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Trinity Mirror plc 31 July 2017

Half-Yearly Financial Report

For the 26 weeks ended 2 July 2017

Financial Highlights

· Resilient performance despite difficult trading environment, with one week less trading versus 2016

Strong management of the cost base limited the decline in adjusted operating profit to 9.4% or £6.5 million despite revenue falling by 14.6% or £54.7 million. Adjusted operating margin increased by 1.2 percentage points to 19.6%. Like for like(2) revenue fell by 9.3% or £32.9 million.

· Continued growth in digital revenue

Like for like publishing digital revenue grew by 5.9% to £41.4 million with digital display and transactional revenue growing by 18.0%. This was partially offset by digital classified revenue falling by 23.9%.

· Structural cost savings target increased to £20 million

We delivered structural cost savings of £10 million in the period. These were ahead of target and we have increased our structural cost savings target for the year to £20 million, £5 million ahead of the £15 million target.

· Decline in pension deficit by £59.2 million

The IAS19 pension deficit fell by £59.2 million to £406.8 million (£336.1 million net of deferred tax). The Group paid £20.6 million into the defined benefit pension schemes in the period.

· Net debt reduced to £22.4 million and continued financial flexibility

Adjusted EBITDA(3) of £72.9 million and reduction in net debt(4) of £8.1 million to £22.4 million. The Group continues to have financial flexibility and during the period made the final payment of £68.3 million on the private placement loan notes utilising cash and a £30 million drawing on the £110 million bank facility.

· Interim dividend up 7.1% to 2.25 pence per share

We remain committed to our progressive dividend policy and the Board expects dividends to increase by at least 5% per annum. The interim dividend has been increased by 7.1% from 2.10 pence to 2.25 pence per share.

· Share buyback progressing

The Group acquired 4.2 million shares for £4.6 million during the period under the £10 million share buyback programme announced in August 2016 bringing the total amount purchased to 6.7 million shares for £6.9 million.

· Historical legal issues

As previously announced, the provision for dealing with historical legal issues has been increased by £7.5 million.

· Strategy and outlook

We continue to make progress with our strategy of growing digital display and transactional revenue whilst at the same time tightly managing our cost base to support profits and cash flow.

Although the trading environment remains challenging, at this stage, the Board expects full year adjusted results to be in line with expectations. 

Commenting on the interim results for 2017, Simon Fox, Chief Executive, Trinity Mirror plc, said:

"Whilst the trading environment for print in the first half was volatile, we remain on course to meet expectations for the year. I continue to anticipate that the second half will show improving revenue momentum as we benefit from initiatives implemented during the first half of the year."

Strategic Highlights

· Grow

- Average monthly page views grew by 9.4% to almost 680 million with two thirds of these now on mobile

- With 32.6 million unique UK browsers in June 2017 Trinity Mirror had more monthly unique browsers in the UK than any other commercial news brand

- We delivered over 300 million video streams in the period, up 38% year on year

· Build

- football.london was launched in January 2017 and achieved 1.8 million monthly browsers and 5.5 million page views in June 2017

- Belfast Live, Dublin Live and Glasgow Live delivered 4.2 monthly browsers and 14.0 million page views in June 2017 up on the 3.0 million monthly browsers and 8.7 million page views in December 2016

- Insider.co.uk and InYourArea.co.uk launched in the period and we anticipate good traction on audience during the second half

· Protect

- Structural cost savings (including synergy savings from the integration of Local World) of £10 million

- Secured a five year print and distribution contract for the Guardian and Observer newspapers

- Renewed a five year print and distribution contract for the Racing Post

- Sports Media secured match day programme and tournament magazine publishing contract for FIFA 2018

· Consolidate

- We continue to evaluate a number of ongoing opportunities that drive value and see ourselves as a consolidator in the newspaper industry

Our progress on delivering the strategy is measured through five KPIs. In the period we achieved three out of the five KPI targets and anticipate further progress in the second half. Further details are on page 7.

Board Changes

The Company's Chairman, David Grigson, has indicated his intention to step down from the Board of Directors during the next calendar year, by which time he will have completed two three-year terms in office. Helen Stevenson, Senior Independent Director, will lead an orderly succession process, with the support of external consultants Egon Zehnder.

Notes

(1) On an adjusted basis excluding non-recurring items, restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results.

(2) The like for like revenue trends for 2017 exclude from the 2016 comparative: the extra week of trading in 2016, the Independent print and distribution contract which ceased in April 2016, Rippleffect which was sold in August 2016 and the four Metros handed back to DMGT and other portfolio changes. Set out in note 17 is the reconciliation between 2016 reported revenue and the 2016 like for like revenue.

(3) Adjusted operating profit (£62.6 million) plus depreciation (£10.3 million).

(4) On a contracted basis assuming at 1 January 2017 that the private placement loan notes and related cross-currency interest rate swaps were not terminated prior to maturity.

Enquiries

Trinity Mirror Brunswick020 7293 3553 020 7404 5959

Simon Fox, Chief Executive Nick Cosgrove, PartnerVijay Vaghela, Group Finance Director Will Medvei, Director

Investor presentation

A presentation for analysts will be held at 9.30am on Monday 31 July 2017. The presentation will be live on our website: www.trinitymirror.com at 9.30am and a playback will be available from 2.00pm.

Statutory and adjusted basis

In the Management Report, performance is stated on an adjusted basis to provide a more meaningful comparison of the Group's trading performance. The adjusted results aim to demonstrate the performance of the Group without the volatility created by non-recurring items, restructuring charges in respect of cost reduction measures and accounting items such as the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results.

