Half Yearly Report

RNS Number : 8659F

Sage Group PLC

04 May 2011

 



Wednesday 4 May 2011                                                                                                                                           

The Sage Group plc unaudited results for the half-year ended 31 March 2011 

 

GROWTH MOMENTUM CONTINUES

Reaping the benefits of innovation and providing an excellent customer experience

Results at a glance	H1 2011	H1 2010	Change
Revenue
- Statutory	£742.7m	£718.9m	+3%
- Underlying* organic#	£728.2m	£699.4m	+4%
EBITA†	£190.3m	£180.5m	+5%
Pre-tax profit
- Statutory	£167.2m	£159.6m	+5%
- Underlying*	£183.5m	£176.1m	+4%
Earnings per share
- Statutory	9.00p	8.62p	+4%
- Underlying*	9.87p	9.52p	+4%
Interim dividend per share	2.68p	2.58p	+4%

 

Financial highlights

§	Underlying pre-tax profit increased by 4%* to £183.5m (H1 2010: £176.1m*)
§	EBITA† margin maintained at 25.6% (H1 2010: 25.2%*, year ended 30 September 2010: 25.5%*), whilst investment in growth initiatives continues
§	Underlying earnings per share increased by 4%* to 9.87p (H1 2010: 9.52p*)
§	Interim dividend increased 4% to 2.68p per share (H1 2010: 2.58p per share)
§	Strong operating cash flow of £233.6m (H1 2010: £236.6m), representing 123% of EBITA†, with net debt reducing to £106.0m at 31 March 2011 (30 September 2010: £219.8m)

 

Operational highlights

§	Good revenue growth momentum in the business: § 4%* organic revenue growth (2%* organic contraction in H1 2010), with Europe up 5%*, North America up 1%* (North America up 4%* excluding Sage Healthcare), and AAMEA up 10%* § 4%* organic growth in software and software-related services revenues (8%* organic contraction in H1 2010)
§	131,000 paying customers added in the period (H1 2010: 127,000)
§	Continued progress in delivering online business solutions and connected services to new and existing customers
§	Our high quality customer support maintained contract renewal rates at 81%, and subscription revenues for the period grew by 4%* organically (H1 2010: 1%*)

Guy Berruyer, CEO, commented: "We delivered good revenue growth and strong cash flows in the first half. I am pleased that our North American business has returned to growth in the period.

As our Sage Business Index, launched in February 2011, has shown, we have seen an increase in business confidence for SMEs in the period, although the picture varies by geography and the outlook remains uncertain. We have continued to invest in the business in the period, including in services offered over the web. Customers have responded well to innovation in our products and services and the provision of strong customer support.

With growth returning to the business, a large and loyal international customer base, and a strong balance sheet, I am confident that Sage is well positioned to capitalise on its many growth opportunities, and look forward to continued progress in the second half of the year."

* Underlying figures neutralise the impact of foreign exchange movements and exclude amortisation of acquired intangible assets.  Foreign currency results for the prior half-year ended 31 March 2010 have been retranslated based on the average exchange rates for the period ended 31 March 2011 of $1.59/£1 and €1.16/£1 to facilitate the comparison of results. 

^#  Organic figures exclude the contributions of current and prior period acquisitions, disposals and non-core products.

^† EBITA is defined as earnings before interest, tax and amortisation of acquired intangible assets and is after neutralising the impact of foreign exchange movements.            

Enquiries:

The Sage Group plc          [phone]	Tulchan Communications                [phone]
Guy Berruyer, Chief Executive	David Shriver
Paul Harrison, Group Finance Director	Lucy Legh
Andrew Griffith, Investor Relations

An analyst presentation will be held at 8.45am today at Deutsche Bank, Winchester House,1 Great Winchester Street, London EC2N 2DB.  A live webcast of the presentation will be hosted on www.investors.sage.com, dial-in number [phone], pin code: 108067#.  A replay of the call will also be available for two weeks after the event: Tel: [phone], pin code: 376990#.

 

Overview of the period and key metrics

We have seen a gradual improvement in our markets in the period with 4%* organic revenue growth in the half, against 3%* growth in H2 2010 and a contraction of 2%* in H1 2010.

Software and software-related services revenues grew by 4%* organically compared to 2%* growth in H2 2010 and an 8%* contraction for H1 2010. 131,000 new customers purchased software solutions in the period, demonstrating the value that our products and services offer to SMEs.

Organic subscription revenues grew by 4%* compared to 3%* growth in H2 2010 and 1%* growth in H1 2010, with good demand for customer support. Support contract renewals, a key measure of the underlying performance of our business model, were maintained at 81% in line with the long-term average renewal rates. Premium support continues to resonate with our customers, with sales of new premium contracts and up-selling of existing premium contracts resulting in revenue from premium support growing by 5%*.

We maintained our EBITA^†margin at 25.6% (H1 2010: 25.2%*, year ended 30 September 2010: 25.5%*) whilst investing in the business in areas such as customer support, sales and marketing in key growth areas, and in delivering online solutions and connected services.

Cash generated from operations represented 123% of EBITA^† reflecting the continued strong cash generation in the business, and underlying EPS grew by 4%* to 9.87p (H1 2010: 9.52p*).

 

Our customers

In February 2011 we released a report "The Sage Business Index 2011, International Small Business Insights", based on research conducted with over 6,000 small businesses across the world in a broad range of industry sectors.  The report covered business confidence and the economy, each country as a place to do business, the role of government, business challenges and advice and the role of technology.

The results reveal that whilst confidence appears to be returning, this is not universal and, though businesses in each country face a variety of issues particular to their geography, there are also common challenges, such as legislation and funding. Entrepreneurial spirit and culture are shown to be alive and well and the report points to how the key driver for adopting new technologies is to improve business efficiency.

From an economic perspective, an average of 41% of respondents felt more positive about their business prospects than a year ago, 40% thought their prospects would stay the same and 19% were less confident. Businesses in Germany were the most confident with businesses in France, UK, US and Canada being quite similar and somewhat confident, and businesses in Spain being the least confident.

