Independent News & Media Regulatory News (INM)

PROFIT BEFORE TAX OF €11.5M IN LINE WITH EXPECTATIONS, NET ASSETS INCREASE TO €88.6M

Dublin and London 31 August 2018: Independent News & Media PLC (INM ID, INM LN) today announces its half year results for the 6 months ended 30 June 2018.

KEY HIGHLIGHTS

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

· Profit before Tax2 of €11.5m in line with expectations with exceptional costs of €2.1m

· Net assets increase to €88.6m with a cash balance of €89.4m

· New corporate strategy identified which focuses on protecting the core, expanding and dominating existing and new niches and enabling the future

· New appointments made to Senior Executive Team ("SET"), who will enable delivery of the corporate strategy, and to the Board of Directors

· Continued diversification through two new acquisitions

Murdoch MacLennan, Chairman, Independent News & Media PLC, said: "Despite the challenges facing INM, the Group generated a profit before tax of €11.5m during the period in line with expectations, while our full year forecast remains unchanged. The Group's new strategy is also making progress and a new Senior Executive Team has been put in place to support our Group CEO, Michael Doorly, as he leads its implementation. Our balance sheet remains strong and we continue to explore new avenues to develop profitable revenue streams to support our core business."

· 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 €46.3m for the period (H1 2017: a reduction of €49.1m) which is reflected in the figures reported above.

· Total revenue[1] of €95.0m, down 4.1%

Total revenue[1] of €95.0m was down 4.1% on the prior year. This was primarily driven by a decline in total advertising revenues of 10.5% and a decline in circulation revenues of 6.2% which were offset in part by an increase in distribution revenues[1] of 18.4%, primarily driven by two acquisitions. Within total advertising, publishing advertising revenues declined by 12.4% and digital advertising revenue declined by 2.9%. In spite of this trend, revenue from the Regional titles increased year on year with publishing advertising revenue increasing by 1.1% and circulation revenue increasing by 1.7%.

· Digital revenues, down 2.9%

Digital revenues have declined by 2.9% on the prior year. The ongoing revenue pressures arising from Google and Facebook in the market were partially offset by the Group's continued investment in new diversified offerings such as CarsIreland.ie which delivered double-digit revenue growth for the period (+21.4%).

· Profit before tax2 €11.5m, down 22.8%

Profit before tax2 decreased by 22.8% to €11.5m primarily due to continued revenue declines which were partially offset by a reduction in operating costs. Earnings per share2 decreased during the period by 0.3c to 0.7c.

· Decrease in operating costs

Total operating costs decreased by €0.9m (-1.1%) in the period, notwithstanding increased investment in consulting, GDPR and cyber-security costs incurred of circa €1.5m, as the business focuses on enabling the future.

· Balance sheet strengthened

The Group net assets of €88.6m as at 30 June 2018 have increased by €8.5m year on year. There was a decrease in the retirement benefit obligations liability of €23.6m, from €90.1m to €66.5m, primarily due to deficit repair/special contribution payments. The inventories balance has increased by €2.7m year on year primarily due to inventories held by the two new acquisitions, Hegadon (trading as Supreme Stationary) and Reachmount DAC. The cash and cash equivalents balance has decreased by €6.3m year on year primarily due to the aforementioned retirement benefit obligations payments and costs associated with the two new acquisitions mentioned above, with these outflows being offset by a positive EBITDA performance.

· Exceptional items

The Group recorded a total net exceptional expense of €2.1m, which included:

Ø A charge of €1.9m for legal costs primarily associated with meeting the requirements of the Office of the Director of Corporate Enforcement ("ODCE") and the related Judicial Review;

Ø A charge of €1.3m related to restructuring costs, primarily redundancy costs;

Ø A charge of €0.1m for acquisition related expenses;

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; and

Ø A tax credit of €0.4m on legal, redundancy and other restructuring costs.

· Exceptional legal costs

Exceptional legal costs of €1.9m were incurred in the period primarily in relation to responding to formal enquiries from the ODCE; responding to an application in the High Court brought by the ODCE seeking the appointment of Inspectors to investigate the affairs of the Group; challenging the lawfulness of the ODCE's decision to bring the application by way of Judicial Review; and related legal issues. The President of the High Court reserved his judgement on the ODCE's application to appoint Inspectors to the Group and that judgement is awaited.