Like for like revenue trend

Revenue trends are distorted by a number of items in 2016. The like for like revenue trends for 2017 exclude from the 2016 comparative: the extra week of trading in 2016, the Independent print and distribution contract which ceased in April 2016, Rippleffect which was sold in August 2016, the four Metros handed back to DMGT and other portfolio changes. Set out in note 17 is the reconciliation between the 2016 reported revenue and the 2016 like for like revenue.

Forward looking statements

Statements contained in this Half-Yearly Financial Report are based on the knowledge and information available to the Company's directors at the date it was prepared and therefore the facts stated and views expressed may change after that date. By their nature, the statements concerning the risks and uncertainties facing the Company in this Half-Yearly Financial Report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. To the extent that this Half-Yearly Financial Report contains any statement dealing with any time after the date of its preparation such statement is merely predictive and speculative as it relates to events and circumstances which are yet to occur. The Company undertakes no obligation to update these forward-looking statements.

Management Report

Operational Performance

The Group delivered a resilient performance in the first half of 2017 despite the difficult trading environment which saw pressure on revenues, particularly print display advertising and both print and digital classified advertising. We continue to deliver good growth in our digital audience and the associated display and transactional revenue.

Group revenue fell by 14.6% or £54.7 million to £320.0 million. The fall in revenue includes the impact of an additional week of trading in the first half of 2016, the cessation of the Independent print and distribution contract in April 2016, the sale of Rippleffect in August 2016 and the impact of handing back four Metros to DMGT and other portfolio changes. On a like for like basis, Group revenue fell by 9.3% or £32.9 million.

Like for like Publishing revenue fell by 9.8% to £296.4 million. Publishing print revenue fell by 11.9% to £255.0 million and we continued to achieve growth in digital revenue of 5.9% to £41.4 million with digital display and transactional revenue growing by 18.0% partially offset by digital classified revenue falling by 23.9%.

Good cost control limited the fall in Group adjusted operating profit to 9.4% or £6.5 million to £62.6 million and the Group delivered adjusted EBITDA of £72.9 million (2016: £80.4 million). The Group delivered structural cost savings (including an incremental £5 million of synergy savings from the integration of Local World) of £10 million.

Adjusted profit before tax fell by 8.4% to £61.3 million and adjusted earnings per share fell by 6.3% to 17.9 pence reflecting the impact of the falling revenues partially offset by tight cost management.

Statutory operating profit fell by £6.3 million, profit before tax fell by £7.0 million and earnings per share fell by 2.2 pence. Non-recurring items were a charge of £7.3 million (2016: £4.0 million) and restructuring charges in respect of cost reduction measures were £6.4 million (2016: £10.1 million).

The trading environment, particularly for our regional titles, has been very challenging during the period and it became clear that our regional organisational structure was not driving the optimum commercial focus. Therefore we initiated a restructure of the senior regional commercial management team to ensure that their full focus is on maximising advertising revenue from each local market. The objectives of the changes are to bring more clarity and accountability to roles, to speed up decision making and to improve our commercial performance.

Financial Flexibility

The cash flows generated by the Group provide resilience and financial flexibility to invest in the business, to grow dividends and over time meet pension obligations despite the uncertain economic environment.

Reduction in contracted net debt of £8.1 million is lower than the reduction of £44.9 million in the first half of 2016 due to the share buyback and associated additional payment to the pension schemes, higher payments in relation to phone hacking and broadly flat working capital movements, whereas 2016 benefited from the extra week of trading and the timing of the period end.

During the period, the Group repaid the final £68.3 million of the private placement loan notes utilising cash and drawing £30 million on the £110 million bank facility. The bank facility is committed until 2021 and the facility size amortises over the term reducing to £50 million for the last year of the term. Following the repayment of the private placement loan notes net debt is the same on both a contracted and statutory basis.

Net debt of £22.4 million at the period end comprised the £30.0 million drawn on the bank facility and cash balances of £7.6 million.

Historical Legal Issues

We have continued to make progress on the settlement of civil claims in relation to phone hacking with damages for over 80% of claims settled. However, the lengthy process of settling claims and the structure and quantum of legal fees for the claimants has required the provision for settling these matters to be increased by £7.5 million in the period. The provision at the end of the period was £15.4 million.

Although there remains uncertainty as to how these matters will progress, the Board remains confident that the exposures arising from these historical events are manageable and do not undermine the delivery of the Group's strategy.

Pension Schemes

The accounting pension deficit fell by £59.2 million to £406.8 million (£336.1 million net of deferred tax) driven by strong asset returns and the benefit of a decrease in future mortality assumptions more than offsetting a further reduction in the discount rate.

The fall in the accounting pension deficit does not have an immediate impact on the agreed funding commitments. The triennial valuation date of the schemes is 31 December 2016 and the valuations, which are currently in progress, are required to be completed by March 2018.

Dividends and Share Buyback

The final dividend for 2016 of 3.35 pence per share was paid in June 2017. The Board has approved an interim dividend for 2017 of 2.25 pence per share, representing an increase of 7.1% on the 2016 interim dividend. This will be paid on 29 September 2017 to shareholders on the register on 8 September 2017. This is in line with the progressive dividend policy which is aligned to the free cash generation of the business with the Board expecting to increase dividends by at least 5% per annum.

The Group acquired a further 4.2 million shares for £4.6 million during the period under the £10 million share buyback programme announced in August 2016 bringing the total amount purchased to 6.7 million shares for £6.9 million. Alongside the share buyback, the Board agreed to contribute a minimum of £5 million or up to a maximum of 75% of the share buyback as additional funding to the defined benefit pension schemes. The Group paid £5.0 million in 2016 and paid the remaining £2.5 million in the period.

