Interim Results

RNS Number : 3184L

Travis Perkins PLC

29 July 2011

 

29 July 2011

TRAVIS PERKINS PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011

FINANCIAL HIGHLIGHTS

·      Group revenue up 54% at £2,347m, up 7.2% on a like-for-like basis

·      Adjusted profit before tax up 25% to £140m

·      Adjusted EPS up 13% on a reported basis

·      Free cash flow generated of £136m

·      Interim dividend of 6.5p per share

·      Underlying net debt reduced by £87m to £696m (note 12b)

OPERATING HIGHLIGHTS

·     Strong like-for-like performance in merchanting with sales increase of 10.7%, a market outperformance of 6%

·      BSS integration programme progressing well

·      Synergy programme on track with a £15m benefit expected in 2011

·      BSS operating margin before synergies increased to 4.3%

·      Retail like-for-like sales increase of 0.3%, an organic market out performance of 3.6%

·      Acquisition of 13 ex-Focus sites for £8m

	Six months ended 30  June 2011	Year-on-year change	Six months ended 30 June 2010
	£m	%	£m
Revenue	2,347.2	54.2	1,522.1
Adjusted operating profit*	150.1	24.7	120.4
Profit before taxation	129.2	20.5	107.2
Adjusted profit before tax*	140.4	25.6	111.8
Adjusted basic earnings per share*	44.7p	12.9	39.6p
Basic earnings per share	43.1p	13.7	37.9p
Proposed dividend per share	6.5p	30.0	5.0p

* Throughout these financial statements consistent with the approach last year the term adjusted has been used to signify that the effect of exceptional items, amortisation of intangible assets and the associated tax impacts have been excluded from the disclosure being made. Full details of the exceptional items for both 2011 and 2010 are given in notes 4 and 7. Where we refer to "proforma" numbers they are based upon last year's published interim numbers for the Travis Perkins Group adjusted to include BSS for the equivalent period. 

Geoff Cooper, Chief Executive, commented:

"The difficult market backdrop will continue to put pressure on weaker competitors and will lead to further consolidation in our markets, particularly in merchanting. We are now the largest provider of building materials in the UK, and we have market-leading customer propositions that are delivering further gains in market share.  We also have an excellent track record of outperforming our market and driving financial performance over a sustained period and consequently look forward to the future with confidence.  Our outlook for the full year remains unchanged with a weaker trading pattern being offset by our achieving BSS synergies earlier than expected."

Enquiries:

Geoff Cooper, Chief Executive

Paul Hampden Smith, Finance Director

Travis Perkins Plc                                                                      [phone]

David Bick / Mike Feltham / Mark Longson

Square1 Consulting Limited                                                        [phone]

 INTERIM MANAGEMENT REPORT

Summary  For the first half of 2011 the Group has achieved profits in line with our expectations, despite a contraction in volumes in our markets. These difficult trading conditions have caused strain amongst weaker competitors, with the failure of two of the Group's retail competitors, and signs of further sector consolidation elsewhere.  Our underlying organic strategy continues to deliver market share gains and good returns.

The organisational and systems integration of BSS is progressing smoothly.  Our synergy programme is running ahead of schedule and we are confident of being able to deliver the targeted £25m of annual synergy benefits faster than previously announced. 

For the first four months of the period, like-for-like ("L4L") sales growth was boosted by a weak comparator from a snow hit January and February in 2010, and increased private new build and RMI activity.  In the last two months, the rate of sales growth has slowed with the result that monthly EBITA is now broadly flat year-on-year on a proforma basis.

With most segments of our market offering little or no volume growth we have maintained our trading stance of concentrating on maximising profits throughout our Group.  A higher than expected rate of product inflation has been beneficial to results in the first half, although this has contributed to some margin erosion in our merchanting business, principally in respect of commodity and known value items. Our organic development initiatives and trading stance, adapted to conditions through the period, have driven a gain in market share in both our retail and merchanting businesses.

Following the £800m acquisition of BSS late in 2010, we invested cautiously in expansion during the first half of 2011.  In May, we took the opportunity to acquire 13 properties from the administrator of Focus for £8m. External investment has been complemented by further organic initiatives to improve customer service, product availability and efficiency.   

Financial Performance  After adjusting for the effects of exceptional items and amortisation, profit before tax was up 25.6% to £140m which, after the effect of the issue of 33m shares in respect of the BSS acquisition, resulted in adjusted earnings per share being 13% higher at 44.7 pence, an increase of 5.1 pence.   On a proforma basis the increase in adjusted profit before tax was £8m, or 6%, and adjusted earnings per share was up 6%, or 2.5 pence.  There is no significant difference between basic and diluted earnings per share.

For the six months ended 30 June 2011 group revenue was £2,347m, an increase of £825m (54.2%) compared to the same period last year. The revenue increase comprised a 7.2% growth in L4L sales, 46.1% from BSS and 1.6% from network expansion, partially offset by a reduction of 0.7% as a result of there being one less trading day. On a proforma basis group revenue increased by £130m, or 6%. 

The Group's adjusted operating margin was 6.4% compared with 7.9% last half-year. 120bps of the difference is a result of the effect of consolidating BSS results following the acquisition in December 2010.

Exceptional operating costs of £3.5m were incurred as a result of the BSS integration programme. We expect that further charges of similar magnitude, will occur during the second half.

Excluding the combined tax effect of the exceptional items and the exceptional tax credit of £7.5m (2010: £1.3m), the tax charge for the period was £35.4m (2010: £32.0m), which represents an effective rate of 26.5%, reflecting the lower statutory tax rate (2010: 28.6%). The exceptional tax credit is due to a combination of the tax effect of the exceptional operating and interest costs and the reduction in the corporation tax rate to 26% from 6 April 2011.

One of our primary areas of focus continues to be debt reduction.  Adjusted free cash flow for the period was £136m (2010: £138m).  Inventory levels increased during the first half due to some pre-price increase buying.

