Reach Plc Regulatory News (RCH)

Trinity Mirror plc

28 July 2014

Half-Yearly Financial Report

for the 26 weeks ended 29 June 2014

Key Highlights

Performance for the first half has been ahead of our expectations, with improved revenue trends and continued momentum in growing our digital audience. This, combined with the benefit of a fall in newsprint prices in the second half, provides the Board with confidence that performance for the full year will be marginally ahead of expectations.

· Continued improvement in revenue trends

Revenue fell by 2.3% year on year with a gradual improvement in trends as we progressed through the first half with May and June declining by only 1.4% year on year.

· Accelerating growth in digital audience and revenue

Average monthly unique users(1) grew by 91% year on year to 61.3 million and average monthly page views(1) grew by 132% year on year to 440.2 million across our publishing operations with publishing digital revenue growing by almost 50%.

· Profit before tax(2) of £48.2 million, down 2.2%, with earnings per share(2) up 0.6% to 15.5 pence

Profit before tax fell by 2.2% as we increased investment and absorbed an increase in newsprint prices. Earnings per share grew marginally as we benefited from the fall in the rate of corporation tax.

· Strong cash flows enabling net debt(3) to fall to £56.0 million

Net debt has fallen to £56.0 million with the £44.2 million debt maturing in June 2014 paid from operating cash flow.

· Exceptional gain of £27.5 million from the disposal of MeteoGroup by PA Group

The disposal of MeteoGroup was completed by PA Group during March 2014 and we received a dividend of £12.9 million in July 2014 with a further dividend anticipated in 2015.

· Strategy remains on track

Good progress continues on delivery of our strategic initiatives with reduced rates of decline in print revenues, continued tight management of the cost base with structural cost savings of at least £10 million for the year and increased investment in digital which is driving strong growth in digital audience and revenues.

· Increased financial flexibility provides confidence to reinstate dividends at the year end

We have today announced the Board's intention to recommend a final dividend for 2014 of 3 pence per share which would be payable in June 2015. At this stage the Board expects paying annual dividends of some 5 pence per share from 2015.

Results

(1) Average monthly unique users and page views for the Publishing division across web, mobile and apps for January to June 2014 versus January to June 2013 (Omniture).

(2) Adjusted items relate to the exclusion of non-recurring items (share of non-recurring credit from associate undertakings of £27.6 million and provision for historical legal issues of £4.0 million), restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge, the pension administrative expenses and the impact of tax legislation changes. Set out in note 17 is the reconciliation between the statutory results and the adjusted results.

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

Commenting on the interim results for 2014, Simon Fox, Chief Executive, Trinity Mirror plc, said:

"The Group continues to make good progress with the delivery of our strategic initiatives as clearly demonstrated in the performance for the first half of 2014. This momentum gives the Board confidence that our performance for the year will be marginally ahead of expectations. The strengthened financial position of the business together with continued strong cash flows also support the Board's intention to reinstate dividends at the end of this year. This will be the first dividend paid by the Group since 2008."

Enquiries

Trinity Mirror

Simon Fox, Chief Executive 020 7293 3553

Vijay Vaghela, Group Finance Director 020 7293 3553

Brunswick

Mike Smith, Partner 020 7404 5959

Nick Cosgrove, Partner 020 7404 5959

Investor presentation

A presentation for analysts will be held at 9.30am on Monday 28 July 2014. The presentation will be live on our website: www.trinitymirror.com at 9.30am and a playback will be available from 2.00pm.

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

Throughout this report, performance is stated on an adjusted basis and the results of fish4, our national digital recruitment site, which were previously reported in the Specialist Digital division, are now reported in the Publishing division following an internal restructure with fish4 now fully integrated into the Publishing division. The reconciliation between statutory results and adjusted results is shown in note 17 and further details of the reclassification, which has no impact on Group revenue or operating profit, is shown in note 16.

Operational Performance

The performance of the Group for the first half was ahead of our expectations with good progress being made on our strategic initiatives which has delivered improved revenue trends and strong growth in digital audience. Revenue fell by 2.3% compared to a decline of 6.0% for 2013. Encouragingly these trends improved as we progressed through the first half with a revenue decline of 3.3% in January and February, 2.4% in March and April and 1.4% in May and June. For the Publishing division, revenue fell by £7.2 million with Print revenue falling by a much reduced 4.3% to £266.7 million with strong growth of 47.5% in digital revenue to £14.9 million.

