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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Independent News & Media Plc | LSE:INM | London | Ordinary Share | IE00B59HWB19 | ORD EUR0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.0919 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMINM
RNS Number : 1951H
Independent News & Media PLC
09 March 2018
PROFIT BEFORE TAX OF EUR28.5M, CASH BALANCE OF EUR91.5M
Dublin and London 9 March 2018: Independent News & Media PLC (INM ID, INM LN) today announces its full year results for the 12 months ended 31 December 2017.
KEY HIGHLIGHTS([1])
Hot Features
Premium
(EURm except where 2017 2016([1]) Change
stated)
--------------------------- --------- ------------- ------------
Total revenue 293.0 323.4 -9.4%
Profit before tax(2) 28.5 41.8 -31.8%
Operating Margin(2) 9.4% 12.4% -300 bps
Basic & Diluted
EPS(2) 1.8c 2.9c -1.1c
Cash and Cash Equivalents 91.5 84.8 +6.7
Net Assets 76.1 62.3 +13.8
--------------------------- --------- ------------- ------------
-- Total revenues of EUR293.0m, down 9.4%
Total revenues of EUR293.0m were down 9.4% on the prior year. This was primarily driven by a decline in total advertising revenues of 10.6%, and a decline in circulation revenues of 8.4% which also impacted distribution revenues which were down 9.5%. Within total advertising, publishing advertising revenues declined by 13.0% while digital revenues remained in line with prior year at EUR15.1m.
-- Digital revenues in line with prior year
Digital revenues have remained in line with prior year despite 2016 revenues including a 53(rd) week. On a 52 week versus 52 week basis digital revenues have grown by 1.0% year on year. Growth has primarily come from INM's classified businesses, including CarsIreland.ie. Digital advertising revenue has declined due to the move away from direct selling to lower yielding programmatic selling. The Group has seen continued strong growth in the CarsIreland.ie business, with revenues increasing by over 45% on a like for like basis.
-- Profit before tax(2) of EUR28.5m
Profit before tax(2) of EUR28.5m was down 31.8% on the prior year. This reduction was primarily due to continued revenue challenges and increased libel and legal costs. The revenue challenges were somewhat mitigated by cost savings. The operating margin(2) increases from 9.4% to 11.9% excluding the impact of these increased libel and legal costs.
-- Operating costs(2) EUR265.5m, down 6.2%
Operating costs(2) have decreased by 6.2%, notwithstanding the increased libel and legal costs referred to above and in INM's Trading Statements in 2017.
-- Net exceptional charge of EUR12.1m
The Group recorded a total net exceptional charge of EUR12.1m in 2017, which included:
Ø A charge of EUR12.7m relating to the impairment of the Belfast Telegraph masthead;
Ø A charge of EUR1.8m related to miscellaneous other items including restructuring costs (primarily redundancy costs in the Island of Ireland) and acquisition related expenses;
Ø A charge of EUR1.5m relating to a severance payment to the former CEO;
Ø A retirement benefits accounting adjustment of EUR2.9m; and
Ø A gain of EUR1.0m in relation to the release of an onerous dilapidations provision.
-- Balance sheet strengthened
Net assets increased by EUR13.8m to EUR76.1m. The cash balance has risen to EUR91.5m, up EUR6.7m year on year despite increased libel and legal payments and payments to the retirement benefit obligation schemes of EUR14.1m, a portion of which was one-off as part of the wind-up agreement. In July 2017, the Group and the Trustees of two of its Republic of Ireland defined benefit pension schemes reached an agreement to commence the wind-up of the schemes. The agreement has brought certainty for the future for both the Group and the scheme members.
([1]) Results to 31 December 2016 include an extra (53(rd) ) week
(2) Pre-exceptionals
(3) ABC Jul to Dec 2017
(4) TGI NI 2017
(5) Per Adobe Analytics
(6) Per Google Analytics
-- Group cash balance of EUR91.5m
The Group ended the year with a cash balance of EUR91.5m. The increase of EUR6.7m year on year was generated primarily from the EBITDA performance, somewhat offset by cash outflows relating to retirement benefit obligations, movement in provisions/working capital, exceptional expenditure, capital expenditure and corporation tax payments. The movement in provisions/working capital is impacted by two significant trade debtor balances totalling EUR2.2m which were both subsequently received post year end.
-- Governance
In 2017, INM appointed a new CEO and subsequently in March 2018, four new non-executive directors to the Board. A new Chairman was appointed by the Board in March 2018. These appointments bring a wealth of experience and expertise in the media industry and the wider corporate world, further strengthening and supporting INM's Board to ensure the Group is equipped to meet the demands of the rapidly changing industry. These appointments also ensure that the Board and its key committees meet the composition recommendations of the UK Corporate Governance Code.
Separately, the Group continues to comply with requirements from the ODCE and is taking all necessary steps to meet the ODCE's requests.
-- Strategic initiatives
The Group continues to actively review potential partnership and acquisition opportunities that diversify the Group's revenues. For example, in 2017 the Group in partnership with Caltray Limited launched Offscript, a producer of digital video content for branded advertising. Additionally, an agreement was signed in November 2017 to acquire the trading business, Supreme Stationery, and certain assets of Hegadon Limited.
The Board and Management are currently collaborating closely with EY on the development of a strategic plan which will provide a roadmap for the future. This plan will involve reshaping the business model to address the challenges faced by the industry.
-- Capital reduction
The Board has commenced work to progress the Capital Reduction proposal which was approved by shareholders at the extraordinary general meeting of the Company held on 5 December 2016, and intends to seek, for good corporate governance reasons, shareholders' confirmation of this proposed capital reduction at the forthcoming AGM in May.
-- Dividend
The Directors are not proposing a dividend for 2017.
Outlook
The outlook for 2018 is for continued difficult trading conditions within the media sector as key revenues - advertising, circulation and distribution - face further declines. INM's digital advertising revenues within the Irish market will continue to be challenged by the domination of global platforms such as Facebook and Google. EBIT from the underlying business is expected to perform in line with market expectations. The Group intends to make a significant investment to reshape the business and to deliver the strategic plan.
([1]) Results to 31 December 2016 include an extra (53(rd) ) week
(2) Pre-exceptionals
(3) ABC Jul to Dec 2017
(4) TGI NI 2017
(5) Per Adobe Analytics
(6) Per Google Analytics
STATEMENTS
Mr Murdoch MacLennan, Chairman, Independent News & Media PLC, said: "I have just taken on the role of Chairman of the Group in the last few days but I am well aware of the challenges currently facing news and online publishers all over the world. While our Group experienced difficult trading conditions over the course of 2017, I am confident that a robust development strategy is being put in place, with the assistance of EY, which will open a pathway for us to identify a successful future for our business.
INM's focus over the coming year will be on implementing that new strategy, while at the same time protecting our existing core print and online business. Reassuringly, the Group has maintained its leadership position in the print publishing market and with independent.ie we have Ireland's most trusted and most visited news website.
I would like to sincerely thank the Board, Management and every employee in INM for their contribution to the Group in 2017 and their ongoing commitment and support as we seek to make further progress in 2018 and the years ahead. Based on the plans I have seen since joining the Board, I believe that we can look forward to the future with both confidence and optimism. "
Mr Michael Doorly, Group Chief Executive Officer, Independent News & Media PLC, said: "The full year results for 2017 clearly demonstrate the major challenges facing our Group and our industry. Despite these challenges, the Group recorded a PBT of EUR28.5 million and has a cash balance of EUR91.5 million.
The Board and Management, with the assistance of consultants EY, are currently reviewing all the Group's operations to develop a clear strategy for future growth. The establishment of an implementation team will be central to the successful delivery of this strategic plan and will involve investment in people and technology.
I would like to thank the staff of INM for their continued commitment and resolve in the face of these challenging times. They have enthusiastically engaged with Management in developing our new strategy and will play a key role in successfully implementing it over the coming months and years."
([1]) Results to 31 December 2016 include an extra (53(rd) ) week
(2) Pre-exceptionals
(3) ABC Jul to Dec 2017
(4) TGI NI 2017
(5) Per Adobe Analytics
(6) Per Google Analytics
OPERATIONAL HIGHLIGHTS
Publishing performance
-- The Irish Independent continues to lead the quality daily market with an ABC(3) of 90,107, maintaining its No.1 position. It has over 50% of the daily quality market in the Republic of Ireland and sells more copies per day on average than The Irish Times and Irish Examiner combined.
-- The Sunday Independent, which recorded an ABC(3) of 178,322, has c.63% of the Sunday quality market and remains by far the biggest selling quality Sunday newspaper, while also providing the largest regular audience on the island of Ireland across any advertising platform.
-- The Sunday World is the nation's largest selling tabloid newspaper with an ABC(3) of 133,946 (c.44% of the Sunday popular market). The paper's award-winning crime reporting team and the glossy magazine maintain the paper's leading market position in the highly competitive Sunday tabloid category.
-- The Herald holds the position as the No.1 paper with Dubliners with an ABC(3) of 36,097. The newspaper benefits from local news and crime related news and has been redesigned with an improved sports and racing package.
-- INM Regional newspapers are market leaders in every region where they publish (Kerry, Wexford, Sligo and Drogheda/Dundalk). Strong revenue performance in 2017 in both circulation and advertising has been driven by a hyper local news agenda.
-- The Star is one of Ireland's most popular daily tabloid newspapers with an ABC(3) of 48,687 and 23% of the daily popular market.
-- In Northern Ireland the Belfast Telegraph, with a recorded daily ABC(3) of 36,403, continues to hold a strong No.1 position within the local daily newspaper market and was the only newspaper to show year on year readership growth with 155,000(4) daily readers. Sunday Life with a recorded ABC(3) of 32,892 and a weekly readership of 150,000(4) outperformed all local competitor titles. With a combined weekly readership of almost one third of the NI population, INM titles hold a commanding position within the NI market.
-- While Newspread's (distribution) revenues have declined due to the continued contraction of the circulation market, its diversification into adjacent categories remains successful delivering a healthy operating margin of 4.9%. In early 2018, Newspread acquired the trading business and certain assets of Hegadon Limited giving it a +20% share of the stationery retail market. Profits from this acquisition will start to flow during 2018.
Digital performance
-- In a challenged advertising marketplace for news publishers, digital revenues across the Group grew slightly on a like for like basis. This growth was fuelled by the continued expansion of the classified platforms such as CarsIreland.ie.
-- Audience on the Group's flagship news platform, independent.ie, grew by over 23%(5) year on year with an average of over 1 million unique users on the platform each day throughout the second half of the year. Our comprehensive real time coverage of major news events continues to be a significant competitive differentiator. For example, the live coverage of the Ophelia storm in October resulted in over 2.5 million people visiting the site in a single 24 hour period.
