Interim Results
Rank Group PLC
03 September 2004
Interim Results for the six months ended 30 June 2004
• Earnings per share* of 7.8p (2003 - 7.7p); 2.2p after goodwill
amortisation and exceptional items (2003 - 3.8p)
• Group operating profit* of £80.2m (2003 - £94.4m); £49.4m after goodwill
amortisation and exceptional items (2003 - £64.0m)
• Profit before tax* of £63.9m (2003 - £80.2m); £29.0m after exceptional
items and goodwill amortisation (2003 - £53.8m)
• Gaming operating profit* down 4% to £54.7m (2003 - £57.1m), reflecting
more challenging short-term trading conditions in casinos
• Hard Rock operating profit of £11.6m (2003 - £13.3m), with improved like
for like sales in restaurants but a lower distribution from hotels
• Deluxe operating profit* of £19.2m (2003 - £27.8m), with Film in-line
with expectations but larger seasonal losses in Media
• Net debt decreased to £668.1m (2003 year end - £700.5m)
• Interim dividend increased to 4.8p (2003 - 4.6p)
• Board to investigate separation of Deluxe Film and Deluxe Media from the
rest of the Group
* before goodwill amortisation and exceptional items
Commenting on the results, Mike Smith, Chief Executive, said:
'This has been a challenging first half for Rank. Trading conditions in Gaming
resulted in a more modest performance and, as expected, Deluxe Media had a more
difficult half year. Film performed in line with expectations. Current trading
trends in Hard Rock and Deluxe Film are similar to the first half whilst Gaming
is showing signs of improvement. The outcome for the full year will be
influenced by these trends and by the seasonal performance of Deluxe Media.
Recent investments have continued to improve the long-term prospects for each of
the Group's businesses. Gaming is well positioned for the now anticipated
deregulation of the UK industry; Hard Rock has returned to positive top line
growth with further opportunities for the brand in hotels and casinos; and while
Deluxe Media faces some short term challenges, Deluxe Film has an excellent
contract position and is now increasingly oriented towards additional, high
value digital services. In order to take full advantage of the scale and scope
of opportunities now facing each of the Group's businesses, the Board believes
that, in principle, and subject to a detailed review of the implications, now
would be an opportune time to separate both Deluxe Film and Deluxe Media from
the rest of the Group.'
Enquiries: Tel: 020 7706 1111
The Rank Group
Mike Smith, Chief Executive
Ian Dyson, Finance Director
Peter Reynolds, Director of Investor Relations
Press Enquiries: Tel: 020 7379 5151
The Maitland Consultancy
Angus Maitland
Suzanne Bartch
Analyst Meeting, webcast and conference call details:
Friday 3 September 2004
There will be an analyst meeting at Deutsche Bank, 1, Great Winchester Street,
London, EC2N 2DB, starting at 9.30am. There will be a simultaneous webcast and
conference call of the meeting. To register for the live webcast, please
pre-register for access by visiting the Group website, (www.rank.com). Details
for the conference call are given below. A copy of the webcast and slide
presentation given at the meeting will be available on the Group's web-site
later today.
An interview with Mike Smith, Chief Executive, in video/audio and text will also
be available from 7.00am GMT on 3 September 2004 on: http:// www.rank.com and on
http://www.cantos.com.
Conference call details:
Friday 3 September 2004
9.20am Please call 0800 387771 (UK) or +44 (0) 1296 317500 (International).
Please quote Passcode : C089208
9.30 am Meeting starts
Forward-looking statements. This announcement includes 'forward-looking
statements'. These statements contain the words 'anticipate', 'believe',
'intend', 'estimate', 'expect' and words of similar meaning. All statements
other than statements of historical facts included in this announcement,
including, without limitation, those regarding the Company's financial position,
business strategy, plans and objectives of management for future operations
(including development plans and objectives relating to the Company's products
and services) are forward-looking statements that are based on current
expectations. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance, achievements or financial position of the Company to be materially
different from future results, performance, achievements or financial position
expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Company's operating
performance, present and future business strategies and the environment in which
the Company will operate in the future. These forward-looking statements speak
only as at the date of this announcement. Subject to the Listing Rules of the UK
Listing Authority, the Company expressly disclaims any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based. Past performance cannot be relied upon as a guide to future
performance.
CHIEF EXECUTIVE'S REVIEW
Results
This has been a challenging first half for Rank. Trading conditions in Gaming
resulted in a more modest performance and, as expected, Deluxe Media had a more
difficult half year. Film performed broadly in-line with expectations. Current
trends in Hard Rock and Deluxe Film are similar to the first half whilst Gaming
is showing signs of improvement. The outcome for the full year will be
influenced by these trends and by the seasonal performance of Deluxe Media.
Gaming experienced more difficult trading conditions in the first half. The
removal of box office fees in Mecca UK had a positive effect on admissions but
reduced margins. In casinos, increased competition and the introduction of new
EU legislation, requiring immediate guest identification, impacted the
performance of Grosvenor's provincial casinos in particular. An unusually low
win percentage at the Clermont also held back performance. Hard Rock enjoyed an
encouraging first half with like for like sales growth in owned cafes, although
this was at a lower margin. There was also a first contribution from the two
Seminole hotel/casinos, which mitigated a lower distribution from the Orlando
hotels joint venture. Deluxe Film's performance was robust despite the loss of
the Universal and Fox International contracts in 2003, and currency movements.
Increased losses at Deluxe Media reflected a further decline in VHS volumes and
the seasonal impact of including Disctronics for the first time.
Development
There have been a number of developments across the Group during the first half
of 2004 which have further strengthened the position of each of the Group's
businesses for long-term growth.
Gaming
The development of our Gaming division has continued during 2004 with a number
of relocations as well as new licences coming on-stream. Bingo relocations were
completed in Burton, Ellesmere Port and Easterhouse in Glasgow. A property in
Stoke-on-Trent, containing a new Grosvenor casino and an existing Mecca bingo,
opened last month and another combined casino and bingo site in Bolton is on
track to open later this year.
We have continued to make solid progress in Spain where our ten bingo clubs have
continued to deliver good growth, and we continue to look for additional sites
in that market. In Belgium, the introduction of slot machines at the end of 2003
and temporary closure of a competitor have both had a positive impact on
performance.
