorial Code of Practice is upheld.

Rigorous investigations and disciplinary processes are carried out following any proven errors. Several initiatives exist to mitigate the risk of libel actions occurring, including renewed policies and compulsory training for contributors.

NOTES TO THE FINANCIAL INFORMATION (continued)

1. Basis of Preparation of Financial Information under IFRS (continued)

Risks and Uncertainties (continued)

(ix) Data Protection Legislation

A breach in data protection legislation could lead to fines as well as reputational and operational damage to INM.

The GDPR Project has been completed and the project is now in business as usual and managed by the ARC team. ARC have sufficient resources and expertise to act as the primary source of advice and assurance in respect of the GDPR and are supported by an external Data Protection Officer.

(x) Economic & Geopolitical uncertainty

General economic conditions can positively or negatively affect the performance of the Group's businesses, such as the consequential risks and uncertainties arising from Brexit.

INM executives monitor the macroeconomic and geopolitical environment by way of regular analysis of business performance through financial results and key performance indicators ('KPIs') to highlight early trends and impacts from economic and geopolitical uncertainty. The implications of Brexit are subject to regular analysis. If there is a managed Brexit transition on a negotiated basis we do not anticipate any material impact on the Group's activities and exchange rate exposures are adequately hedged.

2. Revenue

The effect of initially applying IFRS 15 on the Group's revenue is described in Note 1. Due to the transition method chosen in applying IFRS 15, comparative information has been restated to reflect the new requirements.

An analysis of the Group's revenue for the year is as follows:

* Restated for IFRS 15.

Third party revenue of €158.0m (2017: €159.8m) relates to the Republic of Ireland, and €33.0m (2017: €35.2m) to Northern Ireland.

An analysis of the Group's revenue on a gross and net basis is as follows:

NOTES TO THE FINANCIAL INFORMATION (continued)

3. Segmental Reporting

A number of operating activities are aggregated into one operating segment on the basis the activities are similar in each of the following respects:

• the type or class of customer for their products and services; and

• the methods used to distribute their products or provide their services.

The Chief Operating Decision Maker ("CODM") reviews and considers management information in respect of the Island of Ireland Publishing operating segment. The key performance measure, that is reviewed for this segment is operating profit/(loss) before exceptional items. Exceptional items are reviewed at Group level across different categories and appear separately from the key performance measure reviewed by the CODM.

Interest income and expense, share of results of associates and joint ventures and taxation were reviewed and considered by the CODM at Group level only.

The Group continued to report its revenues and operating profit before exceptional items by geographical areas with a further analysis of the geographical areas by class of business also provided.

NOTES TO THE FINANCIAL INFORMATION (continued)

4. Exceptional Items

Exceptional items are those items of income and expense that the Group considers are material and/or of such a nature that their separate disclosure is relevant to a better understanding of the Group's financial performance.

* Of the exceptional expense in 2018 of €13.3m, €5.2m is shown as an exceptional expenditure outflow in the Group Cash Flow Statement and primarily relates to legal, redundancy and restructuring costs. Of the exceptional expense of €12.1m in 2017, €3.9m is shown as an exceptional expenditure outflow in the Group Cash Flow Statement and primarily relates to redundancy and miscellaneous restructuring costs.

(i) 2018

Primarily relates to the following:

(a) A charge of €4.0m relating to restructuring costs, primarily redundancy costs in the Island of Ireland; and

(b) A charge of €0.1m for acquisition related expenses.

2017

Primarily relates to the following:

(a) A retirement benefits accounting adjustment of €2.9m relating to the finalisation of the de-recognition of two of the Group's Republic of Ireland defined benefit schemes on 7 November 2016;

(b) A gain of €1.0m in relation to the release of an onerous dilapidations provision;

(c) A charge of €1.5m relating to a severance payment to the former CEO;

(d) A charge of €1.2m related to miscellaneous restructuring costs, primarily redundancy costs in the Island of Ireland; and

(e) A charge of €0.5m for acquisition related expenses.

(ii) 2018

Relates to the following:

(a) A charge of €4.8m relating to the impairment of property, plant and equipment in the Northern Ireland - Belfast Publishing CGU (see note 12);

(b) A charge of €1.3m relating to the impairment of the Belfast Telegraph masthead (see note 14); and

(c) A charge of €0.9m relating to the impairment of software also in the Northern Ireland - Belfast Publishing CGU (see note 14).