([1]) Results to 31 December 2016 include an extra (53(rd) ) week
(2) Pre-exceptionals
(3) ABC Jul to Dec 2017
(4) TGI NI 2017
(5) Per Adobe Analytics
(6) Per Google Analytics
-- Building on the successful launch of the FarmIreland.ie vertical, we continued to identify and build out niche audience propositions in 2017. The Group launched TheVow.ie weddings vertical and relaunched The Vow magazine during the year. The Vow offers a unique proposition to the over 22,000 couples planning their weddings each year in Ireland with advice and inspiration on everything from the initial proposal through to choosing a venue, fashion, beauty and finances. For suppliers to the wedding sector, The Vow offers a premium environment to showcase their offering to a highly engaged audience.
-- Belfasttelegraph.co.uk is the leading commercial news website in Northern Ireland, publishing content across desktop, mobile and on app. Further investment in editorial content delivered traffic and commercial growth through 2017. Traffic grew by 7% with the site now delivering over 16m(6) page impressions per month, driven by a 15% growth in Mobile traffic with News and Business up 20% and 30% respectively. As a trusted news source and with a wide portfolio of advertising solutions the site provides the strongest commercial Digital platform in Northern Ireland.
-- The leading classified sites of nijobfinder.co.uk and PropertyNews.com also enjoyed further investment with both sites being relaunched during the year. With a fresh new design and a number of new features to enhance user experience both sites have seen a dramatic rise in 'applications' and 'lead generation' across Recruitment and Property respectively with job applications through the mobile platform up over 40% year on year. With 312,000(5) monthly unique users and 3 times more social followers on Facebook than the nearest competitor, nijobfinder.co.uk has a powerful position in the local recruitment market. Visits and unique users have also risen to PropertyNews.com (7% and 5% respectively) with a concerted focus on delivering quality leads to estate agents.
-- CarsIreland.ie, which was fully acquired by the Group in 2016, grew its revenue by over 45% while also increasing its operating margin. It is now firmly established as one of the leading classified platforms in the Republic of Ireland for motor vehicles. The company is investing significantly in innovation using open source technology and cloud based data solutions in order to drive future value. Consumers are increasingly moving online to inform themselves about the purchase of a car and CarsIreland.ie is well placed to benefit from this behavioural shift.
-- Responding to the growing demands from brands for higher quality digital video content, INM partnered with Caltray Limited to establish a joint venture called Offscript. This new partnership, which was cleared by the CCPC in October 2017, aims to disrupt the market by bringing broadcast quality content production to digital-first channels. Working with clients including Vodafone, Ulster Bank, Failte Ireland and the British and Irish Trade Alliance in the UK, Offscript met their revenue target in 2017. Offscript officially launched to the media industry in February 2018.
SUBSEQUENT EVENTS
In January 2018, the Group purchased the trading business and certain assets of Hegadon Limited following approval by the CCPC. In March 2018, four new non-executive directors and a new Chairman were appointed by the Board. There were no other events since the year end that would require disclosure or adjustment in the financial statements.
- Ends -
([1]) Results to 31 December 2016 include an extra (53(rd) ) week
(2) Pre-exceptionals
(3) ABC Jul to Dec 2017
(4) TGI NI 2017
(5) Per Adobe Analytics
(6) Per Google Analytics
For further information, contact:
MEDIA INVESTORS & ANALYSTS
Brian Bell Michael Doorly
Wilson Hartnell Group Chief Executive Officer
+353 1 669 0030 (office) Independent News & Media PLC
brian.bell@ogilvy.com +353 1 466 3200
Michael.Doorly@inmplc.com
Ryan Preston
Group Chief Financial Officer
Independent News & Media PLC
+353 1 466 3200
ryan.preston@inmplc.com
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements in this announcement are forward-looking. They represent our expectations for our business and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and projections about future events. We believe that our expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond our control, our actual results or performance, may differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements speak only as of the date of this document and no obligation is undertaken, save as required by law or by the Listing Rules of the Irish Stock Exchange and/or the UK Listing Authority, to reflect new information, future events or otherwise.
ABOUT INDEPENT NEWS & MEDIA PLC
INM is a market-leading media Group in the Republic of Ireland and Northern Ireland, with a strong newspaper and digital presence. INM is the largest wholesale newspaper distributor on the island of Ireland. It manages gross assets of EUR204.8m and employs approximately 800 people.
INDEPENT NEWS & MEDIA PLC
GROUP INCOME STATEMENT
Year Ended 31 December Year Ended 31 December
2017 (Unaudited) 2016* (Audited)
Before Before
Exceptional Exceptional Exceptional Exceptional
Items Items(**) Total Items Items(**) Total
Notes EURm EURm EURm EURm EURm EURm
------------- -------------- -------- ------------- ---------------- --------
Revenue 2 293.0 - 293.0 323.4 - 323.4
Operating
(costs)/income (265.5) (12.0) (277.5) (283.2) 12.0 (271.2)
------------- -------------- -------- ------------- ---------------- --------
Operating profit/(loss) 3 27.5 (12.0) 15.5 40.2 12.0 52.2
Share of results of
associates
and joint ventures 9 0.9 (0.1) 0.8 1.2 - 1.2
28.4 (12.1) 16.3 41.4 12.0 53.4
Finance
income/(expense):
- Finance income 6 0.1 - 0.1 0.4 2.9 3.3
- Finance expense 6 - - - - (1.5) (1.5)
------------- -------------- -------- ------------- ---------------- --------
Profit/(loss) before
taxation 28.5 (12.1) 16.4 41.8 13.4 55.2
Taxation charge 7 (3.9) - (3.9) (1.6) (3.3) (4.9)
------------- -------------- -------- ------------- ---------------- --------
Profit/(loss) for the
year 24.6 (12.1) 12.5 40.2 10.1 50.3
Profit attributable to:
Non-controlling - - - - - -
interests
Equity holders of the
Company 24.6 (12.1) 12.5 40.2 10.1 50.3
------------- -------------- -------- ------------- ---------------- --------
24.6 (12.1) 12.5 40.2 10.1 50.3
------------- -------------- -------- ------------- ---------------- --------
Earnings per ordinary
share
(cent)
Basic 8 0.9c 3.6c
Diluted 8 0.9c 3.6c
-------- --------
* Results to 31 December 2016 include an extra (53(rd) ) week.
** See note 4.
GROUP STATEMENT OF COMPREHENSIVE INCOME
Year Ended Year Ended
31 December 31 December
2017 2016*
(Unaudited) (Audited)
EURm EURm
------------- -------------
Profit for the year 12.5 50.3
------------- -------------
Other comprehensive income/(expense)
Items that will never be reclassified
to profit or loss:
Retirement benefit obligations:
- Remeasurement gains/(losses)** 2.4 (32.1)
- Related movement on deferred tax
asset (note 15) (0.2) 2.6
------------- -------------
2.2 (29.5)
Items that are or may be reclassified
subsequently to profit or loss:
Currency translation adjustments
- subsidiaries (0.5) (3.1)
Currency translation adjustments
- reclassification on disposal of
subsidiary - (0.6)
Profits relating to cash flow hedges*** - 0.1
(0.5) (3.6)
Other comprehensive income/(expense)
for the year, net of tax 1.7 (33.1)
Total comprehensive income for the
year 14.2 17.2
============= =============
Total comprehensive income attributable
to:
Non-controlling interests - -
Equity holders of the Company 14.2 17.2
------------- -------------
14.2 17.2
============= =============
* Results to 31 December 2016 include an extra (53(rd) ) week.
** In 2016, the reduction in shareholders' equity attributable to the INIL and MSL defined benefit pension plans amounted to approximately EUR6 million mainly comprising a deficit on remeasurement of the defined benefit liabilities in the period from 1 January to 7 November of EUR17.6 million recognised in OCI and a credit to the Group Income Statement of EUR11.8 million on de-recognition of the defined benefit plans on 7 November 2016.
*** Relates to a charge of EUR0.1m (2016: EURnil) due to cashflow hedges maturing during the year offset by a credit of EUR0.1m (2016: EUR0.1m) relating to cashflow hedges outstanding at the end of the year.
GROUP STATEMENT OF FINANCIAL POSITION
31 December 31 December
2017 2016
(Unaudited) (Audited)
Notes EURm EURm
------------- ------------
Assets
Non-Current Assets
Intangible assets 14 33.6 48.2
Property, plant and equipment 12 40.1 41.6
Investments in associates and
joint ventures 9 1.7 1.5
Deferred tax assets 15 7.7 12.1
Available-for-sale financial
assets 0.2 0.2
83.3 103.6
------------- ------------
Current Assets
Inventories 2.8 4.0
Trade and other receivables 24.7 23.7
Derivative financial instruments 0.1 0.1
Corporation tax recoverable 2.4 0.3
Cash and cash equivalents 13 91.5 84.8
------------- ------------
121.5 112.9
------------- ------------
Total Assets 204.8 216.5
------------- ------------
Liabilities
Current Liabilities
Trade and other payables 39.1 43.7
Provisions 9.5 10.5
48.6 54.2
------------- ------------
Non-Current Liabilities
Retirement benefit obligations 11 77.5 97.3
Deferred taxation liabilities 15 1.4 1.4
Other payables 0.7 0.8
Provisions 0.5 0.5
------------- ------------
80.1 100.0
------------- ------------
Total Liabilities 128.7 154.2
------------- ------------
Net Assets 76.1 62.3
============= ============
Equity
Equity Attributable to Company's
Equity Holders
Share capital 10 13.9 13.9
Share premium 767.0 767.0
Other reserves 316.6 318.0
Retained losses (1,021.4) (1,036.6)
------------- ------------
Total Equity 76.1 62.3
============= ============
GROUP STATEMENT OF CHANGES IN EQUITY (2017 Unaudited; 2016 Audited)
Share
Based Other Currency Other Equity Non-Controlling
Share Share Payment Undenominated Translation Equity Retained Interest Interests***
Group Capital Premium Reserve Capital Reserve Other* Reserve** Losses of Total
Parent
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
----------
At 1 January
2016 13.9 767.0 0.4 413.2 (92.6) - - (1,057.4) 44.5 - 44.5
Total Comprehensive
(Expense)/Income
for the year
Profit for the
year - - - - - - - 50.3 50.3 - 50.3
Other comprehensive
(expense)/income**** - - - - (3.7) 0.1 - (29.5) (33.1) - (33.1)
Total Comprehensive
(Expense)/Income
for the year - - - - (3.7) 0.1 - 20.8 17.2 - 17.2
--------- --------- -------- --------------- ------------- -------- ----------- ---------- ---------- ----------------- ---------
Attributable
to owners of
the Company,
recognised directly
in equity
Equity settled
share based
payments - - 0.6 - - - - - 0.6 - 0.6
Total attributable
to owners of
the Company - - 0.6 - - - - - 0.6 - 0.6
--------- --------- -------- --------------- ------------- -------- ----------- ---------- ---------- ----------------- ---------
At 1 January
2017 13.9 767.0 1.0 413.2 (96.3) 0.1 - (1,036.6) 62.3 - 62.3
Total Comprehensive
(Expense)/Income
for the year
Profit for the
year - - - - - - - 12.5 12.5 - 12.5
Other comprehensive
(expense)/income**** - - - - (0.5) - - 2.2 1.7 - 1.7
Total Comprehensive
(Expense)/Income
for the year - - - - (0.5) - - 14.7 14.2 - 14.2
--------- --------- -------- --------------- ------------- -------- ----------- ---------- ---------- ----------------- ---------
Attributable
to owners of
the Company,
recognised directly
in equity - - - - - - - - - - -
Equity settled
share based
payments -
charge/(credit)
Equity settled
share based
payments - transfer - - (0.5) - - - - 0.5 - - -
Put option on
Subsidiary - - - - - - (0.4) - (0.4) - (0.4)
--------- --------- -------- --------------- ------------- -------- ----------- ---------- ---------- ----------------- ---------
Total attributable
to owners of
the Company - - (0.5) - - - (0.4) 0.5 (0.4) - (0.4)
--------- --------- -------- --------------- ------------- -------- ----------- ---------- ---------- ----------------- ---------
At 31 December
2017 13.9 767.0 0.5 413.2 (96.8) 0.1 (0.4) (1,021.4) 76.1 - 76.1
--------- --------- -------- --------------- ------------- -------- ----------- ---------- ---------- ----------------- ---------
* 2016: A EUR0.1m movement relates to a movement on cash flow hedging reserve (see Group Statement of Comprehensive Income for further information).