The benefit of structural cost savings of £6 million and cost mitigation actions has contributed to operating costs falling by £5.7 million. This was after increased investment in digital of £3 million and inflationary cost increases, in particular newsprint prices which increased in the first half by over 10% year on year.

Our share of results of associates fell by £0.3 million to £3.1 million with underlying growth in PA Group ('the PA') and Local World offset by the disposal of MeteoGroup by the PA in March 2014.

The fall in operating costs limited the reduction in operating profit to £2.4 million or 4.6%. Earnings per share, which benefited from lower interest costs due to reduced leverage and from the fall in the rate of corporation tax, grew year on year by 0.6% to 15.5 pence.

Non-recurring items during the first half were a credit of £23.6 million including a £27.5 million share of the non-recurring gain from the PA's disposal of MeteoGroup and a provision of £4.0 million for dealing with and resolving historical legal issues. A dividend of £12.9 million from the PA was received on 23 July 2014 with a further dividend anticipated in 2015.

Financial Flexibility

Strong cash flow enabled the repayment of £44.2 million of maturing loan notes in June without the need to draw on the Group's bank facility with net debt falling to £56.0 million. On 25 July 2014, we negotiated a new £60 million bank facility which is committed until July 2018.

The Group has aligned the triennial valuations of the principal defined benefit pension schemes to 31 December 2013. These valuations are expected to be finalised in the second half of the year with annual deficit funding payments increasing from £33.5 million to some £36 million per annum from 2015 for the foreseeable future.

The strengthened balance sheet and strong cash flows of the business provide increased financial flexibility for both investment opportunities and the return of capital to shareholders alongside appropriately funding our pension schemes.

Dividends

We have today announced the Board's intention to recommend a final dividend for 2014 of 3 pence per share which would be payable in June 2015. The Board expects to adopt a progressive dividend policy aligned to the free cash generation of the Group and the investment required to deliver sustainable growth in revenues and profits over the medium term. At this stage the Board expects paying annual dividends of some 5 pence per share from 2015. The final dividend for 2014 would be the first dividend payment since dividends were suspended in 2008.

Historical Legal Issues

The Group continues to co-operate with the police in respect of Operation Elvedon (the investigation relating to alleged inappropriate payments to public officials) and Operation Golding (the investigation into alleged phone hacking).

The Group is aware of a number of civil claims from individuals in relation to phone hacking. In the first half we have provided £4.0 million to cover the cost of dealing with and resolving claims. 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.

Outlook

Continued momentum with the strategy coupled with the benefit of a fall in newsprint prices in the second half provides the Board with confidence that performance for the year will be marginally ahead of expectations.

Management Report continued

Strategic Update

We continue to make progress towards delivering our vision "of being a dynamic and growing media business that is an essential part of our customers' daily lives". Our clear goal to deliver sustainable growth in revenues and profits will be delivered through four key areas of strategic focus:

· Protecting and revitalising our core brands in print;

· Growing our existing brands onto digital delivery channels;

· Continuing our relentless focus on efficiency and cost management; and

· Launching, developing, investing in or acquiring new businesses built around distinctive content or audience.

Key highlights of progress on each area of strategic focus in the first half of the year were:

Protecting and revitalising our core brands in print

· During the first half we launched the second phase of our #Madeuthink brand campaign, positioning the Daily Mirror as the "intelligent tabloid" to differentiate the Daily Mirror from other titles in the tabloid sector. The results have been encouraging with the Daily Mirror continuing to outperform the market in terms of year on year circulation trends.

· NASA, the National Advertising Sales Agency, launched a new cross media sales innovation unit called "NASA Invention". The new 25 strong unit combines the skills of our sales team with that of business planners, researchers, designers and writers to create and sell innovative cross media advertising solutions for growing numbers of new and existing clients. In June, James Wildman joined as Chief Revenue Officer of NASA. James joins us from his position as Yahoo MD for UK and Ireland and brings with him a wealth of experience in sales and marketing in a global digital business.

· The Daily Mirror and Sunday Mirror have increased print advertising market share with one of the major contributory factors being the success of new packages such as "Big City" and "Sunday Best" which combine the full scale and reach of the Trinity Mirror portfolio by combining the sales of our major regional newspapers, with our national brands to provide media planners and buyers with a brand new mass market audience proposition.