2017

A charge of €12.7m relating to the impairment of the Belfast Telegraph masthead (see note 14).

NOTES TO THE FINANCIAL INFORMATION (continued)

4. Exceptional Items (continued)

(iii) 2018

Relates to the Company's costs associated with meeting its obligations towards the ODCE and the DPC in their respective investigations; the Company's and the ODCE's costs in relation to the application to the High Court for the appointment of inspectors; the Company's and the ODCE's costs in relation to the judicial review application made by the Company in relation to the ODCE's decision to apply to the High Court; the Company's costs in relation to the inspection; and, the Company's costs in complying with its statutory obligations towards certain individuals seeking information in relation to the 2014 data security incident.

(iv) 2017

The share of associates' and joint ventures' exceptional items (net of tax and non-controlling interests) charge of €0.1m relates to redundancies in Independent Star Limited.

(v) 2018

Relates to a gain arising from the re-measurement to fair value of the Group's pre-existing 50% interest in Reachmount DAC upon obtaining control (see note 17).

(vi) 2018

The exceptional tax credit of €0.5m relates to the tax effect of exceptional expenses.

2017

The exceptional tax charge of €nil includes a reduction in the deferred tax liability of €2.2m following the impairment of intangible assets offset by a related reduction in the Group's deferred tax asset of €2.2m. Exceptional tax in 2017 also relates to a deferred tax charge of €0.4m due to the retirement benefits accounting adjustment relating to the de-recognition of two of the Group's Republic of Ireland defined benefit schemes on 7 November 2016 and a current tax credit of €0.4m arising on exceptional expenses in the Republic of Ireland.

5. Fair Value

The fair values of quoted other investments and derivative financial instruments are measured using market values. Unquoted other investments and derivatives are measured using valuation techniques. The carrying amount of non interest bearing financial assets and financial liabilities and cash and cash equivalents approximates their fair values. The Group has not disclosed the fair value of certain financial instruments such as other payables, short-term receivables and short term payables because their carrying amounts are a reasonable approximation of fair value.

The other investments of €0.2m (2017: €0.2m) are measured at Level 3 of the fair value hierarchy.

The derivative financial instruments - cash flow hedges of €nil (2017: €0.1m) are measured at Level 2 of the fair value hierarchy.

6. Net Finance Income/(Costs)

The 2018 exceptional finance income of €0.8m (2017: €nil), relates to a gain arising from the re-measurement to fair value of the Group's pre-existing 50% interest in Reachmount DAC upon obtaining control (see note 17).

NOTES TO THE FINANCIAL INFORMATION (continued)

7. Taxation

(a) Amounts recognised in profit or loss

(b) Amounts recognised in Other Comprehensive Income

NOTES TO THE FINANCIAL INFORMATION (continued)

7. Taxation (continued)

(c) Reconciliation of effective tax rate

The total tax charge for the year is different from the standard rate of Corporation Tax in Ireland of 12.5%

(2017: 12.5%). The differences are explained below:

For further information on movement in deferred tax in 2018, see note 15.

Within the total tax charge of €1.3m (2017: charge of €3.9m), a net credit of €0.5m (2017: net charge of €nil) is classified as exceptional tax.

The exceptional tax credit of €0.5m relates to exceptional expenses and to a reduction in the deferred tax liability of €0.2m following the impairment of intangible assets offset by a related reduction in the Group's deferred tax asset amount of €0.2m. The exceptional tax charge of €nil in 2017 includes a reduction in the deferred tax liability of €2.2m following the impairment of intangible assets offset by a reduction in the Group's deferred tax asset amount of €2.2m.

There is inherent uncertainty surrounding the UK's exit from the EU and the impact on tax laws and rates. The directors have assessed and have not identified any significant tax matters impacting the financial statements arising from the UK's exit from the EU.

NOTES TO THE FINANCIAL INFORMATION (continued)

8. Earnings Per Share

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. There are no dilutive potential ordinary shares at year end.

