Newspaper group sees further falls
Trinity Mirror raises cost cuts as profits slump
Trinity Mirror saw a slump in profits and revenue as income from print publications continued to dwindle.
It has raised the level of cost savings by £5m and also increased the compensation to victims of the phone hacking scandal by £7.5 million to £15.4m.
The group, which publishes the Daily Record and Sunday Mail, as well as a number of local newspapers and websites, said adjusted profit before tax for the half year fell by 8.4% to £61.3m on a 14.6% decline in revenue to £320m.
Print revenue fell by 16.6%. On a like for like basis print revenue fell by 11.9%.
Circulation revenue fell by 9.9%. On a like for like basis circulation revenues fell by 6.3% with volume declines partially mitigated by cover price increases.
The circulation volume trends in the market have been distorted by cover price differentials, cover price discounting and increased sampling.
The Daily Mirror volume fell by 11.1% compared to a 9.1% fall for the UK national daily tabloid market and the Daily Record fell 10.3% against an overall Scottish daily tabloid market decline of 10%.
The Sunday Mirror and Sunday People volumes declined by 15.2% and 15.9% respectively in a UK national Sunday tabloid market that fell by 10.9% and the Sunday Mail declined 12.6% against an overall Scottish Sunday tabloid market decline of 10.7%.
The market for the company’s regional titles “remained challenging” with declines of 12.9% for paid for dailies, 14% for paid for weeklies and 14.1% for paid for Sundays.
Print advertising revenue fell by 26.8% with display and other down by 27.3% and classified down by 26.3%. Like for like print advertising revenues fell by 20.9% with display and other down 17.9% and classified down 23.5%.
The fall in revenue includes the impact of an additional week of trading in the first half of 2016, the ending of the Independent print and distribution contract in April 2016, the sale of Rippleffect in August 2016 and the impact of handing back four Metros to DMGT and other portfolio changes. On a like for like basis, group revenue fell by 9.3% or £32.9m.
Like for like publishing revenue fell by 9.8% to £296.4m. Publishing print revenue fell by 11.9% to £255m.
Digital revenue rose 5.9% to £41.4m with digital display and transactional revenue growing by 18%, though this was partially offset by digital classified revenue falling by 23.9%.
Good cost control limited the fall in group adjusted operating profit to 9.4% or £6.5m to £62.6m with EBITDA of £72.9m (2016: £80.4 million). The group delivered structural cost savings (including an incremental £5 million of synergy savings from the integration of Local World) of £10m.
Adjusted profit before tax fell by 8.4% to £61.3m and adjusted earnings per share fell by 6.3% to 17.9p reflecting the impact of the falling revenues partially offset by tight cost management.
Statutory operating profit fell by £6.3m, profit before tax was down by £7m and earnings per share fell by 2.2p. Non-recurring items were a charge of £7.3m (2016: £4m) and restructuring charges in respect of cost reduction measures were £6.4m (2016: £10.1m).
The company said the trading environment, particularly for its regional titles, has been very challenging during the period and it became clear that the regional organisational structure was “not driving the optimum commercial focus”.
This led to a restructure of the senior regional commercial management team “to ensure that their full focus is on maximising advertising revenue from each local market.
“The objectives of the changes are to bring more clarity and accountability to roles, to speed up decision making and to improve our commercial performance.”
Reduction in contracted net debt of £8.1m is lower than the reduction of £44.9m in the first half of 2016 due to the share buyback and associated additional payment to the pension schemes, higher payments in relation to phone hacking and broadly flat working capital movements, whereas 2016 benefited from the extra week of trading and the timing of the period end.
Chief executive Simon Fox, said: “Whilst the trading environment for print in the first half was volatile, we remain on course to meet expectations for the year. I continue to anticipate that the second half will show improving revenue momentum as we benefit from initiatives implemented during the first half of the year.”
Historical Legal Issues
The company said it has continued to make progress on the settlement of civil claims in relation to phone hacking with damages for over 80% of claims settled. However, the lengthy process of settling claims and the structure and quantum of legal fees for the claimants has required the provision for settling these matters to be increased by £7.5m in the period. The provision at the end of the period was £15.4m.
“Although there remains uncertainty as to how these matters will progress, the board remains confident that the exposures arising from these historical events are manageable and do not undermine the delivery of the group’s strategy,” said the company in a statement.
The accounting pension deficit fell by £59.2m to £406.8m (£336.1m net of deferred tax) driven by strong asset returns and the benefit of a decrease in future mortality assumptions more than offsetting a further reduction in the discount rate.
Dividends and Share Buyback
The final dividend for 2016 of 3.35p per share was paid in June 2017. The board has approved an interim dividend for 2017 of 2.25p per share, representing an increase of 7.1% on the 2016 interim dividend. This will be paid on 29 September 2017 to shareholders on the register on 8 September.
The group acquired a further 4.2 million shares for £4.6m during the period under the £10m share buyback programme announced in August 2016 bringing the total amount purchased to 6.7 million shares for £6.9m.
Current Trading and Outlook
In July, group revenue is expected to fall by 8% on a like for like basis and represents an improvement on the 9% decline in the first half.
Structural cost savings for the year are expected to be some £20m, which is £5m ahead of its initial £15m target, while restructuring charges are expected to be £15m, £5m ahead of the initial £10m guidance.
“We continue to make progress with our strategy of growing digital display and transactional revenue whilst at the same time tightly managing our cost base to support profits and cash flow.
“Although the trading environment remains challenging, at this stage, the Board expects full year adjusted results to be in line with expectations.” said the company.
Publishing digital display and transactional revenue, which is primarily driven by audience, grew on a like for like basis by 18% to £32.8m, benefitting from the higher page views and an increase in higher yielding revenues categories such as video. Video streams in the period were over 300 million, up 38% year on year. Digital classified revenue which is predominantly upsold from print fell on a like for like basis by 23.9% with the largest category, recruitment, falling by 33.3%.
Digital audience growth continues with average monthly page views in the period growing by 9.4% year on year to almost 680 million. Mobile page views were some two thirds of the page views and grew by 22% while desktop pages views fell by 13%. Three quarters of page views were UK page views which grew by 11% while non UK page views grew by 4%. Page view growth rates have been adversely impacted by the removal of Streamo and Live Event page views as this functionality reduced the viewability of ads served due to the speed at which the pages were viewed by users. It is estimated to have impacted the growth rate by over 10%.
The three “Live” sites (Belfast, Glasgow and Dublin) delivered 4.2 million monthly browsers and 14 million page views in June 2017, up on the 3 million monthly browsers and 8.7 million page views in December 2016.
The company said print markets remained challenging particularly advertising with display and other declining on a like for like basis by 17.9% and classified declining on a like for like basis by 23.5%. Circulation, the largest revenue category, performed better falling on a like for like basis by 6.3% with cover price increases reducing the impact of volume declines.