Reach Plc Regulatory News (RCH)

Trinity Mirror plc

2 August 2012

Half-Yearly Financial Report

for the 26 weeks ended 1 July 2012

Key Highlights

Commenting on the results for the half year, David Grigson, Chairman, Trinity Mirror plc, said:

·; Operating profit (1) up 11.5% to £52.5 million and earnings per share (1) up 23.7% to 14.6 pence

"We have increased operating profit and earnings per share despite a revenue decline of 4.0% to £356.0 million due to the difficult economic environment."

·; Continued focus on profitability of our core print assets while investing for growth

"We increased the profitability of our core print assets and we are continuing to invest in the technology led transformation of our publishing capabilities and in new products and services across multiple digital channels."

·; Strong cash generation and a reduction in net debt (2)

"Operating cash flow remains strong with net debt reduced by £40.3 million to £180.9 million since the year end. We made a repayment of £69.7 million of maturing private placement loan notes and our leverage (3) continues to fall rapidly from 2.3 times at December 2009 to 1.3 times at June 2012."

·; Outlook 

"Although the trading environment is expected to remain difficult, the Board anticipates that through strong operational management and the benefit of a fall in newsprint prices for the second half, we will deliver an outcome for 2012 which will be ahead of current expectations."

Results

(1) Adjusted items relate to the exclusion of non-recurring items, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance credit or charge and the impact of tax legislation changes. A reconciliation between the adjusted results and the statutory results including an explanation for the restatement of prior year adjusted profit before tax and adjusted earnings per share is provided in note 14.

(2) On a contracted basis assuming that the private placement loan notes and related cross-currency interest rate swaps are not terminated prior to maturity.

(3) Contracted net debt at 1 July 2012 divided by adjusted earnings before interest, tax and depreciation for the 52 weeks ended 1 January 2012 (December 2009: at 2 January 2010/53 weeks ended 2 January 2010).

Enquiries

Trinity Mirror

Vijay Vaghela, Group Finance Director 020 7293 3000

Nick Fullagar, Director Corporate Communications 020 7293 3622

FTI Consulting

John Waples 020 7831 3113

Charles Palmer

Conference call/Webcast

A webcast and teleconference for analysts will be held at 9.30am on Thursday 2 August 2012. The presentation will be live on our website www.trinitymirror.com at 9.30am and a playback will be available from 2.00pm. If you wish to ask a question, the dial-in number is +44 (0)20 3140 8286, Confirmation Code: 5749907.

Interim Management Report

Chairman's Statement

The first half has witnessed significant changes to the Board. On behalf of all of us, I thank Sir Ian Gibson for his leadership as Chairman and Laura Wade-Gery for her contribution as non-executive director over the last six years. I also thank Sly Bailey for her contribution and leadership as CEO for more than nine years during which Trinity Mirror has established an impressive reputation for strong operational management of costs and cash flows in difficult times. I wish them all well for the future. I also welcome Donal Smith, and his expertise in building digital businesses and experience in publishing from his time at the Financial Times, to the Board. I am looking forward to working very closely with the management and executive team while we identify a successor as CEO. We have appointed Egon Zehnder International to assist with the process and our search is progressing well.

While the first half has been challenging and exciting, nothing I have seen in my first few months on the Board has changed my view that this is a business with strong operational management that is well placed to adapt to a digital future. This has clearly been demonstrated in the last six months by the Group's ability to grow profits and deliver strong cash flows whilst continuing to invest in the technology led transformation of its publishing capabilities and in new products and services across multiple digital channels.

The UK media industry is rich and diverse and within this Trinity Mirror continues to provide news to mass market audiences across both print and digital channels. From great national newspapers, including the Daily Mirror and the Sunday Mirror, to our strong portfolio of big metropolitan market leading regional titleswhich sit at the heart of their communities, they all form part of the fabric of everyday life for millions of people across the country. The strong portfolio of newspapers is complemented by a growing portfolio of digital products and services which in many cases leverage the strength and trust of our print titles.Our journalists are the heartbeat of the business and in a multi-media world their compelling content is being read by more and more people. The business delivers vast amounts of up to date information, from news and sport to politics and showbiz, to a content hungry population which increasingly wants it instantly and on the move.

In my short time as Chairman I have been impressed by the very many people I have met from around the Group and by my colleagues on the Board and in the senior executive team. I believed before I joined the Board, and I believe even more strongly now, that Trinity Mirror is a company with a strong portfolio of media assets and an impressive track record of cost and cash flow management in what have been difficult times. Once we have a new CEO at the helm I am confident that the Group can build on these strengths and provide a bright and prosperous future for all its stakeholders.