At 31 December 2018: 476,555 options (2017: 518,081) were excluded from the diluted weighted average number of ordinary shares calculation because their effect is anti-dilutive.

Basic and diluted earnings per share before exceptional items are presented in order to give a better understanding of the Group's underlying financial performance.

NOTES TO THE FINANCIAL INFORMATION (continued)

9. Investments in Associates and Joint Ventures

* On 31 May 2018, the Group acquired the remaining 50% of the shares and voting interests in Reachmount DAC (trading as Reach Retail Services). As a result, the Group was deemed to have disposed of its 50% interest in the joint venture upon acquiring 100% of the shares and obtaining control of Reachmount DAC (see note 17).

(i) Carrying Amount

The reporting year end dates of the Group's associates and joint ventures are the same as the Group's reporting year end date.

(ii) Associates

The closing balance for year end 31 December 2018 for associates of €0.9m relates to Click & Go (2017: €0.9m).

(iii) Joint Ventures

The closing balance for year end 31 December 2018 for joint ventures of €0.4m relates to The Star (2017: €0.8m related to The Star and Reachmount DAC).

NOTES TO THE FINANCIAL INFORMATION (continued)

10. Share Capital

NOTES TO THE FINANCIAL INFORMATION (continued)

11. Retirement Benefit Obligations

The Group operates defined benefit and defined contribution pension schemes. A summary of the Group's net liabilities in respect of these schemes is set out below:

Group Income Statement

The amounts recognised in the Group Income Statement in respect of all retirement benefit schemes are as follows:

* Charged to administration expenses.

** Credited to exceptional items in the Group Income Statement.

NOTES TO THE FINANCIAL INFORMATION (continued)

11. Retirement Benefit Obligations (continued)

Group Other Comprehensive Income

Remeasurements recognised in Other Comprehensive Income are as follows:

Cumulatively since transition to IFRS on 1 April 2004, €211.9m has been recognised as a charge in the Group Statement of Comprehensive Income in respect of defined benefit pension schemes.

Defined Benefit Pension Schemes

The discount rates used were as follows:

NOTES TO THE FINANCIAL INFORMATION (continued)

11. Retirement Benefit Obligations (continued)

Defined Benefit Pension Schemes (continued)

Movement in net defined benefit (asset)/liability

The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit (asset)/liability and its components:

NOTES TO THE FINANCIAL INFORMATION (continued)

11. Retirement Benefit Obligations (continued)

Defined Benefit Pension Schemes (continued)

Movement in net defined benefit (asset)/liability (continued)

*Comprises the ongoing annual employer deficit repair contributions of €1.4m to the Group's defined benefit pension schemes and a contribution of €13.9m made to the Belfast Telegraph defined benefit pension scheme in November 2018 as part of the agreed funding arrangements.

Defined Contribution Pension Schemes

The defined contribution provision recognised by the Group consists of contributions in respect of two groups of current and former employees in the Republic of Ireland - a group of employees who opted to transfer their legacy defined benefit entitlements to the Company's defined contribution scheme and the non-pensioner members of the two defined benefit schemes which wound up in July 2017.

The contributions will be of the same form as the expected future payments the Company would have made to the defined benefit schemes in respect of these members under the terms of the Funding Proposal.

The discount rate used in the calculation of the provision as at 31 December 2018 was -0.05% (0.06% in 2017).

The following table shows the movement in the present value of defined contribution scheme liabilities over the year:

NOTES TO THE FINANCIAL INFORMATION (continued)

12. Other items

(a) Statement of Comprehensive Income

A currency translation adjustment of €0.1m (all of which related to the translation of subsidiaries with a different functional currency to that of the presentational currency of the Group) has been recognised in the Group Statement of Comprehensive Income as at 31 December 2018 (2017: a net loss of €0.5m (all of which related to subsidiaries)).

(b) Property, Plant and Equipment

The carrying amount of the Group's property, plant and equipment decreased by €6.5m from €40.1m at 31 December 2017 to €33.6m at 31 December 2018. This decrease is driven primarily by an impairment charge of €4.8m, a depreciation charge of €3.4m and a negative foreign exchange movement of €0.1m, somewhat offset by additions of €1.8m.