Current Trading and Outlook

In July, Group revenue is expected to fall by 8% on a like for like basis and represents an improvement on the 9% decline in the first half.

Structural cost savings for the year are expected to be some £20 million, which is £5 million ahead of our initial £15 million target, while restructuring charges are expected to be £15 million, £5 million ahead of our initial £10 million guidance.

We continue to make progress with our strategy of growing digital display and transactional revenue whilst at the same time tightly managing our cost base to support profits and cash flow.

Although the trading environment remains challenging, at this stage, the Board expects full year adjusted results to be in line with expectations.

Strategic Update

We refreshed our strategy at the beginning of the year and adopted new financial KPIs to ensure even closer alignment between our strategic initiatives and their financial outcomes.

Our vision is "to be an essential part of people's daily lives by delivering quality content and services that inform, enlighten and enrich". To deliver this vision it is clear that quality content is and will remain at the heart of our business.

Our strategic objective remains to deliver sustainable growth in revenue, profit and cash flow over the medium term.

This will be delivered through four key areas of strategic focus:

· Grow: Grow digital audience and revenue through deepening relationships with readers and optimising response for advertisers;

· Build: Build a diversified product portfolio and sustainable mix of new revenue;

· Protect: Protect our print brands by efficiently delivering quality products; and

· Consolidate: Seek out strategic opportunities that drive value.

Growth from digital and new revenue streams will begin to outstrip print declines on an aggregate basis, leading to a stabilisation of Group revenue and then a return to top line growth. This, combined with our inbuilt and relentless focus on efficiencies, makes the Board confident that the delivery of sustainable growth in revenue, profit and cash flow is achievable in the future, for the benefit of all stakeholders.

Key highlights of progress on each area of strategic focus during the first half of 2017 are set out below:

Grow

Publishing digital display and transactional revenue, which is primarily driven by audience, grew on a like for like basis by 18.0% to £32.8 million, benefitting from the higher page views and an increase in higher yielding revenues categories such as video. Video streams in the period were over 300 million, up 38% year on year. Digital classified revenue which is predominantly upsold from print fell on a like for like basis by 23.9% with the largest category, recruitment, falling by 33.3%.

Digital audience growth continues with average monthly page views in the period growing by 9.4% year on year to almost 680 million. Mobile page views were some two thirds of the page views and grew by 22% while desktop pages views fell by 13%. Three quarters of page views were UK page views which grew by 11% while non UK page views grew by 4%. Page view growth rates have been adversely impacted by the removal of Streamo and Live Event page views as this functionality reduced the viewability of ads served due to the speed at which the pages were viewed by users. It is estimated to have impacted the growth rate by over 10%.

Strategic Update continued

Grow continued

We are simplifying our digital portfolio to focus on brands which can deliver scale and significant daily local audience reach in their market places.

We continue to migrate the former Local World digital brands onto our Escenic content publishing platform and onto our fully responsive new Chameleon site. In the period, the Cambridge News, the Bristol Post, the Bath Chronicle, Gloucestershire Live, Somerset Live, the Hull Daily Mail, the Grimsby Telegraph, the Scunthorpe Telegraph and Lincolnshire Live have all moved and are benefiting from the new look design, cleaner template and more powerful digital storytelling tools. The new sites provide greater emphasis on video, and a much improved live blogging system. The roll out to all sites is expected to be completed by the end of September 2017.

We have established a national direct digital sales team, working with direct clients both existing and new, across our entire national and regional digital portfolio. With initial categories including Education, Travel and Professional Services, we will offer the opportunity to utilise our digital scale and develop audience marketing solutions.

Build

We continue to explore new product ideas to leverage our portfolio of print and digital brands whilst seeking to diversify the revenue streams beyond advertising.

The three "Live" sites (Belfast, Glasgow and Dublin) delivered 4.2 million monthly browsers and 14.0 million page views in June 2017, up on the 3.0 million monthly browsers and 8.7 million page views in December 2016. The 'Live' sites are a digital one-stop shop for all things relating to the city featuring live breaking news, local sport, entertainment, events, local interest, traffic and travel and What's On.

"InYourArea" sites are being trialled for very local content. InYourArea is a hyperlocal news, information and local community product that aggregates in realtime the latest hyperlocal news, events, crime data, local issues, council updates, social media content and more, all using a postcode.

We launched Insider.co.uk, a dynamic daily business news site, which operates alongside the market leading Business Insider magazine. The Insider team will provide Scottish businesses with a rich mix of live breaking city news, expert analysis and original economic data.

We launched football.london in January 2017 which is a 24/7, fan-led, standalone digital site covering London football clubs with a focus on issues fans really care about, behind-the-scene, podcasts, interactive quizzes and games. The site has positive advocates on social media as a result of developing a particular tone of voice and authority. The site achieved 1.8 million monthly browsers and 5.5 million page views in June 2017.

The Group acquired a 50% stake in Brand Events in October 2016. Brand Events is one of the UK's leading creators and operators of consumer event formats. The focus of the joint venture is to expand and create events in three main sectors: Sports, Crafts and Food. The target audience of the events are in line with our core audience and we are able to leverage our in-house marketing expertise across print and digital to help promote events and our regional footprint allows the efficient marketing of a roll-out of existing shows. Events will be centred on the main metropolitan cities which complements our regional and Scottish portfolios. Since the investment, Brand Events has launched three new events, bringing the total to five in 2017.

Protect

Protecting our print brands through understanding our print readers and delivering a quality product, whilst leveraging our brands, communities and advertisers to maximise our financial performance remains a key area of strategic focus.