We consider that the report is consistent with Sage's broader experience in the half, with our markets gradually improving and with customers looking to invest in software solutions where they provide real business benefits.

Innovation

Innovation is key to our approach to the market, whether that is in providing best of breed small business and mid-market solutions, or giving customers the option to deploy solutions on-premise or on the web, or providing integrated connected services to our customer base, or in providing the highest quality maintenance and support to our customers and partners.

With over 6 million customers and over 1.9 million support contracts, we are focussed on providing an excellent experience to our customers in all their interactions with Sage from the time when they buy a product or service, to using it to the fullest extent and helping with any queries, through to renewing their contracts. We also continue to develop our support offerings with new services being added such as HR advice. In this way, innovation is relevant to all our interactions with our customers.

As part of this approach to our customers, the web offers the potential for significant benefits to SMEs in how they manage their businesses. The provision of these benefits to our customers is a key priority for Sage, and our strategy to do this is as follows:

Ø  Connected services: We are offering a range of web-based services which extend the reach of our on-premise applications into the Cloud. These include mobile, e-Commerce, employee services, customer management, and payment processing. Connected services offer the potential to increase average revenue per customer and average life of a customer due to the deepening of the customer's relationship with Sage. Connected services launched in the period include an updated Sage Virtual Terminal (a sophisticated online payments hub enabling small businesses to accept and manage card payments), and we expect the number of such connected services to continue to increase in the future.

Ø  Online business solutions: For small businesses we are developing and launching new web-based online solutions offered on a multi-tenant basis where the relatively straight-forward needs of smaller businesses suit this approach. We have a number of these solutions in the market, including SageOne and VIP Liquid Payroll which were launched in the period. For the mid-market, where a customer's needs are more complex (including frequently the requirement to customise a solution) we plan to make available Cloud versions of our existing leading products, offered on a single-tenant basis. Some Cloud versions are already available such as Sage ERP Accpac Online and Sage SalesLogix Cloud, with other launches planned. All our online solutions have subscription pricing, are hosted and are accessed via the web.

Overall we are seeing good demand for our web-based solutions with both stand alone sales, and as a component of higher tier support contracts.

Our approach to innovation also relates to ensuring that customers maximise the business benefits available through the use of our products. So, in our small business products, we are increasingly able to track how our customers use our products and which functions are relevant to different types of customer, and so tailor future releases to these needs. In the mid-market, our products are increasingly pre-configured for verticals and we are maintaining a high quality partner channel to implement our solutions (whether such solutions are deployed on-premise or in the Cloud). In the upper mid-market, our product Sage ERP X3 is focussed on customer value, simplicity and pragmatism, together with rich functionality, and we saw revenue for this product grow by 11%* in the half.

Board and executive team

On 20 April 2011, Paul Stobart, CEO of Sage Northern Europe, announced his intention to leave the Group. Paul will cease to be a Director of The Sage Group plc on 31 May 2011. Álvaro Ramírez, who was CEO of Sage Southern Europe, assumed responsibility for all of Sage's European operations with effect from 20 April 2011.

Following this organisational change, Sage's business will be organised into three regions: Europe, North America and AAMEA (Africa, Australia, Middle East and Asia). Sage's results have been stated on this basis within this release.

As we reported in December 2010, Sue Swenson, CEO of our North American business, had indicated her intention to retire. We are therefore pleased to report that, following a hand over period with Sue, Pascal Houillon has now taken over as CEO of our North American business.

Acquisitions

We continue to evaluate acquisitions as part of our strategy. Acquisition opportunities lie in both existing and new geographical markets.  They also lie in opportunities to sell new products and services to our large and loyal customer base including web-based solutions.  We continue to apply rigorous discipline to the evaluation of these opportunities, with appraisal models clearly linked to shareholder value. We did not complete any significant acquisitions in the period.

Regional review

Throughout the regional review, growth trends are stated on a currency neutral basis with prior period results retranslated at current period exchange rates.  This is done to facilitate the comparison of results.  A reconciliation of underlying headline revenue to organic revenue is shown in the table in note 1 on page 12.

Regional analysis

									Europe		North America	AAMEA	Group underlying*	Foreign exchange	Amortisation of acquired intangible assets	Group statutory
Revenue
H1 FY11							£m		401.5		270.9	70.3	742.7			742.7
H1 FY10							£m		383.3		269.6	62.1	715.0	3.9		718.9
Change							%		5%		0%	13%	4%			3%
EBITA†/Operating profit
H1 FY11							£m		115.8		57.9	16.6	190.3		(16.3)	174.0
H1 FY10							£m		106.3		60.0	14.2	180.5	1.4	(17.9)	164.0
Change							%		9%		-4%	17%	5%			6%

Europe (UK & Ireland, France, Spain, Germany, Switzerland, Poland and Portugal)

Total Europe revenues grew by 5%* to £401.5m (H1 2010: £383.3m*). On an organic basis this was also 5%* (H1 2010: 1%* contraction). Organic subscription revenues grew at 5%* (H1 2010: 3%*), with organic software and software-related services revenues also growing by 5%* (H1 2010: 7%* contraction).

Our UK & Ireland business grew by 4%* in the period with strong execution in the small business segment and good demand in the accountants' market. We also launched SageOne in the period, an online accounting product targeting the small and micro business segment and we are seeing early positive customer demand.

Revenues in our French business grew 5%* organically in the period, with our treasury products in particular benefitting from the move to a Single Euro Payments Area and good performances from our ERP products, including Sage ERP X3 and our accountants' products. At the lower end, we saw strong take up of our free solution for "Auto-Entrepreneur" businesses (a business status which offers simplified legislation and administration), which offers good potential for conversion to revenue in due course.

In a challenging market, Spanish revenues grew by 3%*, with strong subscription revenues from the continued focus on premium support including connected services. Sage Germany benefitted from an improving economy particularly impacting mid-market manufacturing companies, and grew by 5%*. Switzerland revenues grew on an organic basis by 2%* and our Polish business grew revenues by 38%* in a strong economy with the additional stimulus of a VAT legislation change. Our Portuguese business grew by 8%* following legislative change, but is expecting to face more challenging conditions going forward given the broader economic issues in Portugal.

