Interim Results

Trifast PLC 21 November 2007 21 November 2007 TRIFAST PLC Interim Results for the six months ended 30 September 2007 Commenting on the interim results, Steve Auld Chief Executive, said: "Trifast performed strongly and delivered a solid operating profit in a challenging market. During the period we have made significant progress with our New Business Development Team and are currently developing new quality business plans to drive growth going forward." Financial and Operational Highlights: • Revenues at £62.07 million • Profit before tax (pre-goodwill, intangible amortisation, IFRS 2 charges, and restructuring costs) up 13% at £4.75 million. • Statutory profit before tax was up 32% at £4.46 million • Basic earnings per share increased by 34% to 3.96p • Interim dividend increased to 0.93p • Investment in Key Account Management Team and business strategy fully operational • Marketing plan to develop the TR brand into one of the recognised leading brands within the industry Enquiries Trifast Group plc Tel: 020 7360 4900 Steve Auld, Chief Executive Officer today only, thereafter Stuart Lawson, Chief Financial Officer Tel: 01825 747 366 Smithfield Consultants Reg Hoare / Will Swan Tel: 020 7360 4900 Arden Partners Richard Day Tel: 020 7398 1632 Notes to Editors Trifast plc is a leading international manufacturer and distributor of industrial fastenings to the assembly industries, with operations in Europe, the Americas and Asia. For more information please visit www.trifast.com Trifast plc Summary interim results for the six months ended 30 September 2007 Six months Six months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 Revenue £62.07m £67.81m £131.95m Gross profit £17.09m £17.45m £34.72m Operating profit £5.23m £4.66m £9.74m (pre-goodwill, intangible amortisation, IFRS 2 charges and restructuring costs) Operating profit £4.94m £3.81m £6.36m Pre-tax profit £4.75m £4.22m £8.81m (pre-goodwill, intangible amortisation, IFRS 2 charges and restructuring costs) Pre-tax Profit £4.46m £3.38m £5.43m Earnings per share - Basic 3.96p 2.95p 4.70p - Diluted 3.94p 2.95p 4.70p Dividend 0.93p 0.77p 2.43p Statement by the Chairman Anthony Allen and Chief Executive Steve Auld Business Review During the first half of the financial year the Company delivered profits in line with market expectations. This is especially pleasing as the market has become an increasingly competitive environment due to globalisation of manufacturers, and as previously reported, the impact of increased prices of raw materials, energy, and freight costs. The Company has taken the appropriate action over the past months which will enable it to meet these challenges. Results In spite of the challenges highlighted above, the Company reported a solid performance for the first half year. Although sales show a decline on the previous year this was due to the loss of lower margin business moving away from the Group, after a detailed customer review. This review was conducted as a result of our continued focus on improving profitability. The highlights to be noted in the interim are the TR Asia results. The businesses have reported sales growth and improved profitability for the period. TR Asia continues to set world class standards for the Industry. Initiatives taken in first half We have strengthened our key sales account management team, and appointed a number of senior sales managers who are now working with our business operations to drive organic growth. These initiatives together with our fully operational business strategy are intended to improve our performance this year notwithstanding challenging market conditions. The New Business Development Team is a work in progress as we still have a few vacancies left to fill. However, we are delighted with the calibre of our new recruits, and these when added to the existing experienced salesmen, form a powerful force. New business plans for 2008 focus on the development of our European Divisions. Additional resources are planned to expand sales in Asia by establishing a new business sales team to mirror that formed in Europe. Transactional sales activity for our business operations has been strengthened by staff training and recruitment. We have also invested in a software solution that improves sales monitoring, which we expect to be fully operational in the second half of the year and we can already see sales growth for TR Proprietary parts. Our marketing plan to support these initiatives will develop the TR brand into one of the recognised leading brands within the industry. The Master Distributor Programme (MDP) is progressing well in Europe and sales are growing. This product base, focused on sales to distributors, has already been launched in North America. The MDP, focusing on selling TR Proprietary products, is expected to result in rapid sales growth during the next three year period. The development of the team will involve additional recruitment and again we will only select high calibre candidates. Staff and customer surveys have recently been conducted. These have given rise to a review of staff training needs and measures to optimise and improve business unit performance. Acquisitions During the period we reviewed a number of potential acquisitions, but have not progressed any as we were not satisfied they met our stringent criteria. Summary Trifast performed strongly and delivered a solid operating profit