· We have re-launched and rebranded the Sunday People magazine to become "Love Sunday" with positive feedback from both readers and advertisers. The Sunday People has also led the market with awards with the title winning Scoop of the Year for the Nigella Lawson and Charles Saatchi story. In Scotland, the Sunday Mail won Newspaper of the Year in the Scottish Press Awards and retains its market leading status as Scotland's best selling news brand.

· All of our major regional daily newspapers are now distributed through the wholesale infrastructure with resulting cost and logistical benefits.

· As the best watched TV awards show on UK terrestrial TV, the annual "Pride of Britain Awards" continues to go from strength to strength. In June, we launched the "Pride of Ireland Awards" and are currently planning the "Pride of Birmingham Awards" later in the year. In Scotland, the Daily Record held its eleventh "Our Heroes" awards in May.

· In our regional markets we continue to adapt and refresh our newspapers to ensure they are increasingly relevant and appealing to our readers and advertisers. Our group wide technology platform gives us the capability to add new products on multiple platforms with a minimal increase in costs or resource. One such example is the recent successful launch of the Sunday Echo in Liverpool which has allowed us to increase our audience on a Sunday both in print and online through the provision of more comprehensive football content.

Growing our existing brands onto digital delivery channels

· The growth in total unique users and page views has accelerated during the first half, in particular for Mirror.co.uk. Our average monthly unique users and average monthly page views for the Publishing division across web, mobile and apps for the first half have grown year on year by 91% to 61.3 million and by 132% to 440.2 million respectively. In June, the Publishing division delivered 65.7 million unique users and 442.4 million page views. This has driven strong growth in digital display advertising which accelerated during the first half with growth of in excess of 134% in June. We continue to refresh our websites to increase user engagement whilst ensuring we can drive revenues through a range of advertising formats.

Management Report continued

Strategic Update continued

Growing our existing brands onto digital delivery channels continued

· We have enhanced the digital classified platforms across our regional websites and have now fully rolled out our new platforms for What's On, Buysell and BMDs. We are currently in the process of changing the digital recruitment platform for our publishing business and this will be completed in the second half. Changes in our commercial platforms have contributed to an improvement in digital classified revenue trends as we progressed through the first half.

· We are investing to increase the quality and volume of video across our websites. This is a key factor in materially increasing video views and the commercial opportunities are significant as video demands the highest revenue per thousand views on our websites.

· We continue to drive new commercial partnerships to diversify and drive digital revenues. We have entered into a new partnership for the provision of bingo and other online games.

· We continue to gain good traction with the e-edition for the Daily Mirror and Sunday Mirror. Our free Monday to Friday editions of the Daily Mirror have in excess of 55,000 Publication Active Views during the week and the Daily Mirror and Sunday Mirror are available through subscription over the weekend with around 10,000 paid for subscribers.

· A new editorial structure, Newsroom 3.1, has been introduced to support a digital first publishing process across our newsrooms. Content will be created to hit key digital audience spikes across the day, ensuring that users find refreshed content every time they access one of our digital platforms. The content created by the digital operation will be edited and packaged for our newspapers. We have increased investment in new digital roles including social media editors, planning analysts and advance content writers, to drive traffic and increase audience engagement. Newsroom 3.1 will be rolled out across our regional operations by the end of the year and will provide content for our rapidly growing digital audience, while producing strong newspapers by editing the best of everything into an entertaining format every day.

· In June, we appointed Pete Picton as Editorial Director for Mirror.co.uk. Pete is an experienced digital journalist and was the former deputy editor of Mail Online. Pete's appointment will help further accelerate our digital audience growth.

Continuing our relentless focus on efficiency and cost management

· Structural cost savings of £6 million were delivered in the first half and we expect to deliver structural cost savings of at least £10 million for the year. This coupled with ongoing tight management of costs enabled operating costs to fall by £5.7 million which is after increased investment in digital of £3 million and after absorbing inflationary cost increases, in particular newsprint prices which increased in the first half by over 10% year on year.

· Savings in the first half have been driven through the outsourcing of IT support and services functions, the restructure of editorial and advertising functions and a range of other smaller initiatives across the Group.

Launching, developing, investing in or acquiring new businesses built around distinctive content or audience

· Our investment in Local World continues to deliver strong returns with our share of post tax profit for the first half up £0.1 million to £2.8 million.

