Interim Results
IG Group Holdings plc
14 January 2008
14 January 2008
IG GROUP HOLDINGS PLC
Interim Results for the six months ended 30 November 2007
IG Group Holdings plc ('IG' or 'the Group') today announces interim results for
the six month period ended 30 November 2007.
Highlights
• Turnover up 54% at £85.8 million
• EBITDA1 up 60% at £48.4 million
• Strong EBITDA margin of 56.4%
• Earnings per share up 61% at 9.99p
• Interim dividend of 3.0p per share
• Paris and Madrid operations successfully opened
• Acquisition of US exchange in December 2007
Tim Howkins, Chief Executive
'IG continues to deliver excellent growth across all areas of the business, with
a substantial increase in both revenue and profits. This continued success has
been underpinned by consistently strong levels of client recruitment, both in
the UK and abroad. Current trading is strong and IG is well positioned for
further growth.'
Financial highlights
Unaudited Unaudited
six months six months
ended ended
30 November 30 November
2007 2006 Growth
£000 £000 %
Revenue 85,778 55,673 +54%
EBITDA1 48,419 30,350 +60%
Profit before taxation 48,197 29,588 +63%
Profit after taxation 33,143 20,416 +62%
Basic earnings per share 10.16p 6.25p +63%
Diluted earnings per share 9.99p 6.20p +61%
Interim dividend per share 3.00p 2.00p +50%
1 EBITDA represents earnings before exceptional administrative costs,
depreciation, amortisation charges, amounts written off property, plant and
equipment and intangible, taxation, interest payable on debt and interest
receivable on corporate cash balances and includes interest receivable on
clients' money net of interest payable to clients.
Chief Executive's statement
For the six months ended 30 November 2007
Our revenue in the six months to 30 November 2007 was £85.8m, an increase of 54%
over the same period last year. Profit before tax increased by 63% to £48.2m.
Even when viewed against our track record of nine years of sustained compound
annual growth in revenue of 40%, these growth levels are excellent. We could
not achieve such high levels of growth year after year without the talented and
hardworking team here at IG. I would like to thank all of our people worldwide
for helping to deliver such good results.
Market volatility undoubtedly played a part in the growth that we have seen in
the last six months. Volatility is an important short-term driver of client
activity as it makes trading of the financial markets more interesting for
existing clients and it also helps with the recruitment of new clients.
While heightened market volatility certainly contributed, we do not believe that
the rise in our growth rate is solely as a result of it. Our long-run growth is
driven by the rate at which we recruit new clients and I view that as the key
lead-indicator of the strength of the business. The strong momentum seen at the
end of the last financial year in relation to the number of financial accounts
opened has continued into this financial year. Two years ago we were, on
average, opening 650 UK spread betting accounts and 350 CFD accounts worldwide
per month. Both figures have increased progressively and over the last quarter
we averaged more than 1,900 spread betting accounts and around 1,400 CFD
accounts opened per month.
I think we are seeing a steady shift in investor behaviour. Many people want to
take more ownership of their own financial affairs and, with at least a
proportion of their investable wealth, they want to manage that money actively
themselves, trading a broad range of asset classes. If you are an active
short-term speculator then both spread betting and CFDs give you leverage and
easy, transparent access to virtually every significant global financial market.
In falling markets they give you the ability to go short and profit from the
fall. In addition, the Internet makes it increasingly easy for the investor to
do his own research and form his own market views. Alongside these external
factors we have invested heavily in technology and are devoting increasing
resources to client education and to marketing. For all these reasons we have
seen increasing demand in the UK and the same pattern is being replicated in our
Australian office, which we opened five years ago. We have businesses now in
four European countries and I believe that, in time, all of these have potential
similar to that of the UK or Australia.
In July we launched our new online financial dealing platform, PureDeal, for UK
spread betting. This platform has been very well received by our clients and I
believe that the increase in client recruitment is thanks in part to the quality
of our technology. We have continued to roll this platform out across our CFD
offering with it going live for UK and Australian CFDs in November and across
most of our European offerings in December. The roll-out of PureDeal will be
substantially completed by the end of this month when we launch it in Singapore.