On 26 June 2018 the Group received notification from the Data Protection Commission ("DPC") that it had commenced an investigation into a data security incident in 2014 which the Group had notified to the DPC's predecessor body in August 2017. The Group is cooperating with that investigation.

· New appointments

INM has developed a new corporate strategy to future proof and support the business in the coming years given the challenging operating and economic environment in the media/print industry.

A critical first step to deliver the new strategy was to ensure that the Board was refreshed and that the SET had leaders with the key skills and ambition to successfully drive the plan forward. Accordingly, a new team has been positioned under Michael Doorly (CEO) consisting of:

· Richard McClean - MD Publishing Ireland

· Henry Minogue - Chief Information Officer

· Ian Keogh - CEO Reach Group

· Ryan Preston - Chief Financial Officer

· Celine Doyle - Chief People Officer

· Richard Morgan - Transformation Director

In addition, Mark Ody will join the organisation in September 2018 as Chief Customer Officer to ensure the customer remains at the heart of everything that INM does. Further appointments will be made later this year at SET level and across the wider organisation as it restructures and refocuses its efforts.

· Corporate Strategy

As part of the "protect the core" pillar of our new strategy, further cost saving plans have been put in place throughout the Group to mitigate the H2 2018 forecast revenue declines.

In line with the "expand into and dominate existing and new niches" pillar of our 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. Two new businesses were launched during the period, both of which further expand the Group's digital niche offerings.

To advance the "enable the future" pillar of our new strategy, the Group has made key appointments at SET level to build the future of the organisation and invested in GDPR compliance and improved cyber-security.

· Dividend

The Directors are not proposing a dividend for 2018.

STATEMENTS

Murdoch MacLennan, Chairman, Independent News & Media PLC, said: "The media industry continues to experience challenging trading conditions, while the Group must also contend with uncertainty as a result of the ODCE's attempt to have inspectors appointed to look into a number of events that took place in recent years and the ongoing DPC investigation of alleged data breaches within INM.

We are mindful of the rapidly changing landscape of the media industry with digital companies leveraging different technologies to directly engage with the consumer. However, this does not undermine the continued quality content produced by INM which remains a trusted source for news.

Despite the challenges facing INM, the Group generated a profit before tax of €11.5m during the period in line with expectations, while our full year forecast remains unchanged. The Group's new strategy is also making progress and a new Senior Executive Team has been put in place to support our Group CEO, Michael Doorly, as he leads its implementation. Our balance sheet remains strong and we continue to explore new avenues to develop profitable revenue streams to support our core business."

Michael Doorly, Group Chief Executive Officer, Independent News & Media PLC, said: "While our industry continues to face many challenges, INM anticipates a full-year EBIT performance in line with market expectations. We now have a new Senior Executive Team in place and our priority is to continue implementing our new three pillar strategy as previously communicated.

I would like to thank all colleagues for their contribution and dedication to the Group in delivering the half year results."

Outlook

Despite the ongoing challenges in the media industry, the Group anticipates a full year EBIT performance in line with market expectations.

SUBSEQUENT EVENTS

In early July 2018, The President of the High Court heard an application brought by the ODCE for the appointment, under section 748 of the Companies Act 2014, of inspectors to investigate the affairs of the Group. The President of the High Court reserved his judgement on the application and this judgement is still awaited.

As a result of information included in materials sent by the ODCE to the Company's solicitors in respect of the Court application, the Board of INM became aware of new information regarding a data security incident which was notified to the DPC in August 2017. The Board subsequently made an additional notification to the DPC in March 2018 following which the DPC launched a formal investigation into the circumstances of the data security incident. Since the period end the Company has sent a formal response to a series of questions put to it by the DPC under Section 10 of the Data Protection Acts 1988 and 2003.

The above matters relating to the ODCE and the DPC could result in the Company incurring further material costs.

In August 2018, Mr. Kieran Mulvey was appointed as a non-executive director by the Board.

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

 - Ends -

For further information, contact:

INDEPENDENT NEWS & MEDIA PLC - CONDENSED INTERIM GROUP FINANCIAL STATEMENTS - CONDENSED GROUP INCOME STATEMENT (unaudited)

* See note 5 for further information.

** See note 1 for further details on the IFRS 15 adjustment in 2018 and the restated figures in 2017.

The notes to the condensed interim Group financial statements on pages 10 to 24 form an integral part of this financial information.