The EBITA^† margin for Europe was 29% (H1 2010: 28%*).

North America

Total revenues in North America were flat* at £270.9m (H1 2010: £269.6*), with organic revenue growth of 1%* (H1 2010: 5%* contraction). Organic subscription revenues grew 1%* (H1 2010: 2%* contraction), while organic software and software-related services revenues were flat* (H1 2010: 13%* contraction).

We have seen an improvement in the optimism of North American SMEs, with external surveys indicating increased business investment and capital spending, but with concerns remaining. Our North American business, excluding Sage Healthcare, grew by 4%* in the half.  Our payments business grew by 16%* in the half, with growth in merchants and volumes and over 50%* growth in cross sell of payments into our ERP base, which now represents 20% of payments revenues. Our small business accounting and mid-market ERP products such as Sage ERP Accpac and Sage ERP Mas 90 performed well, with strong execution and increased demand. The market for our construction products remains challenging, but our Nonprofit Solutions business was strong.

Our Healthcare business contracted organically by 5%* (H1 2010: 4%*) with growth of 8%* for the Intergy product line being offset by a 16%* decline in Medical Manager and other products. With Intergy now representing over 50% of the total business, the impact of the Medical Manager attrition on the overall Healthcare business will reduce in the future. We continue to focus on minimising the Medical Manager attrition through the provision of strong customer support and product updates. We are seeing good demand for Intergy Electronic Health Records, with bookings ahead of revenue growth and this will contribute to revenue in future periods. As anticipated, Sage Healthcare's EBITA^† margin reduced to 14% (H1 2010: 19%*) with continued investment in sales and marketing to benefit from the government stimulus, the impact of which is expected to be felt from the second half of the current financial year onwards.

For the total North American business, the EBITA^† margin was 21% (H1 2010: 22%*).

AAMEA (Africa, Australia, Middle East and Asia)

Total revenues in AAMEA grew by 13%* to £70.3m (H1 2010: £62.1m*). Organic revenue grew 10%* (H1 2010: 4%*). Organic subscription revenues showed strong growth of 15%* (H1 2010: 13%*), while organic software and software-related services grew by 6%* (H1 2010: 4%* contraction).

South Africa showed organic revenue growth of 15%*, with both accounting and payroll solutions performing well.  Sales into the broader African continent have continued to grow well and remain a good future opportunity. Australia grew by 2%* organically with HandiSoft, our product for tax practitioners and consultants, continuing to perform well.  Together, our Middle East and Asian businesses grew by 11%* with a particularly strong performance in Singapore.

The EBITA^† margin was 24% (H1 2010: 23%*).

Financial review

Revenues

Statutory revenues were 3% greater than the prior period at £742.7m (H1 2010: £718.9m).  Organic revenue, on a constant currency basis, was 4%* greater than H1 2010. Organic revenue excludes contributions of current and prior period acquisitions and disposals (0% of current period revenues) and non-core products (2% of current period revenues). 

On a constant currency basis, subscription revenues grew 4%* to £489.8m (H1 2010: £469.1m*). Total software and software-related services revenues grew 3%* to £252.9m (H1 2010: £245.9m*). 

Profitability

The Group's EBITA^† margin was maintained at 25.6% (H1 2010: 25.2%*, year ended 30 September 2010: 25.5%*) reflecting tight cost control.

The Group's net finance expenses increased to £6.8m (H1 2010: £4.4m). The majority of the interest charge relates to fixed rate interest on the $300m 5 to 7 year US private placement loan notes raised in 2010.

Statutory profit before taxation increased 5% to £167.2m (H1 2010: £159.6m).  Statutory earnings per share increased 4% to 9.00p (H1 2010: 8.62p).  On a constant currency basis, underlying pre-tax profit increased 4%* to £183.5m (H1 2010: £176.1m*), and underlying earnings per share increased 4%* to 9.87p (H1 2010: 9.52p*).  A reconciliation of underlying pre-tax profit to statutory profit before taxation is shown in the table in note 2 on page 14.

The Group's effective tax rate for the period is 29% (H1 2010: 29%).

Cash flow and dividend

The Group remains highly cash generative with operating cash flow of £233.6m, representing 123% of EBITA^†. At 31 March 2011, net debt was £106.0m (30 September 2010: £219.8m). Over the period, strong cash generation reduced net debt by £109.8m on a currency neutral basis. The Group has committed funding of £545.7m in place until 2015 to 2017.

We believe that our consistently strong cash flows, robust balance sheet and recurring revenue streams provide a sustainable basis for a progressive dividend policy, whilst ensuring that the Group can continue to maintain appropriate levels of organic and acquisition-led investment. As a result, we are increasing the interim dividend by 4% to 2.68p per share (H1 2010: 2.58p per share). The interim dividend will be payable on 10 June 2011 to shareholders on the register at close of business on 13 May 2011.

Foreign exchange

Since 1 October 2010, rates for the Euro to Sterling showed a movement of 2% to €1.13 from €1.15 with an average rate of €1.16 for the period. Rates for the US Dollar showed a movement of 1% to US$1.60 from US$1.58, with an average rate of US$1.59 for the period.  It is Sage's policy to align the currency denominations of our debt with the cash flows arising from our trading activities in those same currencies to hedge our currency exposure.  We do not hedge pure translational exposure resulting from conversion for accounting purposes of overseas companies' results into Sterling. 

Outlook

With growth returning to the business, a large and loyal international customer base, and a strong balance sheet, we are confident that Sage is well positioned to capitalise on its many growth opportunities, and look forward to continued progress in the second half of the year.