In each case the launch of PureDeal is accompanied by a major re-working of
our web-site, a programme of client communication followed by an advertising
campaign show-casing the features of PureDeal. We are continually developing
and refining PureDeal, and many of our other systems, so as to make the user
experience as rich as possible.
Our client education programme, TradeSense, has now also been rolled out across
virtually all of our operations world-wide. The roll-out will be completed
later this month when it is launched in Singapore.
Financial business
Overall our financial business achieved revenue growth of 60%, up to £79.4m.
The proportion of this revenue which derives from clients based outside the UK
is up to 27% of all financial business, from 21% in the corresponding period
last year.
UK
Our UK financial betting business continues to deliver strong growth. Revenue
for this business was £48.2m compared to £33.7m in the corresponding period last
year, an increase of 43%. In the six months to 30 November 2007 we recruited
10,100 financial spread betting clients in our UK business, up almost 100% on
the corresponding period last year.
Revenue from UK based CFD clients was up 67.5% to £9.6m. Accounts opened in the
period were 2,513, again an increase of almost 100% on the corresponding period
last year.
Europe
Revenue from the rest of Europe rose by 94% to £8.9m. The European operations
that we established in the Autumn of 2006 have continued to show good growth in
revenue and in rate of account opening. We continue to see good levels of
business from clients in Ireland and our revenue from Irish clients
approximately doubled to £4m.
The advent of the Markets in Financial Instruments Directive ('MiFID') allowed
us to set up offices in France and Spain, both of which started to recruit
clients in early November. It is obviously too early to draw any conclusions,
but the early signs from both of these new markets are encouraging with both
getting good levels of interest. Together our offices in Paris and Madrid will
add about £2.5m to our annual costs. We do not anticipate that they will
contribute materially to our revenue in the current year, but in the longer term
I believe they will all be important sources of revenue.
Asia Pacific
Asia Pacific delivered our strongest growth with revenue up by 124% to £12.1m.
This growth was driven primarily by a very strong performance by our Australian
operation, but also reflects a strong performance from our Singapore office
which we established in the Spring of 2006. While Singapore is only a small
country with a population of around 4.5m, we are pleased with the levels of
account opening and revenue this office has generated. In the six month period
our Singapore office opened almost 750 accounts. Our Australian office opened
almost 4,000 accounts in the six month period, 54% more than in the
corresponding period of the prior year. Account opening in Australia is now
running at a similar rate to that of our UK spread betting business two years
ago.
US
In December we completed our acquisition of HedgeStreet Inc, which is a US
exchange regulated by the Commodity Futures Trading Commission ('CFTC'). Our
first step in the development of that business will be to re-open the exchange
with its existing, relatively limited, offering of binary options. We hope to
do that before the end of this month. We have plans to offer additional
products on the exchange and we will continue to develop the product set during
the course of 2008.
We are also in the process of activating our US-based forex business, IG Markets
Inc, which will offer OTC forex contracts, including OTC forex binary options.
We anticipate that this business will commence trading in March.
We have leased office space in Chicago and begun recruiting the additional staff
that we need. We expect that these two new US businesses will add approximately
£2m to our costs in the second half of the year. While neither of these US
businesses is likely to contribute significant revenue in this financial year,
in the longer term, I believe that the US should become an interesting and
profitable market for us.
Future Developments
We have made significant progress over the last two years in our strategy of
international expansion and now have offices or operations targeting many of the
major economies worldwide. Some of these are fledgling; some are already
contributing significantly. Germany, Italy and Singapore, all established
during the course of 2006, together accounted for 4% of the Group's revenue in
November. More importantly, they made up 24% of our global CFD accounts opened
that month. There is now a great deal of work to be done, particularly on
marketing and consumer education, to build these newer operations into
substantial businesses. This will take time and we expect the businesses to
experience different growth rates reflecting the wider spectrum of cultures and
risk attitudes of our growing client base.
We continue to evaluate new markets, in particular in Asia, and I am hopeful
that during the course of 2008 we will make further progress in extending the
geographic reach of our business.