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME (unaudited)

The notes to the condensed interim Group financial statements on pages 10 to 24 form an integral part of this financial information.

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION (unaudited)

The notes to the condensed interim Group financial statements on pages 10 to 24 form an integral part of this financial information.

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY (unaudited)

* Other equity reserve at 30 June 2018, 31 December 2017 and 30 June 2017 relates to a put option over the non-controlling interest on a 51% owned subsidiary, INM Events DAC.

The notes to the condensed interim Group financial statements on pages 10 to 24 form an integral part of this financial information.

CONDENSED GROUP CASH FLOW STATEMENT (unaudited)

The notes to the condensed interim Group financial statements on pages 10 to 24 form an integral part of this financial information.

NOTES TO THE INTERIM STATEMENT (unaudited)

1. Basis of Preparation of Financial Information under IFRS

Basis of Preparation and Going Concern

Independent News & Media PLC ("the Company") is a company domiciled in Ireland. These condensed interim Group financial statements as at and for the six months ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as "the Group") and the Group's interest in associates and joint ventures.

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 for the foreseeable future.

The condensed interim Group financial statements for the six months ended 30 June 2018 and the comparative amounts have not been audited or reviewed by the auditors. The condensed interim Group financial statements are not the statutory financial statements of the Company. A copy of the statutory financial statements has been annexed to the Company's annual return to the Companies Registration Office in Ireland in respect of the year ended 31 December 2017. The auditor's report on those financial statements was unqualified. The financial statements for the year ended 31 December 2017 are available online at www.inmplc.com.

These condensed interim Group financial statements are presented in Euro, which is the functional currency of the Company and presentation currency of the Group.

The condensed interim Group financial statements were approved by the Directors on 30 August 2018.

The condensed interim Group financial statements for the six months ended 30 June 2018, which should be read in conjunction with the 2017 Annual Report, have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland and in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34) as adopted by the European Union.

Accounting Policies

The accounting policies and methods of computation and presentation adopted in the preparation of the condensed interim Group financial statements are consistent with those applied in the Annual Report for the year ended 31 December 2017 and are described in those financial statements on pages 121 to 139, except for the impact of the standards described below.

Newly effective IFRSs

The following new IFRS requirements are effective for the Group for the first time for the financial year beginning 1 January 2018:

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.

The key impact on the Group on 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. 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:

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

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

^ All figures are before exceptional items.

Other newly effective IFRSs

There were a number of other newly effective IFRS requirements including IFRS 9 Financial Instruments ("IFRS 9") that did not have a material impact on the Group.

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 and loss and no gains and losses will be reclassified to profit and loss on disposal; and

· The lifetime expected credit loss ("Lifetime ECL") model replaces the "incurred loss" model in IAS 39 for receivables.

Forthcoming IFRS requirements

A number of new IFRS requirements are effective for annual periods beginning on or after 1 January 2019, and have not been applied in preparing these consolidated financial statements. These are set out as follows:

• IFRS 16: Leases ("IFRS 16")*

• IFRIC 23: Uncertainty over Income Tax Treatments*

• IFRS 17: Insurance Contracts**

Other than IFRS 16 the aforementioned are not expected to have a material impact.

* Amendments are effective for annual period commencing on 1 January 2019.

** Amendments are effective for annual period commencing after 1 January 2021.

Estimated impact of the adoption of IFRS 16

IFRS 16 Leases ("IFRS 16") replaces existing leases guidance including IAS 17 leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

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

The standard is effective for annual periods beginning on or after 1 January 2019.

IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right of use asset representing its right to use the underlying asset and also a lease liability representing its obligation to make lease payments. There are recognition exemptions for short term leases and leases of low value items. Lessor accounting remains similar to the current standard (i.e. lessors continue to classify leases as finance or operating leases).

The Group is undergoing an assessment of the impact on its consolidated financial statements but has not yet completed its detailed assessment. The Group will recognise right of use assets and related lease liabilities for its operating leases. Please refer to note 28 of the 2017 annual report.

2. Risks and Uncertainties

The principal risks and uncertainties facing the Group were detailed in the Risk Report in the 2017 Annual Report and these continue to be considered the principal risks and uncertainties for the remaining six months of the year most likely to influence the performance of the Group.