Consolidated income statement

For the six months ended 31 March 2011

	Note	Six months ended 31 March 2011  (Unaudited)  £m	Six months ended 31 March 2010  (Unaudited) £m	Year ended 30 September 2010 (Audited) £m
Revenue	1	742.7	718.9	1,435.0
Cost of sales		(51.8)	(52.9)	(103.5)
Gross profit		690.9	666.0	1,331.5
Selling and administrative expenses		(516.9)	(502.0)	(1,001.5)
Operating profit	1	174.0	164.0	330.0
Finance income		2.3	1.7	3.3
Finance costs		(9.1)	(6.1)	(13.4)
Finance costs - net		(6.8)	(4.4)	(10.1)
Profit before taxation		167.2	159.6	319.9
Income tax expense	3	(48.5)	(46.3)	(92.6)
Profit for the period - attributable to owners of the parent		118.7	113.3	227.3
EBITA†	1	190.3	181.9	365.8
Earnings per share (pence)
- Basic	5	9.00p	8.62p	17.29p
- Diluted	5	8.97p	8.60p	17.23p

Consolidated statement of comprehensive income

For the six months ended 31 March 2011

		Six months ended 31 March 2011  (Unaudited)  £m		Six months ended  31 March 2010  (Unaudited) £m	Year ended 30 September 2010 (Audited) £m
Profit for the period		118.7		113.3	227.3
Other comprehensive (expense)/income:
Currency translation differences		(6.2)		51.2	10.5
Actuarial gain/(loss) on post employment benefit obligations		0.7		0.1	(0.3)
Cash flow hedges		1.0		(0.3)	(0.7)
Other comprehensive (expense)/income for the period, net of tax		(4.5)		51.0	9.5
Total comprehensive income for the period - attributable to owners of the parent			114.2	164.3	236.8

^†    EBITA measure (Earnings before interest, tax and amortisation) excludes the effects of:

•  Amortisation of acquired intangible assets; and

•  Net amortisation of software development expenditure. 

Consolidated balance sheet

As at 31 March 2011

	Note	31 March  2011 (Unaudited) £m	31 March 2010  (Unaudited) £m	30 September 2010 (Audited) £m
Non-current assets
Goodwill	6	2,024.6	2,084.3	2,031.1
Other intangible assets	6	164.8	200.6	179.1
Property, plant and equipment	6	148.4	141.2	149.6
Deferred income tax assets		13.8	10.5	10.4
		2,351.6	2,436.6	2,370.2
Current assets
Inventories		3.7	4.8	4.1
Trade and other receivables		319.7	292.5	276.3
Cash and cash equivalents (excluding bank overdrafts)	8	115.5	80.2	70.8
		438.9	377.5	351.2
Total assets	1	2,790.5	2,814.1	2,721.4
Current liabilities
Trade and other payables		(293.0)	(255.5)	(288.9)
Current income tax liabilities		(79.1)	(87.0)	(73.7)
Borrowings		(1.9)	(19.0)	(2.8)
Deferred consideration		(2.2)	(1.6)	(2.7)
Deferred income		(466.4)	(452.7)	(402.7)
		(842.6)	(815.8)	(770.8)
Non-current liabilities
Borrowings		(186.7)	(345.7)	(249.3)
Derivative financial instruments		-	(0.6)	(1.0)
Retirement benefit obligations		(11.7)	(10.8)	(11.3)
Deferred income tax liabilities		(42.6)	(35.3)	(39.6)
		(241.0)	(392.4)	(301.2)
Total liabilities		(1,083.6)	(1,208.2)	(1,072.0)
Net assets		1,706.9	1,605.9	1,649.4
Equity attributable to owners of the parent
Ordinary shares	7	13.2	13.2	13.2
Share premium	7	507.9	496.1	499.8
Other reserves		254.1	300.4	259.3
Retained earnings		931.7	796.2	877.1
Total equity		1,706.9	1,605.9	1,649.4

Consolidated statement of cash flows

For the six months ended 31 March 2011

	Note	Six months ended 31 March 2011 (Unaudited) £m	Six months ended  31 March 2010 (Unaudited) £m	Year ended 30 September 2010 (Audited) £m
Cash flows from operating activities
Cash generated from continuing operations	8	233.6	236.6	428.7
Interest paid		(8.4)	(5.4)	(11.6)
Income tax paid		(41.2)	(28.6)	(75.6)
Net cash generated from operating activities		184.0	202.6	341.5
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired		(1.2)	(0.9)	(7.5)
Disposal of subsidiaries, net of cash disposed		1.3	4.8	7.4
Purchases of intangible assets		(5.5)	(3.6)	(7.1)
Purchases of property, plant and equipment		(11.6)	(6.9)	(20.9)
Proceeds from sale of property, plant and equipment		1.8	-	0.6
Interest received		2.3	1.7	3.3
Net cash used in investing activities		(12.9)	(4.9)	(24.2)
Cash flows from financing activities
Proceeds from issuance of ordinary shares	7	8.1	4.2	7.9
Purchase of treasury shares		-	-	(7.3)
Finance lease principal payments		(0.3)	-	(0.1)
Issue costs on loans		-	(1.4)	(4.4)
Repayments of borrowings		(60.3)	(217.8)	(340.0)
Proceeds from borrowings		0.4	104.2	126.2
Movement in cash collected from customers		(5.5)	1.4	15.6
Dividends paid to Company's shareholders	4	(68.7)	(64.7)	(98.6)
Net cash used in financing activities		(126.3)	(174.1)	(300.7)
Net increase in cash, cash equivalents and bank overdrafts (before exchange rate changes)	8	44.8	23.6	16.6
Effects of exchange rate changes	8	0.1	3.3	1.8
Net increase in cash, cash equivalents and bank overdrafts		44.9	26.9	18.4
Cash, cash equivalents and bank overdrafts at 1 October	8	70.6	52.2	52.2
Cash, cash equivalents and bank overdrafts at period end	8	115.5	79.1	70.6