· Our investment in UsVsTh3m continues to deliver strong audience growth with average monthly unique users for the first half of 3.9 million. Monthly unique users in April reached 9.4 million.

· Our product development team continues to launch new and innovative products with the launch of Pinpoint, a geo-targeting application for advertisers, a Betting app in partnership with Paddy Power integrated with the Mirror Football app, and GoalTime an all new live football betting pool game.

· The new technology platform that we have rolled out across the business provides significant flexibility for the launch, development or integration of acquisitions built around distinctive content or audience.

Management Report continued

Group Review

\* The 2013 statutory split between costs and associates has been restated. Following a change in management structure, the Group has reclassified the revenue and results of fish4 from the Specialist Digital operating segment to the Publishing operating segment. The revision to the operating segments has had no impact on the revenue or operating profit of the Group. The 2013 comparatives have been restated as a result of this change. Note 16 sets out the impact of this change on the previously reported results.

The results have been prepared for the 26 weeks ended 29 June 2014 (2014) and the comparative period has been prepared for the 26 weeks ended 30 June 2013 (2013). 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 17 is the reconciliation between the statutory results and the adjusted results.

Revenue fell by £7.8 million or 2.3% to £324.2 million. Excluding Trinity Mirror Digital Property which was sold at the end of August 2013, revenue fell by £6.3 million or 1.9%. Further details on the revenue trends for each division are shown in the Divisional Review.

Statutory costs increased by £3.2 million or 1.1% to £293.5 million while adjusted costs fell by £5.7 million or 2.0% to £277.0 million:

Adjusted operating costs fell by £5.7 million reflecting the benefit of structural cost savings of £6 million and ongoing cost mitigation actions which have more than offset increased investment in digital of £3 million and inflationary price increases in particular a significant increase in newsprint prices. Structural cost savings in the first half have been delivered through the outsourcing of IT support and services functions, the restructure of editorial and advertising functions, the closure of the Reading print plant and a number of smaller offices and continued restructuring of all operating functions.

Statutory costs also include non-recurring items, the amortisation of other intangible assets, the pension administrative expenses and the restructuring charges in respect of cost reduction measures which are excluded from the adjusted results.

Management Report continued

Group Review continued

The Group has a 21.5% investment in PA Group and a 20.0% investment in Local World, accounted for as associated undertakings.

The statutory share of the post tax profits from associates increased by £27.5 million to £29.3 million. The non-recurring items comprise our £27.5 million share of the gain on the disposal by the PA of its weather forecasting business, MeteoGroup, our £0.4 million share of the profit of MeteoGroup recorded by the PA up to the date of completion less our £0.3 million share of restructuring costs incurred by the PA and Local World. Adjusted share of the post tax profit from associates fell by £0.3 million to £3.1 million. This includes a reduction in the contribution of the PA of £0.4 million to £0.3 million following its disposal of MeteoGroup which has been partially offset by an increase in our share of post tax profit of Local World of £0.1 million to £2.8 million. The investment in associates has increased by £29.3 million since the year end.

The increase in statutory operating profit of £16.5 million to £60.0 million is driven by our share of the exceptional gain by the PA on their disposal of MeteoGroup. Adjusted operating profit fell by £2.4 million or 4.6% to £50.3 million with operating margin falling by 0.4 percentage points from 15.9% to 15.5% as we increased investment and absorbed a significant increase in newsprint prices.

Statutory financing costs which also include the pension finance charge, the change in derivative financial instruments and the foreign exchange changes on retranslation of foreign currency borrowings fell by £3.7 million to £9.5 million. Adjusted financing costs fell by £1.3 million to £2.1 million reflecting the benefit of the material fall in long term debt and the continued benefit of the low interest rate environment.

The statutory tax charge of £4.9 million (2013: £6.5 million) comprises a current tax charge of £7.8 million (2013: £8.6 million) and a deferred tax credit of £2.9 million (2013: £2.1 million). The effective tax rate is lower than the standard rate of corporation tax as the share of results of associates is post tax. The adjusted tax charge of £9.8 million (2013: £11.2 million) represents 20.3% (2013: 22.7%) of adjusted profit before tax and reflects the benefit of the reduction in the rate of corporation tax from 23.0% to 21.0% on 1 April 2014.