** Other equity reserve at 31 December 2017 related to a put option over the non-controlling interest on a 51% owned subsidiary.
*** Profit for the year in 2017 for non-controlling interests of EURnil (2016: EURnil) relates to a profit of EUR0.1m attributable to the non-controlling interest in a 51% owned subsidiary offset by a loss of EUR0.1m attributable to the non-controlling interest in a 70% owned subsidiary.
**** Details can be found in the Group Statement of Comprehensive Income.
GROUP CASH FLOW STATEMENT
Year Ended Year Ended Year Ended Year Ended
31 December 31 December 31 December 31 December
2017 2017 2016* 2016*
(Unaudited) (Unaudited) (Audited) (Audited)
EURm EURm EURm EURm
-------------------- ------------- ------------- -------------
Profit for the year 12.5 50.3
Exceptional items 12.1 (10.1)
-------------------- -------------
Profit for the year
before exceptional
items 24.6 40.2
Share of results of
associates and joint
ventures (0.9) (1.2)
Finance income (0.1) (0.4)
Tax charge 3.9 1.6
-------------------- -------------
Operating profit before
exceptional items 27.5 40.2
Depreciation/amortisation 6.3 6.4
-------------------- -------------
Earnings Before Interest,
Tax, Depreciation and
Amortisation 33.8 46.6
Share based payment
charge - 0.6
Movement in provisions/working
capital (5.0) (2.3)
Retirement benefit
obligations deficit
repair/special contribution
payments** (14.1) (7.7)
Defined benefit retirement
benefit obligations
charge recognised in
the Group Income Statement 1.1 2.3
-------------------- -------------
Cash generated from
operations (before
cash exceptional items) 15.8 39.5
Exceptional expenditure
(see note 4) (3.9) (8.2)
-------------------- -------------
Cash generated from
operations 11.9 31.3
Income tax paid (2.0) (3.6)
-------------------- -------------
Cash generated by operating
activities 9.9 27.7
Cash flows from investing
activities
Dividends received
from associates and
joint ventures 0.6 1.0
Purchases of property,
plant and equipment (1.7) (2.3)
Purchases of intangible
assets (1.4) (3.4)
Proceeds from sale
of property, plant
and equipment - 7.6
Proceeds from disposal
of available-for-sale
financial assets - 0.3
Purchases of/advances
to associates and joint
ventures - (0.3)
Interest received 0.1 0.1
Acquisition of subsidiary,
net of cash acquired - (3.0)
Net cash used in investing (2.4) -
activities
GROUP CASH FLOW STATEMENT
(continued)
Year Ended Year Ended Year Ended Year Ended
31 December 31 December 31 December 31 December
2017 2017 2016* 2016*
(Unaudited) (Unaudited) (Audited) (Audited)
EURm EURm EURm EURm
-------------------- ------------- ------------- -------------
Cash flows from financing
activities
Interest paid - -
Net cash used in financing - -
activities
------------- -------------
Increase in cash and
cash equivalents 7.5 27.7
Foreign exchange losses (0.8) (2.6)
------------- -------------
Net increase in cash
and cash equivalents 6.7 25.1
Balance at beginning
of the year 84.8 59.7
------------- -------------
Cash and cash equivalents
at end of the year 91.5 84.8
------------- -------------
* Results to 31 December 2016 include an extra (53(rd) ) week.
** Comprises EUR1.4m of deficit repair payments in respect of defined benefit pension schemes and EUR12.7m of
special contributions in respect of defined contribution pension schemes.
NOTES TO THE FINANCIAL INFORMATION
1. Basis of Preparation of Financial Information under IFRS
Reporting Entity and Basis of Accounting
Independent News & Media PLC ("the Company") is a company domiciled in Ireland. These condensed preliminary Group financial statements as at and for the twelve months ended 31 December 2017 comprise the financial statements of the Company and its subsidiaries (together referred to as "the Group") and the Group's interest in associates and joint ventures.
This financial information has been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due during the 12 months from the date of approval of the 2017 Annual Report, the time period that the Directors have considered in evaluating the appropriateness of the going concern basis.
Financial Information
The financial information in this announcement does not constitute the statutory financial statements of the Company and the Group, a copy of which is required to be annexed to the Company's annual return to the Companies Registration Office in Ireland. A copy of the statutory financial statements in respect of the year ended 31 December 2017 will be annexed to the Company's annual return for 2017. The annual report and financial statements will be approved by the Board of Directors by 30 April 2018. Accordingly, this financial information is unaudited. A copy of the statutory financial statements required to be annexed to the Company's annual return in respect of the year ended 31 December 2016 has been annexed to the Company's annual return for 2016 to the Companies Registration Office. The audit opinion on these financial statements was unqualified.
The 2017 statutory financial statements of the Company will be available on the Company's website inmplc.com as of 30 April 2018. Consistent with prior years, the full financial statements for the year ended 31 December 2017 and the audit report thereon will be completed and available to all shareholders at least 20 working days before the AGM.
General Information
The Group is required to present its annual consolidated financial statements for the year ended 31 December 2017 in accordance with EU adopted International Financial Reporting Standards ("IFRS") and with those parts of the Companies Act 2014, applicable to companies reporting under IFRS. This financial information comprises the Group Statement of Financial Position, Group Income Statement, Group Cash Flow Statement, Group Statement of Comprehensive Income, Group Statement of Changes in Equity and selected notes for the years ended 31 December 2017 and 31 December 2016. This financial information for the years ended 31 December 2017 and 31 December 2016 have been prepared in accordance with the Listing Rules of the Irish Stock Exchange.
Measurement of Fair Values
A number of the Group's accounting policies and disclosures require the measurement at fair values, for both financial and non-financial assets and liabilities.
The Group regularly reviews significant unobservable inputs and valuation adjustments.
Significant valuation issues are reported to the Group's Audit and Risk Committee.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
NOTES TO THE FINANCIAL INFORMATION (continued)
1. Basis of Preparation of Financial Information under IFRS (continued)
Measurement of Fair Values (continued)
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
- Note 5 - financial instruments
- Note 16 - share-based payment arrangements; and
- Note 17 - acquisition of subsidiary.
Except as described below, the accounting policies and methods of computation and presentation adopted in the preparation of this financial information are consistent with those applied in the Annual Report for the year ended 31 December 2016 and are described in those financial statements on pages 115 to 132.
The Group has consistently applied its accounting policies to all years presented in these consolidated financial statements.
The following new and amended standards and interpretations are effective for the Group for the first time for the financial year beginning 1 January 2017 or later as indicated.
-- Disclosure initiative (Amendments to IAS 7)
-- Recognition of deferred tax assets for unrealised losses (Amendments to IAS 12)
-- IFRS 9: Financial Instruments*
-- IFRS 15: Revenue from contracts with customers*
-- Amendments to IFRS 2: Classification and measurement of share-based payment transactions*
-- Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts*
-- Amendments to IAS 40: Transfers of Investment Property*
-- Annual Improvements to IFRS 2014-2016 Cycle - various standards (Amendments to IFRS 1 and IAS 28)*
-- IFRIC 22: Foreign Currency Transactions and Advance Consideration*
-- IFRS 16: Leases**
-- IFRIC 23: Uncertainty over Income Tax Treatments**
-- IFRS 17: Insurance Contracts. ***
The aforementioned did not have a material impact on the Group.
* Amendments are effective for annual period commencing after 1 January 2018. ** Amendments are effective for annual period commencing after 1 January 2019.
*** Amendments are effective for annual period commencing after 1 January 2021.
Estimated impact of the adoption of IFRS 9, IFRS 15 and IFRS 16
The following new or amended standards and interpretations that are mandatory for future periods will be applicable to the Group:
IFRS 9 Financial Instruments 1 January 2018
--------- ------------------------ ----------------
IFRS 15 Revenue from contracts 1 January 2018
with customers
--------- ------------------------ ----------------
IFRS 16 Leases 1 January 2019
--------- ------------------------ ----------------
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet affective.
The impact of these new or amended standards and interpretations has been considered as follows:
NOTES TO THE FINANCIAL INFORMATION (continued)
1. Basis of Preparation of Financial Information under IFRS (continued)
Estimated impact of the adoption of IFRS 9
The Group is required to adopt IFRS 9 Financial Instruments from 1 January 2018. IFRS 9 Financial Instruments sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The Group has substantially completed its assessment of the estimated impact that initial application of IFRS 9 will have on the consolidated financial statements.
Classification of financial assets and financial liabilities
Based on its assessment, the Group concludes that the classification requirements will not have a material impact on any of its accounting balances.
Impairment - Financial assets
IFRS 9 requires the Group to record expected credit losses on all of its trade receivables, either on a 12 month or lifetime basis. The Group will apply the "simplified" approach and record lifetime expected losses on all trade receivables. The Group has determined that due to the nature of its receivables, the impact of IFRS 9 will not significantly impact the provision for bad debts.