Consolidated statement of changes in equity

For the six months ended 31 March 2011

	Attributable to owners of the parent
	Ordinary shares £m	Share premium £m	Other reserves £m	Retained earnings £m	Total equity £m
At 1 October 2010 (Audited)	13.2	499.8	259.3	877.1	1,649.4
Profit for the period	-	-	-	118.7	118.7
Other comprehensive income:
Currency translation differences	-	-	(6.2)	-	(6.2)
Actuarial gain on post employment benefit obligations	-	-	-	0.7	0.7
Cash flow hedges	-	-	1.0	-	1.0
Total comprehensive (expense)/income for the period ended 31 March 2011 (Unaudited)	-	-	(5.2)	119.4	114.2
Transactions with owners:
Employees share option scheme:
- Proceeds from shares issued	-	8.1	-	-	8.1
- Value of employee services	-	-	-	3.9	3.9
Dividends	-	-	-	(68.7)	(68.7)
Total transactions with owners for the period ended 31 March 2011 (Unaudited)	-	8.1	-	(64.8)	(56.7)
At 31 March 2011 (Unaudited)	13.2	507.9	254.1	931.7	1,706.9
	Attributable to owners of the parent
	Ordinary shares £m	Share premium £m	Other reserves £m	Retained earnings £m	Total equity £m
At 1 October 2009 (Audited)	13.1	492.0	249.5	742.9	1,497.5
Profit for the period	-	-	-	113.3	113.3
Other comprehensive income:
Currency translation differences	-	-	51.2	-	51.2
Actuarial gain on post employment benefit obligations	-	-	-	0.1	0.1
Cash flow hedges	-	-	(0.3)	-	(0.3)
Total comprehensive income for the period ended 31 March 2010 (Unaudited)	-	-	50.9	113.4	164.3
Transactions with owners:
Employees share option scheme:
- Proceeds from shares issued	0.1	4.1	-	-	4.2
- Value of employee services	-	-	-	3.9	3.9
- Equity movement of deferred tax	-	-	-	0.7	0.7
Dividends	-	-	-	(64.7)	(64.7)
Total transactions with owners for the period ended 31 March 2010 (Unaudited)	0.1	4.1	-	(60.1)	(55.9)
At 31 March 2010 (Unaudited)	13.2	496.1	300.4	796.2	1,605.9

Notes to financial information

For the six months ended 31 March 2011

 Group accounting policies

a General information

The Sage Group plc ("the Company") and its subsidiaries (together "the Group") is one of the leading global suppliers of business management software and services to small and medium-sized enterprises. The Group operates in 24 countries worldwide in Europe, North America, Southern Hemisphere and Asia.

These financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2010 were approved by the Board of directors on 20 December 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is North Park, Newcastle upon Tyne, NE13 9AA.

The Company is listed on the London Stock Exchange.

The Group condensed consolidated half-yearly financial information was approved for issue by the Board of directors on 4 May 2011.

b Basis of preparation

This condensed consolidated half-yearly financial information for the half-year ended 31 March 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim Financial Reporting" as adopted by the European Union. The condensed consolidated half-yearly financial information should be read in conjunction with the annual financial statements for the year ended 30 September 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

c Accounting policies

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report.  Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated half-yearly financial information.

Changes in accounting policy

Other than as described below, the accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 September 2010, as described in those annual financial statements.

Adoption of new and revised International Financial Reporting Standards

The following standards, interpretations, and amendments to standards were effective during the period to 31 March 2011 and have been adopted in this condensed consolidated half-yearly financial information.

Annual improvements to IFRSs (2009) (effective 1 January 2010). This is a collection of amendments to 12 standards as part of the IASB's programme of annual improvements. The standards impacted are:

- IFRS 2, "Share-based Payment"

- IFRS 5, "Non-current Assets Held for Sale and Discontinued Operations"

- IFRS 8, "Operating Segments"

- IAS 1, "Presentation of Financial Statements"

- IAS 7, "Statement of Cash Flows"

- IAS 17, "Leases"

- IAS 18, "Revenue"

- IAS 36, "Impairment of Assets"

- IAS 38, "Intangible Assets"

- IAS 39, "Financial Instruments: Recognition and Measurement"

- IFRIC 9, "Reassessment of Embedded Derivatives"

- IFRIC 16, "Hedges of a Net Investment in Foreign Operation"

Most of the amendments are effective for annual periods beginning on or after 1 January 2010; early adoption is permitted.

There is no material impact of the adoption of these standards in this condensed consolidated half-yearly financial information.

At the date of approval of this condensed consolidated half-yearly financial information, the following new standards, interpretations and amendments were issued but not yet mandatory for the Group and early adoption has not been applied. 

International Financial Reporting Standards ("IFRS")

- IFRS 9, "Financial Instruments: Classification and Measurement"

International Financial Reporting Interpretations Committee ("IFRIC") interpretations

- IFRIC 19, "Extinguishing Financial Liabilities with Equity Instruments"

Amendments to existing standards

- Amendment to IFRS 1, "First-time Adoption: Financial Instrument Disclosures"

- Amendment to IFRS 1, "First-time Adoption: On Fixed Dates and Hyperinflation"

- Amendment to IAS 12, "Income Taxes' on Deferred Tax"

- Amendment to IFRS 7, "Financial Instruments: Disclosures' on Derecognition"

- Amendment to IFRIC 14, "Prepayments of a Minimum Funding Requirement"

- Annual Improvements to IFRSs 2010

All the IFRSs, IFRIC interpretations and amendments to existing standards are endorsed by the European Union at the date of approval of this condensed consolidated half-yearly financial information with the exception of IFRS 9, the amendment to IFRS 1, "First Time Adoption: On Fixed Dates and Hyperinflation", the amendment to IAS 12 and the amendment to IFRS 7.

The future financial effect of the adoption of these standards will be dependent on the circumstances surrounding the future transactions to which they will apply, that are at present unknown.

Website

This condensed consolidated half-yearly financial information for the half-year ended 31 March 2011 can also be found on our website:  www.investors.sage.com/reports_presentations

1 Segment information

In accordance with IFRS 8, "Operating Segments", information for the Group's operating segments has been derived using the information provided to and used by the Chief Operating Decision Maker. The Group's Executive Committee has been identified as the Chief Operating Decision Maker as the committee is responsible for the allocation of resources to operating segments and assessing their performance. The profit measure used by the Executive Committee is Earnings before interest, tax and amortisation ("EBITA") which excludes the effects of amortisation of acquired intangible assets and the net amortisation of software development expenditure on a constant currency basis. Operating segments are reported in a manner which is consistent with the operating segments produced for internal management reporting. 