Print markets remained challenging particularly advertising with display and other declining on a like for like basis by 17.9% and classified declining on a like for like basis by 23.5%. Circulation, the largest revenue category, performed better falling on a like for like basis by 6.3% with cover price increases reducing the impact of volume declines.

Our national and regional newspapers showed the power of the brands in reporting on the election and other events on the national and regional stage in the period.

In light of the challenging trading conditions across the Regionals business, a number of changes to the commercial management structure have been made. The objectives of the changes are to bring more clarity and accountability to roles, to speed up decision making and to improve our commercial performance.

Strategic Update continued

Protect continued

We have also reorganised the senior editorial teams and further reorganised the regional newsrooms across the UK. The restructure followed a review of growth opportunities in each of the markets we operate, and a review of our editorial print production practices. The review has identified opportunities for greater investment, particularly around digital and content creation, as we look to increase engagement and connect with digital audiences on a larger scale. The review of editorial print production has identified examples of best practice that is becoming standardised across the regions.

We continue to rationalise the portfolio and have announced the closure of a small number of regional titles.

Sport Media continues to consolidate its position as the UK's leading sports publishing business working with the best in the Premier League and World football, from clubs to international organisations and some of the top individuals in sport. It has recently been awarded the 2018 FIFA World Cup matchday programme and tournament magazine contract and this builds on the Rugby World Cup matchday programme in 2015. After a busy end to the football season which culminated in Sport Media helping Tottenham Hotspur deliver a hugely successful souvenir programme and record-breaking sales operation for the historic last game at White Hart Lane, and a special Champions book for Chelsea FC, Sport Media are currently focusing on a summer football calendar growth strategy.

The Group delivered structural cost savings (including synergy savings from the integration of Local World) of £10 million. Restructuring charges in respect of cost reduction measures were £6.4 million. For the full year, we expect £20 million of structural cost savings (including synergy savings from the integration of Local World), £5 million ahead of the target for the year and £15 million of restructuring charges in respect of cost reduction measures.

During the period, the Group secured a five year print and distribution contract for the Guardian and Observer newspapers from early 2018 and renewed a five year print and distribution contract for the Racing Post.

Consolidate

We continue to seek out strategic opportunities that drive value. We will continue to exercise rigorous discipline in considering any acquisition opportunities that enhance our strategy or brings new diversified revenue streams. We see ourselves as a consolidator in the newspaper industry and will continue to do so subject to tight financial returns.

Key Performance Indicators

To track delivery of our strategy, the following KPIs are reported on at each reporting date:

Publishing digital revenue like for like growth of 5.9% for the period is below the KPI due to the material decline of 23.9% in classified advertising revenue with the audience related display and transactional revenue continuing to grow strongly by 18.0%.

Circulation revenue like for like decline of 6.3% is in line with the target with cover price increases partially mitigating volume declines.

Print advertising revenue is being impacted by volume declines which have been worse than the national market trends due to the strong performance during June 2016 from the European Football Championship related activity, particularly for the Daily Mirror, and a marked increase in travel advertising which benefited competitors more than our titles.

Continued focus on costs has resulted in adjusted operating margin increasing by 1.2 percentage points from 18.4% to 19.6%.

The interim dividend of 2.25 pence per share is an increase of 7.1% on the 2016 interim dividend.

We anticipate an improvement in performance against the KPIs in the second half as we benefit from a number of initiatives started in the first half.

Group Review

The results have been prepared for the 26 weeks ended 2 July 2017 (2017) and the comparative period is for the 27 weeks ended 3 July 2016 (2016). The results are presented on a statutory and adjusted basis to provide a more meaningful comparison of the Group's performance. Set out in note 16 is the reconciliation between the statutory results and the adjusted results.

Group revenue fell by 14.6% or £54.7 million to £320.0 million. The fall in revenue includes the impact of an additional week of trading in the first half of 2016, the cessation of the Independent print and distribution contract in April 2016, the sale of Rippleffect in August 2016 and the impact of handing back four Metros to DMGT and other portfolio changes. On a like for like basis, Group revenue fell by 9.3% or £32.9 million. Further details on the revenue trends for each division are shown in the Divisional Review. Set out in note 17 is the reconciliation between the 2016 reported revenue and the 2016 like for like revenue.

Statutory costs fell by £48.3 million or 15.0% to £273.0 million reflecting reduced adjusted operating costs and the benefit of lower restructuring costs in the period compared to the first half in 2016 which helped offset the more challenging advertising markets and higher non-recurring items in the period compared to the first half of 2016. Non-recurring items comprise the £7.5 million increase in the provision for dealing with and resolving civil claims arising from phone hacking partially offset by a £0.2 million gain on the sale of a property.

Adjusted operating costs fell by £48.1 million or 15.7% to £257.9 million reflecting the benefit of the impact of an additional week of trading in the first half of 2016, the cessation of the Independent print and distribution contract in April 2016, the sale of Rippleffect in August 2016 and the impact of handing back four Metros to DMGT and other portfolio changes together with reduced costs from structural cost savings and ongoing cost mitigation.

Group Review continued

Statutory operating profit pre associates fell by £6.4 million or 12.0% to £47.0 million while adjusted operating profit pre associates fell by £6.6 million or 9.6% to £62.1 million.

The Group has a 21.53% investment in PA Group and a 50% investment in Brand Events, accounted for as associated undertakings. The statutory and adjusted share of results from associates increased by £0.1 million to £0.3 million and £0.5 million respectively.

The statutory operating profit fell by £6.3 million or 11.8% to £47.3 million. Adjusted operating profit fell by £6.5 million or 9.4% to £62.6 million with operating margin increasing by 1.2 percentage points from 18.4% to 19.6%.