Blue Square has continued to develop new games and products for its expanding
customer base. The latest development has been the launch of a Blue Square
Casino, which went live last month. The first Blue Square betting shop, located
next to our Victoria Casino just off the Edgware Road in London, is expected to
open next year.
Draft Gambling Bill
Since the Group's preliminary results in February 2004, there have been a number
of developments regarding the proposed modernisation of the UK's gaming laws.
The Joint Committee on the Draft Gambling Bill ('JCDGB') published its initial
report on 7 April 2004 and the Government responded on 14 June 2004. The JCDGB
was then invited by the Government to undertake a further review of its
proposals for regional casinos and the JCDGB published its report on 22 July
2004.
Rank believes that the proposals contained in the latest JCDGB report are a
sensible balance and hopes that the Government will take these recommendations
into account before publishing a final version of the Gambling Bill later this
year.
Whilst some of the finer points of detail have yet to be finalised, the core
elements of the Gambling Bill, including the introduction of more slot machines
and sports betting into casinos, removal of non-permitted areas, abolition of
the 24-hour rule for casinos and bingo clubs, and relaxation of certain
advertising restrictions for casinos, remain intact. Each of these measures is
expected to be positive for the UK industry.
Hard Rock
Within Hard Rock, two new owned cafes opened during the first half - one in
Louisville, Kentucky and one in Bristol. The Fort Lauderdale cafe was relocated
to within the larger of the two Seminole Hard Rock hotel/casinos, in Hollywood,
Florida and opened in May 2004. Both of the new cafes are smaller footprints
than many of the traditional cafes, with more flexible customer facilities and a
lower capital cost. New franchised cafes opened in Catania, Italy, in January,
and Dublin in June. Since the period end, new owned cafes have opened in Destin,
Florida and the Foxwoods casino, Connecticut. New franchised cafes are scheduled
to open in Athens, Hurghada, Kuwait City and Panama by the end of the year.
The extension of the Hard Rock brand into non-restaurant activities took a major
step forward during the first half of 2004 with the opening of two major hotel/
casino developments in Florida. The first, just outside Tampa, opened in March
and has a 250 room hotel and a 90,000 square feet gaming floor. The second, in
Hollywood, near Fort Lauderdale, opened in May and has a 500 room hotel and
130,000 square feet of casino gaming. A plan to open a new Hard Rock Hotel in
New York was announced in July and work is expected to start on the
refurbishment of the former Paramount Hotel in early 2005, following which it
will be rebranded the Hard Rock Hotel, New York. The development of the new Hard
Rock hotel/casino in Biloxi, Mississippi, is well underway and on track to open
in the second half of 2005.
Deluxe
In Deluxe Film, we have completed our contract renewal programme with all major
studio contracts now secure until at least the end of 2007, and the vast
majority until 2008 or beyond. Contractually, Deluxe Film is better placed for
the future than ever before. In the expanding area of digital services, we
acquired the remaining 80% of EFILM that we did not already own in August 2004.
Through EFILM, Deluxe has been a major pioneer in the use of digital
intermediates, helping to produce the industry's first all 4K digital
intermediate of a full feature production with 'Spider-Man 2' this summer. EFILM
was established in 1993 and is now Hollywood's leading manufacturer of digital
intermediates and represents an exciting addition to the service offering for
Deluxe Film's studio customers.
Also in August 2004, Deluxe completed the acquisition of Digital Video
Compression Centre and Softitler, both of which have further strengthened
Deluxe's presence in the important content production and authoring market.
Following the completion of these digital-related acquisitions, the Group has
today announced a proposed internal reorganisation within Deluxe involving,
inter alia, the transfer of the profitable and growing digital services business
from Media to Film, leaving the Media business focused on manufacturing and
distribution. The reorganisation has been driven by the similarity between the
post-production activities within Deluxe Film and the Digital Services business
in Deluxe Media. It is believed that by having these businesses under a single
management team, the opportunities to cross-sell more of Deluxe's value-added
services to studio customers will be increased. The enlarged Film business,
which accounted for over 80% of Deluxe's operating profit in 2003, is the
world's market leader: it has a track record of strong growth, a well-balanced,
secure contract position, and a strong position in the hi-tech, post-production
market.
In Deluxe Media, we announced the loss of a major international DVD contract in
May 2004. While the Group has been actively pursuing a number of replacement
contracts, and discussions are continuing with a number of studio customers, no
new contracts have yet been signed and therefore an associated exceptional
charge of £23.1m relating to the impairment of certain assets, onerous lease
provisions and other costs has been made in the period.
The decision to focus Deluxe Media on pure manufacturing and distribution has
prompted a change to the senior management structure. Peter Pacitti, President
and CEO of Deluxe Media will be leaving the Group and will be replaced by Tom
Vale, the current CFO of Deluxe Media. We wish to thank Peter for all of his
efforts in successfully transforming the Media business away from VHS and into
DVD and CD and wish him every success for the future. In addition, Greg Van Howe
has been appointed as Executive Vice President, Europe. Greg was formerly head
of client services based in the US.
Cash flow and financing
Operating cash flow grew to £53.6m (2003 - £31.6m) and net debt at 30 June 2004
has fallen since the year end to £668.1m.
Contingent liability
As disclosed in the Group's annual report and accounts, Rank has for some years
been involved in a dispute with Serena Holdings Limited over the purchase
consideration of an acquisition which has been referred to an expert for
determination. We have been informed that the expert will make a determination
during the course of the next few weeks. The Board continues to believe that any
associated liability will not be material in the context of the Group. Any
liability that could arise will be accounted for as an adjustment to the
purchase price of the acquisition concerned with no impact on the profit and
loss account.
Current trading and outlook
Overall, in the nine weeks to 29 August 2004, trading has been satisfactory. In
Gaming, Mecca UK's admissions are up 1% and turnover is up 6% while Grosvenor
has also seen an improvement in admissions (up 20%) and handle (up 8%). Like for
like sales at Hard Rock are in line with last year and volumes in Deluxe Film
continue to be in line with expectations. While Media remains ahead of last year
in volume terms, the peak season, between October and Christmas, is key to
determining its full year performance.
Dividend
We are pleased to announce an increase in the interim dividend to 4.8p,
reflecting the strength of the Group's long-term prospects.