Statutory earnings per share increased by 8.8 pence or 91.7% to 18.4 pence and adjusted earnings per share increased by 0.1 pence or 0.6% to 15.5 pence. The fall in the weighted average number of shares year on year reflects the impact of shares acquired by the Trustees of the Trinity Mirror Employee Benefit Trust over the last 18 months, being 1,391,550 shares in June 2014 and 2,600,000 shares in June 2013, more than offsetting the 2,271,355 shares options exercised during the first half and the 1,652,091 shares options exercised during the prior year.

Management Report continued

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 specialist classified 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 revenue and adjusted operating profit by operating segment is presented below:

* Following a change in management structure, the Group has reclassified the revenue and results of fish4 from the Specialist Digital operating segment to the Publishing operating segment. The revision to the operating segments has had no impact on the revenue or operating profit of the Group. The 2013 comparatives have been restated as a result of this change. Note 16 sets out the impact of this change on the previously reported results.

Publishing

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

* Includes fish4 with the comparatives restated. Note 16 sets out the impact of this change on the previously reported results.

Revenue fell by 2.5% or £7.2 million to £281.6 million with print revenue declining by 4.3% and digital revenue growing by 47.5%.

The decline in print revenue of 4.3% compared to a decline of 6.7% in the prior year.

Circulation revenue fell marginally by 1.2% reflecting the benefit of cover price increases which are helping offset the impact of falling volumes.

The Daily Mirror continues to outperform the market with a volume decline of 7.4% compared to a 7.8% decline in the UK national daily tabloid market. The Sunday Mirror and Sunday People declined by 10.2% and 11.2% respectively in a UK national Sunday tabloid market that declined by 9.7%. The Sunday titles performed below market trends in part due to both titles having increased cover prices in the second half of last year. The Daily Record and the Sunday Mail both marginally underperformed the Scottish circulation market trends. The Daily Record was down 9.7% against an overall Scottish daily tabloid market decline of 9.4% and the Sunday Mail was down 10.9% against an overall Scottish Sunday tabloid market decline of 10.7%.

Management Report continued

Divisional Review continued

Publishing continued

The market for our regional titles remains difficult with declines of 13.4% for paid for dailies, 14.3% for paid for weeklies and 19.3% for paid for Sundays. This excludes the newly launched Sunday Echo in Liverpool. These declines are broadly in line with the trends forecast for the market.

Print advertising fell by 8.8% with display lower by 5.8%, classified lower by 13.2% and other categories down by 9.4%. Whilst the print advertising market remains challenging and volatile we are encouraged by the improved trends in display advertising and recruitment where the rate of decline was 5.8% and 3.4% respectively.

The Daily Mirror and the Sunday Mirror have grown print advertising volume market share with the Daily Mirror growing share from 18.4% to 18.6% and the Sunday Mirror growing share from 16.2% to 17.5%. The Sunday People share declined from 11.4% to 11.0%. The Daily Record grew share from 14.6% to 15.0% and the Sunday Mail grew share from 28.0% to 28.1% against the main Scottish competitor set.

For our regional newspapers, we believe our print advertising performance is broadly in line with market trends although we have materially improved classified recruitment trends with print recruitment advertising declining by only 3.4% compared to a decline of 24.9% during last year.

Print other revenue grew by 1.3% driven by increased revenues from events, syndication and by the new contracts secured by our sports contract publishing business including the match day programmes contract for Manchester United partly offset by continued pressure on leaflets.

Digital revenue increased by 47.5% year on year driven by strong growth in our publishing digital audience with average monthly unique users increasing 91% to 61.3 million year on year with average monthly page views increasing 132% to 440.2 million year on year. In June, monthly unique users were 65.7 million and monthly page views were 442.4 million.

Digital advertising revenue increased by 46.7% year on year. Digital display revenue has seen accelerated growth as we progressed through the period with growth of 107.3%. Digital classified revenue increased by 1.3% with recruitment recovering following the internal changes made in prior years with growth of 18.8%. Other classified categories of motors and property remain challenging with dominant competitors. The remaining classified categories are also challenging and we are improving our offering in these areas such as through new platforms for What's On, Buysell and BMDs.

Digital other revenue increased by 54.5% benefiting from the growth in audience and new commercial partnerships.

Costs fell by £3.9 million or 1.7% to £227.9 million. This includes structural cost savings and the continued tight management of the cost base to help mitigate the impact of a challenging print market. The reduction is after the impact of an increase in newsprint prices and increased investment in digital resources and product development.