The operating segments have been restated for the six months ended 31 March 2010 in line with the Executive Committee changes.  The main change is that UK & Ireland is no longer a separately identifiable segment and has been combined with Mainland Europe into a new Europe segment.

The Group is organised into three operating segments. The UK is the home country of the parent. The main operations in the principal territories are as follows:

- Europe (UK & Ireland, France, Spain, Germany, Switzerland, Poland and Portugal)

- North America (US and Canada)

- AAMEA (Africa, Australia, Middle East and Asia)

The Africa operations are principally based in South Africa, the Middle East and Asia operations are principally based in Singapore, Malaysia, UAE, China and India. The revenue analysis in the table below is based on the location of the customer which is not materially different from the location where the order is received and where the assets are located.

Revenue by segment (Unaudited)

	Six months ended 31 March 2011														Six months ended 31 March 2010 (Restated)										Change %
	IFRS  statutory	Organic revenue adjustment1			Non- GAAP organic				IFRS statutory			Currency impact2				Underlying at constant currency			Organic revenue adjustment1			Non- GAAP organic  constant currency			IFRS statutory			Underlying at constant currency			Non- GAAP organic constant currency
Subscription revenue  by segment
Europe	245.7	-		245.7			238.9				(4.7)			234.2				(0.6)			233.6			3%			5%			5%
North America	207.5	(8.1)		199.4			204.3				0.2			204.5				(7.8)			196.7			2%			1%			1%
AAMEA	36.6	(1.7)		34.9			27.9				2.5			30.4				-			30.4			31%			20%			15%
Subscription revenue	489.8	(9.8)		480.0			471.1				(2.0)			469.1				(8.4)			460.7			4%			4%			4%
Software and software-related services revenue by segment (SSRS)
Europe	155.8	-		155.8			153.1				(4.0)			149.1				(0.8)			148.3			2%			4%			5%
North America	63.4	(4.7)		58.7			65.3				(0.2)			65.1				(6.4)			58.7			-3%			-3%			0%
AAMEA	33.7	-		33.7			29.4				2.3			31.7				-			31.7			15%			6%			6%
SSRS revenue	252.9	(4.7)		248.2			247.8				(1.9)			245.9				(7.2)			238.7			2%			3%			4%
Total revenue by segment
Europe	401.5	-		401.5			392.0				(8.7)			383.3				(1.4)			381.9			2%			5%			5%
North America	270.9	(12.8)		258.1			269.6				-			269.6				(14.2)			255.4			0%			0%			1%
AAMEA	70.3	(1.7)		68.6			57.3				4.8			62.1				-			62.1			23%			13%			10%
Total revenue	742.7	(14.5)		728.2			718.9				(3.9)			715.0				(15.6)			699.4			3%			4%			4%

1 Organic revenue adjustment excludes the contributions of current and prior period acquisitions, disposals and non-core products.

2 Foreign currency results for the prior half-year ended 31 March 2010 have been retranslated based on the average exchange rates for the period ended 31 March 2011 of $1.59/£1 and €1.16/£1 to facilitate the comparison of results.

1 Segment information (continued)

Profit by segment (Unaudited)

	Six months ended 31 March 2011			Six months ended 31 March 2010 (Restated)					Change %
	IFRS statutory operating profit	Adjustment1	Non- GAAP   EBITA	IFRS statutory operating profit	Adjustment1	Non- GAAP EBITA reported	Currency impact2	Underlying Non- GAAP EBITA  constant currency	IFRS statutory  operating profit	Non-GAAP EBITA reported	Underlying Non- GAAP EBITA  constant currency
Profit by segment
Europe	107.7	8.1	115.8	99.5	9.1	108.6	(2.3)	106.3	8%	7%	9%
North America	50.1	7.8	57.9	51.5	8.7	60.2	(0.2)	60.0	-3%	-4%	-4%
AAMEA	16.2	0.4	16.6	13.0	0.1	13.1	1.1	14.2	25%	27%	17%
Total profit	174.0	16.3	190.3	164.0	17.9	181.9	(1.4)	180.5	6%	5%	5%

1 Adjustment includes the effects of amortisation of acquired intangible assets and the net amortisation of software development expenditure.

2 Foreign currency results for the prior half-year ended 31 March 2010 have been retranslated based on the average exchange rates for the period ended 31 March 2011 of $1.59/£1 and €1.16/£1 to facilitate the comparison of results.

Reconciliation of Non-GAAP EBITA to IFRS statutory operating profit

		Six months ended 31 March 2011 (Unaudited)  £m	Six months ended 31 March 2010 (Unaudited) £m
Underlying non-GAAP EBITA at constant exchange rates		190.3	180.5
Impact of movements in foreign currency exchange rates		-	1.4
Non-GAAP EBITA reported		190.3	181.9
Net amortisation of software development expenditure		(0.1)	(0.2)
Amortisation of acquired intangible assets		(16.2)	(17.7)
IFRS statutory operating profit		174.0	164.0

Total assets by segment

	31 March 2011 (Unaudited) £m	Restated 31 March 2010 (Unaudited) £m	Restated 30 September 2010 (Audited) £m
Segment assets
Europe	1,214.3	1,143.4	1,133.6
North America	1,441.1	1,515.5	1,457.0
AAMEA	135.1	155.2	130.8
Consolidated total assets	2,790.5	2,814.1	2,721.4

2 Reconciliation to statutory revenue and profit before taxation

Reconciliation of revenue

	Six months ended 31 March 2011 (Unaudited)  £m	Six months ended 31 March 2010 (Unaudited) £m	Growth (Unaudited) %
Revenue on foreign currency exchange rate neutral basis	742.7	715.0	4%
Impact of movements in foreign currency exchange rates	-	3.9
IFRS statutory revenue	742.7	718.9	3%

Reconciliation of profit before taxation

	Six months ended 31 March 2011 (Unaudited)  £m	Six months ended 31 March 2010 (Unaudited) £m	Growth (Unaudited) %
Underlying pre-tax profit	183.5	176.1	4%
Impact of movements in foreign currency exchange rates	-	1.4
	183.5	177.5	3%
Net amortisation of software development expenditure	(0.1)	(0.2)
Amortisation of acquired intangible assets	(16.2)	(17.7)
Statutory profit before taxation	167.2	159.6	5%

3 Income tax expense

Income tax for the six months ended 31 March 2011 (Unaudited) is charged at 29% (six months ended 31 March 2010 (Unaudited): 29%; year ended 30 September 2010 (Audited): 29%), representing the best estimate of the average annual effective income tax rate expected for the full year, applied to the pre-tax income for the period ended 31 March 2011.