Estimated impact of the adoption of IFRS 15
The Group is required to adopt IFRS 15 Revenue from contracts with customers from 1 January 2018. IFRS 15 establishes a comprehensive framework for determining whether, how much, and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 revenue, IAS 11 Construction contracts and IFRIC 13 Customer Loyalty Programmes.
The Group is involved in the sale of advertising, the sale of print and digital media and the provision of digital, printing and distribution services. Revenue from the provision of these services to customers is measured at the fair value of the consideration received or receivable (excluding sales taxes).
The Group has reviewed the requirements of the new standard and considered those requirements in the context of the Group's revenue generating contracts. The Group has substantially completed its review of the sale of advertising, the sale of print and digital media, and the provision of printing and digital services. Based on the Group's review, it concludes that the new standard will not have a material impact on the net profit or equity of the Group. In respect of distribution revenue services, the Group has yet to conclude its detailed assessment of the principal versus agent accounting treatment of distribution services revenue. However the Group expects that it will not have a material impact on the net profit or equity of the Group.
Estimated impact of the adoption of IFRS 16
IFRS 16 Leases replaces existing leases guidance including IAS 17 leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 at or before the date of initial application of IFRS 16.
IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right of use asset representing its right to use the underlying asset and also a lease liability representing its obligation to make lease payments. There are recognition exemptions for short term leases and leases of low value items. Lessor accounting remains similar to the current standard (i.e. lessors continue to classify leases as finance or operating leases).
The Group has commenced an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. It is expected that the Group will recognise right of use assets and related lease liabilities for its operating leases.
NOTES TO THE FINANCIAL INFORMATION (continued)
1. Basis of Preparation of Financial Information under IFRS (continued)
Risks and Uncertainties
(i) Market Disruption (Print Media)
Maintaining profitability is increasingly challenging due to market disruption (i.e. shift from print media to digital/mobile) negatively affecting newspaper circulation and print advertising revenues giving rise to an increased need to achieve cost reductions to offset this contraction.
This is being managed through weekly management meetings, marketing budgets, customer relationship management and cost containment to protect and grow margins.
(ii) Digital Revenue Growth Risk
A failure to achieve anticipated growth in digital revenues, primarily due to the changes in the digital advertising market for publishers, could significantly impact revenue and profit targets and impede the strategic development of the Group.
Weekly and monthly Island of Ireland Publishing revenue/cost reporting, which includes Digital performance, is submitted to Group Finance to support monitoring of investment performance. Significant investment in people and technology to adapt to the shift to programmatic purchasing of display advertising has taken place over the past 12 months. In addition the Group continues to diversify digital revenue streams away from display advertising which is challenged.
(iii) Mergers and Acquisitions
A failure to identify, execute or properly integrate acquisitions, or other growth opportunities could impact on profit targets and impede the strategic development of the Group.
The Group have a mergers and acquisitions team which are supported by Executive management and external specialists where appropriate. All potential acquisitions are subject to an assessment to ascertain the value of the acquisition, and for strategic fit within the Group.
(iv) Cyber and Information Security
Maintaining adequate IT systems and infrastructure to support growth and development may be affected by:
-- accidental exposure or deliberate theft of sensitive information; -- loss of service or system availability; -- significant system changes or upgrades; and -- cybercrime.
IT standards and policies are subject to internal audit and external reviews annually to ensure they are in line with appropriate best practices. Cyber security reviews, including penetration testing and vulnerability assessments are performed throughout the year by specialist third party technical experts to provide independent assurance. Following an in depth cyber and security gap analysis in 2017, INM have hired an Information Security Advisor to bring focus and alignment to INM with respect to cyber security, information risk management and Data Management in order to reduce INM's exposure to security risks. Advancing INM's security posture is a high strategic priority for the INM Group.
(v) Data Protection Legislation
A breach in data protection legislation could lead to fines as well as reputational and operational damage to INM.
The Group have developed a General Data Protection Regulation ("GDPR") readiness programme with the assistance of a 3(rd) party specialist to ensure preparedness for when the new regulation becomes effective in May 2018. Since July 2017 all the Data Protection risks, and their action plans, have been logged within a data protection tool and a GDPR Steering Committee has been appointed to monitor its updates. A GDPR compliant Data Processor Agreement Template is used for new projects and the Data Protection team, developed as part of this programme, oversee its customisation.
NOTES TO THE FINANCIAL INFORMATION (continued)
1. Basis of Preparation of Financial Information under IFRS (continued)
Risks and Uncertainties (continued)
(vi) IT Disaster Recovery and Business Continuity
A significant loss of production capability during a disaster scenario could severely impact revenue and lead to increased costs.
Business continuity plans ("BCP") and IT disaster recovery plans ("DRP") are in place and tested throughout the year. These plans are subject to review on an annual basis by external specialists.
(vii) Talent Management/Succession Planning
A failure to attract, retain or develop high calibre talent and management throughout the Group could impact on the attainment of strategic objectives.
The Group maintains a constant focus on talent management with structured succession planning, people/management development and remuneration programmes in place.
(viii) Litigation
Libel action or other types of litigation taken against the INM Group or producing published content that lacks trust and credibility could result in financial loss or reputational damage.
Libel action claims are actively managed by Editorial senior management in conjunction with legal support. Collaborative reviews of articles prior to publishing between journalists and legal ensure Editorial Code of Practice is upheld. Rigorous investigations and disciplinary processes are carried out following any proven errors.
(ix) Economic and Geopolitical uncertainty
General economic conditions can positively or negatively affect the performance of the Group's businesses.
The main geographies which the Group are directly exposed to are the Republic of Ireland and Northern Ireland. Following the UK's vote to leave the EU, there is continued uncertainty surrounding the nature, timing and associated trade conditions of the UK exit. Given its proximity and close trading relationship with the Republic of Ireland, the UK's exit from the EU is certain to affect the Irish domestic economy.
INM executives monitor the macroeconomic and geopolitical environment by way of regular analysis of business performance through financial results to highlight early trends and impacts from economic and geopolitical uncertainty.
(x) Compliance with laws and regulations
Increasing regulation, including in the areas of Corporate Governance such as director's duties and director's compliance statement requires increased focus and resources to ensure the Group is compliant with all applicable laws and regulations. Failure to comply with all relevant laws and regulations could result in financial penalties and reputational damage.
The Group manages compliance with laws and regulations through the following:
-- Changes in laws and regulations are monitored and potential impacts discussed with relevant management team members, Board, or sub-committees as appropriate.
-- Professional services are retained to support the Group in key compliance areas, such as Tax, Corporate Governance and Company Secretarial duties.
-- Developments in the legal and regulatory landscape are reviewed by the Audit & Risk Committee.
-- Group-wide policies are implemented where required to address new legislation and regulation.
NOTES TO THE FINANCIAL INFORMATION (continued)
2. Revenue
An analysis of the Group's revenue for the year is as follows:
2017 2016
EURm EURm
---------------------------------------------------------- ------ ------
Newspaper advertising revenues 55.6 63.9
Online revenues 15.1 15.1
Revenue from sale of newspapers and magazines 87.7 95.8
Revenue from distribution/commercial printing activities 134.6 148.6
---------------------------------------------------------- ------ ------
293.0 323.4
---------------------------------------------------------- ------ ------
3. Segmental Reporting
A number of operating activities are aggregated into one operating segment on the basis that they exhibit similar long-term financial performance as they have similar economic characteristics and the activities are similar in each of the following respects:
-- the nature of the products and services; -- the nature of the production processes; -- the type or class of customer for their products and services; and -- the methods used to distribute their products or provide their services.
The Chief Operating Decision Maker ("CODM") reviews and considers management information in respect of the Island of Ireland Publishing operating segment. The key performance measure, that is reviewed for this segment is operating profit/(loss) before exceptional items. Exceptional items are reviewed at Group level across different categories and appear separately from the key performance measure reviewed by the CODM.
Interest income and expense, share of results of associates and joint ventures and taxation were reviewed and considered by the CODM at Group level only.
The Group continued to report its revenues and operating profit before exceptional items by geographical areas with a further analysis of the geographical areas by class of business also provided.
NOTES TO THE FINANCIAL INFORMATION (continued)
3. Segmental Reporting (continued)
Operating Profit/(Loss)
Revenue (3(rd) Party) (Before Exceptional Items)
-------------------------------- ------------------------------ ----------------------------------
2017 2017 2016 2016 2017 2017 2016 2016
EURm EURm EURm EURm EURm EURm EURm EURm
-------------------------------- ------ ------ ------ ------ -------- ------- ------- ------
Island of Ireland - Publishing 293.0 323.4 36.3 46.6
Central Costs - - (8.8) (6.4)
-------------------------------- ------ ------ ------ ------ -------- ------- ------- ------
Total operations 293.0 323.4 27.5 40.2
Profit (including exceptionals)
2017 2016
EURm EURm
------------------- ---------------
Total operating profit before exceptional items 27.5 40.2
Operating exceptionals (12.0) 12.0
Share of results of associates and joint ventures (including exceptionals) 0.8 1.2
Net finance income (including exceptionals) 0.1 1.8
Taxation charge (including exceptionals) (3.9) (4.9)
Profit for the year (including exceptionals) 12.5 50.3
------------------- ---------------
NOTES TO THE FINANCIAL INFORMATION (continued)
4. Exceptional Items
Exceptional items are those items of income and expense that the Group considers are material and/or of such a nature that their separate disclosure is relevant to a better understanding of the Group's financial performance.
2017 2016
EURm EURm
----------------------------------------- --------- --------- ---------
Included in profit/(loss) before
taxation are the following:
Restructuring credit (i) 0.7 13.8
Impairments (ii) (12.7) (1.8)
----------------------------------------- --------- --------- -------
(12.0) 12.0
Share of associates' and joint
ventures' exceptional items (net (iii) (0.1) -
of tax and non--controlling interests)
Exceptional finance income (note
6) (iv) - 2.9
Exceptional finance expense (note
6) (v) - (1.5)
----------------------------------------- --------- --------- -------
(12.1) 13.4
Exceptional tax charge (note
7) (vi) - (3.3)
----------------------------------------- --------- --------- -------
Exceptional items net of taxation (12.1) 10.1
---------------------------------------------------- --------- -------
Total - exceptional items net
of taxation and non-controlling
interests* (12.1) 10.1
---------------------------------------------------- --------- -------
* Of the exceptional expense in 2017 of EUR12.1m, EUR3.9m is shown as an exceptional expenditure outflow in the Group Cash Flow Statement and primarily relates to redundancy and restructuring costs. Of the exceptional gain of EUR10.1m in 2016, EUR8.2m is shown as an exceptional expenditure outflow in the Group Cash Flow Statement and primarily relates to redundancy and miscellaneous restructuring costs (proceeds received from the sale of property, plant and equipment are disclosed separately in the Group Cash Flow Statement).