Summary

The Group has delivered robust profits in the period whilst continuing with its investment plans in new technology and organic growth initiatives. Our national titles have maintained market share in the period with improved trading in June benefitting from the Diamond Jubilee and the Euro 2012 football tournament. Our regional titles continue to perform in line with market trends despite our portfolio being in the currently more economically challenged large northern metropolitan markets.

Our ongoing focus on driving efficiencies and reducing the structural cost base of the business ensured that operating costs fell by £20.0 million. The fall in costs is after investment in digital and is not distorted by any material change in input prices in the period.

The benefit of reduced costs ensured the Group delivered an adjusted operating profit of £52.5 million, an increase of 11.5% or £5.4 million from £47.1 million despite revenues falling by 4.0% or £15.0 million from £371.0 million to £356.0 million.

Robust operating profits coupled with continued prudent management of working capital delivered strong cash flows during the period which reduced net debt by a further £40.3 million to £180.9 million. These strong cash flows have also enabled leverage (contracted net debt to adjusted earnings before interest, tax and depreciation) to fall rapidly from 2.3 times in 2009 to 1.3 times at June 2012 and this is expected to fall below 1.0 times during 2013.

Adjusted earnings per share increased by a significant 23.7% to 14.6 pence reflecting the benefit of increased operating profit, reduced leverage and a reduction in the rate of corporation tax.

The three key management actions which continue to drive performance in the short term whilst positioning the Group to create value are:

·; focus on the profitability of our core print portfolio whilst ensuring we provide the highest quality newspapers for our target audience;

·; the technology led transformation of our publishing capabilities ensuring we have the appropriate infrastructure in place to optimise our publishing model; and

·; investing for growth through the combination of organic development and selective acquisitions.

Interim Management Report continued

Summary continued

Focus on the profitability of our core print portfolio

We have continued to implement numerous operational changes during the period, alongside continued responsible management of the portfolio, which collectively have ensured we support profitability whilst providing adequate headroom to fund our investment plans. In particular, we have:

·; substantially completed the integration of both of our Scottish operations following the creation of Media Scotland, Scotland's biggest publishing business delivering unrivalled scale and reach across the Scottish market. They are operating as a single business delivering significant improvements to the quality of our editorial content and cross media solutions to our advertisers from a more efficient publishing model. We anticipate revenue benefits accruing as we leverage the wider portfolio to drive circulation and advertising revenues;

·; created a seven day publishing operation for the Daily Mirror and the Sunday Mirror. This builds on the seven day operation across the Daily Record and the Sunday Mail in Scotland which has been in operation for the past two years delivering enhanced content across the portfolio whilst driving efficiencies. As part of this plan we have created a new senior management structure within the editorial team with the newly created post of Editor, Daily Mirror and Sunday Mirror supported by a new Weekday Editor for the Daily Mirror and a new Weekend Editor for the Saturday edition of the Daily Mirror and the Sunday Mirror; and

·; continued to build our contract print business with contract print revenues growing by 8.2% to £25.1 million during the period.

The above initiatives, coupled with continuing restructuring initiatives throughout the business, enable the Group to increase the target for structural cost savings from £15 million to £20 million for the year.

Technology led transformation of our publishing capabilities

Our investment in new publishing systems in all of our businesses including editorial, advertising and production systems together with new digital content management and customer relationship management systems is progressing well and remains on track for completion in 2013. The new publishing systems underpin our ability to drive revenues whilst ensuring we maintain the quality of our content at a significantly reduced cost.

Our Media Scotland business will be the first part of the Group to fully benefit from this investment with implementation due for completion during the second half of this year. The technology will enable highly efficient sharing of resource and help drive revenues by allowing more creative media solutions for our clients across Scotland while at the same time also lowering costs.

Investing for growth

We have continued to invest across our digital businesses during the period. The investment has been targeted on:

·; improving our content driven and specialist websites to increase user engagement and drive revenues with unique users in June of 28 million and page views of 156 million. The new Mirror.co.uk website launched in February is achieving improved user engagement. In late summer we will launch our first paid for e-editions for the Daily Mirror and the Daily Record on tablet devices. These important steps ensure the continued development of our major brands, in print, online, mobile and on tablet devices;

·; increased resources in our digital marketing services business where we have seen underlying revenue growth of 33.6% during the period and this is expected to continue for the remainder of the year; and

·; the launch of happli in the daily deals market. By the end of June we had built a subscriber base of over 200,000 and envisage this increasing further in the second half of 2012. This is a crucial step to building revenues.