During the first half, despite continued capital expenditure, the Group has reduced its underlying debt by £87m to £696m. For covenant purposes adjusted net debt (note 13) was £635m (31 December 2010: £701m).  At 30 June, the ratio of net debt to EBITDA was 1.7x (31 December 2010: 1.9x). 

In June 2011, following discussions with the holders of the Senior Guaranteed Notes issued by BSS Group prior to its acquisition, the Group redeemed $25m of notes, due 2016, at par.    The remaining $100m of BSS Group notes were redeemed on 28 July 2011.

Good investment returns, higher bond yields and further cash investment by the Group has resulted in the combined gross pension deficits for the Group's four defined benefit schemes falling by £12.5m to £15.4m in the 6 months to June 2011.

The Director's are recommending a 30% increase in the interim dividend from 5 pence to 6.5 pence.  It will be paid on 14 November to shareholders on the register at close of business on 14 October.  In determining the level of dividend the Director's were mindful of the current market conditions, their desire to continue reducing debt levels and their intention to reduce dividend cover from the 2010 level of 5 times to between 2.5 and 3.5 times over the medium term.

Markets   After a good start to the year, with weak comparatives from 2010, the effects of government cutbacks, direct tax increases and low consumer confidence impacted the second quarter.  The markets of most importance to our businesses, trade repair, maintenance and improvement ("RMI") and private housing new build, showed good resilience to the worsening economic conditions.  However, as the period progressed it became apparent that, as predicted, public sector work, which represents around 20% of our revenue, was starting to slow down.

Commercial and industrial markets, which represent 8% of our revenue, have been flat, but with significant variations in sub-sectors - industrial, and general commercial work has been growing, whilst office developments and refurbishments continue to be subdued.

The retail market has continued to display a similar trait to that established in 2010.  In 2011 it has been adversely impacted by a combination of customers purchasing in advance of the January 2011 VAT increase, low consumer confidence and, from April, higher personal taxes further reducing spending power.  These factors have particularly impacted the market for big ticket items, such as kitchens and bathrooms, sales of which have contracted during the first half despite price inflation. 

Sector capacity has remained reasonably constant during most of the first half of 2011 with little expansion activity being undertaken.  However, the recent closures of Focus and Moben will result in contraction in retail capacity, from the second half onwards.  So far, apart from some short term loss of volumes and margin during closing down sales, the closures have had a very limited impact on our trading; a clearer picture will emerge during the second half.

The individual lead indicators we track are giving a mixed picture, although overall we believe that the outlook remains fragile.  Both the number of housing transactions and the number of mortgage approvals have been relatively flat all year, and whilst consumer confidence has risen recently the overall trend remains negative, especially in respect of major purchases.  All of this indicates to us that the markets within which we operate are likely to remain in low percentage volume decline for the rest of this year.

Looking further ahead, the gradual recovery in private sector work must continue if the planned reduction in public sector construction and repair work is not to cause a contraction in market activity levels next year.

Operational Performance   TheMerchanting division turnover grew by 11.1% year-on-year with a strong performance from both yard and direct to site sales.   One less trading day this year reduced sales by 1.1%. However, L4L sales per trading day increased by 10.7% whilst new branch openings contributed 1.5%.  We estimate that the L4L increase, which comprised 5.2% for volume and 5.5% for price inflation, represented an outperformance against the market of around 6% against the overall merchanting market. 

We have maintained our stance of maximising cash profits, which has resulted in all eight of our merchanting businesses achieving a strong increase in L4L sales with Keyline, which benefited from the strength of private housing starts in the first quarter, and Travis Perkins in the South East being the standout performers.  As a result of our focus on selective price investment, margins are slightly lower than last year, principally due to competitive pressures on sales of commodity and known value items.

Overall, the merchanting division achieved an operating margin, before the effect of synergies, of 8.5% over the six-month period, 0.8% lower than last year.  Gross margins were 78 basis points below last year's level whilst overheads as a percentage of sales were broadly flat. Earnings before synergies, interest and taxation ("EBIT") was £96m (2010: £95m).

Additional volume is not being driven by market growth, so we continue to invest in organic initiatives, including improvements in our product offering, customer service and supply chain capabilities. We estimate that these programmes have contributed a net £7m to EBIT in the period.

A number of new customer service related projects are being tested in our merchanting business.  We have improved our timber and sheet material ranging in a number of pilot branches, which has resulted in a significant increase in sales.  New customer flow processes are in trial in a number of general merchanting branches, with the aim of improving service and loading times. Customer and staff reaction in the trial branches in which we have implemented this "Fast lane" concept has been excellent.

CCF has been piloting the tracking of new on-time in full delivery services, which we expect to roll out during July.  This is a major part of CCF's customer service strategy, which will be market leading and transferable to other businesses when fully implemented. 

We also have piloted a new bathroom showroom format in City Plumbing, managed by a dedicated specialist team, which is designed to provide to trade customers a best in category service proposition, next day from stock.   This has enabled us to reduce the number of stock lines by 50%, reduce distribution purchases by 40% and provides a strong platform for selling "IFLO", our own brand directly sourced product.  230 locations have been identified for a future roll out, with a likely cost of around £10m over two years.

To facilitate both the expansion of our direct sourcing activities and the transfer in-house of activities currently undertaken on our behalf by an agent, we have established a service company in Shanghai.  By the end of the year, we will employ 50 colleagues in China whose responsibility includes ensuring our suppliers continue to adhere to the Group's quality, ethical and delivery requirements.  We currently direct source around £400m of non BSS purchases from non UK manufacturers and we are targeting a further £250m of direct purchases over the next 5 years.

Closer to home we continue to invest in our supply chain.  With the acquisition of BSS, we now operate 24 warehouse facilities situated throughout the country.  At Gowerton Road, Northampton we have opened another 500,000 square foot composite distribution warehouse which will help further improve stock availability and margins, through greater centralisation and improved distribution of stock-holding, particularly in respect of directly sourced products. 

Retail    In a difficult market Wickes gained a further 3.6% of organic market outperformance in the first half of 2011. Core product market share increased due to the impact of our pricing initiatives on key value items ("KVI") and also the successful national delivery service we introduced in 2010. 