(i) 2017
Primarily relates to the following:
(a) A retirement benefits accounting adjustment of EUR2.9m relating to the finalisation of the de-recognition of two of the Group's Republic of Ireland defined benefit schemes on 7th November 2016; (b) A gain of EUR1.0m in relation to the release of an onerous dilapidations provision; (c) A charge of EUR1.5m relating to a severance payment to the former CEO;
(d) A charge of EUR1.2m related to miscellaneous restructuring costs, primarily redundancy costs in the Island of Ireland; and
(e) A charge of EUR0.5m for acquisition related expenses.
2016
Primarily relates to the following:
(a) A retirement benefits accounting adjustment of EUR11.8m (see note 11 for further information) with EUR0.4m of related professional fees. In 2016, the reduction in shareholders' equity attributable to the INIL and MSL defined benefit pension plans amounted to approximately EUR6 million mainly comprising a deficit on re-measurement of the defined benefit liabilities in the period from 1 January to 7 November of EUR17.6 million recognised in OCI and a credit to the Group Income Statement of EUR11.8 million on de-recognition of the defined benefit plans on 7 November 2016;
(b) A gain on the disposal of property, plant and equipment in the Island of Ireland of EUR5.8m;
(c) A gain of EUR0.6m for a currency translation adjustment due to the disposal of two Australian subsidiaries;
(d) A charge of EUR3.3m related to miscellaneous restructuring costs, primarily redundancy costs in the Island of Ireland; and
(e) A charge of EUR0.7m (of which EUR0.2m related to Digital Odyssey Limited) for acquisition related expenses.
NOTES TO THE FINANCIAL INFORMATION (continued)
4. Exceptional Items (continued)
(ii) 2017
A charge of EUR12.7m relating to the impairment of the Belfast Telegraph masthead (see note 14).
2016
A charge of EUR1.8m relating to miscellaneous impairments and write-offs of property, plant and equipment in the Island of Ireland to its recoverable amount, primarily as a result of a review of the distribution business. The impairment amount was quantified by the use of a third party valuation report.
(iii) 2017
The share of associates' and joint ventures' exceptional items (net of tax and non-controlling interests) charge of EUR0.1m relates to redundancies in Independent Star Limited.
(iv) 2016
Relates to a gain arising from the remeasurement to fair value of the Group's pre-existing 50% interest in Digital Odyssey Limited following the acquisition of the remaining 50% of the shares and voting rights in that entity (see note 17).
(v) 2016
Relates to a charge of EUR1.5m for the write down of two available-for-sale financial assets deemed not recoverable.
(vi) 2017
The exceptional tax charge of EURnil includes a reduction in the deferred tax liability of EUR2.2m following the impairment of intangible assets offset by a related reduction in the Group's deferred tax amount of EUR2.2m. Exceptional tax in 2017 also relates to a deferred tax charge of EUR0.4m due to the retirement benefits accounting adjustment relating to the de-recognition of two of the Group's Republic of Ireland defined benefit schemes on 7th November 2016 and a current tax credit of EUR0.4m arising on exceptional expenses in the Republic of Ireland.
2016
The exceptional tax charge in 2016 primarily relates to a tax charge of EUR2.1m arising on the release of a deferred tax asset (see note 15 for further information), a tax charge of EUR1.5m arising due to the retirement benefit accounting adjustment (see note 11 for further information) and a tax credit of EUR0.3m arising on exceptional expenses in the Republic of Ireland.
5. Fair Value
The fair values of quoted available-for-sale financial assets and derivative financial instruments are measured using market values. Unquoted available-for-sale financial assets and derivatives are measured using valuation techniques. The carrying amount of non interest bearing financial assets and financial liabilities and cash and cash equivalents approximates their fair values. The Group has not disclosed the fair value of certain financial instruments such as other payables, short-term receivables and short term payables because their carrying amounts are a reasonable approximation of fair value.
The available-for-sale financial assets of EUR0.2m (2016: EUR0.2m) are measured at Level 3 of the fair value hierarchy.
The derivative financial instruments - cash flow hedges of EUR0.1m (2016: EUR0.1m) are measured at Level 2 of the fair value hierarchy.
NOTES TO THE FINANCIAL INFORMATION (continued)
6. Net Finance Income/(Costs)
2017 2016
EURm EURm
---------------------------------------- ----- -----
Finance income 0.1 0.4
Finance costs - -
---------------------------------------- ----- -----
Net finance income (before exceptional
finance items) 0.1 0.4
Net exceptional finance income (note
4) - 1.4
---------------------------------------- ----- -----
Net finance income 0.1 1.8
---------------------------------------- ----- -----
The 2017 net exceptional finance income was EURnil. The 2016 net exceptional finance income of EUR1.4m related to a gain of EUR2.9m arising from the remeasurement to fair value of the Group's pre-existing 50% interest in Digital Odyssey Limited following the acquisition of the remaining 50% of the shares and voting rights in that entity and a charge of EUR1.5m for the write down of two available-for-sale financial assets deemed not recoverable.
7. Taxation
(a) Amounts recognised in profit or loss
2017 2016
EURm EURm
---------------------------------------- ------ --------
Current tax:
Current year - 2.0
Adjustment for prior year (0.2) (1.1)
---------------------------------------- ------ --------
(0.2) 0.9
---------------------------------------- ------ --------
Deferred tax:
Origination and reversal of temporary
differences 1.8 0.3
Release of deferred tax asset on
defined benefit schemes 0.1 7.7
Release/(recognition) of deferred
tax asset arising on provision for
defined contribution scheme payments 2.0 (6.2)
Charge in respect of tax losses 0.2 -
Release of deferred tax asset arising
from a change in tax rates - 0.1
Release of deferred tax asset arising
from a change in accounting estimate - 2.1
---------------------------------------- ------ --------
4.1 4.0
---------------------------------------- ------ --------
Taxation charge 3.9 4.9
---------------------------------------- ------ --------
(b) Amounts recognised in Other Comprehensive Income
2017 2016
EURm EURm
-------------------------------------------- -------- ------
Deferred tax (charge)/credit on retirement
benefit obligation remeasurements (0.2) 2.6
-------------------------------------------- -------- ------
NOTES TO THE FINANCIAL INFORMATION (continued)
7. Taxation (continued)
(c) Reconciliation of effective tax rate
The total tax charge for the year is different from the standard rate of Corporation Tax in Ireland of 12.5%
(2016: 12.5%). The differences are explained below:
2017 2016
EURm EURm
------------------------------------------ ------ ------
Profit before taxation 16.4 55.2
Share of results of associates and
joint ventures (0.8) (1.2)
------------------------------------------ ------ ------
Profit of Company and subsidiary
undertakings before taxation 15.6 54.0
------------------------------------------ ------ ------
Profit of Company and subsidiary
undertakings before taxation multiplied
by standard rate of Corporation
Tax in Ireland of 12.5% (2016: 12.5%) 1.9 6.7
Effects of:
Release of deferred tax asset arising
from a change in tax rates - 0.1
Exceptional items - 0.1
Release/(recognition) of deferred
tax asset 2.0 (0.1)
Adjustment in respect of prior periods (0.2) (1.1)
Other differences (0.1) (2.9)
Release of deferred tax asset arising
from a change in accounting estimate - 2.1
Unrecognised tax losses 0.3 -
----------------------------------------- ------ ------
3.9 4.9
----------------------------------------- ------ ------
For further information on movement in deferred tax in 2017, see note 15.
Within the total tax charge of EUR3.9m (2016: charge of EUR4.9m), a net charge of EURnil (2016: net charge of EUR3.3m) is classified as exceptional tax.
The exceptional tax charge of EURnil includes a reduction in the deferred tax liability of EUR2.2m following the impairment of intangible assets offset by a related reduction in the Group's deferred tax amount of EUR2.2m. Exceptional tax in 2017 also relates to a deferred tax charge of EUR0.4m due to the retirement benefits accounting adjustment relating to the de-recognition of two of the Group's Republic of Ireland defined benefit schemes on 7th November 2016 and a current tax credit of EUR0.4m arising on exceptional expenses in the Republic of Ireland.
There is inherent uncertainty surrounding the UK's exit from the EU and the impact on tax laws and rates. The directors have assessed and have not identified any significant tax matters impacting the financial statements arising from the UK's exit from the EU.
NOTES TO THE FINANCIAL INFORMATION (continued)
8. Earnings Per Share
2017 2016
EURm EURm
Total Total
---------------------------- ---------------- ----------------
Profit attributable
to ordinary shareholders
Profit attributable
to the equity holders
of the Company (basic
and diluted) 12.5 50.3
Exceptional items
(note 4) 12.1 (10.1)
---------------------------- ---------------- ----------------
Profit before exceptional
items attributable
to the equity holders
of the Company (adjusted) 24.6 40.2
---------------------------- ---------------- ----------------
2017 2016
Weighted average
number of shares
Weighted average
number of shares
outstanding during
the year (excluding
5,597,077 treasury
shares) 1,386,547,375 1,386,547,375
Impact of share options - 3,508,772
---------------------------- ---------------- ----------------
Diluted number of
shares 1,386,547,375 1,390,056,147
Basic earnings per
share 0.9c 3.6c
---------------------------- ---------------- ----------------
Basic earnings per
share before exceptional
items 1.8c 2.9c
---------------------------- ---------------- ----------------
Diluted earnings
per share 0.9c 3.6c
---------------------------- ---------------- ----------------
Diluted earnings
per share before
exceptional items 1.8c 2.9c
---------------------------- ---------------- ----------------
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Share options are the Company's only category of dilutive potential ordinary shares.
At 31 December 2017: 518,081 options (2016: 535,098) were excluded from the diluted weighted average number of ordinary shares calculation because their effect is anti-dilutive.
Employee share options are contingently issuable shares because of the requirement to satisfy specific performance and service conditions. These contingently issuable shares are included in the computation of diluted earnings per ordinary share to the extent that the conditions would have been satisfied as at the end of the reporting period if this was the vesting date.
At 31 December 2017 there were 3,583,764 share options granted on 1 January 2016 under the INM Long Term Incentive Plan 2014 that are contingently issuable.
Basic and diluted earnings per share before exceptional items are presented in order to give a better understanding of the Group's underlying financial performance.
NOTES TO THE FINANCIAL INFORMATION (continued)
9. Investments in Associates and Joint Ventures
2017 2016
EURm EURm
------------------ ------ ------
Associates
At 1 January 0.9 0.6
Share of results 0.1 0.3
Dividends (0.1) -
------------------ ------ ------
At 31 December 0.9 0.9
------------------ ------ ------
2017 2016
EURm EURm
-------------------------------- ------ ------
Joint Ventures
At 1 January 0.6 1.0
Purchases of/advances to joint
ventures - 0.3
Disposal of joint ventures* - (0.6)
Share of results 0.7 0.9
Dividends (0.5) (1.0)
At 31 December 0.8 0.6
-------------------------------- ------ ------
* On 13 May 2016, the Group acquired the remaining 50% of the shares and voting interests in Digital Odyssey Limited (trading as CarsIreland.ie). As a result, the Group is deemed to have disposed of its 50% interest in the joint venture upon acquiring 100% of the shares and obtaining control of Digital Odyssey Limited.
(i) Carrying Amount
2017 2016
EURm EURm
---------------- ------ ------
Associates 0.9 0.9
Joint Ventures 0.8 0.6
---------------- ------ ------
1.7 1.5
---------------- ------ ------
The reporting year end dates of the Group's associates and joint ventures are the same as the Group's reporting year end date.
NOTES TO THE FINANCIAL INFORMATION (continued)
9. Investments in Associates and Joint Ventures (continued) (ii) Associates
The closing balance for year end 31 December 2017 for associates of EUR0.9m relates to Click & Go (2016: EUR0.9m).
(iii) Joint Ventures
Summarised financial information in respect of the Group's share of its joint ventures (The Star and Reachmount) is set out below:
2017 2016
EURm EURm
---------------------------------- ------ ------
Group
Current assets 4.8 4.5
Non-current assets 0.4 0.6
Current liabilities (3.6) (3.7)
Non-current liabilities - (0.3)
---------------------------------- ------ ------
Net Assets (100)% 1.6 1.1
---------------------------------- ------ ------
Group's share 0.8 0.6
Group's carrying amount of joint
ventures 0.8 0.6
---------------------------------- ------ ------
Revenue 19.3 19.1
---------------------------------- ------ ------
Profit 1.4 1.8
---------------------------------- ------ ------
Total comprehensive income 1.4 1.8
---------------------------------- ------ ------
Group's share of joint ventures'
total comprehensive income 0.7 0.9
---------------------------------- ------ ------
10. Share Capital and Share Premium
2017 2016
EURm EURm
---------------------------------- ------ ------
Group and Company
Authorised:
7,000,000,000 ordinary shares of
EUR0.01 each 70.0 70.0
Issued and fully paid:
1,392,144,452 ordinary shares of
EUR0.01 each 13.9 13.9
13.9 13.9
---------------------------------- ------ ------
At the EGM during 2016 the Company, in accordance with Section 83(1)(f)(ii) of the Companies Act 2014, reduced the authorised share capital of the Company from EUR259,045,221.72 to EUR70,000,000 by the cancellation of 556,015,358 deferred shares of EUR0.34 each, which had not been taken or agreed to be taken by any person.
NOTES TO THE FINANCIAL INFORMATION (continued)
11. Retirement Benefit Obligations
The Group operates defined benefit and defined contribution pension schemes. The pension scheme assets are held in separate trustee administered funds. A summary of the Group's net liabilities in respect of these schemes is set out below:
2017 2017 2017 2016 2016 2016
ROI NIRE Total ROI NIRE Total
EURm EURm EURm EURm EURm EURm
-------------- -------------- -------------- -------------- -------------- -------------- --------------
Net defined
benefit
pension
liability (7.9) (29.8) (37.7) (9.9) (31.8) (41.7)
Present
value of
defined
contribution
scheme
provision (39.8) - (39.8) (55.6) - (55.6)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
Retirement
Benefit
Obligations (47.7) (29.8) (77.5) (65.5) (31.8) (97.3)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
Group Income Statement
The amounts recognised in the Group Income Statement in respect of all pension schemes are as follows:
2017 2016
EURm EURm
-------------------------------------------------------------- ------------- -------------
* Net interest/administration cost relating to defined
benefit pension schemes (excluding exceptional items) 1.1 2.3
* Interest cost on defined contribution pension scheme
liabilities (excluding exceptional items) 0.1 0.1
* Current service cost relating to defined contribution
pension schemes (excluding exceptional items) 2.8 2.9
Total recognised in Group Income
Statement (excluding exceptional
items)* 4.0 5.3
Accounting adjustments on settlements
(all schemes)** (2.9) (11.8)
-------------------------------------------------------------- ------------- -------------
Total recognised in Group Income
Statement (including exceptional
items) 1.1 (6.5)
-------------------------------------------------------------- ------------- -------------
* Charged to administration expenses.
** Credited to exceptional items in the Group Income Statement.
NOTES TO THE FINANCIAL INFORMATION (continued)
11. Retirement Benefit Obligations (continued)
Group Other Comprehensive Income
Remeasurements recognised in Other Comprehensive Income are as follows:
2017 2016
EURm EURm
------------------------------------------- ------------- -------------
Return on scheme assets excluding
interest income - defined benefit
pension schemes (0.7) (9.5)
Experience variations - defined benefit
pension schemes 1.2 (1.7)
Actuarial loss from changes in financial
assumptions - defined benefit pension
schemes 0.3 43.1
Actuarial gain from changes in demographic
assumptions - defined benefit pension
schemes (3.2) -
Actuarial loss from changes in financial
assumptions - defined contribution
pension schemes - 0.2
------------------------------------------- ------------- -------------
Total (gain)/loss included in Other
Comprehensive Income* (2.4) 32.1
------------------------------------------- ------------- -------------
*Of the EUR32.1m remeasurement losses in 2016, EUR17.6m relates to remeasurement losses in the two Republic of Ireland defined benefit pension schemes into which the Group ceased making contributions with effect from 7 November 2016.
Cumulatively since transition to IFRS on 1 April 2004, EUR217.0 million has been recognised as a charge in the Group Statement of Comprehensive Income in respect of defined benefit pension schemes.
Defined Benefit Pension Schemes
The discount rates used were as follows:
2017 2016
------------ ----- -----
ROI schemes 2.15% 1.90%
NIRE scheme 2.50% 2.70%
------------ ----- -----
NOTES TO THE FINANCIAL INFORMATION (continued)
11. Retirement Benefit Obligations (continued)
Defined Benefit Pension Schemes (continued)
Movement in net defined benefit (asset)/liability
The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit (asset)/liability and its components.
Defined Benefit Fair Value of Net defined benefit
Obligation plan assets (asset) liability
2017 2016 2017 2016 2017 2016
EURm EURm EURm EURm EURm EURm
At 1 January 110.0 215.5 (68.3) (135.2) 41.7 80.3
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
Included in
Group Income
Statement
Accounting adjustment
on settlements - (61.8) - - - (61.8)
Interest cost/(income) 2.7 5.7 (1.7) (3.8) 1.0 1.9
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
Administration
expenses - - 0.1 0.4 0.1 0.4
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
2.7 (56.1) (1.6) (3.4) 1.1 (59.5)
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
Included in
Group Other
Comprehensive
Income Statement
Remeasurements:
- experience
variations 1.2 (1.7) - - 1.2 (1.7)
- actuarial
loss from changes
in financial
assumptions 0.3 43.1 - - 0.3 43.1
- actuarial
gain from changes
in demographic
assumptions (3.2) - - - (3.2) -
- return on
plan assets
excluding
interest income - - (0.7) (9.5) (0.7) (9.5)
Exchange (gain)/loss (3.3) (10.5) 2.0 7.2 (1.3) (3.3)
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
(5.0) 30.9 1.3 (2.3) (3.7) 28.6
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
Other
Contributions
by employers
relating to
deficit repair
plan - - (1.4) (7.7) (1.4) (7.7)
Benefits paid (3.5) (3.7) 3.5 3.7 - -
Settlement payments - (76.6) - 76.6 - -
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
(3.5) (80.3) 2.1 72.6 (1.4) (7.7)
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
At 31 December 104.2 110.0 (66.5) (68.3) 37.7 41.7
----------------------- ------------- ------------- ------------- ------------- -------------- -------------
NOTES TO THE FINANCIAL INFORMATION (continued)
11. Retirement Benefit Obligations (continued)
Defined Benefit Pension Schemes (continued)
Movement in net defined benefit (asset) liability (continued)
The accounting adjustment on settlements of EUR61.8 million in 2016 reflected the value of the IAS19 defined benefit obligation settled in excess of the value of the assets at the date of cessation of contributions to two of the Group's Republic of Ireland defined benefit schemes (i.e. 7 November 2016).
Defined Contribution Pension Schemes
The defined contribution provision recognised by the Group consists of contributions in respect of two groups of current and former employees in the Republic of Ireland - a group of employees who opted to transfer their legacy defined benefit entitlements to the Company's defined contribution scheme and the non-pensioner members of the two defined benefit schemes which wound up in July 2017.
The contributions will be of the same form as the expected future payments the Company would have made to the defined benefit schemes in respect of these members under the terms of the Funding Proposal.
The discount rate used in the calculation of the provision as at 31 December 2017 was 0.06% (0.06% in 2016).
The following table shows the movement in the present value of defined contribution scheme liabilities over the year:
2017 2017 2017 2016 2016 2016
ROI NIRE Total ROI NIRE Total
EURm EURm EURm EURm EURm EURm
----------------------- ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 55.6 - 55.6 5.8 - 5.8
Interest Cost 0.1 - 0.1 - - -
Cash Paid (12.7) - (12.7) (0.4) - (0.4)
Change in provision (2.9) - (2.9) 50.0 - 50.0
Administration
expenses (0.3) - (0.3) - - -
Actuarial loss
from changes
in
financial assumptions - - - 0.2 - 0.2
----------------------- ------------ ------------ ------------ ------------ ------------ ------------
At 31 December 39.8 - 39.8 55.6 - 55.6
----------------------- ------------ ------------ ------------ ------------ ------------ ------------
12. Other items
(a) Statement of Comprehensive Income
A negative currency translation adjustment of EUR0.5m (all of which related to subsidiaries) has been recognised in the Group Statement of Comprehensive Income as at 31 December 2017 (2016: a net loss of EUR3.7m (all of which relates to subsidiaries)). The negative currency translation adjustment has arisen due to the weakening of the Sterling Pound exchange rate at 31 December 2017 compared to the rates at 31 December 2016 used in the translation of the Group's investments in subsidiaries with a functional currency different to that of the Parent Company.
(b) Property, Plant and Equipment
The carrying amount of the Group's property, plant and equipment decreased by EUR1.5m from EUR41.6m at 31 December 2016 to EUR40.1m at 31 December 2017. This decrease is driven primarily by a depreciation charge of EUR3.4m, disposals of EUR0.4m and a negative foreign exchange movement of EUR0.3m, somewhat offset by additions of EUR1.7m and a transfer from inventories of EUR0.9m.
NOTES TO THE FINANCIAL INFORMATION (continued)
13. Cash and Cash Equivalents
As of 31 December 2017, the Group held no debt and had cash and cash equivalents of EUR91.5m (EUR84.8m as at 31 December 2016).
14. Intangible Assets
Impairment Testing
The Group's indefinite life intangible assets (including goodwill) are tested annually for impairment or whenever there is an indication of impairment. When testing for impairment, the recoverable amounts for the Group's cash-generating units ("CGU"s) are measured at their value in use (except for the Island of Ireland Publishing CGU) by discounting future expected cash flows. These calculations use cash flow projections for five years based on management approved forecasts which reflect management's current experience and future expectations of the markets in which the CGU operates. In respect of the Island of Ireland Publishing CGU, the recoverable amount of this CGU was based on fair value less costs of disposal, estimated using discounted cashflows. The fair value measurement was categorised as a level 3 fair value based on the inputs used in the value in use calculations, except management have also factored in profit enhancement initiatives in arriving at the cash flow projections for the five years 2018 to 2022 inclusive.
There was an impairment charge of EUR12.7m recognised in 2017 in relation to the Northern Ireland - Belfast Publishing CGU. This arose primarily due to the reduction in forecasted EBITDA as a result of advertising and circulation revenue declines.
The key assumptions used in determining the value in use are:
i) Forecasted cash flows
Forecasted cash flows are based on budgeted EBITDA as adjusted for expenditure necessary to maintain the asset or CGU at its current standard of performance. The budgeted EBITDA results are based on the approved 2018 budget and projections for 2019 to 2022. These calculations use cash flow projections for five years based on management approved forecasts which reflect management's current experience and future expectations of the markets in which the CGU operates.
ii) Terminal value multiple
A terminal value multiple of five was applied to positive year five EBITDA projections (2016: a terminal value multiple of five) in the value in use calculations.
iii) Discount rate
For the purpose of impairment testing, pre-tax discount rates ranging from 13.1% to 16.0% (from Republic of Ireland to Northern Ireland) were applied to the CGUs (2016: 12.4% - 15.2%).
The Group's intangible assets were EUR48.2m at 31 December 2016 and EUR33.6m at 31 December 2017 (includes EUR7.3m of software (2016: EUR8.6m)). The decrease of EUR14.6m is primarily driven by an impairment of EUR12.7m, an amortisation charge of EUR2.9m and a negative FX movement of EUR0.4m partially offset by additions of EUR1.4m.
A total of three CGUs (2016: three CGUs) have been identified and these are analysed below:
2017 2017 2017 2016
------------------------------------------ -------------- ----------- -------- --------
Mastheads
and
Other Goodwill Total Total
Intangibles* EURm EURm EURm
EURm
------------------------------------------ -------------- ----------- -------- --------
Northern Ireland - Belfast
Publishing (net book amount) 1.3 - 1.3 14.4
Island of Ireland - including
Irish Independent, Sunday Independent,
The Herald, Sunday World and
Sligo Champion Publishing (net
book amount) 5.3 14.0 19.3 19.5
Island of Ireland - Newspread
Distribution (net book amount) - 5.7 5.7 5.7
At 31 December 2017 6.6 19.7 26.3 39.6
------------------------------------------ -------------- ----------- -------- --------
* Other Intangibles include a closing balance at 31 December 2017 of EUR1.1m in relation to brand and customer listings which are amortised.
NOTES TO THE FINANCIAL INFORMATION (continued)
14. Intangible Assets (continued)
Supplementary Non-IFRS Information
The Statement of Financial Position reports the carrying value of newspaper mastheads at their acquired cost. Where these assets have been acquired through a business combination, cost will be the fair value in acquisition accounting. The value of internally generated newspaper mastheads or post-acquisition revaluations are not permitted to be recognised in the Statement of Financial Position in accordance with IFRS and, as a result, no values for certain of the Group's internally generated newspaper mastheads (e.g. three of the main Irish titles, the Irish Independent, the Herald and the Sunday Independent) are reflected in the Statement of Financial Position.
The Directors are of the view that the Group has many other intangible assets which have substantial value that are not reflected on the Group's Statement of Financial Position. This is because these intangible assets are carried in the Group's Statement of Financial Position at a nil value or a value which is much less than their recoverable amount. The Directors are of the view that if these intangible assets were allowed to be carried on the Group's Statement of Financial Position then the Group's intangible assets would be greater than currently reported.
15. Analysis of Deferred Taxation Balances
Retirement
Capital Benefit Tax
Allowances Obligations Losses Other Total
EURm EURm EURm EURm EURm
------------------------- --------------------- ------------- --------- -------- --------
Group
At 1 January
2016 6.4 7.9 0.4 (1.4) 13.3
(Charge)/credit
to Income Statement (1.9) (2.3) - 0.2 (4.0)
Recognised
in other comprehensive
income* - 2.6 - - 2.6
Exchange movements (1.1) - (0.1) - (1.2)
------------------------- --------------------- ------------- --------- -------- --------
Total (charge)/credit
for the year (3.0) 0.3 (0.1) 0.2 (2.6)
------------------------- --------------------- ------------- --------- -------- --------
At 31 December
2016 3.4 8.2 0.3 (1.2) 10.7
Charge to Income
Statement (1.8) (2.1) (0.2) - (4.1)
Recognised
in other comprehensive
income* - (0.2) - - (0.2)
Exchange movements (0.1) - - - (0.1)
------------------------- --------------------- ------------- --------- -------- --------
Total charge
for the year (1.9) (2.3) (0.2) - (4.4)
------------------------- --------------------- ------------- --------- -------- --------
At 31 December
2017 1.5 5.9 0.1 (1.2) 6.3
------------------------- --------------------- ------------- --------- -------- --------
* Tax effect of retirement benefit obligation remeasurements.
Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised.
In particular, significant judgement is used when assessing the extent to which deferred tax assets should be recognised, with consideration given to the timing and level of future taxable income in the relevant tax jurisdiction. The Group has tax losses, capital allowances and tax credits in relation to retirement benefit obligations available that have the potential to reduce tax payments in future years.
NOTES TO THE FINANCIAL INFORMATION (continued)
15. Analysis of Deferred Taxation Balances (continued)
Deferred tax assets have been recognised in relation to these to the extent that their recovery is probable having regard to the projected future taxable profits of the relevant companies. Deferred tax is measured on an undiscounted basis in the periods in which the asset is expected to be realised or the liability expected to be settled, based on tax rates and tax laws substantively enacted at the reporting date.
The net deferred tax asset at 31 December 2017 was EUR6.3m and the Group estimates that the majority of this will be settled/recovered more than 12 months after the reporting date.
The above net deferred tax balance is reflected in the Statement of Financial Position as follows:
2017 2016
EURm EURm
------------------------------- ------ ------
Deferred taxation assets 7.7 12.1
Deferred taxation liabilities (1.4) (1.4)
------------------------------- ------ ------
6.3 10.7
------------------------------- ------ ------
Analysis of deferred taxation assets:
2017 2016
EURm EURm
--------------------------------- ------ ------
Retirement benefit obligations
- defined benefit schemes 1.0 1.3
Retirement benefit obligations
- defined contribution schemes 4.9 6.9
Capital allowances - property,
plant and equipment 1.5 3.4
Tax losses 0.1 0.3
Other 0.2 0.2
--------------------------------- ------ ------
7.7 12.1
--------------------------------- ------ ------
Analysis of deferred taxation liabilities:
2017 2016
EURm EURm
------- ------ ------
Other (1.4) (1.4)
------- ------ ------
(1.4) (1.4)
------- ------ ------
The decrease of EUR4.4m in the Group's net deferred tax asset during the year primarily relates to the movement on retirement benefit obligations, capital allowances and tax losses (2016: The decrease of EUR2.6m in the Group's net deferred tax asset related to the change in accounting estimate of EUR2.1m, the retirement benefits accounting adjustment of EUR1.5m, and a negative foreign exchange movement of EUR1.2m; somewhat offset by a movement of EUR2.6m on the actuarial increase in the pension liability recognised through other comprehensive income).
NOTES TO THE FINANCIAL INFORMATION (continued)
15. Analysis of Deferred Taxation Balances (continued)
The Directors have estimated the recoverability of the Group's deferred tax assets based on their current assessment of the availability of future taxable profits against which to utilise the deferred tax assets. The Directors determine that capital allowances and losses should be available to shelter a significant portion of the projected profit in the future periods. The Group recognised deferred tax assets projected to be realised in the timescale within which the Group believes that it can assess the likelihood of its profits arising as being more likely than not. The deferred tax assets recognised represent approximately five years (2016: five years) of taxable profits in the relevant entities.
The Group has unrecognised tax losses as at 31 December 2017 of EUR259.2m (2016: EUR254.8m) which have a tax value of EUR41.1m (2016: EUR40.1m). In addition the Group has unrecognised available capital allowances as at 31 December 2017 of EUR33.9m (2016: EUR31.8m) which have a tax value of EUR5.8m (2016: EUR5.4m). There is no expiry date applicable to these unrecognised tax losses or available capital allowances. In Northern Ireland, the Group has an unrecognised benefit from future retirement benefits of EUR29.8m (2016: EUR31.8m) which has a tax value of EUR5.1m (2016: EUR5.4m).
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Deferred income tax has not been recognised for withholding and other taxes that may be payable on the unremitted earnings of certain subsidiaries, associates and joint ventures, as the timing of the reversal of these temporary differences is controlled by the Group and it is probable that these temporary differences will not reverse in the foreseeable future.
As at 31 December 2017, no unremitted earnings were available in the Group which could have been repatriated to Ireland, which would have given rise to such a deferred tax liability.
NOTES TO THE FINANCIAL INFORMATION (continued)
16. Share-based payment
The Company operates the following share based schemes which provides for the grant of share options:
(a) INM Employee Share Scheme 2008; and
(b) INM Long Term Incentive Plan 2014.
The Group recognised total expenses of EURnil (2016: EURnil) in the Group Income Statement related to equity-settled share based payment transactions in respect of the INM Employee Share Scheme 2008.
The Group recognised total expenses of EURnil (2016: EUR0.6m) in the Group Income Statement related to equity-settled share based payment transactions in respect of the INM Long Term Incentive Plan 2014. This comprised a EUR0.5m share based payment charge in the current year offset by a EUR0.5m credit relating to the non-vesting at 31 December 2017 of the Earnings Per Share ("EPS") element of the share options granted on 1 January 2015. In addition the Group booked a EUR0.5m (2016: EURnil) credit in retained losses relating to the non-vesting at 31 December 2017 of the Total Shareholder Return ("TSR") element of the share options granted on 1 January 2015.