Although revenues fell by £7.2 million, operating profit fell by only £3.3 million or 5.8% to £53.7 million. As a result of increased investment, operating margin fell by 0.6 percentage points from 19.7% to 19.1%.

Printing

The revenue and costs of the Printing division is as follows:

Revenues increased by £1.1 million or 3.4% to £33.8 million. Revenues from contract printing grew by £0.2 million or 1.0% to £19.5 million. Newsprint supply revenues from newsprint supplied to contract print customers increased due to the higher newsprint price which more than offset volume declines. Other revenues were flat year on year.

Management Report continued

Divisional Review continued

Printing continued

External costs fell by £0.6 million or 0.6% to £98.8 million due to the costs associated with increases in contract printing revenues and inflationary cost increases including the newsprint price increase more than offset by cost reduction initiatives.

The costs recharged to the Publishing division were £65.0 million compared to £66.7 million in the prior year. This fall in costs reflects the impact of an increase in newsprint prices and other inflationary cost increases more than offset by cost savings.

Specialist Digital

The Specialist Digital division includes Trinity Mirror Digital Recruitment, our digital specialist classified recruitment vertical and Rippleffect and Communicator, our digital marketing services businesses. Trinity Mirror Digital Property, a digital specialist classified property vertical was sold effective the end of August 2013.

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

* Excludes fish4 with the comparatives restated. Note 16 sets out the impact of this change on the previously reported results.

Excluding Trinity Mirror Digital Property revenue fell marginally by £0.3 million to £7.2 million and operating profit was £0.8 million compared to £nil in 2013.

Central

The Central division includes revenue and costs not allocated to the operational divisions and the share of results of associates. The revenue and operating loss of the Central division is as follows:

The result for the first half was a loss of £4.2 million compared to a loss of £4.4 million in the prior year.

Revenue primarily relates to rental income from surplus office space at the Group's main office at Canary Wharf which increased as more vacant space was leased to third parties.

Costs fell by £0.4 million from £9.3 million to £8.9 million reflecting cost savings more than offsetting investment in new business development and a number of initiatives.

The fall in the share of results of associates is due to the PA reducing by £0.4 million to £0.3 million due to the impact of its recent disposal partially offset by Local World increasing by £0.1 million to £2.8 million.

Management Report continued

Other Items

Pensions

The Group operates a defined contribution pension scheme 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 has aligned the triennial valuations of the principal defined benefit pension schemes to 31 December 2013. These valuations are expected to be finalised in the second half of the year with annual deficit funding payments increasing from £33.5 million to some £36 million per annum from 2015 for the foreseeable future.

The accounting pension deficit increased during the first half by £19.9 million from £252.2 million (£201.8 million net of deferred tax) to £272.1 million (£217.7 million net of deferred tax) reflecting the impact of a decrease in assets of £30.7 million more than offsetting a decrease in liabilities of £10.8 million. The decrease in assets was driven by pension payments and a reduction for buy-outs being greater than the positive asset returns. The decrease in liabilities is due to pension payments and a reduction for buy-outs being greater than the higher liabilities from a further fall in the real discount rates of 0.05% from 1.05% to 1.00%. There were no changes in demographic assumptions. The change in the accounting pension deficit does not impact current funding commitments.

Net debt

Contracted net debt, assuming that the private placement loan notes and the cross-currency interest rate swaps are not terminated prior to maturity, fell by £41.0 million from £97.0 million to £56.0 million.

Net debt on a contracted basis is different to the statutory net debt which includes the US$ denominated private placement loan notes at the period end exchange rate and the related cross-currency interest rate swaps at fair value.

On a statutory basis, net debt fell by £39.1 million from £88.2 million to £49.1 million. The fair value of the Group's cross-currency interest rate swaps was a liability of £1.5 million and the Sterling amount of the private placement loan notes was £59.9 million.

The Group repaid the maturing loan notes of £44.2 million in June 2014 from cash balances without the need to draw on the Group's bank facility. The remaining repayment on the private placement loan notes is £68.3 million in June 2017.

The Group had no drawings during the half year on its £101.8 million bank facility which was committed until August 2015. On 25 July 2014, the £101.8 million facility was cancelled and replaced with a £60 million facility which is committed until July 2018. The new facility reflects the benefit of continued strong cash flows generated by the business and the much reduced leverage of the Group.