Matters relating to the Office of the Director of Corporate Enforcement ("ODCE") application to the High Court for the appointment of inspectors to investigate the affairs of the Group, and the Data Protection Commissioner's ("DPC") investigation into the possibility of personal data having been put at risk of inappropriate disclosure, remain ongoing and could result in the Group incurring material costs.

The preparation of interim Group financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results could differ materially from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2017.

When measuring the fair value of an asset or a liability, the Group uses market observable 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).

If the inputs used to measure the fair value of an asset or liability might be categorised in 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 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.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

3. Segmental Reporting

A number of operating activities are aggregated into one operating segment on the basis that they exhibit similar long-term financial performance as they have similar economic characteristics and the activities are similar in each of the following respects:

• the nature of the products and services;

• the nature of the production processes;

• 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 INTERIM STATEMENT (unaudited) (continued)

3. Segmental Reporting (continued)

The taxation charge (including exceptionals) for the period relates to a charge of €0.8m (2017: €1.3m) in respect of Republic of Ireland taxation.

*Refer to Note 1 for details on restatement of 2017 revenue.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

3. Segmental Reporting (continued)

Breakdown of revenue

*Refer to Note 1 for details on restatement of 2017 revenue.

4. Net Finance Income/(Expense)

5. 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 of €2.1m in 2018, and the restructuring provision as at 31 December 2017, €1.3m is shown as an exceptional expenditure outflow in the Group Cash Flow Statement and primarily relates to legal, redundancy and other restructuring costs. Of the exceptional gain of €2.2m in 2017 and the restructuring provision as at 31 December 2016, €0.8m is shown as an exceptional expenditure outflow in the Group Cash Flow Statement and primarily relates to redundancy and other restructuring costs.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

5. Exceptional Items (continued)

(i) 2018

Primarily relates to the following:

(a) A charge of €1.3m related to restructuring costs, primarily redundancy costs; and

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

2017

Primarily relates to the following:

(a) A retirement benefits accounting adjustment of €3.1m relating to the finalisation of the de-recognition of two of Group's Republic of Ireland defined benefit schemes on 7 November 2016;

(b) A charge of €0.4m related to restructuring costs, primarily redundancy costs; and

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

(ii) 2018

Relates primarily to legal costs associated with the meeting the requirements of the ODCE and the related Judicial Review.

(iii) 2018

Relates to a gain arising from the re-measurement to fair value of the Group's pre-existing 50% interest in Reachmount DAC (see note 12).

(iv) 2018

Relates primarily to a tax credit on legal, redundancy and other restructuring costs.

2017

Relates primarily to a deferred tax movement 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.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

6. 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 period.

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. Share options are the Company's only category of dilutive potential ordinary shares.

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 INTERIM STATEMENT (unaudited) (continued)

7. Other Items

a) Retirement Benefits

The retirement benefit obligations as at 30 June 2018 in the Balance Sheet has decreased by €11.0m to €66.5m compared to €77.5m at 31 December 2017. This decrease in the retirement benefit obligations is primarily driven by deficit repair/special contribution payments of €7.3m and remeasurement gains of €4.5m. The discount rate used in the Republic of Ireland at 30 June 2018 was 2.20% versus the discount rate of 2.15% used at 31 December 2017. The discount rate used in Northern Ireland at 30 June 2018 was 2.80% versus the discount rate of 2.50% used at 31 December 2017.

Retirement benefit obligations have been classified between current liabilities €6.1m (31 December 2017: €6.2m) and non-current liabilities €60.4m (31 December 2017: €71.3m) which is on a consistent basis with the agreed terms of the pension schemes.

b) Statement of Comprehensive Income

A currency translation adjustment of €nil has been recognised in the Group Statement of Comprehensive Income for the half year to 30 June 2018 (2017: a negative currency translation adjustment of €0.6m). There has been no material movement in the Sterling Pound exchange rate from 31 December 2017 to 30 June 2018. The negative currency translation adjustment in 2017 arose due to the weakening of the Sterling Pound exchange rate at 30 June 2017 compared to the rates at 31 December 2016 used in the translation of the Group's investments in subsidiaries with a functional currency different to that of the Parent Company.

c) Dividends

The Directors are not proposing an interim dividend for 2018. There was no dividend paid or declared in respect of 2017.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

8. Cash and Cash Equivalents

As of 30 June 2018, the Group held no debt and had cash and cash equivalents of €89.4m (€91.5m as at 31 December 2017).