Statutory financing costs which include the pension finance charge, the change in derivative financial instruments and the foreign exchange changes on retranslation of foreign currency borrowings increased by £0.7 million to £9.1 million. Adjusted financing costs fell by £0.9 million to £1.3 million reflecting the benefit of the repayment of borrowings in the prior year.

The statutory tax charge of £9.1 million (2016: £9.2 million) comprises a current tax charge of £8.3 million (2016: £9.0 million) and a deferred tax charge of £0.8 million (2016: £0.2 million). The statutory effective tax rate is higher than the standard rate of corporation tax for the reasons set out in the reconciliation below:

The adjusted tax charge of £12.0 million (2016: £13.5 million) represents 19.6% (2016: 20.2%) of adjusted profit before tax. The adjusted effective rate is less than the statutory effective rate as the main items not deductible in determining taxable profit relate to non-recurring items.

Statutory earnings per share fell by 2.2 pence or 17.2% to 10.6 pence. Adjusted earnings per share fell by 1.2 pence or 6.3% to 17.9 pence.

The fall in the weighted average number of shares year on year reflects the shares bought back as part of the share buyback programme. 

Divisional Review

The Group has four operating segments, each of which is a division, that are regularly reviewed for the purposes of allocating resources and assessing performance. The divisional review that follows is presented on an adjusted basis and there is no difference between the operating profit by division and the segment result of each operating segment that is shown in note 3.

The operating segments are: Publishing which includes all of our newspapers and associated digital publishing; Printing which provides printing services to the Publishing segment and to third parties; Specialist Digital which includes our acquired digital classified recruitment and digital marketing services businesses; and Central which includes revenue and costs not allocated to the operational divisions and our share of results of associates.

The revenue and adjusted operating profit by operating segment is presented below:

The year on year revenue trends are distorted by the extra week of trading in 2016, the Independent print and distribution contract which ceased in April 2016, Rippleffect which was sold in August 2016 and the four Metros handed back to DMGT and other portfolio changes which took place in 2016. The like for like revenue trends for 2017 exclude from the 2016 comparative the impact of these items.

Publishing

The revenue and adjusted operating profit for the Publishing division is as follows:

Revenue fell by 14.2% or £49.1 million to £296.4 million with print revenue falling by 16.6% and digital revenue growing by 4.3%. On a like for like basis revenue fell by 9.8% with print revenue declining by 11.9% and digital revenue growing by 5.9%.

Costs fell by 15.4% or £41.8 million to £229.6 million. This includes the benefit of the impact of an additional week of trading in the first half of 2016, the cessation of the Independent distribution contract in April 2016 and the impact of handing back four Metros to DMGT and other portfolio changes together with the benefit of structural cost savings and ongoing cost mitigation actions.

Operating profit fell by £7.3 million or 9.9% to £66.8 million with operating margin increasing by 1.1 percentage points from 21.4% to 22.5%.

Divisional Review continued

Publishing continued

Print revenue

Print revenue fell by 16.6%. On a like for like basis print revenue fell by 11.9%.

Circulation revenue fell by 9.9%. On a like for like basis circulation revenues fell by 6.3% with volume declines partially mitigated by cover price increases.

The circulation volume trends in the market have been distorted by cover price differentials, cover price discounting and increased sampling.

Excluding the impact of sampling, the Daily Mirror volume fell by 11.1% compared to a 9.1% fall for the UK national daily tabloid market and the Daily Record fell 10.3% against an overall Scottish daily tabloid market decline of 10.0%.

The Sunday Mirror and Sunday People volumes declined by 15.2% and 15.9% respectively in a UK national Sunday tabloid market that fell by 10.9% and the Sunday Mail declined 12.6% against an overall Scottish Sunday tabloid market decline of 10.7%.

The market for our regional titles remained challenging with declines of 12.9% for paid for dailies, 14.0% for paid for weeklies and 14.1% for paid for Sundays.

Print advertising revenue fell by 26.8% with display and other down by 27.3% and classified down by 26.3%. Like for like print advertising revenues fell by 20.9% with display and other down 17.9% and classified down 23.5%.

Increased challenges in print advertising markets saw declines in display advertising across a number of sectors, in particular retail. The year on year trends have also been adversely impact by the strong advertising performance during June 2016 from the European Football Championship.

Most classified advertising categories also came under pressure, in particular recruitment and property which experienced like for like declines of 35.3% and 34.3% respectively.

The Daily Mirror print advertising volume market share in the UK national daily tabloid market fell from 17.8% to 15.8%. The Sunday Mirror share fell from 17.3% to 14.7% and the Sunday People share fell from 10.8% to 10.3%. The Daily Record share improved from 16.0% to 19.0% and the Sunday Mail share declined from 33.2% to 28.4%.

The more challenging market performance has been driven by the strong performance during June 2016 from the European Football Championship related activity, particularly for the Daily Mirror, and a marked increase in travel advertising which benefited competitors more than our titles.

Our regional titles continue to experience difficult advertising markets, particularly display advertising in our metropolitan titles and classified across all titles.

Other print revenue fell by 4.1%. Like for like other revenues are in line with last year with improvements in Sports Media and syndication offset by declines in leaflets and business enterprise revenue.

Digital revenue

Digital revenue grew by 4.3% with display and transactional revenue growing by 16.7% and classified revenue declining by 25.9%.

Like for like digital revenue grew by 5.9% with strong growth from display and transactional revenue of 18.0% driven by an increase in audience, engagement, video and digital marketing services partly offset by classified revenue, which is predominantly upsold from print, which declined by 23.9%, primarily due to recruitment which fell by 33.3%.