Related party transactions

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

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 16 and 17 in the Trinity Mirror plc 2013 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;

· 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; and

· 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.

Management Report continued

Other Items continued

Going concern

In determining whether the Group's half-yearly financial report 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 risks and uncertainties relating to 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 financing facilities for the foreseeable future.

The directors have a reasonable expectation 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 half-yearly financial report.

Press regulation

The Group, along with the vast majority of national and regional newspaper and magazine publishers, has entered into a contract to be regulated by the Independent Press Standards Organisation ("IPSO").

We recognise that the reputation of the British press has been severely damaged by the revelations of the Leveson Enquiry and we welcome the new regime and high regulatory standards that will be required under IPSO.

Following an independent process, IPSO has appointed its first Chairman, Sir Alan Moses, and its first Board. It expects to be operational in September 2014. The Group will continue to play a supporting role as IPSO is established. Paul Vickers, the Group's Secretary and Group Legal Director, has been appointed Chairman of the Regulatory Funding Company, the body that raises the funding for the regulator from the industry.

Board changes

Lee Ginsberg and Helen Stevenson joined the Board as non-executive directors from 1 January 2014. Lee Ginsberg was appointed Chair of the Audit Committee on 1 January 2014. Gary Hoffman, Senior Independent Director, stepped down from the Board on 13 March 2014. Following the departure of Gary Hoffman on 13 March 2014, Jane Lighting took on the role of Senior Independent Director and Helen Stevenson was appointed chair of the Remuneration Committee, replacing Jane Lighting.

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 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 Conduct 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

Simon Fox Vijay Vaghela

Chief Executive Group Finance Director

Consolidated income statement

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

*Adjusted items relate to the exclusion of non-recurring items (share of non-recurring credit from associate undertakings of £27.6 million and provision for historical legal issues of £4.0 million), restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge, the pension administrative expenses and the impact of tax legislation changes. Set out in note 17 is the reconciliation between the statutory results and the adjusted results.

Consolidated statement of comprehensive income

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

Consolidated statement of changes in equity

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

Consolidated balance sheet

at 29 June 2014 (30 June 2013 and 29 December 2013)

Consolidated cash flow statement

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

Notes to the consolidated financial statements

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

1. General information

The financial information in respect of the 52 weeks ended 29 December 2013 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 consolidated financial statements for the 26 weeks ended 29 June 2014 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 consolidated financial statements and their report is set out on page 31.

The consolidated financial statements were approved by the directors on 28 July 2014. 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 polices

Basis of preparation

The Group's annual consolidated financial statements are prepared in accordance with IFRS as adopted by the European Union. The 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 Group's half-yearly financial report.

Changes in accounting policy

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

The Group has adopted new, amended and revised standards and interpretations during the current financial period which have had no material impact on the Group:

· IFRS 10 (Issued) 'Consolidated Financial Statements' - effective for periods beginning on or after 1 January 2014

· IFRS 11 (Issued) 'Joint Arrangements' - effective for periods beginning on or after 1 January 2014

· IFRS 12 (Issued) 'Disclosure of Interests in Other Entities' - effective for periods beginning on or after 1 January 2014

· IAS 27 (Revised) 'Separate Financial Statements' - effective for periods beginning on or after 1 January 2014

· IAS 28 (Revised) 'Investments in Associates' - effective for periods beginning on or after 1 January 2014

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

· IFRIC 21 (Issued) 'Levies' - effective for periods starting on or after 1 January 2014

At the date of approval of these consolidated financial statements the following new standards, which have not been applied and when adopted will have no material impact on the Group, were in issue but not yet effective:

· IFRS 9 (Issued) 'Financial Instruments' - effective for periods starting on or after 1 January 2015

· IFRS 15 (Issued) 'Revenue from contracts with Customers' - effective for periods starting on or after 1 January 2017

Changes in reporting

Following a change in management structure, the Group has moved the revenue and results of fish4 from the Specialist Digital operating segment to the Publishing operating segment. The revision to the operating segments has had no impact on the revenue or operating profit of the Group. The 2013 comparatives have been restated as a result of this change. Note 16 sets out the impact of this change on the previously reported results.

Notes to the consolidated financial statements

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

2. Accounting polices (continued)

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, described above, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements:

Acquisitions and intangible assets

Judgements have been made 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.

Key sources of estimation uncertainty

The key assumptions concerning the future and 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, are discussed below:

Impairment of goodwill and other intangible assets

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. 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.