9. Intangible Assets and Goodwill/ Investment in Associates and Joint ventures/ Property, Plant & Equipment

Intangible Assets

The carrying amount of the Group's intangible assets (including goodwill) increased by €6.1m, from €33.6m at 31 December 2017 to €39.7m at 30 June 2018. This increase is driven by additions of €7.7m, primarily relating to two acquisitions (see note 12) and to computer software, offset by an amortisation charge of €1.6m (primarily computer software).

Impairment Reviews

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 at 31 December 2017, the recoverable amounts for the Group's cash-generating units ("CGU"s) were measured at their value in use (except for the Island of Ireland Publishing CGU) by discounting future expected cash flows. These calculations used 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 cash flows. 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 2018 to 2022 inclusive.

The Group looked for any indications of impairment as at 30 June 2018 and it determined that there were no indications of impairment. Consequently the Group did not conduct an impairment test as at 30 June 2018.

Property, Plant & Equipment

The carrying amount of the Group's property, plant & equipment decreased by €0.6m, from €40.1m at 31 December 2017 to €39.5m at 30 June 2018. This decrease is driven primarily by depreciation charges of €1.7m which are somewhat offset by additions of €1.1m.

Investments in Associates and Joint Ventures

The carrying amount of investments in associates and joint ventures decreased by €0.2m, from €1.7m as at 31 December 2017 to €1.5m as at 30 June 2018. The movement is primarily due to the derecognition of the previous shareholding of €0.4m on obtaining control of the remaining 50% in Reachmount DAC due to the acquisition of the entire business (see note 12 for further information on the acquisition of subsidiary) and dividends received from associates, offset by the Group's share in profits from associates and joint ventures.

Provisions

The carrying amount of provisions increased by €0.5m, from €10.0m at 31 December 2017 to €10.5m at 30 June 2018. This increase is primarily driven by restructuring provisions and contingent consideration provisions relating to acquisitions and slightly offset by a decrease in the libel provision.

10. Related Party Information

In the 2017 Annual Report the Group disclosed a number of related party transactions (see note 31 of the 2017 Annual Report). During the first six months of the current financial year, transactions with iMedia Advisory Ltd ceased to be related party transactions following the resignation of Allan Marshall as a director of INM PLC.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

11. Share-based payment arrangement

At 30 June 2018, the Group had the following share-based payment arrangements.

Share option programme (equity-settled)

In June 2014, the Remuneration Committee proposed the introduction of a new share option scheme and this was approved by the shareholders at the AGM on 6 June 2014. This scheme entitles certain employees to purchase shares in the Company.

On 1 January 2015 a grant under this scheme, with two separate and independent sets of vesting conditions, was made to certain employees. Holders of vested options were entitled to purchase shares at the nominal value of the share at the grant date. At 31 December 2017, the vesting criteria were not met and therefore none of the share options under this grant vested.

On 1 January 2016, a further grant on similar terms was offered to key management personnel and senior employees. 3,583,764 share options are outstanding at 30 June 2018 in relation to this grant.

There was no new grant under this scheme in either 2017 or 2018.

All options are to be settled by physical delivery of shares. The terms and conditions and the main vesting criteria of the share options are set out in the tables as follows:

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

11. Share-based payment arrangement (continued)

The fair value of services received in return for share options granted is based on the fair value of the share options granted.

Measurement of grant date fair values

The inputs used in the measure of the fair value at grant date of 1 January 2016 of the share-based payment arrangement are outlined on page 171 of the 2017 Annual Report.

12. Acquisitions

(a) Hegadon Limited

On 11 January 2018, the Group acquired the trading business and certain assets of Hegadon Limited (trading as Supreme Stationery). The business has been fully integrated into the existing Reach Group stationery business unit (Reach Stationery). The acquisition further diversifies the product range and customer base of Reach Group in the stationery sector while leveraging the existing distribution network.

i) Consideration transferred

The total consideration was €4.7m, which comprised €4.5m of cash and €0.2m of estimated contingent consideration. The contingent consideration payment will be determined by the trading performance in the 12 months following completion. The range of contingent consideration is between €nil and €0.2m and payment will be based on the achievement of revenue targets along with maintenance of a set gross margin percentage.

ii) Acquisition related costs

The Group incurred acquisition-related costs of €0.2m on legal fees and other transaction costs. These costs were incurred in 2017 and therefore were included in 'exceptional items' in 2017.

iii) Identifiable assets acquired

The following table summarises the recognised amounts of assets acquired at the date of acquisition.