Group structure
At the time of the restructuring of the Group in 1999/2000, Rank acknowledged
that Deluxe was the 'least best fit' of the businesses comprising the Group, but
decided that it was in the best interests of shareholders that the business be
retained. Since then, the Group has been focussed on developing its three core
divisions through a combination of product development and carefully planned
investment. Deluxe has prospered with operating profit growing from £73m in 2000
to £94m in 2003. Film has a strong contract position and has increased profits
from £49m to £72m, a compound growth rate of almost 15%, whilst Media has
broadly held its profits flat during a period of major transition from VHS to
DVD manufacturing and distribution.
Against this background, and given the anticipated deregulation of UK Gaming and
further opportunities for the Hard Rock brand, the Board considers that, in
principle, now would be an opportune time to separate both Deluxe Film and
Deluxe Media from the rest of the Group. The Board has therefore commenced a
thorough investigation of the technical and commercial implications of
separation, which will include discussions with key stakeholders, including
customers and employees.
It is expected that an update on progress will be made during the first quarter
of 2005.
SUMMARY OF RESULTS
Turnover Profit before
exceptional
items*
2004 2003 2004 2003
£m £m £m £m
Gaming 443.9 422.6 54.7 57.1
Hard Rock 112.9 115.1 11.6 13.3
Deluxe 359.1 324.3 19.2 27.8
US Holidays 15.5 17.9 1.5 3.4
Central costs and other - - (6.8) (7.2)
--------- --------- --------- ---------
931.4 879.9 80.2 94.4
========= ========= ========= =========
Net income from associates and
joint ventures 0.2 0.1
Managed businesses' interest (16.5) (14.3)
--------- ---------
Profit before tax, exceptional
items and goodwill amortisation 63.9 80.2
Amortisation of goodwill (3.7) (2.8)
--------- ---------
Profit before tax and exceptional items 60.2 77.4
Exceptional items (31.2) (23.6)
--------- ---------
Profit before tax 29.0 53.8
========= =========
Basic earnings per share before
goodwill amortisation and exceptional items 7.8p 7.7p
Basic earnings per share before
exceptional items 7.3p 7.3p
Basic earnings per share 2.2p 3.8p
Dividend per share 4.8p 4.6p
* before goodwill amortisation and exceptional items
Group turnover, as reported, was up 6%. This growth was influenced by three
specific factors: the full year effect of acquisitions made in 2003; the change
to a gross profits tax regime in UK bingo which added £12.6m to reported
turnover; and the effect of movements in exchange rates which reduced turnover
by £30.6m. After adjusting for these factors, like for like turnover was up by
3%.
Group operating profit before goodwill and exceptional items was 15% below 2003.
After adjusting for the impact of movements in exchange rates, operating profit
was down 12%. Gaming experienced more difficult trading conditions in Grosvenor
casinos; Hard Rock profits were affected by higher operating costs and a lower
distribution from the Orlando hotels joint venture; Deluxe Film was in line with
expectations, but Deluxe Media results were affected by the continued decline in
VHS and the acquisition of Disctronics which added to the traditional seasonal
losses of this business.
The interest charge was £2.2m higher than 2003 due to an increase in average net
debt following the redemption of the convertible preference shares in December
2003.
Group profit before tax, goodwill amortisation and exceptional items was £63.9m,
20% below last year. Earnings per share, before goodwill amortisation and
exceptional items, was 7.8p (2003 - 7.7p).
The Group has recorded an exceptional charge before tax in the first half of
£31.2m including restructuring costs in Deluxe Media of £27.1m comprising costs
associated with the loss of a major DVD replication and distribution contract
and further costs associated with the VHS restructuring in Europe that we
announced in February 2004. The balance of £4.1m principally relates to a loss
on the disposal of Rank Leisure Machine Services.
The following table sets out the divisional results and profit before tax after
exceptional items and goodwill amortisation.
Profit before tax
2004 2003
£m £m
Gaming 53.3 49.7
Hard Rock 11.6 13.3
Deluxe (10.2) 14.2
US Holidays 1.5 3.4
Central costs and other (6.8) (16.6)
--------- ---------
Continuing operations including acquisitions 49.4 64.0
Net income from associates and joint ventures 0.2 0.1
Non-operating items (4.1) 4.0
Managed businesses' interest (16.5) (14.3)
--------- ---------
Profit before tax 29.0 53.8
========= =========
GAMING
Turnover Operating profit*
2004 2003 2004 2003
£m £m £m £m
Mecca Bingo
UK# 133.9 119.2 35.4 36.7
Spain 13.0 11.7 3.4 3.1
-------- --------- -------- ---------
146.9 130.9 38.8 39.8
Grosvenor Casinos
UK 88.4 84.3 13.7 15.4
Belgium 6.0 4.2 1.0 (0.1)
-------- --------- -------- ---------
94.4 88.5 14.7 15.3
Blue Square 198.2 179.2 1.3 0.9
-------- --------- -------- ---------
439.5 398.6 54.8 56.0
Goodwill amortisation - - (1.4) (1.4)
-------- --------- -------- ---------
439.5 398.6 53.4 54.6
Rank Leisure Machine Services 4.4 24.0 (0.1) 1.1
-------- --------- -------- ---------
443.9 422.6 53.3 55.7
======== ======== ======== =========
* before goodwill amortisation and exceptional items
# 2004 turnover includes £12.6m attributable to the introduction of a gross
profits tax (2003 - nil)
Mecca Bingo
2004 2003 Change
%
UK Bingo statistics
Admissions ('000s) 10,710 10,901 (1.8)
Spend per head (£) 11.32 10.93 3.6
On a comparable basis (i.e. after removing the effect of the introduction of a
gross profits tax), turnover at Mecca UK was up 2%. The introduction of a gross
profits tax, and the consequent increase in bingo prizes being offered on main
stage bingo, was a factor in improving the trend in admissions, which were down
only 1.8% in the first half. At the same time, Mecca took the decision to remove
box office fees, which further supported the admissions performance, albeit at
the expense of a £4.1m reduction in turnover versus 2003. It is encouraging that
the lost box office fees appear to be being recycled into other spend within the
clubs, principally main stage bingo, resulting in continued growth in spend per
head of 3.6%. Since the half year, the key indicators have continued to improve
and in the 9 weeks to the end of August, admissions are ahead by 1% and spend
per head is 4% ahead of last year.
The split of revenue by activity is shown below.