Retirement benefits

Actuarial assumptions adopted and external factors can significantly vary the surplus or deficit of defined benefit pension schemes. Advice is sourced from independent actuaries in selecting suitable assumptions.

Derivative financial instruments

Derivative financial instruments are recognised at fair value and can change significantly from period to period.

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 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 acquired digital specialist classified 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 described in note 2. The Board and chief operating decision maker are not provided with an amount for total assets by segment. The Group's operations are located in the UK and the Group is not subject to significant seasonality during the year.

Segment revenue and results

Notes to the consolidated financial statements

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

3. Operating segments (continued)

Segment revenue and results (continued)

The prior year comparatives have been restated as set out in notes 2 and 16.

4. Revenue

Notes to the consolidated financial statements

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

4. Revenue (continued)

5. Non-recurring items

(a) At the 2013 year end, an impairment review comparing the carrying value of the Group's assets with value in use was undertaken in accordance with IAS 36. The review indicated that a £225.0 million impairment charge against goodwill and publishing rights and titles in respect of the Nationals and certain regional (Scotland, North East and Cardiff) cash-generating units was required.

(b) The Group is aware of a number of civil claims from individuals in relation to phone hacking. In the first half we have provided £4.0 million to cover the cost of dealing with and resolving claims. 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.

(c) During the second half of 2013, the Group disposed of Trinity Mirror Digital Property Limited realising a profit on disposal of £0.6 million.

(d) Share of the after tax non-recurring items comprising our £27.5 million share of the gain on the disposal by PA Group of its weather forecasting business, MeteoGroup, our £0.4 million share of the profit of MeteoGroup recorded by PA Group up to the date of completion less our £0.3 million share of restructuring costs incurred by PA Group and Local World.

6. Investment revenues

7. Finance costs

Notes to the consolidated financial statements

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

8. Tax

The standard rate of corporation tax reduced from 23% to 21% on 1 April 2014. The blended rate for the accounting year is 21.5% being a mix of 23% up to 31 March 2014 and 21% from 1 April 2014 (2013: 23.25% being a mix of 24% up to 31 March 2013 and 23% from 1 April 2013). The current tax liabilities amounted to £15.2 million (30 June 2013: £17.5 million and 29 December 2013: £16.7 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 23% to 20% was accounted for in the prior year resulting in a £34.3 million credit in the consolidated income statement and a £8.9 million charge in the consolidated statement of comprehensive income.

The tax on actuarial (losses)/gains on defined benefit pension schemes taken to the consolidated statement of comprehensive income is a credit of £2.5 million comprising a deferred tax credit of £2.5 million (26 weeks ended 30 June 2013: a deferred tax charge of £1.2 million and 52 weeks ended 29 December 2013: a charge of £8.5 million comprising a deferred tax charge of £9.2 million and a current tax credit of £0.7 million).

The tax on share-based payments taken to equity is a charge of £3.6 million (26 weeks ended 30 June 2013: £nil and 52 weeks ended 29 December 2013: credit of £5.9 million).

9. Dividends

No dividend was declared for both 2014 and 2013.

10. Earnings per share

*Adjusted items relate to the exclusion of non-recurring items (share of non-recurring credit from associate undertakings of £27.6 million and provision for historical legal issues of £4.0 million), restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge, the pension administrative expenses and the impact of tax legislation changes. Set out in note 17 is the reconciliation between the statutory results and the adjusted results.

Notes to the consolidated financial statements

for the 26 weeks ended 29 June 2014 (26 weeks ended 30 June 2013 and 52 weeks ended 29 December 2013)

10. 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 weighted average number of potentially dilutive ordinary shares not currently dilutive was 4,312,644 (30 June 2013: 9,094,870 and 29 December 2013: 5,215,571).

Potentially dilutive ordinary shares in respect of share options have not been included in the statutory diluted loss per share calculation as they are antidilutive in this instance.

*Adjusted items relate to the exclusion of non-recurring items (share of non-recurring credit from associate undertakings of £27.6 million and provision for historical legal issues of £4.0 million), restructuring charges in respect of cost reduction measures, the amortisation of intangible assets, the retranslation of foreign currency borrowings, the impact of fair value changes on derivative financial instruments, the pension finance charge, the pension administrative expenses and the impact of tax legislation changes. Set out in note 17 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