Our regional media sales house Amra now represents over 50% of regional newspapers across the UK following its successful representation of Northcliffe Media from May 2012. Amra launched The National package making it simple for national advertisers to use regional newspapers with just one contact. The National package represents over 4 million readers across 16 market leading titles in England and Wales.

Dividends

The Board regularly considers the appropriate time and circumstances in which it can approve the reinstatement of dividends. The Group is moving in the right direction in driving profitability and using surplus cash flows to reduce debt thereby providing the financial flexibility that is a prerequisite for the payment of dividends at a time when revenues are under pressure. The Board will continue to keep this under review.

Interim Management Report continued

Summary continued

Outlook

We anticipate underlying year on year revenue trends to show a marginal improvement in the second half of the year. However, actual revenue, and in particular circulation revenue trends will be adversely impacted by the tougher comparatives following the closure of the News of the World in July 2011.

Although the trading environment is expected to remain difficult, the Boardanticipates that through strong operational management and the benefit of a fall in newsprint prices for the second half, we will deliver an outcome for 2012 which will be ahead of current expectations.

Group Review

The interim management report, unless otherwise stated, is presented on an adjusted basis to provide a more meaningful comparison of the Group's business performance. Adjusted results exclude the impact of non-recurring items, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance credit or charge and the impact of tax legislation changes. A reconciliation between the adjusted results and the statutory results including an explanation for the restatement of prior year adjusted profit before tax and adjusted earnings per share is provided in note 14. The interim management report has been prepared for the 26 weeks ended 1 July 2012 and the comparative period has been prepared for the 26 weeks ended 3 July 2011.

Statutory results

Group revenues for the period fell by 4.0% or £15.0 million from £371.0 million to £356.0 million with statutory operating profit increasing by 12.4% or £5.0 million from £40.2 million to £45.2 million. Profit before tax on a statutory basis increased by £6.2 million from £28.9 million to £35.1 million. This reflects the increased operating profit and lower debt interest costs. The statutory tax credit for the period was £4.4 million reflecting a current period tax charge of £9.0 million more than offset by a prior year credit of £1.8 million and a credit of £11.6 million relating to the impact of the reduction in the rate of corporation tax on opening deferred tax balances. Profit after tax increased by £6.6 million from £32.9 million to £39.5 million with statutory earnings per share increasing by 2.8 pence from 13.2 pence to 16.0 pence.

Adjusted results

Group revenues for the period fell by 4.0% or £15.0 million from £371.0 million to £356.0 million. Group revenue by type is set out below:

Advertising markets have remained difficult across the consumer media sector during the period. Consistent with this, advertising revenues declined by 10.5% reflecting a decline of 10.8% in the first quarter and 10.2% in the second quarter. We are pleased that our national titles broadly maintained advertising volume market share and that our regional titles continue to perform in line with market trends.

Circulation revenues fell during the period by 0.6% reflecting an increase of 3.1% in the first quarter and a decline of 4.3% in the second quarter. The performance in the second quarter reflects the impact of a new cut price national Sunday title which was launched in February this year.

Other revenues grew during the period by 7.8% reflecting growth of 10.3% in the first quarter and 5.5% in the second quarter. This has been driven by growth in contract print and digital marketing services. This includes the acquisition of Communicator Corp, which if excluded, other revenues increased by 3.8%.

Digital revenues increased during the period by 8.9% or £1.7 million from £19.1 million to £20.8 million. Display advertising has grown by 10.3% to £3.2 million and other revenues have grown by 118.5% to £5.9 million. This has been partially offset by declines of 13.2% to £11.7 million in classified advertising, including our most cyclical revenues of recruitment and property driven by high levels of unemployment and a sluggish property market. The performance in the period includes the benefit of Communicator Corp which was acquired in December 2011 and is included in other revenues, which if excluded, saw digital revenue remaining broadly flat year on year.

Interim Management Report continued

Group Review continued

Adjusted results continued

Management has continued to drive efficiencies and has taken decisive action to control costs with total costs falling by £20.0 million. This reduction in costs includes structural cost savings and is after investment in digital and is not distorted by a material change in input prices.

The reduced costs have enabled operating profit during the period to increase by 11.5% or £5.4 million from £47.1 million to £52.5 million despite revenues being lower. The benefits of reduced costs enabled operating margin to increase by 2.0 percentage points from 12.7% to 14.7%.

Profit before tax for the period increased by £7.6 million from £40.5 million to £48.1 million reflecting the increased operating profit and lower debt interest costs. The tax charge of £12.2 million for the period represents 25.4% of profit before tax. Profit after tax increased by £6.5 million from £29.4 million to £35.9 million with earnings per share increasing by 2.8 pence from 11.8 pence to 14.6 pence.

Divisional Review

The Group operates across the UK and has two trading divisions: Nationals and Regionals. Following the transfer of management control of the Scottish regionals business from Regionals during 2011, the Nationals division now includes all our activities in Scotland. This has no impact on total Group numbers but has resulted in a restatement of the prior year half year reporting at a divisional level with revenue of £14.9 million and operating profit of £3.4 million previously reported in Regionals now reported in Nationals.

Nationals

Our Nationals division publishes five national newspaper titles: the Daily Mirror, the Sunday Mirror and The People across the UK and the Daily Record and the Sunday Mail predominantly in Scotland and our regional titles in Scotland. The titles are complemented by a portfolio of digital businesses, events and business conferences.

The revenue and operating profit of our Nationals division are as follows:

Our Nationals division performed strongly in the period with operating profit increasing by 11.8% reflecting the continued focus on driving efficiencies and reducing the underlying cost base of the business. Revenues have remained under pressure during the period due to the economic climate and the launch of a new national Sunday title in February this year.

Although advertising markets remain difficult we have continued to broadly maintain advertising volume market share for our national titles. We have seen an improvement in trends in the second quarter with advertising revenues declining by 6.8% which compares to a decline of 9.4% in the first quarter. In June we only experienced a decline of 1.4% with improvements driven by the Diamond Jubilee and the Euro 2012 football tournament.

While circulation volumes for our national Sunday titles fell after the launch of the new national Sunday title, we are encouraged that the underlying circulation volumes are ahead of the trend prior to the closure of the News of the World in July last year. The 0.3% growth in circulation revenues reflects growth of 5.0% in the first quarter which was substantially offset by a decline of 4.4% in the second quarter.

Year on year volume changes for the daily national titles were a decline of 6.9% for the Daily Mirror and 9.6% for the Daily Record. Our Sunday titles saw an increase of 17.8% for the Sunday Mirror, 13.3% for The People and a decline of 8.2% for the Sunday Mail. The Scottish regional titles declined by 7.7%. We had limited cover price increases during the period.

We have seen continued growth in other revenues driven by contract print revenue and more stability in bingo revenues.

Digital revenue increased by 12.5% following the relaunch of Mirror.co.uk and our investment in digital resource. Audience reach across our websites in June was unique users of 16 million with page views of 74 million.

Interim Management Report continued

Divisional Review continued

Regionals

Our Regionals division publishes a portfolio of market leading titles across England and Wales which are complemented by companion websites. The division also includes our national digital brands in recruitment and property and our growing digital marketing services and contract publishing activities.

The revenue and operating profit of our Regionals division are as follows:

Our Regionals division has seen challenging trading conditions in our key large northern metropolitan markets which are feeling the brunt of the tough economic conditions and in addition the public sector spending cuts and continuing media fragmentation. These have impacted both advertising and circulation revenues.

Advertising revenue fell by 12.1% reflecting a decline of 11.7% in the first quarter and 12.6% in the second quarter with our regional titles continuing to perform in line with market trends. By category display fell 9.9%, recruitment fell 13.2%, property fell 10.8%, motors fell 24.5% and other classified categories fell 13.2%.

Circulation revenue fell by 3.9% reflecting similar declines in the first and second quarters. Volume declines, period on period, were 7.9% for paid-for dailies, 7.9% for paid-for Sundays and 11.9% for paid-for weeklies.

Growth in other revenues is driven by increased revenue from digital marketing services and contract publishing for football clubs which have more than offset declines in print publishing related revenues such as leaflets. Other revenues include the impact of the acquisition of Communicator Corp, which if excluded, saw a fall of 3.3%.

Digital revenue increased by 8.4% with strong performances in display advertising and other revenues driven by the increased level of investment in our operations and the acquisition of Communicator Corp. These have been partially offset by declines in recruitment and property advertising revenues which fell by 13.1%. Excluding Communicator Corp, digital revenue fell by 3.0%. Audience reach across our websites in June was unique users of 12 million with page views of 82 million.

Central

Central includes costs not allocated to the operational divisions and the share of results of associates. The result for the period was a loss of £6.0 million compared to £5.1 million in the prior period. Costs not allocated to the operational divisions increased to £6.9 million from £5.6 million. The share of results of associates was an operating profit of £0.9 million compared to £0.5 million in the prior period.

Other items

Non-recurring items

During the period the Group had a non-recurring charge of £5.5 million relating to the delivery of cost reduction measures and we anticipate non-recurring restructuring charges for the full year of around £15 million.

Pension schemes

The Group operates defined contribution pension schemes with contributions and associated costs charged to operating profit. The defined benefit pension schemes operated by the Group were closed to future accrual in 2010. The Group made deficit funding payments of £5.0 million and a payment of £0.9 million relating to costs incurred by the schemes in the period. Further deficit funding payments of £5.0 million will be made in the second half.

The IAS 19 pension deficit fell during the period by £20.2 million from £230.1 million (£172.6 million net of deferred tax) to £209.9 million (£159.5 million net of deferred tax). Liabilities have reduced due to an increase of 0.1% in the real discount rate which has been partly offset by a strengthening of the mortality assumptions. During the period £18.9 million of liabilities were secured through the purchase of insurance policies by the pension Trustees resulting in the removal of future exposure relating to these liabilities. At the period end 20.9% or £353 million of liabilities are secured by insurance policies. Further details relating to the Group's defined benefit pension schemes including an estimate of the sensitivity of the deficit to key assumptions are shown in note 12.

Interim Management Report continued

Other items continued

Cash flow and net debt

Operating cash flow remains strong. Net debt on a contracted basis, assuming that the private placement loan notes and the cross-currency interest rate swaps are not terminated prior to maturity, fell by £40.3 million from £221.2 million to £180.9 million. The Group had a £20.0 million drawing on the bank facility and a net cash balance of £6.1 million at the period end comprising cash and cash equivalents of £11.9 million less bank overdrafts of £5.8 million.

On a statutory basis, net debt fell by £37.2 million from £200.7 million to £163.5 million. Statutory net debt includes the US$ denominated loan notes at the period end exchange rate and the cross-currency interest rate swaps at fair value. An analysis of net debt on a statutory and contracted basis together with a reconciliation between statutory and contracted net debt is shown in note 11.

The Group repaid the maturing £69.7 million of private placement loan notes in June 2012 through cash balances and a £20.0 million drawing on the bank facility. The next repayments of the private placement loan notes are £54.5 million in October 2013, £44.2 million in June 2014 and £68.3 million in June 2017. In June 2012 the Group entered into a two year interest rate swap in respect of £100 million of loan notes which ensures that interest on this debt is now fixed at 2.6% until 2014.

The Group has in place a £135 million bank facility which is committed until June 2013. The Group also has in place a £110 million bank facility which is committed to August 2015 from the earlier of the termination of the £135 million bank facility or June 2013.

Capital expenditure

Capital expenditure in the period was £3.8 million against depreciation of £14.6 million. Capital expenditure is expected to be maintained at around £15 million per annum going forward.

Related party transactions

There have been no changes in the nature of the related party transactions and no material transactions during the period.

Principal risks and uncertainties

The principal risks and uncertainties that affect the Group on an ongoing basis are described on pages 22 and 23 in the Group's Annual Report and Accounts for the 52 weeks ended 1 January 2012. These are still considered the most relevant risks and uncertainties at this time. They could have an impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ from expected or historical results.

The key risk is that advertising and circulation revenues, representing the core revenue streams for the Group, are materially affected by the challenging economic conditions and competitor activity in the second half of 2012. The fragile economy and uncertain outlook significantly impacted revenues during the first half of 2012 and this is expected to continue as we proceed through 2012.

The current issues in the Euro zone have been considered by the Board. Revenues directly earned from Euro zone members are less than 0.5% of revenues and the most significant cost impacted is newsprint, the price of which has already been agreed for the second half of the year. The Group has European banks participating in the bank facility which if withdrawn would reduce the funds available but would not impact the conclusion of the going concern review.

The Group continues to fully cooperate with the Leveson inquiry and it is too early to determine what, if any, impact there will be on our businesses from the review. We note the arrests of a current and a former journalist employed by the Group as a result of the Metropolitan Police Operation Elveden. We take any accusation against employees very seriously and we are co-operating with the police on this matter. We are also providing legal support for both journalists.

Going concern

In determining whether the Group's half-yearly financial report can be prepared on a going concern basis, the directors considered factors likely to affect future development, performance and financial position, including cash flows, liquidity position and borrowing facilities and the risks and uncertainties relating to business activities. These are set out on page 35 in the Group's Annual Report and Accounts for the 52 weeks ended 1 January 2012.

Having considered 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 financing facilities for the foreseeable future. The Group secured new financing during the period which is committed to August 2015 and does not expect to have to refinance or renegotiate its facilities during the next 12 months.

Interim Management Report continued

Other items continued

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 condensed consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union; and

b) the half-yearly financial report includes a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) and 4.2.8R (disclosure of related parties transactions and changes therein).

By order of the Board of directors

David Grigson Vijay Vaghela

Chairman Group Finance Director

Forward looking statements

Statements contained in this Interim Management 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 Interim Management Report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. To the extent that this Interim Management 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.