4 Dividends

	Six months ended 31 March 2011 (Unaudited) £m	Six months ended 31 March 2010 (Unaudited) £m	Year ended 30 September 2010 (Audited) £m
Final dividend paid for the year ended 30 September 2009 of 4.93p per share	-	64.7	64.7
Interim dividend paid for the year ended 30 September 2010 of 2.58p per share	-	-	33.9
Final dividend paid for the year ended 30 September 2010 of 5.22p per share	68.7	-	-
	68.7	64.7	98.6

The interim dividend of 2.68p per share will be paid on 10 June 2011 to shareholders on the register at the close of business
on 13 May 2011.

5 Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding those held in the employee share trust, which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period and the contingently issuable shares under the Group's long-term incentive plan.

At 31 March 2011, the performance criteria for the vesting of the awards under the incentive scheme had not been met in all cases and consequently the shares in question are excluded from the diluted EPS calculation.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

Basic EPS

	Six months ended 31 March 2011 (Unaudited)			Six months ended 31 March 2010 (Unaudited)
	Earnings £m	Weighted average number of shares millions	Per share amount pence	Earnings £m	Weighted average number of shares millions	Per share amount pence
Basic EPS - Profit attributable to equity holders of the Company	118.7	1,319.2	9.00	113.3	1,313.7	8.62
Effect of dilutive securities
Options		4.1	(0.03)		3.3	(0.02)
Diluted EPS	118.7	1,323.3	8.97	113.3	1,317.0	8.60

Underlying EPS - Non-GAAP measure

	Six months ended 31 March 2011 (Unaudited)			Six months ended 31 March 2010 (Unaudited)
	Earnings £m	Weighted  average number of shares millions	Per share amount pence	Earnings £m	Weighted average number of shares millions	Per share amount pence
Basic EPS - Profit attributable to equity holders of the Company	118.7	1,319.2	9.00	113.3	1,313.7	8.62
Non-GAAP items:
Intangible asset amortisation excluding amortisation of computer software	16.3			17.9
Taxation	(4.7)			(5.2)
Net adjustments	11.6		0.87	12.7		0.97
Underlying basic EPS	130.3	1,319.2	9.87	126.0	1,313.7	9.59
Exchange adjustments
Exchange adjustments				(1.4)
Taxation				0.4
Net exchange adjustments				(1.0)		(0.07)
Underlying basic EPS (after exchange adjustments)	130.3	1,319.2	9.87	125.0	1,313.7	9.52
Effect of dilutive securities
Options		4.1	(0.03)		3.3	(0.02)
Underlying diluted EPS (after exchange adjustments)	130.3	1,323.3	9.84	125.0	1,317.0	9.50

6 Non-current assets

	Goodwill (Unaudited) £m	Other intangible assets (Unaudited) £m	Property, plant and equipment (Unaudited) £m	Total (Unaudited) £m
Opening net book amount at 1 October 2010	2,031.1	179.1	149.6	2,359.8
Additions	0.5	5.5	14.0	20.0
Disposals	-	-	(4.0)	(4.0)
Depreciation, amortisation and other movements	-	(19.7)	(11.8)	(31.5)
Exchange adjustments	(7.0)	(0.1)	0.6	(6.5)
Closing net book amount at 31 March 2011	2,024.6	164.8	148.4	2,337.8

Non-financial assets that have an indefinite life are not subject to amortisation, but are tested for impairment annually at the year-end (30 September) or whenever there is any indication of impairment. At 31 March 2011, there was no indication of impairment for non-financial assets with indefinite lives. Financial assets were reviewed for impairment as at 31 March 2011. There was no indication of impairment.

	Goodwill (Unaudited) £m	Other intangible assets (Unaudited) £m	Property, plant and equipment (Unaudited) £m	Total (Unaudited) £m
Opening net book amount at 1 October 2009	2,030.8	216.0	144.5	2,391.3
Additions	0.5	3.6	6.9	11.0
Disposals	(8.3)	(1.6)	(1.0)	(10.9)
Depreciation, amortisation and other movements	-	(21.2)	(11.0)	(32.2)
Exchange adjustments	61.3	3.8	1.8	66.9
Closing net book amount at 31 March 2010	2,084.3	200.6	141.2	2,426.1

 

7 Share capital and premium

	Number of shares (Unaudited)	Ordinary shares (Unaudited) £m	Share premium (Unaudited) £m	Total (Unaudited) £m
At 1 October 2010	1,317,360,582	13.2	499.8	513.0
Employee share option scheme:
- Proceeds from shares issued	4,045,889	-	8.1	8.1
At 31 March 2011	1,321,406,471	13.2	507.9	521.1

	Number of shares (Unaudited)	Ordinary  shares (Unaudited) £m	Share premium (Unaudited) £m	Total (Unaudited) £m
At 1 October 2009	1,312,966,956	13.1	492.0	505.1
Employee share option scheme:
- Proceeds from shares issued	2,468,954	0.1	4.1	4.2
At 31 March 2010	1,315,435,910	13.2	496.1	509.3