Analysis of UK bingo turnover 2004 2003 Change
£m £m %
Main stage bingo 23.7 19.8 19.7
Interval games 54.9 54.1 1.5
Gaming machines 30.1 28.8 4.5
Food, beverage & other 12.6 12.4 1.6
Box office - 4.1 -
--------- --------- --------
121.3 119.2 1.8
Impact of gross profits tax 12.6 - -
--------- --------- --------
133.9 119.2 12.3
========= ========= ========
In Spain, the Group's ten bingo clubs continued to perform well with the benefit
of one additional club versus last year resulting in operating profit of £3.4m
(2003 - £3.1m).
Grosvenor Casinos
Turnover Operating profit
2004 2003 2004 2003
£m £m £m £m
UK
London - upper 11.6 8.1 1.9 1.8
London - other 25.9 26.2 4.4 4.6
Provincial 45.8 45.6 11.5 13.7
Hard Rock 5.1 4.4 (0.5) (0.8)
Overheads - - (3.6) (3.9)
--------- --------- --------- ---------
88.4 84.3 13.7 15.4
========= ========= ========= =========
Grosvenor Casinos in the UK had a weaker first half. While overall revenues were
up 5%, operating profit was 11% below last year reflecting a movement in bad
debts of £1.8m, and a weaker performance from provincial casinos which were
affected by increased competition and the impact of new EU legislation on guest
identification.
Admissions Handle per head Win %
('000s) (£)
2004 2003 2004 2003 2004 2003
UK
London - upper 25 21 2,377 2,017 18.8 19.2
London - other 299 300 465 487 17.0 16.9
Provincial 1,298 1,374 178 182 16.7 15.9
Hard Rock 180 167 141 125 16.6 18.2
At the Group's two London-upper casinos, handle was up 40%, reflecting strong
business levels at both the Clermont and the recently refurbished Park Tower.
However, a lower win percentage at the Clermont of just 14.5%, compared with
24.9% last year, together with an adverse variance on bad debts, resulted in
only a modest profit increase. Attendance at the three London-other casinos, the
Victoria, the Gloucester and the Connoisseur, was in line with last year, having
been held back by the introduction of new EU legislation on guest identification
in March 2004. This, together with a small reduction in spend per head, resulted
in turnover being flat at £25.9m (2003 - £26.2m) and operating profit slightly
below last year at £4.4m (2003 - £4.6m).
The slowdown in growth in provincial casinos during the second half of 2003,
continued in the first half. Attendance was down 6% with guest attendance being
particularly affected by the new EU rules. However, this provided an opportunity
to convert more guests into members and as a result overall membership was up
11%. New competition in seven key locations and the increasing availability of
roulette on the high street through fixed odds betting terminals were also
factors affecting first half performance. Overall in the provinces turnover was
flat at £45.8m, but operating profit was down 16% to £11.5m, reflecting
increased labour costs and depreciation resulting from relocations in 2003.
Since the half year, the key metrics of attendance and handle have been
encouraging with attendance in the provinces up by 25% and handle up by 11%
versus 2003.
The two Hard Rock casinos continue to make progress. London is enjoying strong
attendance, is now the Group's second busiest casino, and is already profitable
on a monthly basis. While Manchester continues to be impacted by neighbouring
building work, it has seen good growth in handle and revenue in the first half.
Rank Leisure Machine Services
The sale of Rank Leisure Machine Services was completed on 10 February 2004.
There was a loss on disposal which represented the majority of the £4.1m charge
recorded as a non-operating exceptional item.
Blue Square
Turnover Gross win
2004 2003* 2004 2003*
£m £m £m £m
Internet 73.8 93.1 6.5 6.4
Telebet 30.0 41.8 2.4 2.5
Games 94.4 62.0 4.3 3.8
---------- ---------- ---------- ----------
198.2 196.9 13.2 12.7
========== ========== ========== ==========
* restated to show Blue Square as if Rank had owned the business for the full
year in 2003
Blue Square has continued to perform in line with expectations following its
acquisition in January 2003. In sportsbook (both internet and telebet) the
quality of earnings has improved with a shift towards more frequent lower-stakes
players (there has been a 9% increase in the number of active customers since
the year end). Whilst this has affected turnover, gross win has been sustained
as margins have improved to 8.6% (2003 - 6.6%). The Games business experienced
strong growth in stakes but a lower gross win margin, reflecting an increased
contribution from HardRockCasino.com. Overall, the business operating profit of
£1.3m before goodwill amortisation was up 44% compared with 2003.
HARD ROCK
Turnover Operating profit
2004 2003 2004 2003
£m £m £m £m
Owned cafes 105.7 109.1 11.3 12.5
Cafe franchise and other income 2.9 3.0 2.2 2.8
Hotel franchise and other income 4.0 2.0 3.1 4.5
Gaming franchise income - - 1.4 -
Territory sales 0.3 1.0 0.3 1.0
Advertising and promotion - - (0.8) (0.4)
Overheads - - (5.9) (7.1)
-------- -------- -------- --------
112.9 115.1 11.6 13.3
======== ======== ======== ========
After a long period of uncertainty in the international travel and tourism
markets, there are signs that market conditions may be improving. Excluding the
impact of adverse currency movements of over £10m, revenues in Hard Rock
increased by 7% during the first half.
Hard Rock like for like cafe sales %
Food and Merchandise Total
Beverage
To 30 June 2004
North America 4.4% (5.5)% 0.7%
Europe 7.1% (2.0)% 3.8%
Total 5.0% (4.7)% 1.5%
Nine weeks to 29 August 2004 2.0% (3.4)% (0.1)%
Like for like sales in the owned cafes were up 1.5% during the period. Europe
has seen a marked improvement with a 3.8% like for like increase while North
America was more modest at just 0.7% positive increase. Overall, both markets
experienced good growth in food and beverage sales offset by negative, albeit
much improved, merchandise sales. A reduced contribution from merchandise
together with the impact of adverse currency movements, resulted in operating
profit of £11.3m (2003 - £12.5m).
Hotel franchise and other income benefited from another good performance from
the three hotels in Orlando, although the distribution from the joint venture
was £2.2m below 2003. Gaming franchise income reflects the first time
contribution from the two Seminole hotel/casinos which opened in March and May
2004.