Condensed consolidated income statement

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

* Adjusted items relate to the exclusion of non-recurring items, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance credit or charge and the impact of tax legislation changes. A reconciliation between the adjusted results and the statutory results including an explanation for the restatement of prior year adjusted profit before tax and adjusted earnings per share is provided in note 14.

Condensed consolidated statement of comprehensive income

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

Condensed consolidated statement of changes in equity

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

Condensed consolidated balance sheet

at 1 July 2012 (3 July 2011 and 1 January 2012)

Condensed consolidated cash flow statement

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

1. General information

The financial information in respect of the 52 weeks ended 1 January 2012 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 condensed consolidated financial statements for the 26 weeks ended 1 July 2012 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 the period 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 consolidated financial statements and their report is set out on page 24.

The condensed consolidated financial statements were approved by the directors on 2 August 2012. This announcement will be made 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

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 financing facilities for the foreseeable future. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial report.

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 amended standards during the current financial period which have had no material impact on the Group:

·; IFRS 1 (Amended) 'First-time Adoption of International Financial Reporting Standards' - effective for periods beginning on or after 1 July 2011

·; IFRS 7 (Amended) 'Financial Instruments' - effective for periods starting on or after 1 July 2011

·; IAS 12 (Amended) 'Deferred Tax' - effective for periods beginning on or after 1 January 2012

At the date of approval of these condensed consolidated financial statements the following new, amended and revised standards and interpretations, which have not been applied and when adopted, except for IAS19 (Amended) 'Employment Benefits', will have no material impact on the Group, were in issue but not yet effective:

·; IFRS 1 (Amended) 'First-time Adoption of International Financial Reporting Standards' - effective for periods beginning on or after 1 January 2013

·; IFRS 7 (Amended) 'Financial Instruments' - effective for periods beginning on or after 1 January 2013

·; IFRS 9 (Issued) 'Financial Instruments' - effective for periods starting on or after 1 January 2013

·; IFRS 10 (Issued) 'Consolidated Financial Statements' - effective for periods beginning on or after 1 January 2013

·; IFRS 11 (Issued) 'Joint Arrangements' - effective for periods beginning on or after 1 January 2013

·; IFRS 12 (Issued) 'Disclosure of Interests in Other Entities' - effective for periods beginning on or after 1 January 2013

·; IFRS 13 (Issued) 'Fair Value Measurement' - effective for periods beginning on or after 1 January 2013

·; IAS 1 (Amended) 'Presentation of Financial Statements' - effective for periods beginning on or after 1 July 2012

·; IAS 19 (Amended) 'Employment Benefits' - effective for periods beginning on or after 1 January 2013

·; IAS 27 (Revised) 'Separate Financial Statements' - effective for periods beginning on or after 1 January 2013

·; IAS 28 (Revised) 'Investments in Associates' - effective for periods beginning on or after 1 January 2013

·; IAS 32 (Amended) 'Financial Instruments' - effective for periods beginning on or after 1 January 2014

·; IFRIC 20 (Issued) 'Stripping Costs in the Production Phase of a Surface Mine' - effective for periods beginning on or after 1 January 2013

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

2. Accounting policies (continued)

Changes in accounting policy (continued)

IAS19 (Amended) 'Employment Benefits' changes the calculation of the finance charge through the income statement which could be materially different from the previous calculation. It is too early to quantify the impact of this non cash change.

In addition, improvements to IFRS (2011) are effective for periods starting on or after 1 January 2013, and will have no material impact on the Group.

Changes in classification

During the second half of last year our regional activity in Scotland, which was previously included in the Regionals segment, was transferred to the Nationals segment following a change in management structure. The comparative half year segment results have been restated to reflect this change with revenue of £14.9 million and segment result of £3.4 million reported in Regionals in 2011, now reported in Nationals.

In 2011, the Group revised the classification of items of expenditure between cost of sales, distribution costs and administrative expenses to better reflect the nature of the costs. In the current period, £4.5 million of costs have been included in distribution costs which would have previously been reported in cost of sales and administrative expenses.

Critical judgements in applying the Group's accounting policies

In applying the entity's accounting policies, management has made certain judgements in respect of the identification of intangible assets based on pre-acquisition forecasts and market analysis. The initial valuations of acquired intangible assets are reviewed for impairment at each reporting date or more frequently if necessary. These judgements have the most significant effect on the amounts recognised in the Group's annual consolidated financial statements.

Key sources of estimation uncertainty

The key assumptions concerning the future and the other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year have been consistently applied to all the periods presented and are set out in the Group's annual consolidated financial statements.