Sport
Our sports business grew by 6%, up to revenue of £6.3m. This growth rate is
distorted by the inclusion of the football World Cup in the comparator period,
which is the most significant event in the four year sporting calendar.
Dividend
An interim dividend of 3p per share (2006: 2p), amounting to £9.8m will be paid
in February.
Current trading and outlook
While it remains difficult to predict future trends in volatility or customer
reaction to any change in market conditions, IG is well positioned for further
growth.
We have continued to see good levels of client activity since the period end.
All parts of the business are performing well and we remain confident about the
group's prospects for the current year.
Tim Howkins
Chief Executive
14 January 2008
For further information please contact:
IG Group 020 7896 0011
Tim Howkins
Steve Clutton
Financial Dynamics 020 7269 7114
Robert Bailhache
Nick Henderson
www.iggroup.com
Analyst Presentation
There will be an analyst presentation on the results at 09:30am on Monday 14
January 2008 at Financial Dynamics, Holborn Gate, 26 Southampton Buildings,
London WC2A 1PB. Those analysts wishing to attend are asked to contact Financial
Dynamics. The presentation will also be accessible via a conference call for
those unable to attend in person. The international dial-in is +44 (0) 1452 560
304 and the passcode is 29861517.
A web cast of the presentation will be available at www.iggroup.com.
Interim consolidated income statement
for the six months ended 30 November 2007
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31 May
2007 2006 2007
Notes £000 £000 £000
Revenue 85,778 55,673 121,990
Cost of sales (4,882) (2,912) (4,214)
Gross Profit 80,896 52,761 117,776
Administrative expenses (39,971) (27,603) (58,574)
Operating profit 40,925 25,158 59,202
Finance revenue 16,361 8,703 22,604
Finance costs (9,089) (4,273) (12,912)
48,197 29,588 68,894
Profit before taxation
Tax expense (15,054) (9,172) (21,027)
Profit for the period 33,143 20,416 47,867
Attributable to:
Equity holders of the parent 33,143 20,416 47,867
Earnings per share
- basic 4 10.16p 6.25p 14.67p
- diluted 4 9.99p 6.20p 14.52p
Dividends per share
- interim proposed 5 3.00p 2.00p -
- interim paid 5 - - 2.00p
- final paid 5 - - 6.50p
The interim proposed dividend of 3.0p per share was declared after the period
end and is not included in the results. The total dividend will amount to
£9,825,000.
All of the group's revenue and profit for the period were derived from
continuing operations.
Interim consolidated balance sheet
as at 30 November 2007
Unaudited Unaudited Audited
30 November 30 November 31 May
2007 2006 2007
Notes £000 £000 £000
Non current assets
Property, plant and equipment 6 8,054 9,602 8,158
Intangible assets 107,440 107,517 107,675
Deferred tax assets 5,861 2,927 3,940
121,355 120,046 119,773
Current assets
Trade receivables 7 283,980 192,242 352,628
Prepayments and other receivables 3,939 3,675 3,954
Cash and cash equivalents 8 423,849 350,052 484,556
711,768 545,969 841,138
Total assets 833,123 666,015 960,911
Current liabilities
Trade payables 9 581,111 461,592 726,144
Other payables 17,907 12,215 18,472
Income tax payable 16,812 13,999 14,547
615,830 487,806 759,163
Non-current liabilities
Redeemable preference shares 40 40 40
40 40 40
Total Liabilities 615,870 487,846 759,203
NET ASSETS 217,253 178,169 201,708
Capital and reserves
Equity share capital 16 16 16
Share premium 125,235 125,235 125,235
Treasury shares (704) (503) (503)
Retained earnings 92,666 53,381 76,920
Shareholders' equity 217,213 178,129 201,668
Minority interests 40 40 40
TOTAL EQUITY 217,253 178,169 201,708
Interim consolidated statement of changes in equity
for the six months ended 30 November 2007 (unaudited)
Own shares
Share held in
Employee
Share premium Benefit Retained Shareholders' Minority Total
capital account Trusts earnings equity interests Equity
£000 £000 £000 £000 £000 £000 £000
Balance at 1 June 2006 16 125,235 - 45,157 170,408 40 170,448
Total recognised income and expense - - - 20,416 20,416 - 20,416
for the period
Employee share-based payments - - - 908 908 - 908