Overall delivered revenue for Wickes increased by 2%.  Core sales increased by 4.1%, partly due to a 40% increase in sales from our multi-channel operation, which represents 6% of our business.  Kitchen and bathroom ("K&B") delivered sales were down 13.2% year-on-year as consumers increasingly elected to pare back expenditure on 'big ticket' items. Overall in retail L4L turnover per trading day was up 0.3%.   

During the period we acquired 13 stores from the administrator of Focus for £8.4m.  These are providing us with the opportunity to further roll out our smaller store formats in catchment areas that previously might not have supported a larger store.  Fit out of the first sites has commenced and we anticipate that they will all be opened by the end of October. We should exit 2011 operating from at least 212 full stores, an increase of 17 since 31 December 2010.

We have continued to roll out the strongly performing stand alone K&B stores and are now starting to transfer some of the successful practices from them to our main estate.  We have also introduced dedicated sales managers into three of our regions, with early results indicating that kitchen and bathroom sales in those stores are holding up better than in the rest of the business.

Tile Giant saw overall turnover increase by 9.3%. L4L sales grew in the first quarter, but lower consumer activity has resulted in a 0.6% L4L reduction for the first half as a whole. We have added a net 4 outlets during the period, taking the total to 105 at the end of June.

Operating margins in the retail division declined from 5.2% to 3.5%, due mainly to organic overhead investment mitigating market volume decline as EBIT fell by 31% to £18m.  Gross margins were 0.1% higher despite the KVI initiative, whilst overheads increased as a result of increased marketing activity, a growing multi-channel offering and the effect of operating the delivery service for the full period this year. The improvements in our customer proposition created by this spend contributed to our 3.6% organic outperformance.

BSS     BSS achieved a L4L sales growth of 3.0% even though the comparable period in 2010 was boosted by the government funded boiler scrapage scheme. 1.8% of our sales increase was due to the excellent work of the Domestic division team which won a significant contract from a major competitor. 

Whilst the P&H market remains highly competitive it continues to experience high product inflation. This has benefited BSS, particularly in its industrial division, which achieved a 9% growth in L4L sales. The specialist division saw some good contract wins by Buck and Hickman and Birchwood Price Tools is benefiting from increased intra-group trading.  Overall profit before synergies for BSS is 9% ahead of the equivalent period last year.  

The synergy programme is delivering ahead of our projected timetable and we have recognised £6.5m of synergies in the first half.  We now anticipate that we will reach our targeted annual savings of £25m by the end of 2012, one year faster than previous indications, with £15m expected this year.  Excellent progress has been made during the second quarter towards achieving our product matching synergies.  A significant number of deals have been agreed with suppliers and many more that are still in negotiation will be concluded this year.  In 2012 our attention will be focused upon realising opportunities to increase direct sourcing and rationalise suppliers, although we believe there will be fewer deals to conclude than in 2011.

Our integration programme is progressing according to plan.  A considerable number of colleagues from all parts of the Group are working together to identify opportunities to increase profitability.   New financial systems are currently being implemented into the PTS and BSS Industrial businesses and we have recently started piloting new branch operating systems at PTS Rugby.  Drawing on the success of the mandated stock range and minimum project quantities requirement in our merchanting business, we have introduced the concept into 5 pilot branches in BSS.  All of these projects are drawing together the best the Group has to offer, which ultimately will benefit all of our individual businesses. 

We are already experiencing some of the benefits that BSS can bring to our Group.  The BSS own-brand range of work-wear, Scruffs, has been successfully introduced into our Wickes and merchanting businesses complementing the existing ranges.  Our P&H sourcing and packaging business, "Connections", is now supplying plumbing fittings to F&P, and the City Plumbing and DHS spares teams are working towards implementing a group-wide spares offering.

ToolStation    Our associate company continues to expand its operations, having opened a further 10 branches since December.  It now operates out of 94 sites situated throughout the country. Sales have increased by 35% year-on-year, so with stores now maturing, the dilutive effect on profits of new stores has lessened. This means ToolStation should be profitable this year.  We currently expect to exercise our option to acquire the remaining 70% of the equity of ToolStation in January 2012.

Property     Gains from carefully selected property development projects continue to be an important and reliable constituent of the Group's profits. In the first half we generated £12.5m (2010: £11.5m) of property profits.  £5m of the proceeds are due to be received in the second half with £9m in 2012.

We were able to accelerate the sales of two sites from the second half of this year, so substantially all of our planned 2011 property profits now have been realised.   However, we are still progressing a further 50 projects aimed at either improving our trading estate or preparing the ground for future asset management projects.    Work has recently started on fitting out the first of the stores acquired from Focus and we are now at an advanced stage of our Guildford project, which will see 6 of the Group's brands operate from a single site.  In addition, having recently obtained planning permission for major works to be undertaken at our St Pancras branch, we have been able to secure our pipeline of property projects and future profits into 2013.

During the first half we successfully completed the sales of the 17 branches requested by the Office of Fair Trading as part of the BSS deal for £2m.   Excluding the forced sale branches we opened a net 42 new sites.  On 30 June the Group, together with ToolStation, was operating from 1,838 sites.  Despite considerable effort being concentrated upon the integration of BSS, our branch opening programme has included 7 new PTS sites a well as further Benchmarx, Tile Giant and ToolStation branches.

PRINCIPAL RISKS AND UNCERTAINTIES   The principal risks and uncertainties faced by the Group have been and are expected to remain consistent with those described on pages 49 to 54 of the 2010 Annual Report and Accounts.  Details are provided of risks relating to Going Concern, Financial Risk Management, Liquidity and Debt, Exposure to Interest Rate and Currency Fluctuations, Credit Exposure, Capital Structure, Tax, Pension Scheme Funding, Insurance Liabilities, Market Conditions, Product Availability and Prices, Information Technology, Leased Property Liabilities, Human Resources, Acquisition Integration and Expansion, Reputation and Legislation, Environmental and Climate.