Digital audience growth continues with average monthly page views in the period growing by 9.4% year on year to almost 680 million. Mobile page views were some two thirds of the page views and grew by 22% while desktop pages views fell by 13%. Three quarters of page views were UK page views which grew by 11% while non UK page views grew by 4%.

Page view growth rates have been adversely impacted by the removal of Streamo and Live Event page views as this functionality reduced the viewability of ads served due to the speed at which the pages were viewed by users. It is estimated to have impacted the growth rate by over 10%.

Divisional Review continued

Printing

The revenue and adjusted operating result of the Printing division is as follows:

Revenue fell by £2.6 million or 13.3% to £16.9 million. The fall in revenue includes the £1.3 million impact of the cessation of the Independent print contract in April 2016 and the impact of one week less of trading. On a like for like basis revenue fell by £0.7 million or 4.0% reflecting the impact of lower volumes and newsprint supply partially offset by an increase in paper and plate waste sales due to increased prices.

External costs fell by £7.8 million or 10.2% to £68.8 million with the benefit of one week less of trading, cost reduction initiatives and the reduction in costs associated with falling contract print revenue.

The net cost recharged to the Publishing division was £51.9 million compared to £57.1 million in the prior year due to cost reductions exceeding the revenue decline.

Specialist Digital

The revenue and adjusted operating profit of the Specialist Digital division is as follows:

The Specialist Digital division includes Trinity Mirror Digital Recruitment, our digital classified recruitment business and Communicator Corp, our digital marketing services business. Rippleffect was sold in August 2016. Trinity Mirror Digital Recruitment advertising revenues fell by £0.1 million while Communicator Corp revenues increased by £0.1 million offset by the Rippleffect disposal impact of £2.9 million. Operating profit improved by £0.1 million.

Central

The revenue and adjusted operating loss of the Central division is as follows:

The Central division includes revenue and costs not allocated to the operational divisions and the share of results of associates. The result for the period was a loss of £5.5 million compared to a loss of £6.2 million in the prior period.

Revenue primarily relates to rental income from surplus office space at the Group's main office at Canary Wharf. Costs fell by £0.7 million from £8.6 million to £7.9 million reflecting the ongoing tight management of costs. Share of results from associates improved by £0.1 million in the period.

Other Items

Principal risks and uncertainties

The principal risks and uncertainties together with mitigating actions that affected the Group during the first half and going forward are described on pages 14 to 16 in the Trinity Mirror plc 2016 Annual Report. The current principal risks and uncertainties are:

· Strategy - the overall strategy or elements of the strategy are inappropriate and the delivery of the strategy is badly executed;

· Revenue loss - faster than anticipated loss of revenue from print and failure to deliver new revenue streams to offset print decline and drive revenue growth;

· Pensions - pension deficits grow at such a rate so as to affect the viability of the Group itself or so that the annual funding costs consume a disproportionate level of cash flow; and

· Historical legal issues - damage to reputation arising from historical events, direct financial impact from legal claims and distraction of senior management time from delivering the strategy.

There continues to be increased macroeconomic uncertainty created by the process of Britain exiting the European Union and political uncertainty created by the General Election. The Group's pension deficit continues to be impacted by the reduction in gilt and bond yields and the weakening of Sterling has increased newsprint costs. Considerations in relation to the uncertainty and these immediate impacts are included in the principal risks above. Whilst the impact of the uncertainty is hard to assess there is a risk that our revenues could be lower than expectations.

Assessment of the Group's prospects

The directors have assessed the Group's prospects, both as a going concern and its longer term viability.

Going concern statement

The directors consider it appropriate to adopt the going concern basis of accounting in the preparation of the Group's half-yearly financial report.

In accordance with LR 9.8.6(3) of the Listing Rules, and in determining whether the Group's interim condensed consolidated financial statements can be prepared on a going concern basis, the directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowing facilities and the principal risks and uncertainties relating to its business activities.

Having considered all the factors impacting the Group's businesses, including downside sensitivities, the directors are satisfied that the Group will be able to operate within the terms and conditions of the Group's financing facilities for the foreseeable future.

The directors have reasonable expectations that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Group's interim condensed consolidated financial statements.

Viability statement

The directors have a reasonable expectation that the Company and the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

The directors assessed the prospects of the Group over a three year period which reflects the budget and planning cycle adopted by the Group. A three year period is adopted as it enables the directors to consider the impact of declining print revenues, the investment required to drive growth in digital and to identify the extent to which costs need to be minimised to support profits and cash flow. The assessment takes into account the Group's current position and the principal risks and uncertainties facing the Group including those that would threaten the business model, future performance, solvency or liquidity.

Sensitivity analysis is applied to the projections to model the potential effects should principal risks and uncertainties actually occur, individually or in combination. The Board also assessed the likely effectiveness of any proposed mitigating actions.

It is understood that such future assessments are subject to a level of uncertainty that increases with time and, therefore, future outcomes cannot be guaranteed or predicted with certainty. Also, this assessment was made recognising the principal risks and uncertainties that could have an impact on the future performance of the Group and also the financial risks described in the notes to the Group's interim condensed consolidated financial statements.

Further information concerning the review of going concern and viability are set out in the Trinity Mirror plc 2016 Annual Report. 

Other Items continued

Related party transactions

There were no material related party transactions during the period.

Management changes

In January 2017, the Group appointed Andy Atkinson as the Chief Revenue Officer for Trinity Mirror Solutions. Andy joined the Group in 2014 as Sales Director of Trinity Mirror Solutions, with responsibility for leading the sales teams in London and Manchester. Prior to joining the Group, Andy was Head of Trading at Google, and has also held senior roles at IDS and Channel 5.