3. Revenue

4. 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 to allocate resources to the segments and to assess their performance. The Board and chief operating decision maker are not provided with an amount for total assets by segment.

The Group operates in three operating segments: Nationals, Regionals and Central. During the prior year our Scottish regionals business, which was previously included in the Regionals segment, was transferred to the Nationals segment following a change in management structure. The comparative segment results have been restated to reflect this change as explained in note 2.

The Nationals division publishes two daily and three Sunday national newspapers, regional newspapers in Scotland and related online brands and activities primarily in the UK. The Regionals division publishes a portfolio of newspaper and online brands in England and Wales. Central includes costs not allocated to the operational divisions and the share of results of associates. The revenues and costs of each segment are clearly identifiable and allocated according to where they arise. The Group is not subject to significant seasonality during the year.

The accounting policies used in the preparation of each segment's revenue and results are the same as the Group's accounting policies described in note 2.

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

4. Operating segments (continued)

Segment revenue and results

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

4. Operating segments (continued)

Segment revenue and results (continued)

5. Non-recurring items

(a) Restructuring charges of £5.5 million (26 weeks to 3 July 2011: £6.6 million and 52 weeks to 1 January 2012: £10.7 million) were incurred in delivery of cost reduction measures and implementation of a new operating model for the Group.

(b) During 2011, a receipt of £1.4 million was received relating to an impairment of receivables in 2009.

6. Investment revenues

7. Finance costs

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

8. Tax

The standard rate of corporation tax reduced from 26% to 24% on 1 April 2012. The blended rate for the accounting year is 24.5% being a mix of 26% up to 31 March 2012 and 24% from 1 April 2012 (2011: 26.5% being a mix of 28% up to 31 March 2011 and 26% from 1 April 2011). The current tax liabilities amounted to £17.3 million (3 July 2011: £9.9 million and 1 January 2012: £17.4 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 substantively enacted by parliament. The change in rate to 25% was substantively enacted and accounted for in 2011. The change in rate to 24% has been accounted for in the period resulting in a £11.6 million credit in the income statement and a £2.3 million debit taken directly to equity.

A further change in the standard rate of corporation tax from 24% to 23% from 1 April 2013 was substantively enacted after the period end on 3 July 2012. The estimated impact in the second half of 2012 is a £11.4 million credit in the income statement and a £2.1 million debit taken directly to equity.

The tax on actuarial losses on defined benefit pension schemes taken to the statement of comprehensive income is a debit of £4.1 million (26 weeks to 3 July 2011: £7.0 million debit and 52 weeks to 1 January 2012: £26.2 million credit) comprising a current tax credit of £0.8 million (26 weeks to 3 July 2011: £8.6 million credit and 52 weeks to 1 January 2012: £8.2 million credit) and a deferred tax debit of £4.9 million (26 weeks to 3 July 2011: £15.6 million debit and 52 weeks to 1 January 2012: £18.0 million credit).

9. Earnings per share

*Adjusted items relate to the exclusion of non-recurring items, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance credit or charge and the impact of tax legislation changes. A reconciliation between the adjusted result and the statutory result including an explanation for the restatement of prior year adjusted profit before tax and adjusted earnings per share is provided in note 14.

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

9. Earnings per share (continued)

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 number of potentially dilutive ordinary shares not currently dilutive was 9,042,546 (26 weeks to 3 July 2011: 10,375,472 and 52 weeks to 1 January 2012: 10,889,717).

*Adjusted items relate to the exclusion of non-recurring items, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance credit or charge and the impact of tax legislation changes. A reconciliation between the adjusted result and the statutory result including an explanation for the restatement of prior year adjusted profit before tax and adjusted earnings per share is provided in note 14.

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

10. Notes to the cash flow statement

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

11. Net debt

The statutory net debt for the Group is as follows:

* The impact on the loan notes of translation into Sterling at the settlement date or at the reporting date exchange rate and the impact on the derivative financial instruments of being stated at fair value at the settlement date or at the reporting date are included in the consolidated income statement within finance costs as set out in note 7.

The US private placement loan notes totalling US$602 million and £32 million were issued in 2001 (US$350 million and £26 million) and 2002 (US$252 million and £10 million). On the issue date the capital repayments and fixed rate interest on the US$ denominated loan notes were swapped into floating rate Sterling through the use of cross-currency interest rate swaps. As hedge accounting under IAS 39 has not been applied, the loan notes and cross-currency interest rate swaps are shown separately in accordance with IAS 39. The loan notes are disclosed at amortised cost and translated into Sterling at the reporting date exchange rate and the cross-currency interest rate swaps are disclosed at fair value at the reporting date. These values do not represent the amounts required to repay the loan notes or cancel the related cross-currency interest rate swaps.