OUTLOOK AND STRATEGY   Continuing the market trends seen in the second quarter, in July L4L sales are 6.5% ahead in merchanting, 4.9% ahead in BSS, whilst in Wickes core L4L sales are flat, K&B ordered sales are down 4.4% and K&B delivered sales are down 19%.  Overall, after eliminating the effect of product inflation, Group volumes are broadly flat.

Our outlook for the full year remains unchanged. Whilst market volumes are likely to be a little weaker than we expected, our level of outperformance has increased, and product inflation remains high. Overall, a weaker trading pattern is being offset by our achieving BSS synergies earlier than expected.

Market levels of activity are expected to fall back a little over the remainder of this year and into 2012 before the long slow climb to more sustainable levels of repair and new build activity returns.

We now plan to take a cautious approach on our organic initiatives by holding the current level of activity on these, while only launching one or two fresh projects from the very long list of potential innovations designed to take us further ahead of our competitors.

The difficult market backdrop will continue to put pressure on weaker competitors and will lead to further consolidation in our markets, particularly in merchanting. We are now the largest provider of building materials in the UK, and have strong positions in our key product and market segments. We have developed and are implementing market-leading customer propositions that are delivering further organic gains in market share.  We also have an excellent track record of outperforming our market and driving financial performance over a sustained period and consequently look forward to the future with confidence.

The Interim Management Report has been prepared solely to provide additional information to shareholders as a body to assess the Group's strategies and the potential for those strategies to succeed, and should not be relied on by any other party for any other purpose.

The Interim Management Report contains forward-looking statements and these statements:

·      have been made by Directors in good faith based on the information available to them up to the time of their approval of this report; and

·      should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information.

Condensed consolidated income statement

	Six months ended  30 June 2011 (Reviewed) £m	Six months ended  30 June 2010 (Reviewed) £m	Year  ended 31 Dec 2010 (Audited) £m
Revenue	2,347.2	1,522.1	3,152.8
Operating profit before exceptional items	150.1	120.4	239.0
Exceptional items (note 4)	(3.5)	(4.6)	(19.0)
Operating profit after exceptional items	146.6	115.8	220.0
Amortisation of intangible assets	(6.5)	-	(0.2)
Operating profit	140.1	115.8	219.8
Finance income (note 6)	9.7	11.2	17.5
Finance costs before exceptional item (note 6)	(19.4)	(19.8)	(39.8)
Exceptional item (note 6)	(1.2)	-	(0.7)
Finance costs after exceptional item	(20.6)	(19.8)	(40.5)
Profit before tax	129.2	107.2	196.8
Tax before exceptional tax credit	(35.4)	(32.0)	(59.8)
Exceptional effect of reduction in corporation tax rate	6.3	-	2.4
Tax credit on exceptional items	1.2	1.3	1.9
Tax (note 7)	(27.9)	(30.7)	(55.5)
Profit for the period	101.3	76.5	141.3
Earnings per share (note 8)
Basic	43.1p	37.9p	69.6p
Diluted	41.7p	36.7p	67.2p
Total dividend declared per share (note 9)	6.5p	5.0p	15.0p

 

All results relate to continuing operations. 

Condensed consolidated statement of comprehensive income 

	Six months ended 30 June  2011 (Reviewed)	Six months ended 30 June 2010 (Reviewed)	Year ended 31 Dec 2010 (Audited)
	£m	£m	£m
Profit for the period	101.3	76.5	141.3
Cash flow hedges: Losses during the period	(5.5)	(0.7)	(4.4)
Transferred to income statement	3.8	0.3	6.8
	(1.7)	(0.4)	2.4
Actuarial (losses) / gains on defined benefit pension schemes	(1.6)	(40.4)	15.9
	(3.3)	(40.8)	18.3
Amortisation of cash flow hedge cancellation payment	2.1	2.8	4.8
Tax relating to components of other comprehensive income	0.3	10.6	(6.7)
Other comprehensive (loss) / income for the period	(0.9)	(27.4)	16.4
Total comprehensive income for the period	100.4	49.1	157.7

Condensed consolidated statement of changes in equity

Six months ended 30 June 2011
	Issued share capital	Share premium account	Merger reserve	Revaluation reserve	Hedging reserve	Own shares	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2011 (Audited)	24.2	471.5	325.9	21.3	(6.9)	(83.4)	1,199.2	1,951.8
Profit for the period	-	-	-	-	-	-	101.3	101.3
Cash flow hedges	-	-	-	-	(1.7)	-	-	(1.7)
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(1.6)	(1.6)
Amortisation of cash flow hedge cancellation payment	-	-	-	-	2.1	-	-	2.1
Tax relating to components of other comprehensive income	-	-	-	-	(0.1)	-	0.4	0.3
Total comprehensive income for the period	-	-	-	-	0.3	-	100.1	100.4
Dividends	-	-	-	-	-	-	(23.5)	(23.5)
Issue of shares	-	0.8	0.1	-	-	-	-	0.9
Own shares	-	-	-	-	-	0.2	(0.2)	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	-	(0.1)	-	-	0.1	-
Realisation of revaluation reserve in respect of property disposals	-	-	-	(1.1)	-	-	1.1	-
Deferred tax rate change	-	-	-	-	-	-	(2.1)	(2.1)
Credit to equity for equity-settled share based payments	-	-	-	-	-	-	8.0	8.0
At 30 June 2011 (Reviewed)	24.2	472.3	326.0	20.1	(6.6)	(83.2)	1,282.7	2,035.5

Condensed consolidated statement of changes in equity (continued)

Six months ended 30 June 2010
	Issued share capital	Share premium account	Revaluation reserve	Hedging reserve	Own shares	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2010 (Audited)	20.9	471.2	21.3	(12.1)	(83.7)	1,042.8	1,460.4
Profit for the period	-	-	-	-	-	76.5	76.5
Cash flow hedges	-	-	-	(0.4)	-	-	(0.4)
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	(40.4)	(40.4)
Unamortised cash flow hedge cancellation payment	-	-	-	2.8	-	-	2.8
Tax relating to components of other comprehensive income	-	-	-	(0.7)	-	11.3	10.6
Total comprehensive income for the period	-	-	-	1.7	-	47.4	49.1
Issue of shares	-	0.1	-	-	-	-	0.1
Costs of issuing shares	-	-	-	-	0.3	(0.3)	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	(0.2)	-	-	0.2	-
Credit to equity for equity-settled share based payments	-	-	-	-	-	6.1	6.1
At 30 June 2010 (Reviewed)	20.9	471.3	21.1	(10.4)	(83.4)	1,096.2	1,515.7