13. Cash and Cash Equivalents

As of 31 December 2018, the Group held no debt and had cash and cash equivalents of €81.7m (€91.5m as at 31 December 2017).

14. Intangible Assets

Impairment Testing

The Group's indefinite life intangible assets (including goodwill) are tested annually for impairment or whenever there is an indication of impairment. When testing for impairment, the recoverable amounts for the Group's cash-generating units ("CGU"s) are measured at their value in use (except for the Island of Ireland - Publishing CGU) by discounting future expected cash flows. These calculations use cash flow projections for five years based on management approved forecasts which reflect management's current experience and future expectations of the markets in which the CGU operates. In respect of the Island of Ireland - Publishing CGU, the recoverable amount of this CGU was based on fair value less costs of disposal, estimated using discounted cashflows. The fair value measurement was categorised as a level 3 fair value based on the inputs used in the value in use calculations, except management have also factored in profit enhancement initiatives in arriving at the cash flow projections for the five years 2019 to 2023 inclusive.

There was an impairment charge of €2.2m, recognised in 2018 in relation to the Northern Ireland - Belfast Publishing CGU. This arose primarily due to the reduction in forecasted EBITDA as a result of advertising and circulation revenue declines.

The key assumptions used in determining the value in use are:

i) Forecasted cash flows

Forecasted cash flows are based on budgeted EBITDA as adjusted for expenditure necessary to maintain the asset or CGU at its current standard of performance. The budgeted EBITDA results are based on the approved 2019 budget and projections for 2020 to 2023. These calculations use cash flow projections for five years based on management approved forecasts which reflect management's current experience and future expectations of the markets in which the CGU operates.

ii) Terminal value multiple

A terminal value multiple of five was applied to positive year five EBITDA projections (2017: a terminal value multiple of five) in the value in use calculations.

iii) Discount rate

For the purpose of impairment testing, the post-tax discount rate used for value in use calculations of the Island of Ireland - Reach Group Distribution CGU was 9.7% (10.5% in 2017). The post-tax discount rate used for value in use calculations of the Northern Ireland - Publishing CGU was 10.4% (11.0% in 2017).

Sensitivity

The Group ran sensitivities based on reasonably possible changes in the key assumptions for the various CGUs and these sensitivities would not result in the need to recognise any additional material impairment in 2018.

NOTES TO THE FINANCIAL INFORMATION (continued)

14. Intangible Assets (continued)

Impairment Testing (continued)

The key assumptions used in determining the fair value less costs of disposal are:

i) Forecasted cash flows

Forecasted cash flows are based on budgeted EBITDA as adjusted for expenditure necessary to maintain the asset or CGU at its current standard of performance. The budgeted EBITDA results are based on the approved 2019 budget and projections for 2020 to 2023. These calculations use cash flow projections for five years based on management approved forecasts which reflect management's current experience and future expectations of the markets in which the CGU operates. Management have also factored in profit enhancement initiatives in arriving at the cash flow projections for the five years 2019 to 2023 inclusive.

ii) Terminal value multiple

A terminal value multiple of five was applied to positive year five EBITDA projections (2017: a terminal value multiple of five) in the fair value less costs of disposal calculations.

iii) Discount rate

For the purpose of impairment testing, the post-tax discount rate used for fair value less costs of disposal calculations of the Island of Ireland - Publishing CGU was 9.7% (10.5% in 2017).

Sensitivity

The Group ran sensitivities based on reasonably possible changes in the key assumptions in the Island of Ireland - including Irish Independent, Sunday Independent, The Herald, Sunday World and Sligo Champion Publishing CGU. These sensitivities outlined that an impairment would be required if there was a reasonably possible change in assumptions. A 5% decrease in the forecasted EBITDA for this CGU would cause an impairment of €3.6m (2017: €nil), a change in the terminal value multiple from five to four for this CGU would cause an impairment of €5.1m (2017: €nil), and a 1% increase in the pre-tax discount rate for this CGU would cause an impairment of €1.3m (2017: €nil).

The Group's intangible assets were €33.6m at 31 December 2017 and €37.7m at 31 December 2018 (includes €6.3m of software (2017: €7.3m)).

A total of three CGUs (2017: three CGUs) have been identified and these are analysed below: