Outcome of the Business Review December 2006


  • Trinity Mirror plc to focus on National newspaper titles and key Regional titles in Scotland, the North of England and Wales and UK digital assets
  • Sports division, including Racing Post, and regional titles in the Midlands and London and the South East to be sold
  • Adoption of new technology led operating model across Group to accelerate growth and reduce costs
  • Programme will deliver additional annualised cost savings of £20 million by 2008
  • The Board intends to at least maintain the current level of annual dividend per share

The Board intends to return to shareholders surplus capital arising from the disposals, net of related tax charges and such pension payments as are necessary

Commenting on the results of the comprehensive Business Review Sly Bailey, Group Chief Executive, said: "It has taken a great deal of hard work by everyone involved but I am very pleased we can now present a strategic plan for Trinity Mirror that, once delivered, will make us one of the most efficient and modern media groups in Europe.

"The proposed disposals will enable us to concentrate on the heart of the group and adopt a new, technology-led operating model that will ensure we serve our advertisers and readers better from a significantly lower cost base. The new integrated model will allow Trinity Mirror plc to develop as a multi-platform media business and capitalise on the enormous strengths we have in our core markets. Now this review has been completed we can move forward swiftly and turn our vision into a reality."

The Board of Trinity Mirror plc (the "Board") today announces the outcome of the review of the Group's businesses which was announced on 3 August 2006.

Background to the Business Review
Since 2003 the Trinity Mirror plc has significantly improved the underlying performance of its portfolio of businesses. The Group has been strengthened through a combination of investment, new launches and selected acquisitions and divestments. These include continuing investment in IT systems and printing presses, the acquisition of five digital businesses and the launch of more than 300 products and services. Non-core assets, including the Irish regional newspapers and the Magazines and Exhibitions division, have been divested. In addition, performance has been improved by a reduction in operating costs of over £60 million per annum and new digital revenues (including revenues from acquisitions) of around £30 million across the Group.

As the next logical step to maximise value the Board, in August, initiated an in-depth review of the Group's businesses, operating models and structure. The Review had two key objectives. Firstly, to determine the best way of maximising value from the Group's existing asset base. Secondly, to ensure the Group is properly positioned to capture the opportunities available to it in a rapidly changing media environment.

The Review has taken into account the current advertising market conditions impacting its Nationals and Regionals businesses, the synergies existing between different parts of the Group as well as the considerable opportunities available to the Group through the development of its digital activities.

In the course of this comprehensive Review several third parties have expressed an interest in acquiring a number of the Group's assets. These unsolicited approaches have naturally been fully considered as part of the Review. The approaches included a conditional indicative offer for the Nationals businesses which the Board concluded substantially undervalued these assets.

In addition, the Review, led by the Chief Executive, examined a full range of alternative structures for the Group including the separation of the Regionals and Nationals businesses by way of full demerger. Having thoroughly considered the implications the Board has concluded that a separation through de-merger would adversely impact shareholder value.

The Review demonstrated that there is considerable additional value that can be delivered to shareholders through a new, technology-enabled operating model that will generate benefits for advertisers and readers alike. These changes will enable the Group to make a number of cost savings and also offer opportunities to generate additional revenue as well as provide a stronger platform for investment and long-term growth.

Conclusions of Business Review
Group Structure
The Board sees the future of the Group as a multi-platform publishing and advertising business based on a combination of market leading newspaper titles and digital assets offering best-in-class margin potential and significant growth potential once advertising market conditions improve.

The Review led the Board to conclude that in order to maximise shareholder value for the medium to long term it should rationalise its portfolio of titles. The Review identified that the Group's Regional businesses in Scotland, the North of England, and Wales, complemented by its strong UK wide digital assets and supported by the strong cash flows of the Nationals, represent the best opportunities for growth.

Our newspaper titles in these regions enjoy leading positions in each of their well-defined and concentrated geographic markets. The complementary local digital businesses and the acquired digital assets provide the platform for strong growth opportunities and increasing shareholder value.

The Board believes that, whilst valuable assets, the Group's Regional businesses in the Midlands and London and the South East, do not offer the same opportunities for the Group and are likely to be more attractive to other owners. The Board has, therefore, concluded that it should seek to dispose of the Regional businesses in the Midlands and London and the South East.

Our National titles, with industry leading margins, generate strong, sustainable and robust cash flows which underpin the financial strength of the Group to enable it invest in and grow the business.