At the reporting date US$80 million and £22 million of the loan notes issued in 2001 were outstanding following repayments made in 2008 and 2011. At the reporting date US$150 million and £10 million of the loan notes issued in 2002 were outstanding following repayments made in 2012.

Bank overdrafts represent bank accounts overdrawn at the reporting date and were repaid immediately after the period end. Cash and cash equivalents represent bank accounts in credit and cash in hand at the reporting date.

The contracted net debt for the Group, assuming that the private placement loan notes and the cross-currency interest rate swaps are not terminated prior to maturity, is as follows:

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

11. Net debt (continued)

The statutory net debt reconciles to the contracted net debt as follows:

12. Retirement benefit schemes

Defined benefit pension schemes

The Group operates 10 defined benefit pension schemes for certain employees which were closed to new entrants with effect from 1 January 2003 and closed to future accrual from 31 March 2010. All employees are entitled to join the Trinity Mirror Pension Plan, a defined contribution pension scheme.

Formal valuations of the defined benefit pension schemes are carried out regularly. The actuarial methods and assumptions used to calculate each scheme's assets and liabilities vary according to the actuarial and funding policies adopted by their respective trustees. All of the schemes are being funded in accordance with the recommendations of the respective actuaries. The most significant of the schemes are the Mirror Group Pension Scheme (the 'Old Scheme'), the MGN Past Service Pension Scheme (the 'Past Service Scheme'), the MGN Pension Scheme (the 'MGN Scheme'), the Trinity Retirement Benefit Scheme (the 'Trinity Scheme') and the Midland Independent Newspapers Pension Scheme (the 'MIN Scheme') which together represent the majority of the aggregate value of the scheme's assets and liabilities.

The full actuarial valuations of the Old Scheme, the Past Service Scheme and the MGN Scheme were completed in March 2012, the Trinity Scheme was completed in June 2010 and the MIN Scheme was completed in May 2011. The next full actuarial valuation dates for these schemes are: the Old Scheme, the Past Service Scheme and the MGN Scheme on 31 December 2013, the Trinity Scheme on 30 June 2012 and the MIN Scheme on 31 March 2013.

Following a period of consultation with the Trustees of the Past Service Scheme, the MGN Scheme, the Trinity Scheme, the MIN Scheme and the Trinity Mirror Retirement Plan (the 'TMRP Plan'), in conjunction with the refinancing completed on 14 March 2012,these schemes agreed to extend their recovery plans with reduced deficit funding payments for 2012, 2013 and 2014. Normalised levels of contributions will recommence from 2015. As part of this consultation process the formal valuations for the Past Service Scheme and the MGN Scheme were completed on 14 March 2012. The Trinity Scheme, the MIN Scheme and the TMRP Plan revised their previous schedules of contributions and recovery plans on 14 March 2012 (13 March 2012 for the TMRP Plan). These revised documents take into consideration their respective Scheme Actuary's latest estimate of the schemes' shortfall of assets when measured against their technical provisions allowing for changes in market conditions.

For the purposes of the Group's condensed consolidated financial statements, valuations have been performed in accordance with the requirements of IAS 19 with scheme liabilities calculated using a consistent projected unit valuation method and compared to the value of the scheme assets at 29 June 2012, the last day prior to the period end for which such values were available.

The assets and liabilities of the most significant schemes included above as at the reporting date are:

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

12. Retirement benefit schemes (continued)

Defined benefit pension schemes (continued)

Based on actuarial advice, the assumptions used in calculating the scheme liabilities and the actuarial value of those liabilities and the expected return on scheme assets are:

The impact on the defined benefit obligation at the reporting date to variations in key assumptions are: a 0.25% decrease in the discount rate would increase the obligation by £61 million, a 0.25% increase in the inflation assumptions would increase the obligation by £36 million and the effect of a 1 year increase in assumed life expectancy would increase the obligation by £50 million.

Post-retirement mortality tables and future life expectancies at age 65 are:

The change in future life expectancies from the year end reflects the mortality assumptions in the latest completed scheme actuarial valuation being appliedin the IAS19 valuation. The net impact was an increase in liabilities by £7 million.

The amount included in the condensed consolidated balance sheet, condensed consolidated income statement and condensed consolidated statement of comprehensive income arising from the Group's obligations in respect of its defined benefit pension schemes is as follows:

Notes to the condensed consolidated financial statements

for the 26 weeks to 1 July 2012 (26 weeks to 3 July 2011 and 52 weeks to 1 January 2012)

12. Retirement benefit schemes (continued)

Defined benefit pension schemes (continued)