New owned cafes opened in Louisville and Bristol during the first half, taking
the number of owned outlets as at the end of June 2004 to 67. The Fort
Lauderdale cafe was relocated to inside the new Seminole hotel/casino in
Hollywood and since the period end, new owned cafes have opened in Destin,
Florida and the Foxwoods casino, Connecticut. New franchised cafes have opened
in Catania, Italy and Dublin.
The hotel joint venture with Sol Melia has announced plans to open a Hard Rock
Hotel in New York City in late 2005. The former Paramount Hotel will be the
second urban hotel to operate under the Hard Rock Hotel brand and will become
the third hotel within the joint venture - Chicago opened in January 2004 and
San Diego, a franchised hotel, is expected to open in 2006. The Paramount will
undergo a major refurbishment which is expected to commence at the beginning of
2005, following which it will be rebranded Hard Rock. The Hard Rock hotel/casino
in Biloxi, Mississippi is scheduled to open in 2005.
DELUXE
Turnover Operating profit*
2004 2003# 2004 2003#
£m £m £m £m
Film Services 185.4 190.6 28.5 32.9
Media Services 173.7 133.7 (9.3) (5.1)
-------- -------- -------- --------
359.1 324.3 19.2 27.8
-------- --------
Goodwill amortisation (2.3) (1.4)
-------- --------
16.9 26.4
Associate investments / joint ventures 0.2 0.1
-------- --------
17.1 26.5
======== ========
* before goodwill amortisation and exceptional items
# as restated for the transfer of digital services businesses from Deluxe Media
to Deluxe Film
Film Services
Turnover Operating profit*
2004 2003# 2004 2003#
£m £m £m £m
Film Laboratories 159.7 168.9 22.0 26.0
Digital & Other Services 25.7 21.7 6.5 6.9
--------- -------- ------- --------
185.4 190.6 28.5 32.9
========= ========
Goodwill amortisation (0.9) (0.6)
------- --------
27.6 32.3
------- --------
Associates 0.2 0.1
------- --------
27.8 32.4
======= ========
* before goodwill amortisation
# as restated for the transfer of digital services businesses from Deluxe Media
to Deluxe Film
Volumes at the Film Laboratories business continued to be strong with footage up
by 8%, despite having no contribution from either the Universal or Fox
International contracts which were lost during 2003. Major titles produced
during the first half included Spider-Man 2, The Day After Tomorrow, 50 First
Dates and Kill Bill Volume 2. After adjusting for currency, turnover was up
2.5%. The operational gearing inherent in the business, together with currency
impact, resulted in operating profit being down 15%. Since the half year,
volumes have been robust with a number of major titles being produced including
I-Robot, The Manchurian Candidate and Alien versus Predator. The schedule for
the remainder of the year is also looking good with titles such as Finding
Neverland, Flight of the Phoenix and Lemony Snicket.
During the year to-date Deluxe Film has successfully extended the two film
contracts that were due to expire in 2005 and 2006 so that as at 31 July 2004,
only 18% of 2003 contracted footage is due for renewal before the end of 2007
and 74% is now secure until at least 2008.
Digital and Other Services comprise ETS (physical film distribution), Capital FX
(titles and special effects) and the digital services businesses previously
managed by Deluxe Media (principally the compression, encoding and authoring
business).
Since the half year, Deluxe has completed the acquisition of Digital Video
Compression Centre and Softitler, both of which have further strengthened
Deluxe's presence in the important authoring and sub-titling market. Also since
the half year, Deluxe has acquired the remaining 80% of the equity in EFILM that
it did not already own. Going forward the results from EFILM will be
consolidated as part of Deluxe Film.
Media Services
Turnover Operating profit*
2004 2003# 2004 2003#
£m £m £m £m
Video duplication 30.5 55.1 (5.1) (3.2)
DVD/CD replication 83.6 33.9 (4.8) (4.4)
Distribution services 59.6 44.7 0.6 2.5
--------- -------- -------- --------
173.7 133.7 (9.3) (5.1)
========= ========
Goodwill amortisation (1.4) (0.8)
-------- --------
(10.7) (5.9)
======== ========
*before goodwill amortisation and exceptional items
# as restated for the transfer of digital services businesses from Deluxe Media
to Deluxe Film
As expected, the decline of VHS continued with volumes down to 49m units (2003 -
77m), resulting in a loss of £5.1m (2003 - £3.2m loss). DVD volumes benefited
from the acquisition of Disctronics in July 2003, with a total of 92m units
produced in the half (2003 - 48m). Disctronics also produced 116m CDs during the
first half (2003 - nil). However, the seasonal nature of the replication
business and its high fixed cost base resulted in an operating loss of £4.8m
(2003 - £4.4m) before goodwill amortisation.
The distribution business enjoyed strong volume growth with an increase in total
units handled to 341m (2003 - 257m), and turnover increased by 33% to £59.6m
(2003 - £44.7m). However, increased set up costs associated with a new customer
account impacted margins and reduced operating profit to £0.6m (2003 - £2.5m).
In May 2004, the Group announced that Deluxe Media had lost a major European DVD
manufacturing and distribution contract. This has given rise to an exceptional
charge in the first half of £23.1m. Further details are given below.
US Holidays
US Holidays' operating profit was £1.5m (2003 - £3.4m). The business generated
net cash of £5.7m (2003 - £6.9m).
Central costs and other
2004 2003
£m £m
Central costs* (7.3) (7.3)
Other income 0.5 0.1
-------- --------
(6.8) (7.2)
======== ========
*before exceptional items
Associates and joint ventures
2004 2003
£m £m
Deluxe associate investments and joint venture 0.2 0.1
========= ========
Associate investments comprise the 20% interest in EFILM and the 50% joint
venture with Atlab in Australia. Since the half year, the Group has acquired the
80% interest in EFILM that it did not already own.
Managed businesses' interest
2004 2003
£m £m
Interest payable and other charges 23.6 19.2
Interest receivable (7.1) (4.9)
-------- --------
16.5 14.3
======== ========
Average interest rate 4.9% 5.1%
Managed businesses' interest and other charges was £16.5m, an increase of £2.2m
from the prior year. This reflects higher net debt levels following the
redemption of the outstanding convertible preference shares.
Taxation
The effective tax rate, before exceptional items, is 28.1% (2003 full year -
28.9%).