The valuation techniques used for measuring the fair value of material assets acquired were as follows:

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

12. Acquisitions (continued)

(a) Hegadon Limited (continued)

iv) Goodwill

Goodwill arising from the acquisition has been recognised as follows.

The principal factors contributing to the recognition of goodwill on the business combination include synergies and supply chain expertise.

(b) Reachmount DAC

On 31 May 2018, Reach Group acquired the remaining 50% of the shares and voting interests in Reachmount DAC (trading as Reach Retail Services) bringing the Group's interest up to 100%.

Reachmount DAC was incorporated on 5 November 2015 as a joint venture between Newspread and Paramount Packaging Limited to provide consumable packaging products to the retail and food service industries. There are clear synergies with Reach Group's existing distribution network which provides a competitive advantage in this sector.

i) Consideration transferred

The total consideration was €1.2m, which comprised €0.8m of cash and €0.4m of estimated contingent consideration. The contingent consideration payment will be determined by the trading performance in the 12 months following completion. The range of contingent consideration is between €nil and €0.4m and payment will be based on the achievement of set gross margin thresholds.

ii) Acquisition related costs

The Group incurred acquisition-related costs which have been included in 'exceptional items'.

iii) Identifiable assets acquired and liabilities assumed

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.

The valuation techniques used for measuring the fair value of material assets acquired were as follows:

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

12. Acquisitions (continued)

(b) Reachmount DAC (continued)

iii) Identifiable assets acquired and liabilities assumed (continued)

iv) Goodwill

Goodwill arising from the acquisition has been recognised as follows:

The remeasurement to fair value of the Group's pre-existing 50% interest in Reachmount DAC resulted in a gain of €0.8m. This amount has been included in 'exceptional items'. The goodwill is attributable to synergies that will be realised through the Group's people, structures and business practices in acquiring the remaining 50% of Reachmount DAC.

(c)Put Option

The Group has a €0.3m liability at 30 June 2018 in respect of a put option over the non-controlling interest on a 51% owned subsidiary, INM Events DAC.

NOTES TO THE INTERIM STATEMENT (unaudited) (continued)

13. Subsequent Events

In early July 2018, The President of the High Court heard an application brought by the ODCE for the appointment, under section 748 of the Companies Act 2014, of inspectors to investigate the affairs of the Group. The President of the High Court reserved his judgment on the application and this judgement is still awaited.

As a result of information included in materials sent by the ODCE to the Group's solicitors in respect of the application the Board of INM became aware of new information regarding a data security incident which was notified to the DPC in August 2017. The Board subsequently made an additional notification to the DPC in March 2018 following which the DPC launched a formal investigation into the circumstances of the data security incident. Since the period end the Group has sent a formal response to a series of questions put to it by the DPC under Section 10 of the Data Protection Acts 1988 and 2003.

The above matters relating to the ODCE and the DPC could result in the Group incurring further material costs.

In August 2018, Mr. Kieran Mulvey was appointed as a non-executive director by the Board.

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

STATEMENT OF DIRECTORS' RESPONSIBILITY FOR THE SIX MONTHS ENDED 30 JUNE 2018

The Directors are responsible for preparing this interim management report and the condensed interim financial information in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 (as amended), the Transparency Rules of the Central Bank of Ireland and with IAS 34, Interim Financial Reporting as adopted by the European Union.

The Directors as listed on pages 41 to 43 of our 2017 Annual Report (being the persons responsible within INM for making this statement) confirm that to the best of their knowledge:

(1) the condensed interim Group financial statements, comprising the condensed Group Income Statement, the condensed Group Statement of Comprehensive Income, the condensed Group Statement of Financial Position, the condensed Group Statement of Changes in Equity, the condensed Group Cash Flow Statement and the related notes, have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union.

(2) the Interim Management Report and the condensed interim Group financial statements include a fair review of:

(a) the important events that have occurred during the first six months of the financial year, and their impact on the condensed interim Group financial statements;

(b) the principal risks and uncertainties for the remaining six months of the financial year;

(c) related party transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or the performance of the Group during that period; and

(d) any changes in the related party transactions described in the last Annual Report, that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

On behalf of the Board

Murdoch MacLennan

Group Chairman