The Review also concluded that the Sports division, principally the Racing Post, has minimal overlap in terms of readership, advertising base or editorial content with the Group's other titles and operates as a standalone business within the Group. The Board therefore believes that the growth opportunities available to this specialist publishing business would be better served under different ownership. It is the intention of the Board that, as part of any divestment, the Racing Post brand is protected and strengthened.

These disposals will result in a Group with increased focus on a streamlined portfolio of high quality media assets, offering growth in revenues, margins and earnings. Strong cash flow generation will support this growth through continued investment and selected acquisitions and will provide continuing rewards to shareholders. The disposals do not affect any of the Group's Manufacturing network.

The Board has appointed Rothschild to advise it on the various disposal processes which are expected to be completed during the second and third quarters of 2007, subject to it receiving full and attractive offers for each of the businesses to be sold.

Operating model
The Review looked at all elements of our portfolio across print and on-line, our organisational structure and the efficiency and effectiveness of our resources to drive revenues, manage cost and build profit.

We have identified a number of areas to improve the performance of our businesses significantly by further investment in technology. This investment will modernise and streamline our processes, drive revenues across print and on-line and allow us to serve our readers better and advertisers more effectively.

By integrating our print and on-line operations more closely we will be able to remove many of the existing barriers to cross selling opportunities and serve our markets at lower cost whilst sustaining attractive margins. The investment in IT systems will transform the way we do business by significantly reducing low value-added administrative tasks thereby freeing up resource to concentrate on revenue generation.

We intend to carry out a fundamental upgrade of editorial systems; to restructure our circulation sales support functions and outsource a number of them where practicable; and to streamline our advertising and pre-press functions using state-of-the-art technology so they will utilise online and call-centre sales channels with significant benefits for all.

  • Specifically, the investment in new technologies will enable our regional businesses to:-
  • Drive revenues by increasing our advertisers' reach through access to our powerful multi-media platforms.
  • Automate the creation of many types of advertising in ways that significantly reduces paper processing and cost
  • Create call-centres with better capacity utilisation and better conversion rates
  • Modernise newspaper sales by creating a unified transport and logistics operation and outsource low value-added administration
  • Streamline our editorial processes to allow more extensive and efficient multimedia publishing

Developing these capabilities will support our overall strategy of deepening our penetration of our geographies and markets.

In our Nationals business, system enhancements in advertising and editorial will result in efficiencies and streamlined processes. Work is already underway to de-layer management and outsource circulation sales supporting activities in Scotland. We aim to build on the total reach and relevance of our Nationals titles with on-line development being an integral part of our strategy. Our UK Nationals on-line digital presence will see new look sites designed to fully play to the strengths of the web, focusing on the key content strands of News, Sport and Showbiz. The sites will be easier to navigate featuring a substantial increase in audio visual and user generated content. Our objective is to increase substantially unique users and online revenues during 2007.

Business Review - financial impact
The businesses to be sold, namely Sports and the regional titles in the Midlands, London and the South East, in aggregate reported sales and EBIT of £132 million and £27 million respectively in the 26 weeks to 2nd July 2006. It is the Board's intention to return to shareholders surplus capital arising from the disposals, net of related tax charges and such pension payments as are necessary. Further guidance will be provided once the disposals have been completed.

The Board is confident that in the medium-term, the streamlined Regionals division will have the capacity to generate margins amongst those of the best-in-class operators in the UK regional newspaper publishing sector. Post 2007, having completed the investment in colour presses, the Nationals division will require minimal capital expenditure requirements over the medium to long term, thereby providing ongoing strong cash flow generation for investment and growth across the Group.

The investment programme required to support the introduction of the new operating model across the Group will be delivered over the next three years. The associated capital costs will be absorbed within the current £180 million capital expenditure programme announced in July 2005. Total Group capital expenditure projections beyond 2007 at around £25-30 million per annum are therefore also unchanged. In addition to capital expenditure it is expected that further non-recurring costs of £10m per annum will be incurred during 2007 and 2008.

This programme will deliver a further £20 million of annualised cost savings by 2008 with incremental revenue benefits expected from 2009.

Upon completion of the proposed divestments the Board is committed to ensuring an efficient capital structure and an appropriate dividend policy. In view of its confidence in the future performance of the Group, the Board intends to at least maintain the current level of annual dividend per share