Purchase of own shares held in - - (503) - (503) - (503)
Employee Benefit Trust
Equity dividends paid - - - (13,100) (13,100) - (13,100)
Balance at 30 November 2006 16 125,235 (503) 53,381 178,129 40 178,169
Profit for the period - - - 27,451 27,451 - 27,451
Excess of tax deduction benefit on - - - 1,814 1,814 - 1,814
share-based payments recognised
directly in equity
Total recognised income and expense - - - 29,265 29,265 - 29,265
for the period
Employee share-based payments - - - 824 824 - 824
Equity dividends paid - - - (6,550) (6,550) - (6,550)
Balance at 1 June 2007 16 125,235 (503) 76,920 201,668 40 201,708
Profit for the period - - - 33,143 33,143 - 33,143
Excess of tax deduction benefit on - - - 1,710 1,710 - 1,710
share-based payments recognised
directly in equity
Total recognised income and expense - - - 34,853 34,853 - 34,853
for the period
Employee share-based payments - - - 2,181 2,181 - 2,181
Purchase of treasury shares - - (201) - (201) - (201)
Equity dividends paid - - - (21,288) (21,288) - (21,288)
Balance at 30 November 2007 16 125,235 (704) 92,666 217,213 40 217,253
Interim consolidated cash flow statement
for the six months ended 30 November 2007
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Operating activities 40,925 25,158 59,202
Operating profit
Adjustments to reconcile operating profit to net
cash flow from operating activities:
Depreciation of property, plant and equipment 1,936 1,589 3,513
Amortisation of intangible assets 420 417 856
Share-based payments 2,210 908 1,842
Property, plant and equipment written off 15 98 211
Intangible assets written off - - 10
Impairment of trade receivables 1,148 768 1,416
(Increase)/decrease in trade and other 67,464 (67,704) (226,563)
receivables
Increase/(decrease) in trade and other (146,810) 175,175 442,587
payables
Cash (used in)/generated from operations (32,692) 136,409 283,074
Income taxes paid (13,000) (15,604) (26,110)
Net cash flow from operating activities (45,692) 120,805 256,964
Investing activities
Interest received 16,409 8,288 21,000
Purchase of property, plant and equipment (1,831) (7,196) (7,793)
Payments to acquire intangible fixed assets (170) (574) (1,414)
Purchase of subsidiary undertakings - (235) -
Net cash flow from investing activities 14,408 283 11,793
Financing activities
Interest paid (9,744) (4,273) (11,508)
Equity dividends paid to equity holders of the (21,288) (13,100) (19,650)
parent
Purchase of own shares held in Employee (201) (503) (503)
Benefit Trust
Repayment of financial liabilities - (92) (92)
Payment of redeemable preference share dividends - - (3)
Net cash flow used in financing activities (31,233) (17,968) (31,756)
Net (decrease)/increase in cash and cash (62,517) 103,120 237,001
equivalents
Cash and cash equivalents at the beginning of the 484,556 247,277 247,277
period
Effect of foreign currency differences on operating 1,810 (345) 278
balances of cash and cash equivalents
Cash and cash equivalents at the end of the period 423,849 350,052 484,556
Notes to the interim condensed consolidated financial statements
At 30 November 2007 (unaudited)
1. General information
The interim condensed consolidated financial statements of IG Group Holdings plc
and its subsidiaries for the six months ended 30 November 2007 were authorised
for issue by the board of directors on 14 January 2008. IG Group Holdings plc is
a public limited company incorporated and domiciled in England and Wales. The
Company's ordinary shares are traded on the London Stock Exchange.
The interim information, together with the comparative information contained in
this report for the year ended 31 May 2007, does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. However,
the information has been reviewed by the company's auditors, Ernst & Young LLP,
and their report appears at the end of the interim financial report. The
financial statements for the year ended 31 May 2007 have been reported on by the
company's auditors, Ernst & Young LLP, and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified and did
not contain a statement under section 237(2) or (3) of the Companies Act 1985.
2. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six months ended
30 November 2007 have been prepared in accordance with IAS 34 Interim Financial
Reporting and the disclosure requirements of the Listing Rules.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements and
should be read in conjunction with the Group's annual financial statements for
the year ended 31 May 2007.
The interim condensed consolidated financial statements are presented in
Sterling and all values are rounded to the nearest thousand pounds (£000) except
where otherwise indicated.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31 May
2007.
3. Segment information
The operating businesses are organised and managed separately according to the
nature of the products provided, with each segment representing a strategic
business unit that offers different products and serves different markets.
Primary reporting format - business segments
The primary segment reporting format is by business segment as the Group's risks
and rates of return are affected predominantly by differences in the products
provided. The financial segment includes financial binaries, which were reported
separately in the previous half year. The directors consider that including
financial binaries within the financial segment is appropriate for the following
reasons: financial binaries are viewed by most of our clients as an adjunct to
the rest of our financial product range, rather than as a stand-alone product;
financial binaries and other financial businesses share common management and
processes; and financial binaries are predominantly traded by the same clients
as other financial clients on their regulated accounts. Figures for the prior
six months have been restated to aid comparability.
The Group operates in two principal areas of activity: financial and sport. The
types of financial instrument included within each of the above categories are:
Financial
Spread bets on equities, equity indices, precious and base metals, soft
commodities, exchange rates, interest rates and other financial markets; spread
bets on options on certain of these products; exchange traded futures and
options. Spot and forward contracts for foreign exchange and contracts for
differences (CFDs) on shares, indices and other financial markets. Financial
binaries, being fixed odds bets on equities, equity indices, precious and base
metals, soft commodities, exchange rates, interest rates and other financial
markets.
Sports
Spread bets and fixed odds bets on sporting and other events.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Revenue
Financial 79,447 49,693 109,791
Sports 6,331 5,980 12,199
85,778 55,673 121,990
Segment result
Financial 61,663 35,960 87,948
Sports 2,056 1,949 3,679
63,719 37,909 91,627
Unallocated administrative expenses (17,651) (9,663) (25,865)
Unallocated finance revenue 2,242 1,385 3,426
Unallocated finance costs (113) (43) (294)
Profit before taxation 48,197 29,588 68,894
Tax expense (15,054) (9,172) (21,027)
Profit for the period 33,143 20,416 47,867
Unallocated administrative expenses comprise overheads, including information
technology costs, which are not specifically attributable to business segments.
Secondary reporting format - geographical segments
Geographical segment information for revenue and profit is based upon client
location. The UK segment includes all clients located in the UK; Europe includes
all clients located in Ireland and continental Europe; Asia Pacific includes all
clients located in Australasia, Asia and the Far East; all other clients are
classified as Rest of World.
The Group has offices in the United Kingdom, Australia, Singapore, France, Spain
and Germany. In the six months to 30 November 2006 geographical segments were
reported according to office location. The Australia and Singapore segment dealt
with clients serviced from the Melbourne and Singapore offices. The UK segment
included the results of all other business. To aid comparability the figures for
the six months ended 30 November 2006 have been restated.
Unaudited Unaudited Audited
six months six months year
ended ended Ended
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Revenue
United Kingdom 64,124 45,278 96,841
Europe 8,899 4,581 11,771
Asia Pacific 12,068 5,509 12,704
Rest of World 687 305 674
85,778 55,673 121,990
4. Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares in issue during the period, excluding shares purchased
by the Company and held as own shares in Employee Benefit Trusts. Diluted
earnings per share is calculated using the same profit figure as that used in
basic earnings per share and by adjusting the weighted average number of
ordinary shares outstanding to assume conversion of all dilutive ordinary
shares.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Basic and diluted earnings attributable to 33,143 20,416 47,867
equity shareholders
Basic weighted average number of equity shares 326,252,385 326,392,804 326,343,794
Effect of share-based payments 5,501,599 2,995,258 3,288,896
Diluted weighted average number of equity shares 331,753,984 329,388,062 329,632,690
Basic earnings per share 10.16p 6.25p 14.67p
Diluted earnings per share 9.99p 6.20p 14.52p
5. Dividends paid and proposed
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Amounts recognised as distributions to equity - - 6,550
holders in the period:
Interim dividend of 2.00p for 2007
Final dividend of 6.50p for 2007 (2006: 4.00p) 21,288 13,100 13,100
21,288 13,100 19,650
9,825 6,550 -
Proposed but not recognised as distributions to
equity holders in the period:
Interim dividend of 3.00p for 2008 (2007: 2.00p)
Final dividend of 6.50p for 2007 - - 21,288
9,825 6,550 21,288
The proposed interim dividend for 2008 of 3.00p per share amounting to
£9,825,000 was approved by the board on 14 January 2008 and has not been
included as a liability at 30 November 2007. This dividend will be paid on 28
February 2008 to those members on the register at the close of business on 25
January 2008.