 

Condensed consolidated statement of changes in equity (continued)

Year ended 31 December 2010
	Issued share capital	Share premium account	Merger reserve	Revaluation reserve	Hedging reserve	Own shares	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2010 (Audited)	20.9	471.2	-	21.3	(12.1)	(83.7)	1,042.8	1,460.4
Profit for the year	-	-	-	-	-	-	141.3	141.3
Cash flow hedges	-	-	-	-	2.4	-	-	2.4
Actuarial gains on defined benefit pension schemes	-	-	-	-	-	-	15.9	15.9
Unamortised cash flow hedge cancellation payment	-	-	-	-	4.8	-	-	4.8
Tax relating to components of other comprehensive income	-	-	-	-	(2.0)	-	(4.7)	(6.7)
Total comprehensive income for the year	-	-	-	-	5.2	-	152.5	157.7
Dividends	-	-	-	-	-	-	(10.1)	(10.1)
Issue of share capital	3.3	0.3	325.9	-	-	0.3	(0.3)	329.5
Realisation of revaluation reserve in respect of property disposals	-	-	-	(0.2)	-	-	0.2	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	-	(0.2)	-	-	0.2	-
Deferred tax rate change	-	-	-	0.4	-	-	-	0.4
Credit to equity for equity-settled share based payments	-	-		-	-	-	13.9	13.9
At 31 December 2010 (Audited)	24.2	471.5	325.9	21.3	(6.9)	(83.4)	1,199.2	1,951.8

Condensed consolidated balance sheet

	As at 30 June 2011 (Reviewed) £m	As at 30 June 2010 (Reviewed) £m	As at 31 Dec 2010 (Audited) £m
ASSETS
Non-current assets
Property, plant and equipment	532.8	483.4	526.0
Goodwill (note 15)	1,702.9	1,352.8	1,690.4
Other intangible assets	404.9	162.5	411.5
Interest in associates	48.1	45.2	45.7
Derivative financial instruments	46.9	55.6	56.9
Investment property	0.4	0.4	0.4
Available-for-sale investments	1.5	1.5	1.5
Deferred tax asset	-	10.2	16.4
Total non-current assets	2,737.5	2,111.6	2,748.8
Current assets
Inventories	607.5	337.7	571.6
Trade and other receivables	816.3	462.7	692.5
Derivative financial instruments	0.6	1.0	0.1
Assets held for resale	-	-	2.3
Cash and cash equivalents	81.0	351.5	62.9
Total current assets	1,505.4	1,152.9	1,329.4
Total assets	4,242.9	3,264.5	4,078.2

Condensed consolidated balance sheet (continued)

	As at 30 June 2011 (Reviewed) £m	As at 30 June 2010 (Reviewed) £m	As at 31 Dec 2010 (Audited) £m
EQUITY AND LIABILITIES
Capital and reserves
Issued capital	24.2	20.9	24.2
Share premium account	472.3	471.3	471.5
Merger reserve	326.0	-	325.9
Revaluation reserve	20.1	21.1	21.3
Hedging reserve	(6.6)	(10.4)	(6.9)
Own shares	(83.2)	(83.4)	(83.4)
Retained earnings	1,282.7	1,096.2	1,199.2
Total equity	2,035.5	1,515.7	1,951.8
Non-current liabilities
Interest bearing loans and borrowings	634.7	698.5	760.9
Derivative financial instruments	8.4	8.2	4.2
Retirement benefit obligations (note 5)	15.4	36.5	27.9
Long-term provisions	38.2	43.7	36.0
Deferred tax liabilities	103.3	59.4	126.9
Total non-current liabilities	800.0	846.3	955.9
Current liabilities
Interest bearing loans and borrowings	138.9	60.2	72.3
Unsecured loan notes	3.3	3.3	3.3
Derivative financial instruments	0.4	-	2.5
Trade and other payables	1,126.5	763.2	999.9
Tax liabilities	84.1	29.4	39.4
Short-term provisions	54.2	46.4	53.1
Total current liabilities	1,407.4	902.5	1,170.5
Total liabilities	2,207.4	1,748.8	2,126.4
Total equity and liabilities	4,242.9	3,264.5	4,078.2

The interim financial statements of Travis Perkins plc, registered number 824821, were approved by the Board of Directors on 28 July 2011 and signed on its behalf by:

G. I. Cooper		P. N. Hampden Smith
Chief Executive		Finance Director

 Condensed consolidated cash flow statement

	Six months ended 30 June 2011 (Reviewed) £m	Six months ended 30 June 2010 (Reviewed) £m	Year ended 31 Dec 2010 (Audited) £m
Operating profit before exceptional items	150.1	120.4	239.0
Adjustments for:
Depreciation of property, plant and equipment	31.3	28.3	57.5
Other non cash movements	7.5	5.9	8.0
Losses of associates	0.6	1.2	2.1
Gain on disposal of property, plant and equipment	(13.0)	(11.5)	(11.3)
Operating cash flows before movements in working capital	176.5	144.3	295.3
Increase in inventories	(34.8)	(25.0)	(62.3)
Increase in receivables	(111.7)	(78.4)	(3.2)
Increase in payables	135.0	127.0	112.8
Payments on exceptional items	(9.1)	(2.2)	(7.6)
Payments to the pension schemes in excess of the charges to profits	(8.4)	(43.8)	(52.7)
Cash generated from operations	147.5	121.9	282.3
Interest paid	(13.2)	(11.6)	(25.4)
Income taxes  received / (paid)	8.2	(20.3)	(42.4)
Net cash from operating activities	142.5	90.0	214.5
Cash flows from investing activities
Interest received	0.3	3.8	9.4
Proceeds on disposal of property, plant and equipment	2.3	9.4	17.2
Purchases of property, plant and equipment	(43.3)	(19.4)	(52.6)
Interests in associates	(1.1)	(13.0)	(12.5)
Acquisition of businesses net of cash acquired	(9.3)	-	(294.9)
Net cash used in investing activities	(51.1)	(19.2)	(333.4)
Financing activities
Proceeds from the issue of share capital	0.9	0.1	0.3
Swap cancellation receipt	-	13.7	13.7
Payment of finance lease liabilities	(0.9)	(0.7)	(1.3)
Repayment of unsecured loan notes	-	(0.6)	(0.6)
Partnership receipt from defined benefit pension scheme	-	34.7	34.7
Decrease in bank loans	(50.3)	(113.7)	(214.1)
Dividends paid	(23.5)	-	(10.1)
Net cash (absorbed by) / generated from financing activities	(73.8)	(66.5)	177.4
Net increase / (decrease) in cash and cash equivalents	17.6	4.3	(296.3)
Cash and cash equivalents at beginning of period	50.9	347.2	347.2
Cash and cash equivalents at end of period	68.5	351.5	50.9

Notes to the interim financial statements

1.      General information and accounting policies

The Interim Financial Statements have been prepared on the historical cost basis, except that derivative financial instruments are stated at their fair value. The Interim Financial Statements include the accounts of the Company and all its subsidiaries ("the Group").

Basis of preparation

The financial information for the six months ended 30 June 2011 and 30 June 2010 is unaudited. This information has been reviewed by Deloitte LLP, the Group's auditors, and a copy of their review report appears on page 25 of this interim report. The financial information for the year ended 31 December 2010 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2010 as prepared under IFRS has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The unaudited interim financial statements for the six months ended 30 June 2011 have prepared in accordance with IAS 34 "Interim Financial Reporting" and have been prepared on the basis of IFRS's as adopted by the European Union.

Management is currently of the opinion that the Group's forecasts and projections show that the Group should be able to operate within its banking facilities and comply with its banking covenants. The Group is however exposed to a number of significant risks and uncertainties, which could affect the Group's ability to meet management's forecasts and projections, and hence its ability to meet its banking covenants. The directors believe that the Group has the flexibility to react to changing market conditions and is adequately placed to manage its business risks successfully despite the uncertain economic outlook and challenging macro economic conditions. After making enquiries, the directors have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the interim financial information.

The accounting policies adopted by Travis Perkins plc are set out in the 2010 full year financial statements, which are available on the Travis Perkins web site www.travisperkinsplc.com. These accounting policies have been consistently applied in all the periods presented. There has been no material impact on these financial statements from changes in accounting standards during the period.

Impacts of standards and interpretations in issue but not yet effective

At the date of authorisation of these condensed interim financial statements, the following standards and interpretations, which have not yet been applied in these financial statements, were in issue, but not yet effective:

·      IFRS 9  Financial Instruments: Classification and Measurement

·      IFRS 10 Consolidated Financial Statements

·      IFRS 11 Joint Arrangements

·      IFRS 12 Disclosure of Interests in Other Entities

·      IFRS 13 Fair Value Measurements

·      IAS   27 Separate Financial Statements

·      IAS   28  Investments in Associates and Joint Ventures

·      Amendments to IAS 12 Deferred tax: Recovery of Underlying Assets

The Directors anticipate that adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group.

Notes to the interim financial statements

2.      Business segments

For management purposes, the Group is currently organised into three operating divisions - Merchanting, Retail and BSS. These divisions are the basis on which the Group reports its primary segment information. Segment results include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Information regarding the Group's operating segments is reported below. Amounts reported conform to the requirements of IFRS 8. 

Segment information

Six months ended 30 June 2011

	Merchanting £m	Retail £m	BSS £m	Consolidated £m
Revenue	1,133.3	513.2	700.7	2,347.2
Result
Segment result before synergies and exceptional items	95.9	18.2	30.1	144.2
Synergies arising from the acquisition of BSS	2.9	-	3.6	6.5
Segment result pre-exceptional items	98.8	18.2	33.7	150.7
Exceptional items	-	-	(3.5)	(3.5)
Segment result	98.8	18.2	30.2	147.2
Share of losses of associates				(0.6)
Amortisation of intangible assets				(6.5)
Finance income				9.7
Finance costs				(20.6)
Profit before taxation				129.2
Taxation				(27.9)
Profit for the period				101.3

Six months ended 30 June 2010

	Merchanting £m	Retail £m	Consolidated £m
Revenue	1,020.0	502.1	1,522.1
Result
Segment result	95.3	26.3	121.6
Share of losses of associate			(1.2)
Exceptional items			(4.6)
Finance income			11.2
Finance costs			(19.8)
Profit before taxation			107.2
Taxation			(30.7)
Profit for the period			76.5

Notes to the interim financial statements

2.      Business segments (continued)

Year ended 31 December 2010

	Merchanting £m	Retail £m	BSS £m	Consolidated £m
Revenue	2,106.5	1,002.9	43.4	3,152.8
Result
Segment result before exceptional items	184.4	59.3	(2.6)	241.1
Exceptional items	(10.3)	(0.6)	(8.1)	(19.0)
Segment result	174.1	58.7	(10.7)	222.1
Share of losses of associate				(2.1)
Amortisation of intangible assets				(0.2)
Finance income				17.5
Finance costs				(40.5)
Profit before taxation				196.8
Taxation				(55.5)
Profit for the year				141.3

For the purposes of monitoring segment performance the Group's Chief Executive monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of cash, investments in associates and holding company intra group balances.

Segment	30 June 2011 £m	30 June 2010 £m	31 Dec 2010 £m
Merchanting	2,866.9	2,410.6	2,543.8
Retail	1,534.4	1,476.0	1,498.5
BSS	1,143.2	-	1,128.4
Unallocated corporate assets	589.7	559.2	308.8
Eliminations	(1,891.3)	(1,181.3)	(1,401.3)
Total	4,242.9	3,264.5	4,078.2

3.      Seasonality

The Group's trading operations are mainly unaffected by seasonal factors. In 2010, the period to 30 June accounted for 49% of the Group's annual turnover (2009: 50%).