Dividend
An interim dividend of 4.8p per Ordinary share (2003 - 4.6p) will be paid on 15
October 2004 to those shareholders on the register on 17 September 2004.
Exchange rates
The net translation effect of changes in average exchange rates between 2003 and
2004 was to decrease turnover by £30.6m, operating profit before goodwill
amortisation by £2.6m, and profit before tax and exceptional items by £1.0m. The
average rates and the impact on divisional results are shown below.
Average Impact on H1
exchange rate 2004
2004 2003 Turnover Operating
profit
£m £m
US dollar 1.82 1.61 (31.4) (2.4)
Canadian dollar 2.36 2.39 0.8 -
Euro 1.46 1.46 - -
------------ ---------
(30.6) (2.4)
============ =========
Gaming - -
Hard Rock (10.5) (0.6)
Deluxe (18.1) (1.8)
US Holidays (2.0) (0.2)
Other - -
------------ ---------
(30.6) (2.6)
Deluxe goodwill amortisation 0.2
Interest 1.4
---------
Net impact on profit before tax (1.0)
=========
Exceptional items
£m
Exceptional items within operating profit
Deluxe Media Services restructuring
Impact of loss of major studio DVD contract (23.1)
Restructuring of VHS facilities in Europe (4.0)
---------
(27.1)
Non-operating exceptional items
Loss on disposal of continuing operations (4.1)
---------
Exceptional items before tax (31.2)
=========
In May 2004, Deluxe Media Services was informed by a major studio that it would
be transferring its business to another supplier on a staged basis over the
period to July 2005. This contract relates primarily to European DVD
manufacturing and distribution. Although negotiations for replacement contracts
are ongoing, no major contracts have yet been secured and accordingly an
exceptional charge of £23.1m, comprising an impairment charge of £18.0m, onerous
lease provisions of £3.8m and other costs of £1.3m, has been recorded.
Deluxe Media Services also incurred an exceptional charge of £4.0m in respect of
the VHS restructuring announced at the time of the 2003 year end results in
February 2004. These charges relate to the closure of VHS manufacturing
facilities in Germany, Italy and Portugal.
Cash flow
2004 2003
(as restated)
£m £m
Cash flow from operating activities
Before Deluxe contract advances 90.4 132.7
Deluxe contract advances, net of repayments 17.9 (54.2)
---------- -----------
108.3 78.5
Capital expenditure (55.3) (48.2)
Fixed asset disposals 0.6 1.3
---------- -----------
Operating cash flow 53.6 31.6
Acquisitions and investments* (14.9) (87.3)
Disposals (including cash disposed) 29.9 -
---------- -----------
68.6 (55.7)
Interest, tax and dividend payments (56.2) (85.8)
---------- -----------
12.4 (141.5)
Issue of Blue Square convertible loan stock - 65.0
---------- -----------
Cash inflow (outflow) 12.4 (76.5)
========== ===========
* including £65m of Blue Square debt in 2003
Cash inflow from operating activities was £29.8m higher than 2003. This is
largely due to a net inflow of £17.9m in respect of contract advances in Deluxe
which more than offset lower profits and working capital movements.
Capital expenditure was £55.3m and is analysed below:
2004 2003
£m £m
Gaming 29.6 24.1
Hard Rock 5.8 6.2
Deluxe 19.0 17.3
US Holidays 0.9 0.6
---------- -----------
55.3 48.2
========== ===========
Increased spend in Gaming included the acquisition of a new 62,000 square foot
freehold facility in Bolton which will open later this year as a new Grosvenor
casino and a relocated Mecca Bingo.
Acquisitions and investments principally relate to cash paid as deferred
consideration on the prior period acquisitions of Ritek, ETS, Disctronics and
Capital FX. Disposals relates to the sale of Rank Leisure Machine Services.
Interest, tax and dividends is £29.6m lower than 2003, largely reflecting a net
tax inflow of £17.4m compared with a net tax payment in 2003 of £16.2m.
Net debt
Net debt at 30 June 2004 was £668.1m compared to £529.6m last year and £700.5m
as at 31 December 2003. Net debt as a percentage of shareholders' funds was 127%
(30 June 2003 - 71%, 31 December 2003 - 133%).
GROUP PROFIT AND LOSS ACCOUNT (unaudited)
2004
Before
Exceptional Exceptional
Items Items Total
£m £m £m
----------- ---------- ----------
Turnover (Note 2)
Continuing operations 931.4 - 931.4
Operating profit (loss) before goodwill
amortisation 80.2 (27.1) 53.1
Goodwill amortisation (3.7) - (3.7)
----------- ---------- ----------
Operating profit (loss) (Note 2) 76.5 (27.1) 49.4
Share of operating profit in associates
and joint ventures 0.5 - 0.5
----------- ---------- ----------
77.0 (27.1) 49.9
Non-operating items (Note 3) - (4.1) (4.1)
----------- ---------- ----------
Profit (loss) before interest 77.0 (31.2) 45.8
Interest:
Managed businesses (16.5) - (16.5)
Associates and joint ventures (0.3) - (0.3)
----------- ---------- ----------
(16.8) - (16.8)
Profit (loss) before tax 60.2 (31.2) 29.0
Tax (Note 4) (16.9) 0.4 (16.5)
----------- ---------- ----------
Profit (loss) after tax 43.3 (30.8) 12.5
Equity minority interests (0.1) 0.5 0.4
Preference dividends - - -
----------- ---------- ----------
Earnings (loss) 43.2 (30.3) 12.9
=========== ========== ==========
Basic earnings (loss) per
Ordinary share (Note 5) 7.3p (5.1)p 2.2p
Diluted earnings (loss) per
Ordinary share (Note 5) 7.2p (5.1)p 2.1p
Basic earnings (loss) per Ordinary
share before goodwill amortisation 7.8p (5.1)p 2.7p
Net dividend per Ordinary share 4.8p
2003
Before
Exceptional Exceptional
Items Items Total
£m £m £m
----------- ---------- ----------
Turnover (Note 2)
Continuing operations 879.9 - 879.9
Operating profit (loss) before goodwill
amortisation 94.4 (27.6) 66.8
Goodwill amortisation (2.8) - (2.8)
----------- ---------- ----------
Operating profit (loss) (Note 2) 91.6 (27.6) 64.0
Share of operating profit in associates
and joint ventures 0.3 - 0.3
----------- ---------- ----------
91.9 (27.6) 64.3