In May 2017, in light of the ongoing challenging trading conditions across our regional business, a number of changes were announced to the management structure with Rachel Addison leaving the Group. Rachel has done a great job as Managing Director of Regionals over the past two years, particularly with the integration of Local World into Trinity Mirror. The Board would like to thank Rachel for everything she has achieved and wish her every future success.

Board changes

On 1 June 2017, David Kelly was appointed Chairman of the Remuneration Committee, replacing Helen Stevenson, who continues as Senior Independent Director. Both Helen and David joined the Board in 2014 as independent non-executive directors and will remain as members of the Audit & Risk, Remuneration and Nomination Committees.

The Company's Chairman, David Grigson, has indicated his intention to step down from the Board of Directors during the next calendar year, by which time he will have completed two three-year terms in office. Helen Stevenson, Senior Independent Director, will lead an orderly succession process, with the support of external consultants Egon Zehnder.

Statement of directors' responsibilities

The directors are responsible for preparing the half-yearly financial report in accordance with applicable laws and regulations.

The directors confirm to the best of their knowledge:

a) the Group's interim condensed consolidated financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and

b) the Management Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

By order of the Board of directors

Simon Fox Vijay Vaghela

Chief Executive Group Finance Director

31 July 2017

Consolidated income statement

for the 26 weeks ended 2 July 2017 (27 weeks ended 3 July 2016 and 53 weeks ended 1 January 2017)

* Adjusted items relate to the exclusion of non-recurring items, restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results.

Consolidated statement of comprehensive income

for the 26 weeks ended 2 July 2017 (27 weeks ended 3 July 2016 and 53 weeks ended 1 January 2017)

Consolidated cash flow statement

for the 26 weeks ended 2 July 2017 (27 weeks ended 3 July 2016 and 53 weeks ended 1 January 2017)

Consolidated statement of changes in equity

for the 26 weeks ended 2 July 2017 (27 weeks ended 3 July 2016 and 53 weeks ended 1 January 2017)

Consolidated balance sheet

at 2 July 2017 (3 July 2016 and 1 January 2017)

Notes to the consolidated financial statements

For the 26 weeks ended 2 July 2017 (27 weeks ended 3 July 2016 and 53 weeks ended 1 January 2017)

1. General information

The financial information in respect of the 53 weeks ended 1 January 2017 does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies and is available at the Company's registered office at One Canada Square, Canary Wharf, London E14 5AP and on the Company's website at www.trinitymirror.com. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The financial information for the 26 weeks ended 2 July 2017 and 27 weeks ended 3 July 2016 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been audited. No statutory accounts for these periods have been delivered to the Registrar of Companies.

This half-yearly financial report constitutes a dissemination announcement in accordance with Section 6.3 of the Disclosure and Transparency Rules.

The auditors have carried out a review of the condensed set of financial statements and their report is set out on page 32.

The half-yearly financial report was approved by the directors on 31 July 2017. This announcement is available at the Company's registered office at One Canada Square, Canary Wharf, London E14 5AP and on the Company's website at www.trinitymirror.com.

2. Accounting policies

Basis of preparation

The Group's annual consolidated financial statements are prepared in accordance with IFRS as adopted by the European Union. The condensed consolidated financial statements included in this financial report have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

Going concern

These condensed consolidated financial statements have been prepared on a going concern basis as set out in the Management Report on page 13.

Changes in accounting policy

The same accounting policies, presentation and methods of computation are followed in the condensed consolidated financial statements as applied in the Group's latest annual consolidated financial statements.

The Group has adopted the following standards during the current financial period which have had no material impact on the Group:

· IFRS 10 (Amended)'Consolidated Financial Statements'

· IFRS 11 (Amended) 'Joint Arrangements'

· IFRS 12 (Amended) 'Disclosure of Interests in Other Entities'

· IAS 1 (Amended) 'Presentation of Financial Statements'

· IAS 16 (Amended) 'Property, Plant and Equipment'

· IAS 27 (Amended) 'Separate Financial Statements'

· IAS 28 (Amended) 'Investments in Associated and Joint Ventures'

· IAS 38 (Amended) 'Intangible Assets'

· Annual improvements 2012 - 2014 cycle

The following standards, which have not been applied and when adopted are not expected to have a material impact on the Group, were in issue and will be effective for periods beginning on or after 1 January 2018 unless stated below:

· IAS 7 (Amended) 'Statement of Cash Flows' - effective for periods beginning on or after 1 January 2017*

· IAS 12 (Amended) 'Income taxes' - effective for periods beginning on or after 1 January 2017*

· IFRS 2 (Amended) 'Share-based Payment'*

· IFRS 9 (Amended) 'Financial Instruments'

· IAS 40 (Amended) 'Investment Property'*

· IFRIC 22 (New) 'Foreign Currency Transaction and Advance Consideration'*

· Annual improvements 2014 - 2016 cycle*

· IFRIC 23 (New) 'Uncertainty over Income Tax Treatments' - effective for periods beginning on or after 1 January 2019*

The following new standards which have not been applied and for which the impact on the Group is being assessed:

· IFRS 15 (Issued)'Revenue from Contracts with Customers' - effective for periods beginning on or after 1 January 2018

· IFRS 16 (Issued) 'Leases' - effective for periods beginning on or after 1 January 2019*

* Not yet endorsed for use in the EU

2. Accounting policies (continued)

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:

Provisions

There is uncertainty as to liabilities arising from the outcome or resolution of the ongoing historical legal issues. Provisions are measured at the best estimate of the expenditure required to settle the obligation based on the assessment of the related facts and circumstances at each reporting date.