4.      Exceptional items

On 14 December 2010 the Group acquired 100% of the issued share capital of The BSS Group plc ("BSS") for a total consideration of £623.9m.  Costs arising on the integration of the BSS business into the Travis Perkins group have been charged to the income statement as an exceptional item. Following the change of control of BSS $25m of the US dollar denominated guaranteed senior notes were repaid. The exchange loss arising on this settlement has been charged to the income statement as an exceptional finance cost.

Notes to the interim financial statements

5.      Retirement benefit obligations

	Six months ended 30 June 2011 £m	Six months ended 30 June 2010 £m	Year ended 31 Dec 2010 £m
Gross deficit 1 January	(27.9)	(43.0)	(43.0)
Current service cost	(5.0)	(2.9)	(5.7)
Other finance income	5.7	3.1	6.2
Liability at date of acquisition	-	-	(59.6)
Contributions received by the Schemes	13.4	46.7	58.3
Actuarial (losses) / gains recognised in the statement of comprehensive income	(1.6)	(40.4)	15.9
Gross deficit at 30 June / 31 December	(15.4)	(36.5)	(27.9)
Deferred tax	4.0	10.2	7.8
Net deficit at 30 June / 31 December	(11.4)	(26.3)	(20.1)

6.      Finance costs

	Six months ended 30 June 2011 £m	Six months ended 30 June 2010 £m	Year ended 31 Dec 2010 £m
Interest receivable	2.0	6.8	10.4
Amortisation of cancellation receipt for swap accounted for as fair value hedge	0.5	1.3	0.9
Net gain on re-measurement or settlement of derivatives at fair value	1.5	-	-
Other finance income - pension scheme	5.7	3.1	6.2
Finance income	9.7	11.2	17.5
Interest on bank loans and overdrafts	(11.9)	(12.0)	(22.1)
Amortisation of issue costs of bank loans	(1.6)	(2.1)	(5.7)
Interest on unsecured loans	(0.1)	(0.1)	(0.2)
Interest on obligations under finance leases	(0.6)	(0.6)	(1.2)
Amortisation of cancellation payment for swaps accounted for as cash flow hedges	(2.1)	(2.8)	(4.9)
Unwinding of discounts in provisions	(3.1)	(2.0)	(4.2)
Net loss on re-measurement or settlement of derivatives at fair value	-	(0.2)	(1.5)
Finance costs before exceptional item	(19.4)	(19.8)	(39.8)
Exceptional item	(1.2)	-	(0.7)
Net finance costs after exceptional item	(10.9)	(8.6)	(23.0)

Notes to the interim financial statements

7.      Tax

	Six months ended 30 June 2011 £m	Six months ended 30 June 2010 £m	Year ended 31 Dec 2010 £m
Current tax
UK corporation tax
- current year	(36.5)	(21.6)	(51.4)
- prior year	-	-	1.2
Total current tax charge	(36.5)	(21.6)	(50.2)
Deferred tax
- current year	8.6	(9.1)	(5.4)
- prior year	-	-	0.1
Total deferred tax	8.6	(9.1)	(5.3)
Total tax charge	(27.9)	(30.7)	(55.5)

Tax for the interim period is charged at 21.6% on profits before tax (year to 31 December 2010: 28.2%), representing the best estimate of the corporation tax rate expected for the full financial year. The tax charge for 2011 includes an exceptional credit of £6.3m arising from a reduction in the rate of UK corporation tax from 27% to 26% on 6 April 2011. Further reductions in the rate of corporation tax announced by Parliament, but not yet enacted, have not been reflected in these financial statements.

8.      Earnings per share

a) Basic and diluted earnings per share
	Six months ended 30 June 2011 £m	Six months ended 30 June 2010 £m	Year ended 31 Dec 2010 £m
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity share holders of the Parent	101.3	76.5	141.3
Number of shares	No.	No.	No.
Weighted average number of shares for the purposes of basic earnings per share	234,826,481	201,665,103	203,127,379
Dilutive effect of share options on potential shares	8,264,196	6,590,764	7,099,195
Weighted average number of shares for the purposes of diluted earnings per share	243,090,677	208,255,867	210,226,574

Notes to the interim financial statements

8.      Earnings per share (continued)

b) Adjusted earnings per share Adjusted earnings per share are calculated by excluding the effect of the exceptional items in 2011 and 2010 from earnings.
	Six months ended 30 June 2011 £m	Six months ended 30 June 2010 £m	Year ended 31 Dec 2010 £m
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity share holders of the Parent	101.3	76.5	141.3
Exceptional items	4.7	4.6	19.7
Amortisation of intangible assets	6.5	-	0.2
Tax credit on exceptional items	(1.2)	(1.3)	(1.9)
Effect of reduction in corporation tax rate on deferred tax	(6.3)	-	(2.4)
Earnings for adjusted earnings per share	105.0	79.8	156.9
Adjusted basic earnings per share	44.7p	39.6p	77.2p
Adjusted diluted earnings per share	43.2p	38.3p	74.6p

9.      Dividends

Amounts were recognised in the financial statements as distributions to equity shareholders in the following periods:

	Six months ended 30 June 2011 £m	Six months ended 30 June 2010 £m	Year ended 31 Dec 2010 £m
Final dividend for the year ended 31 December 2010 of 10 pence (2009: nil pence) per share	23.5	-	-
Interim dividend for the year ended 31 December 2010 of  5 pence (2009 nil pence) per share	-	-	10.1

The proposed interim dividend of 6.5p per share in respect of the year ending 31 December 2011 was approved by the Board on 28 July 2011 and has not been included as a liability as at 30 June 2011.  It will be paid on 14 November 2011 to shareholders on the register at close of business on 14 October 2011.  The shares will be quoted ex-dividend on 12 October 2011.