8 Cash flow and net debt

		Six months ended 31 March 2011 (Unaudited)  £m	Six months ended 31 March 2010 (Unaudited) £m
EBITA		190.3	181.9
Depreciation/amortisation/profit on disposal of intangible assets and property, plant and equipment		15.8	15.0
Equity-settled share-based transactions		3.9	3.9
Working capital change		(36.8)	(17.5)
Deferred income change		62.6	55.1
Exchange movements		(2.2)	(1.8)
Cash generated from continuing operations		233.6	236.6
Interest paid and issue costs on loans		(6.1)	(5.1)
Income tax paid		(41.2)	(28.6)
Net capital expenditure		(15.3)	(10.5)
Free cash flow		171.0	192.4
Opening net debt 1 October		(219.8)	(439.4)
Acquisitions/disposals		0.1	3.9
Dividends paid to Company's shareholders		(68.7)	(64.7)
Exchange movements		4.0	(2.5)
Other		7.4	5.0
Closing net debt 31 March		(106.0)	(305.3)

Analysis of change in net debt (inclusive of finance leases)	At 1 October 2010 (Audited) £m	Cash flow (Unaudited) £m	Acquisition (Unaudited) £m	Other (Unaudited) £m	Exchange movements (Unaudited) £m	At 31 March 2011 (Unaudited) £m
Cash and cash equivalents	70.8	44.6	-	-	0.1	115.5
Bank overdrafts	(0.2)	0.2	-	-	-	-
Cash, cash equivalents and bank overdrafts	70.6	44.8	-	-	0.1	115.5
Loans due within one year	(2.0)	0.9	-	-	-	(1.1)
Finance leases due within one year	(0.6)	(0.2)	-	-	-	(0.8)
Loans due after more than one year	(246.0)	59.0	(0.1)	(0.7)	3.8	(184.0)
Finance leases due after more than one year	(3.3)	0.5	-	0.1	-	(2.7)
Cash collected from customers	(38.5)	5.5	-	-	0.1	(32.9)
Total	(219.8)	110.5	(0.1)	(0.6)	4.0	(106.0)

Included in cash above is £32.9m (31 March 2010: £20.8m, 30 September 2010: £38.5m) relating to cash collected from customers, which the Group is contracted to pay onto another party. A liability for the same amount is included in trade and other payables on the balance sheet and is classified within net debt above.

9 Business combinations

On 24 March 2011 the Group completed the acquisition of the entire share capital of Alcior Sarl, for a consideration of £0.9m.  The goodwill arising on the acquisition is £0.6m.

During the six months ended 31 March 2011 adjustments were made in respect of goodwill on prior year acquisitions of £0.1m, due to a reduction in deferred consideration of £0.1m.  Payments were made in relation to deferred consideration on previous years acquisitions of £0.5m.

On 8 October 2010 the Group completed the disposal of the Providex business based in North America, for a consideration of £0.5m.  On 29 October 2010 the Group completed the disposal of the Carpe Diem business based in North America, for a consideration of £0.8m.  There is no goodwill associated with the above disposals.

10 Contingent liabilities

The Group had no contingent liabilities at 31 March 2011 (31 March 2010 and 30 September 2010: none).

11 Related party transactions

The Group has taken advantage of the exemption available under IAS 24, "Related Party Disclosures", not to disclose details of transactions with its subsidiary undertakings. There are no other external related parties.

Key management compensation	Six months ended 31 March 2011 (Unaudited) £m	Six months ended 31 March 2010 (Unaudited) £m
Salaries and short-term employee benefits	3.5	3.2
Post-employment benefits	0.3	0.3
Share-based payments	1.8	1.8
	5.6	5.3

The key management figures given above include directors. Key management personnel are deemed to be members of the Executive Committee. The members of the Executive Committee are defined in the Group's Annual Report and Accounts 2010.

Álvaro Ramírez and Pascal Houillon joined the Executive Committee on 1 January 2011 and 31 March 2011 respectively.  Sue Swenson left the Executive Committee on 31 March 2011 upon her retirement.  There have been no other changes in the six months ended 31 March 2011.

12 Group risk factors

As with all businesses, Sage is affected by certain risks and uncertainties, not wholly within our control, which could have a material impact on the Group's long-term performance and could cause actual results to differ materially from forecast and historic results. Despite the current uncertainty in the global economy, the principal risks and uncertainties facing the Group, and the mitigating factors to address these risks and uncertainties, have not changed from those set out in the Annual Report and Accounts 2010.  These risks and uncertainties are not expected to change materially in the remainder of the year and can be summarised as follows:

- Sage face significant competitive risk

- Sage must ensure its intellectual property is appropriately secure

- Sage must ensure it has procedures and plans in place to protect the business in the event of the loss of key management

- Sage must ensure it is able to react to ongoing technology changes

- Sage is a worldwide company facing a number of wide ranging international factors

- Sage must ensure that its products and services are of an appropriate quality for customers

Sage has defined risk management responsibilities and processes, which were also summarised in the Annual Report and Accounts 2010. These responsibilities and processes have continued to be in operation throughout the Group in the first half of the 2011 financial year. For a full discussion of the risks to our future business performance and the risk management responsibilities and processes within Sage, please refer to pages 38 and 39 of the Annual Report and Accounts 2010, or go to www.ar2010.sage.com.

13 Events after the reporting period

On 20 April 2011 the Board announced a change to its executive team.  Paul Stobart, CEO of Sage Northern Europe, announced his intention to leave the Group.  Paul will cease to be a Director of The Sage Group plc on 31 May 2011.  Álvaro Ramírez, who was CEO of Sage Southern Europe, assumed responsibility for all of Sage's European operations with effect from 20 April 2011.

Statement of Directors' Responsibilities

We confirm that to the best of our knowledge this condensed consolidated half-yearly financial information has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

- an indication of important events that have occurred during the six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

On behalf of the Board

G S Berruyer                                        P S Harrison

Chief Executive                                    Group Finance Director

4 May 2011                                           4 May 2011

Independent review report to The Sage Group 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 31 March 2011, which comprises the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated statement of cash flows, the Consolidated statement of changes in equity and related notes. 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.

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 the Group accounting policies, 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. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency 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.

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 31 March 2011 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.

PricewaterhouseCoopers LLP

Chartered Accountants

Newcastle upon Tyne, 

4 May 2011

 

END

 

 

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