Non-operating items (Note 3) - 4.0 4.0
----------- ---------- ----------
Profit (loss) before interest 91.9 (23.6) 68.3
Interest:
Managed businesses (14.3) - (14.3)
Associates and joint ventures (0.2) - (0.2)
----------- ---------- ----------
(14.5) - (14.5)
Profit (loss) before tax 77.4 (23.6) 53.8
Tax (Note 4) (23.4) 0.7 (22.7)
----------- ---------- ----------
Profit (loss) after tax 54.0 (22.9) 31.1
Equity minority interests (0.1) 1.8 1.7
Preference dividends (10.5) - (10.5)
----------- ---------- ----------
Earnings (loss) 43.4 (21.1) 22.3
=========== ========== ==========
Basic earnings (loss) per
Ordinary share (Note 5) 7.3p (3.5)p 3.8p
Diluted earnings (loss) per
Ordinary share (Note 5) 7.3p (3.6)p 3.7p
Basic earnings (loss) per Ordinary
share before goodwill amortisation 7.7p (3.5)p 4.2p
Net dividend per Ordinary share 4.6p
GROUP PROFIT AND LOSS ACCOUNT (unaudited)
6 months to 6 months to Year to
30.6.04 30.6.03 31.12.03
£m £m £m
Turnover (Note 2) 931.4 879.9 1,925.9
Operating profit before goodwill
amortisation 80.2 94.4 223.0
Goodwill amortisation (3.7) (2.8) (6.4)
--------- ---------- ----------
Operating profit (Note 2) 76.5 91.6 216.6
Exceptional items within operating
profit (27.1) (27.6) (51.1)
Non-operating items (Note 3) (4.1) 4.0 4.6
Share of operating profit
in associates and joint ventures 0.5 0.3 0.8
--------- ---------- ----------
Profit before interest 45.8 68.3 170.9
Interest:
Managed businesses (16.5) (14.3) (29.7)
Associates and joint ventures (0.3) (0.2) (0.4)
Exceptional interest charge - - (11.5)
--------- ---------- ----------
Profit before tax 29.0 53.8 129.3
--------- ---------- ----------
Profit before tax and exceptional items 60.2 77.4 187.3
--------- ---------- ----------
Tax (Note 4):
Tax on ordinary activities (16.9) (23.4) (54.2)
Exceptional tax credit 0.4 0.7 26.1
--------- ---------- ----------
Profit after tax 12.5 31.1 101.2
Equity minority interests 0.4 1.7 0.5
Preference dividends - (10.5) (17.1)
--------- ---------- ----------
Earnings 12.9 22.3 84.6
========= ========== ==========
Earnings before exceptional items 43.2 43.4 113.7
--------- ---------- ----------
Basic earnings per Ordinary share 2.2p 3.8p 14.3p
before exceptional items (Note 5) 7.3p 7.3p 19.2p
Diluted earnings per Ordinary share 2.1p 3.7p 13.8p
before exceptional items (Note 5) 7.2p 7.3p 18.5p
Basic earnings per Ordinary share before
goodwill amortisation 2.7p 4.2p 15.2p
before exceptional items (Note 5) 7.8p 7.7p 20.1p
GROUP BALANCE SHEET (unaudited)
30.6.04 30.6.03 31.12.03
(as restated) (as restated)
£m £m £m
Fixed assets
Intangible assets 115.2 116.0 123.9
Tangible assets 770.4 789.0 803.2
Investments (Note 1) 55.0 58.7 56.5
--------- ---------- ----------
940.6 963.7 983.6
--------- ---------- ----------
Current assets
Stocks 62.4 83.6 70.2
Debtors (including amounts falling due
after one year) 722.5 683.0 776.4
Investments 13.0 28.2 4.2
Cash and deposits 104.0 162.8 167.9
--------- ---------- ----------
901.9 957.6 1,018.7
Creditors (amounts falling due within
one year)
Loan capital and borrowings (243.5) (70.8) (292.1)
Other (421.5) (351.3) (441.7)
--------- ---------- ----------
(665.0) (422.1) (733.8)
Net current assets 236.9 535.5 284.9
--------- ---------- ----------
Total assets, less current
liabilities 1,177.5 1,499.2 1,268.5
Creditors (amounts falling due after
more than one year)
Loan capital and borrowings (541.6) (649.8) (580.5)
Other creditors and provisions(Note 1) (94.9) (88.0) (144.9)
--------- ---------- ----------
541.0 761.4 543.1
========= ========== ==========
Capital and reserves
Called up share capital 60.1 104.7 59.6
Share premium account 25.9 15.2 17.5
Other reserves 440.0 624.8 449.9
--------- ---------- ----------
Shareholders' funds (Note 1) 526.0 744.7 527.0
--------- ---------- ----------
Equity interests 526.0 517.2 527.0
Non-equity interests - 227.5 -
--------- ---------- ----------
Equity minority interests 15.0 16.7 16.1
--------- ---------- ----------
541.0 761.4 543.1
========= ========== ==========
GROUP CASH FLOW (unaudited)
6 months 6 months Year to
to 30.6.04 to 30.6.03 31.12.03
(as restated) (as restated)
£m £m £m
Net cash inflow from operating
activities (Note 6) 108.3 78.5 291.9
Returns on investment and servicing
of finance
Interest (net) (17.5) (7.0) (38.6)
Dividends paid to Preference
shareholders and minorities (0.6) (10.5) (27.0)
--------- ---------- ----------
(18.1) (17.5) (65.6)
Tax received (paid) - net 17.4 (16.2) (27.8)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (55.3) (48.2) (111.4)
Purchase of investments (Note 1) - - (2.8)
Sale of fixed assets and assets
held for disposal 0.6 1.3 9.8
--------- ---------- ----------
(54.7) (46.9) (104.4)
Acquisitions and disposals
Purchase of businesses (14.7) (23.7) (53.7)
Net cash (disposed) acquired (0.4) 1.4 1.6
Sale of businesses and investments 30.3 - -
Investments in associates and joint
ventures (0.2) - -
--------- ---------- ----------
15.0 (22.3) (52.1)
Ordinary dividends paid (55.5) (52.1) (79.4)
--------- ---------- ----------
Cash inflow (outflow) before use of
liquid resources and financing 12.4 (76.5) (37.4)
========= ========== ==========
Movements in net debt
Cash inflow (outflow) before use of
liquid resources and financing 12.4 (76.5) (37.4)
Borrowing and lease obligations
disposed (acquired) with subsidiaries 1.3 - (11.8)
Issue of Ordinary share capital 6.9 1.6 3.9
Redemption of share capital (5.0) - (214.9)
Increase in finance leases - (0.5) -
Blue Square convertible loan stock - (65.0) (65.0)
Conversion of loan stock (Blue Square) 2.1 - -
Purchase of own shares - (2.4) (3.7)
Foreign exchange differences 14.7 12.3 27.5
--------- ---------- ----------
Decrease (Increase) in net debt 32.4 (130.5) (301.4)
Net debt at beginning of period (700.5) (399.1) (399.1)