6. Property, plant and equipment
During the six months ended 30 November 2007 the group acquired assets with a
cost of £2,000,763. This comprised leasehold improvements of £716,472 and
computer and other equipment amounting to £1,284,291.
7. Trade receivables
Unaudited Unaudited Audited
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Amounts due from brokers 271,200 187,055 345,076
Amounts due from clients 12,780 5,187 7,552
283,980 192,242 352,628
8. Cash and cash equivalents
Unaudited Unaudited Audited
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Cash at bank and in hand 103,271 94,464 92,116
Short-term deposits 5,570 842 1,167
Client money held 315,008 254,746 391,273
423,849 350,052 484,556
Cash and cash equivalents are deposited for varying periods of between one day
and three months depending on the immediate cash requirements of the Group and
earn interest at the respective short-term deposit rates. The fair value of cash
and cash equivalents is not materially different from the book value.
Net interest receivable on client balances amounted to £5,143,000 (2006:
£3,088,000; year ended 31 May 2007: £6,559,000).
9. Trade payables
Unaudited Unaudited Audited
30 November 30 November 31 May
2007 2006 2007
£000 £000 £000
Amounts due to clients 581,111 461,592 726,144
581,111 461,592 726,144
10. Related party transactions
During the 6 months to 30 November 2007, fees amounting to £15,000 (2006:
£25,000; year ended 31 May 2007: £50,000) were paid to CVC Capital Partners
Limited relating to the services of Robert Lucas as a director of IG Group
Holdings of £15,000 (2006: £15,000; year ended 31 May 2007: £30,000), and four
other individuals as directors of IG Group Limited amounting to £nil (2006:
£10,000; year ended 31 May 2007: £20,000).
Funds managed or advised by CVC Capital Partners Limited or its affiliates held
7.7% of the ordinary share capital of the Company at 30 November 2007 (2006:
7.7%; 31 May 2007: 7.7%).
There were no further related party transactions during the year or the
preceding year.
11. Acquisition of HedgeStreet
On the 6th December 2007, IG Group Holdings plc ('IG') completed the purchase of
the entire issued share capital of HedgeStreet Inc. ('HedgeStreet') for a total
cash consideration of $6.0m (approximately £2.9m). Net liabilities acquired of
HedgeStreet Inc. and its subsidiaries were $758,000 (approximately £0.4m).
HedgeStreet is a US company, which, since 2004, has operated the HedgeStreet
Exchange ('the Exchange'). The Exchange is a US based Designated Contract Market
operating under the regulatory oversight of the US Commodity Futures Trading
Commission ('CFTC'). HedgeStreet is also registered with the CFTC as a
Derivatives Clearing Organisation. The Exchange has previously listed binary
options contracts, principally on forex and commodities. The Exchange ceased
listing contracts at the end of September 2007.
Independent review report to IG Group Holdings plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
November 2007 which comprises the group income statement, group balance sheet,
group cash flow statement, group statement of changes in equity, and the related
notes 1 to 11. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with guidance contained
in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed
by the Independent Auditor of the Entity' issued by the Auditing Practices
Board. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our work, for this report,
or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting,' as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 November 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Ernst & Young LLP
Registered Auditor
London
14 January 2008
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