Retirement benefits

Actuarial assumptions adopted and external factors can significantly impact the surplus or deficit of defined benefit pension schemes. 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. Advice is sourced from independent and qualified actuaries in selecting suitable assumptions at each reporting date.

Impairment of goodwill and other intangible assets

There is uncertainty in the value in use calculation. The most significant area of uncertainty relates to expected future cash flows for each cash-generating unit. Determining whether goodwill and other intangible assets are impaired requires an estimation of the value in use of the cash-generating unit to which these have been allocated. It also requires assessment of the appropriateness of the cash-generating unit at each reporting date. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Projections are based on both internal and external market information and reflect past experience. The discount rate reflects a long-term equity and debt mix based on the period end enterprise value assuming a long-term debt to EBITDA ratio of 2.5 times.

3. Operating segments

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board and chief operating decision maker (Executive directors) to allocate resources to the segments and to assess their performance. The Group has four operating segments that are regularly reviewed by the Board and chief operating decision maker.

The operating segments are: Publishing which includes all of our newspapers and associated digital publishing; Printing which provides printing services to the Publishing segment and to third parties; Specialist Digital which includes our digital classified recruitment and our digital marketing services businesses; and Central which includes revenue and costs not allocated to the operational divisions and our share of results of associates.

The accounting policies used in the preparation of each segment's revenue and results are the same as the Group's accounting policies. The Board and chief operating decision maker are not provided with an amount for total assets by segment. The Group's operations are primarily located in the UK and the Group is not subject to significant seasonality during the year.

Segment revenue and results

3. Operating segments (continued)

Segment revenue and results (continued)

4. Revenue

4. Revenue (continued)

5. Non-recurring items

(a) Increase in the provision for dealing with historical legal issues in relation to phone hacking of £7.5 million (27 weeks ended 3 July 2016: nil and 53 weeks ended 1 January 2017: £11.5 million). It remains uncertain as to how these matters will progress, whether further allegations or claims will be made, and their financial impact. Due to this uncertainty a contingent liability has been highlighted in note 18.

(b) Profit on disposal of property with net proceeds of £1.2 million less carrying value of £1.0 million (27 weeks ended 3 July 2016: nil and 53 weeks ended 1 January 2017: profit on disposal of Cardiff and Coventry properties with net proceeds of £10.6 million less carrying value of £10.4 million).

(c) In 2016, a break fee of £2.0 million was paid to Iliffe Print Cambridge Limited.

(d) In 2016, a £2.0 million charge against the carrying value of goodwill in our Specialist Digital division was required.

(e) In 2016, costs associated with closure of the printing site in Cardiff and a press line in Scotland (Cardonald) of £10.7 million including the write off of fixed assets of £9.1 million.

(f) Group's share of restructuring costs incurred by PA Group.

6. Investment revenue

7. Finance costs

8. Tax

The standard rate of corporation tax for the period is 19.25% (2016: 20%). The tax effect of items that are not deductible in determining taxable profit includes certain costs where there is uncertainty as to their deductibility. The current tax liabilities amounted to £7.4 million (3 July 2016: £9.4 million and 1 January 2017: £9.8 million) at the reporting date.

The opening deferred tax position is recalculated in the period in which a change in the standard rate of corporation tax has been enacted or substantively enacted by parliament. The change in rate from 18% to 17% in 2020 was accounted for in the prior year resulting in £9.8 million credit in the consolidated income statement and a £4.4 million charge in the consolidated statement of comprehensive income.

The tax on actuarial gains/(losses) on defined benefit pension schemes taken to the consolidated statement of comprehensive income is a charge of £7.8 million comprising a deferred tax charge of £10.1 million and a current tax credit of £2.3 million (27 weeks ended 3 July 2016: credit of £23.8 million comprising a deferred tax credit of £21.5 million and a current tax credit of £2.3 million and 53 weeks ended 1 January 2017: credit of £32.1 million comprising a deferred tax credit of £26.5 million and a current tax credit of £5.6 million). In the prior year, the deferred tax charge resulting from the future change in tax rate of £0.6 million comprised a charge of £4.4 million from the change in future tax rates and a credit of £3.8 million from a change in the expected reversal of timing differences.

9. Dividends

The Board has approved an interim dividend for 2017 of 2.25 pence per share. On 4 May 2017 the final dividend proposed for 2016 of 3.35 pence per share was approved by shareholders at the Annual General Meeting and was paid on 9 June 2017. The total dividend payment amounted to £9.2 million. On 5 May 2016 the final dividend proposed for 2015 of 3.15 pence per share was approved by shareholders at the Annual General Meeting and was paid on 10 June 2016. An interim dividend for 2016 of 2.10 pence per share was paid on 25 November 2016. The total dividend payment in 2016 amounted to £14.6 million.

10. Earnings per share

* Adjusted items relate to the exclusion of non-recurring items, restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results.

Basic earnings per share is calculated by dividing profit for the period attributable to equity holders of the parent by the weighted average number of ordinary shares during the period. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all potentially dilutive ordinary shares. The weighted average number of potentially dilutive ordinary shares not currently dilutive was 2,518,604 (3 July 2016: 3,442,642 and 1 January 2017: 2,805,385).

* Adjusted items relate to the exclusion of non-recurring items, restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the pension administrative expenses, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge and the impact of tax legislation changes. Set out in note 16 is the reconciliation between the statutory results and the adjusted results.

The basic earnings per share impact for each non-recurring item disclosed in note 5 are as follows:

11. Notes to the consolidated cash flow statement