Notes to the interim financial statements

10.     Borrowings

At the period end, the Group had the following borrowing facilities available:

	30 June 2011 £m	30 June 2010 £m	31 Dec 2010 £m
Drawn facilities
US guaranteed senior notes	339.5	297.6	366.0
5 year term loan	352.5	411.3	382.0
5 year revolving credit facility	15.0	-	20.0
Bank overdrafts	12.5	-	12.0
	719.5	708.9	780.0
Undrawn facilities
5 year revolving credit facility	460.0	475.0	455.0
Bank overdrafts	37.9	40.0	38.4
	497.9	515.0	493.4

After the period end, as part of the continuing integration of the BSS Group the remaining $100m of the guaranteed senior notes introduced to the group on the acquisition of The BSS Group plc were repaid.

11.     Share capital

	Allotted
Ordinary shares of 10p	No.	£m
At 1 January 2011	241,701,917	24.2
Allotted under share option schemes	162,294	-
At 30 June 2011	241,864,211	24.2

12a)   Net debt reconciliation

	Six months ended 30 June 2011 £m	Six months ended 30 June  2010 £m	Year ended 31 Dec  2010 £m
Net debt at 1 January	(773.6)	(467.2)	(467.2)
Increase / (decrease)  in cash and cash equivalents	17.6	4.3	(296.3)
Net debt arising on acquisition	-	-	(174.6)
Cash flows from debt	51.2	66.6	167.6
Decrease / (increase) in fair value of derivatives	9.4	(9.3)	3.1
Exchange gain / (loss) on private placement	1.8	(2.1)	-
Finance charges netted off bank debt	(1.5)	(2.1)	(5.7)
Amortisation swap cancellation receipt	0.5	-	1.0
Other non cash movements	-	(0.7)	-
Discount unwind on pension SPV	(1.3)	-	(1.5)
Net debt at 30 June / 31 December	(695.9)	(410.5)	(773.6)

Notes to the interim financial statements

12b)   Underlying net debt

The reduction in underlying net debt of £86.8m is calculated by adding the decrease in net debt of £77.7m (note 13) to the cash impact of exceptional items of £9.1m.

13.     Non-statutory information

a) Gearing	At 30 June 2011 £m	At  30 June  2010 £m	At 31 Dec  2010 £m
Net Debt under IFRS	(695.9)	(410.5)	(773.6)
IAS 17 finance leases	21.1	22.5	21.9
Swap cancellation receipt	4.6	6.9	5.1
Fair value of debt acquired	-	-	12.4
Fair value adjustment to debt	38.6	51.9	37.4
Finance charges netted off bank debt	(3.1)	(7.5)	(4.6)
Net debt under covenant calculations	(634.7)	(336.7)	(701.4)
Total equity	2,035.8	1,515.7	1,951.8
Gearing	31.2%	22.2%	36.0%
b) Covenant calculations (rolling 12 months)
Profit before taxation	218.8	229.5	196.8
Net finance costs	25.3	26.0	23.0
Depreciation, amortisation and impairments	67.2	56.9	57.7
EBITDA under IFRS	311.3	312.4	277.5
Exceptional items	17.9	(28.1)	19.0
BSS 2010 pre-acquisition EBITDA	41.0	-	71.3
Reversal of IFRS effect	(2.6)	(2.5)	(2.6)
Adjusted EBITDA under covenant calculations	367.6	281.8	365.2
Adjusted net debt to EBITDA	1.73x	1.19x	1.92x
Net interest payable under covenant calculations (rolling 12 months)	17.5	13.5	12.6
Interest cover	15.3x	16.8x	18.9x

Notes to the interim financial statements

13.     Non-statutory information (continued)

c) Adjusted free cash flow	Six months ended 30 June 2011 £m	Six months ended 30 June  2010 £m	Year ended 31 Dec  2010 £m
Net debt at 1 January	(773.6)	(467.2)	(467.2)
Net debt at 30 June / 31 December	(695.9)	(410.5)	(773.6)
Decrease / (increase) in net debt	77.7	56.7	(306.4)
Dividends paid	23.5	-	10.1
Net cash outflow for expansion capital expenditure	16.7	7.9	29.0
Net cash outflow for acquisitions	9.3	-	294.9
Amortisation of swap cancellation receipt	(0.5)	-	(0.9)
Discount unwind on SPV	1.3	-	1.5
Cash impact of exceptional items	9.1	2.2	7.6
Interest in associates	1.1	13.0	12.5
Shares issued	(0.9)	(0.1)	(0.3)
Change in fair value of debt	(9.4)	9.3	(3.1)
Exchange loss on private placement	(1.8)	2.1	-
Other non cash movements	-	0.7	-
Decrease in finance charges netted off bank debt	1.5	2.1	5.7
Net debt arising on BSS on acquisition	-	-	174.6
Special pension contributions	8.4	43.8	52.6
Adjusted free cash flow	136.0	137.7	277.8

14.        Related party transactions

The Group has a related party relationship with its subsidiaries and with its directors.  Transactions between group companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note.  There have been no material related party transactions with directors. The Group advanced a further £1.1m in the form of loans to its associate companies ToolStation Limited and The Mosaic Tile Company Limited. Operating transactions with ToolStation Limited and The Mosaic Tile Company Limited were not significant during the period.

15.        Goodwill

During the period, adjustments of £4.1m were made to the provisional fair value adjustments recognised on the acquisition of The BSS Group plc at 31 December 2010. The directors will continue to review the fair value adjustments during the second half of the financial year and accordingly they remain provisional. In addition the Group paid £8.4m for goodwill in respect of the ex- Focus branches.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(b) the Interim Management Report includes a fair review of the information required by DTR 4.2 .7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the Interim Management Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).

By order of the Board

G. I. Cooper                               P. N. Hampden Smith

Chief Executive                          Finance Director

28 July 2011                              28 July 2011

INDEPENDENT REVIEW REPORT TO TRAVIS PERKINS PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the income statement, the statement of comprehensive income, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with 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.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 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.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

28 July 2011

 

END

 

 

IR SEMFMAFFSEEW