--------- ---------- ----------
Net debt at end of period (668.1) (529.6) (700.5)
========= ========== ==========
GROUP RECOGNISED GAINS AND LOSSES
6 months 6 months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
Profit for the financial period 12.9 32.8 101.7
Currency translation differences on
foreign currency net investments 5.1 (0.3) (10.2)
Tax on exchange adjustments offset
in reserves - - 8.8
--------- ---------- ----------
Total recognised gains and losses for
period 18.0 32.5 100.3
========= ========== ==========
MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS
6 months 6 months Year to
to 30.6.04 to 30.6.03 31.12.03
(as restated) (as restated)
£m £m £m
Profit for the financial period 12.9 32.8 101.7
Dividends payable (29.0) (36.6) (99.9)
Redemption of convertible
preference shares - - (226.1)
Credit in respect of employee share
schemes 1.6 1.6 4.2
Other recognised gains and losses (net) 5.1 (0.3) (1.4)
New share capital subscribed 9.0 1.6 4.1
--------- ---------- ----------
Net movement in shareholders' funds (0.4) (0.9) (217.4)
Opening shareholders' funds as
previously stated 527.0 748.6 748.6
Prior year adjustment
Investment in own shares - UITF 38 (0.6) (3.0) (4.2)
--------- ---------- ----------
Opening shareholders' funds as
restated 526.4 745.6 744.4
--------- ---------- ----------
Closing shareholders' funds 526.0 744.7 527.0
========= ========== ==========
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1. Accounting policies
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's statutory financial statements for
the year ended 31 December 2003, with the exception of the change detailed
below.
The Group has adopted Urgent Issues Task Force ('UITF') abstract 38 'Accounting
for ESOP trusts' and abstract 17 (2003) 'Employee share schemes' in 2004. UITF
38 requires investments in own shares to be deducted from equity and not
disclosed as an investment. In addition, in the Cash Flow Statement, amounts
paid to purchase own shares are disclosed as financing and not capital
expenditure and financial investment. This change in accounting policy has been
accounted for as a prior period adjustment and accordingly the results reported
in 2003 have been restated. The change reduces shareholders' funds for the six
months ended 30 June 2003 by £1.4m and by £nil for the year ended 31 December
2003 and reduces cash outflow before use of liquid resources and financing for
the six months ended 30 June 2003 by £2.4m and by £3.7m for the year ended 31
December 2003. UITF 17 (2003) requires the cost of the shares awarded to be
equal to the fair value of the shares at the grant date. There has been no
restatement of the Group's profit and loss account as this change is not
significant.
2. Segmental analysis by geographical area of origin
6 months 6 months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
Turnover
United Kingdom 504.2 462.4 1,064.3
North America 299.2 329.5 665.6
Rest of the world 128.0 88.0 196.0
------------ ---------- ---------
931.4 879.9 1,925.9
============ ========== =========
Operating profit before exceptional items
United Kingdom 41.2 41.4 98.1
North America 23.0 38.7 87.7
Rest of the world 12.3 11.5 30.8
------------ ---------- ---------
76.5 91.6 216.6
============ ========== =========
3. Non-operating items
Non-operating items comprise:
6 months 6 months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
Profit on disposal of discontinued
operations - 4.0 4.6
Loss on disposal of continuing operations (4.1) - -
--------- --------- --------
Non-operating items before interest and tax (4.1) 4.0 4.6
========= ========= ========
4.Tax charge
The tax charge may be analysed as follows:
6 months 6 months Year to
to 30.6.03 to 30.6.03 31.12.03
£m £m £m
Rank subsidiaries 16.8 23.3 54.0
Associates and joint ventures 0.1 0.1 0.2
--------- --------- --------
16.9 23.4 54.2
========= ========= ========
Exceptional tax credit (0.4) (0.7) (26.1)
========= ========= ========
Taxation has been provided at an estimated effective rate of 28.1% (2003 full
year - 28.9%), before exceptional items.
5. Weighted average number of shares
The weighted average number of shares used in the calculation of basic earnings
per share is 596.8m (2003 first half: 592.4m, full year: 592.3m). For diluted
earnings per share the weighted average number of shares used in the calculation
is 600.4m (2003 first half: 595.3m, full year: 618.5m)
6. Reconciliation of operating profit to cash flow
6 months 6 months Year to
to 30.6.04 to 30.6.03 31.12.03
£m £m £m
Operating profit 49.4 64.0 165.5
Exceptional operating costs charged 27.1 27.6 51.1
Cash payments in respect of exceptional
costs and provisions (14.4) (12.7) (34.8)
Depreciation and amortisation 39.5 45.0 94.9
Contract advance payments, net of repayments 17.9 (54.2) (17.3)
(Decrease)/increase in working capital (15.6) 4.8 30.6
Other items 4.4 4.0 1.9
-------- -------- --------
Net cash inflow from operating activities 108.3 78.5 291.9
======== ======== ========
7.Exchange rates
The US$/£ exchange rates for the relevant accounting periods are:
6 months 6 months Year to
to 30.6.04 to 30.6.03 31.12.03
US$/£
Average 1.82 1.61 1.63
Period-end 1.81 1.66 1.79
Independent review report to The Rank Group Plc
Introduction
We have been instructed by the Company to review the financial information which
comprises the profit and loss account, the balance sheet, the cash flow
statement, the statement of recognised gains and losses, the statement of
movements in shareholders' funds and the related notes. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for, and only for, the Company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
London
3 September 2004
This information is provided by RNS
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