(a) INM Employee Share Scheme 2008
Eligibility was restricted to certain employees who agreed to amend the terms and conditions of their employment to provide for a permanent reduction in salary (effective 1 January 2009). All options are exercisable within ten years from the date they were granted (23 January 2009). No other performance conditions attach to these options.
The following table shows the number of options outstanding under the INM Employee Share Scheme 2008 as at 31 December 2017:
2017
--------------------- ---------------------------------
Weighted
Number average
of exercise
share price Value
options EUR EUR
--------------------- ---------- ---------- ---------
Outstanding at the
beginning of the
year 535,098 1.321 706,865
Forfeited/cancelled
during the year (17,017) 1.321 (22,479)
---------- ---------- ---------
Outstanding at the
end of the year 518,081 1.321 684,386
---------- ---------- ---------
No options have been exercised under this Plan to date. The options outstanding at 31 December 2017 are exercisable at EUR1.321.
NOTES TO THE FINANCIAL INFORMATION (continued)
16. Share-based payment (continued)
(b) INM Long Term Incentive Scheme 2014
In June 2014, the Remuneration Committee proposed the introduction of a new share option scheme and this was approved by the shareholders at the AGM on 6 June 2014.
The following table shows the number of options outstanding under the INM Long Term Incentive Plan 2014 as at 31 December 2017:
2017 2016
--------------------- ------------------------------------------- ------------ ---------- -------------
Weighted Weighted
Number average Number average
of exercise Grant of exercise Grant
share price date share price date
options EUR fair options EUR fair
value value
EUR EUR
--------------------- --------------- ---------- -------------- ------------ ---------- -------------
Outstanding at
the beginning
of the year 13,650,637 0.01 1,875,409* 9,315,271 0.01 1,164,409*
Granted during
the year - - - 4,335,366 0.01 711,000*
Forfeited/cancelled
during the year** (10,066,873) 0.01 (1,287,672) - - -
--------------- ---------- -------------- ------------ ---------- -------------
Outstanding at
the end of the
year 3,583,764 0.01 587,737 13,650,637 0.01 1,875,409
--------------- ---------- -------------- ------------ ---------- -------------
* Total expense is recognised over a 3 year period.
** Includes 8,923,528 share options granted on 1 January 2015 which did not meet the vesting criteria at the end of the 3 year vesting period and therefore did not vest. The remaining 1,143,345 relates to share options which were forfeited in line with the rules of the 2014 Long Term Incentive Plan due to the employees leaving the service of the company during 2017.
There were no share options exercisable at year end. The share options have a vesting period of 3 years.
Expected volatility is based on the weighted average historic volatility over a period equal to the weighted average expected life. The market price of Ordinary Shares of EUR0.01 each was EUR0.09 at 31 December 2017 and ranged from EUR0.09 to EUR0.13 during the year.
On 1 January 2015 a grant under the scheme, with two separate and independent sets of vesting conditions, was made to certain employees. Holders of vested options were entitled to purchase shares at the nominal value of the share at the grant date. At 31 December 2017, the vesting criteria were not met and therefore none of the share options under this grant vested.
On 1 January 2016, a further grant on similar terms was offered to key management personnel and senior employees. 3,583,764 share options are outstanding at the end of the year in relation to this grant.
In late 2017 it was agreed that no grant would be issued in 2017.
All options are to be settled by physical delivery of shares. The terms and conditions and the main vesting criteria of the share options are set out in the tables as follows:
NOTES TO THE FINANCIAL INFORMATION (continued)
16. Share-based payment (continued)
(b) INM Long Term Incentive Scheme 2014 (continued)
Vesting Grant date/ Number Vesting conditions Contractual
criteria employees of instruments life of
entitled options
------------------ ----------------- ---------------- ------------------------ ------------
Total Shareholder On 1 Jan 4,461,764 3 years service 7 years
Return 2015 to certain (50% of from grant date
("TSR") employees. total and a sliding
criteria grant) TSR condition
(share price
growth and dividends
On 1 Jan of INM compared
2016 to certain 1,791,882 with companies
employees. (50% of in the FTSE 350
total Media Group)
grant)
- Below median:
0% of total grant
- Between median
and 75(th) percentile:
25% - 50% of
total grant pro
rata
- 75(th) percentile
or above: 50%
of total grant
------------------ ----------------- ---------------- ------------------------ ------------
Earnings On 1 Jan 4,461,764 3 years service 7 years
Per Share 2015 to certain (50% of from grant date
("EPS") employees. total and a sliding
criteria grant) EPS condition
(level that INM's
annualised EPS
On 1 Jan growth is in
2016 to certain 1,791,882 excess of the
employees. (50% of annualised change
total in CPI)
grant)
- Less than 5%:
0% of total grant
- Between 5%
and 10%: 20%
- 50% of total
grant pro rata
- Above 10%:
50% of total
grant
In addition,
the annualised
EPS growth must
be positive and
the average 30
day share price
at the end of
the arrangement
must be higher
than at the start
of the arrangement.
------------------ ----------------- ---------------- ------------------------ ------------
The fair value of services received in return for share options granted is based on the fair value of the share options granted, measured using the Black-Scholes model.
Measurement of grant date fair values
The following inputs were used in the measure of the fair value at grant date of the share-based payment arrangement.
Share option Share option
programme programme for
for certain certain employees
employees
-------------------------------- ------------- -------------------
2016 2015
-------------------------------- ------------- -------------------
Fair value at grant
date EUR0.164 EUR0.125
-------------------------------- ------------- -------------------
Share price at grant
date EUR0.169 EUR0.130
-------------------------------- ------------- -------------------
Exercise price EUR0.01 EUR0.01
-------------------------------- ------------- -------------------
Expected volatility
(weighted average volatility) 35% 39%
-------------------------------- ------------- -------------------
Vesting period 3 years 3 years
-------------------------------- ------------- -------------------
Expected dividends 0% 0%
-------------------------------- ------------- -------------------
Risk free interest rate
(based on German government
bonds) 0.21% 0.83%
-------------------------------- ------------- -------------------
Expected volatility is estimated taking into account historic average share price volatility.
NOTES TO THE FINANCIAL INFORMATION (continued)
17. Acquisitions
(a) Post Year End Acquisition
On 11 January 2018, the Group acquired the trading business and certain assets of Hegadon Limited (trading as Supreme Stationery). The business has been fully integrated into the existing Newspread stationery business unit.
i) Consideration transferred
The total consideration was EUR4.7m, which comprised EUR4.5m of cash and EUR0.2m of estimated contingent consideration. The contingent consideration payment will be determined by the trading performance in the 12 months following completion.
ii) Acquisition related costs
The Group incurred acquisition-related costs of EUR0.2m on legal fees and other transaction costs. These costs have been included in 'exceptional items'.
iii) Identifiable assets acquired
The following table summarises the recognised amounts of assets acquired at the date of acquisition.
EURm
Intangible assets 0.6
Business Contracts 0.3
Total identifiable assets
acquired 0.9
-----
iv) Goodwill
Goodwill arising from the acquisition has been recognised as follows.
EURm
Consideration transferred 4.7
Fair value of identifiable
assets (0.9)
------
Goodwill and other intangibles* 3.8
------
The principal factors contributing to the recognition of goodwill on the business combination include business reputation and supply chain expertise.
* The amounts recognised above are provisional amounts based on information available at the acquisition date. The Group expects to complete this acquisition accounting by 30 June 2018, including finalising any deferred tax liability to be booked in respect of this acquisition.
(b) Put Option
The Group booked a EUR0.4m liability in 2017 in respect of a put option over the non-controlling interest on a 51% owned subsidiary.
NOTES TO THE FINANCIAL INFORMATION (continued)
17. Acquisitions (continued)
(c) 2016 - Digital Odyssey Limited
On 13 May 2016, the Group acquired the remaining 50% of the shares and voting interests in Digital Odyssey Limited (trading as CarsIreland.ie). As a result of acquiring the remaining 50% shareholding, the Group obtained control of Digital Odyssey Limited.
There are clear synergies with INM's existing motoring features across print and digital. CarsIreland.ie is a prominent destination for drivers looking to sell their car or buy a new vehicle and enjoys significant visitor numbers. The site's online position fits well with INM's strategy for both its online and print titles.
i) Acquisition related costs
The Group incurred acquisition-related costs of EUR0.2m on legal fees and due diligence costs. These costs have been included in 'exceptional items'.
ii) Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
EURm
Intangible assets 1.7
Trade receivables 0.1
Cash and cash equivalents 0.5
Trade and other payables (0.2)
Total identifiable net
assets acquired 2.1
------
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Assets acquired Valuation technique
------------------ ------------------------------------------
Intangible The brands of EUR1.2m were valued
Assets using the relief-from-royalty
method. The relief-from-royalty
method considers the discounted
estimated royalty payments that
are expected to be avoided as
a result of the acquisition.
The customer list of EUR0.3m was
valued using the multi-period
excess earnings method. The multi-period
excess earnings method considers
the present value of net cash
flows expected to be generated
by the customer relationships,
by excluding any cash flows related
to contributory assets.
Other intangible assets of EUR0.2m
relate to software and were deemed
not to be material.
------------------ ------------------------------------------
Trade Receivables The trade receivables comprise
gross contractual amounts due
of EUR0.1m.
------------------ ------------------------------------------
Other Assets The carrying value of other assets
acquired equate to their fair
value.
------------------ ------------------------------------------ iii) Goodwill
Goodwill arising from the acquisition has been recognised as follows:
EURm
Consideration transferred
(in the form of cash) 3.5
Fair value of pre-existing
interest in Digital Odyssey
Limited 3.5
Fair value of identifiable
net assets (2.1)
------
Goodwill 4.9
------
NOTES TO THE FINANCIAL INFORMATION (continued)
17. Acquisitions (continued)
The remeasurement to fair value of the Group's pre-existing 50% interest in Digital Odyssey Limited resulted in a gain of EUR2.9m. This amount has been included in 'exceptional items'. The goodwill is attributable to synergies that will be realised through the Group's people, structures and business practices in acquiring the remaining 50% of Digital Odyssey Limited.
18. Contingencies
Litigation
Given the nature of the Group's business, from time to time, it is party to various legal proceedings. It is the opinion of the Directors that INM's share of the losses, if any, arising in connection with these matters will have no material adverse impact on the financial position of the Group.
19. Subsequent Events
In January 2018, the Group purchased the trading business and certain assets of Hegadon Limited following approval by the Competition and Consumer Protection Commission ("CCPC") (see note 17 for further information).
In March 2018, four new non-executive directors and a new Chairman were appointed by the Board.
There were no other events since the year end that would require disclosure or adjustment in the financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSUFAAFASEDD
(END) Dow Jones Newswires
March 09, 2018 02:00 ET (07:00 GMT)
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