in a challenging market. During the period we have made significant progress with our New Business Development Team and are currently developing new quality business plans to drive growth going forward. Trifast has a proven ability to follow business into new territories. Currently India and Vietnam are countries where customer based opportunities are being supported. Sales to the challenging automotive sector have found success in providing either comprehensive supply solutions or focussed manufacturing capability. Particular success is being found also with domestic appliance manufacturers in Eastern Europe. Trifast continues to seek out customers committed to long term relationships to achieve mutual benefits whilst paying attention to the quality and its earnings. Current Trading and Prospects The current short term focus of our business operations is to deliver the full year profit targets. The first half results above and the good start to the second half gives us confidence that these profits are achievable. With the development of our sales teams and our detailed marketing policy the medium to long term prospects for profitable sales growth are good. FINANCIAL OVERVIEW This period has given us many external challenges including raw material price increases, foreign exchange movements and general market uncertainties. However, Trifast has dealt with these challenges along with our own internal issues of new sites, changing computer systems and reviewing profitability of sales accounts, to deliver an increase in net profit (pre goodwill, IFRS2, intangible amortisation and restructuring costs) of 12.6% at £4.75million. Results Gross profit for the six month period was £17.09million (2006:£17.45million), representing a £0.36million reduction, but an increase in return on sales from 25.7% to 27.5%. We continue to focus on new sales and are confident that we can maintain this improved gross margin level. Profit before income tax in the period was £4.46million (2006:£3.38million), indicating a better business mix to move forward on and an improved net profit percentage on sales of 2.2% points to 7.2% (or 8.0% at operating profit level). With an effective tax rate of 24.9% (2006:26.3%), profit after tax was £3.35million (2006:£2.49million). Operating profit before financing costs was £4.94million, up 29.7% from last year's £3.81million reflecting the higher gross margin and effective overhead control. As a result of our continued review of profitability of key accounts and a toughening market, Group revenue reduced by £5.74million on prior year and £2.07million from the second half of the year ended March 2007 to £62.07million. Allowing for known reductions, the underlying revenue growth was disappointing at 2.7%. The result of a profitability review and our continued focus on costs and efficiency of our sourcing has helped us to continue to improve our gross margins with an improvement of 1.8% points on the prior year and 1.2% points on the full year ended 31 March 2007. Europe/USA European/USA revenues which now represent 78.2% (2006:80.8%) have decreased by £6.27m as explained above but the gross margin has increased to 23.7%. Sales revenue in the UK declined by £5.15million. Positive growth was seen in Holland, Hungary, Poland and Turkey. A large proportion of the UK reduction was attributable to the movement of accounts to Asia. Asia Our Asian revenues were up on last year at £13.52million, up 3.7%, with lower margin sales from Taiwan to the USA automotive industry declining but higher margin sales from Singapore and China replacing this. The result being an increase in gross margin of 3.7% points to 34.8%. Other factors impacting on the increased margin include more inter-Group sourcing from Asia, increased consolidated purchasing and continued improvements to the efficiency our factories. China continues to benefit from the movement of global customers to lower cost regions and is now proving to be an excellent place to locate our Asian sourcing office. One Off Items Our focus on Group efficiencies has resulted in us absorbing a further £0.25million of one-off costs within our results and we should see a similar number in the second half. The Group's distribution and administration overheads now stand at 19.3% of sales (2006:19.0%), a level at which we are comfortable and feel that there is still some spare capacity for sales growth, thus reducing the percentage overheads to sales. As indicated at the year end, we had no further material restructuring costs, but we continue to set costs against the provisions made in the prior two years. Debt / Cash Gross debt in the period has been reduced by a further £1.84million to £17.69million since the year ended 31st March 2007 with net debt now at £12.97million at the period end, giving a gearing of 25.0%. Cash generated from operations in the period amounted to £2.23m before restructuring costs of £1.11million. This figure is lower than the prior year due to the increased purchasing from Asia which results in lower payment terms but higher gross margins and the tightening up of supply chain controls to reduce customer risk in the supply chain. Working Capital Stock levels have remained consistent to year end, as stock reduction procedures take effect, however, a number of sites saw an increase in stock levels in preparation for new accounts commencing delivery in the second half of the year. The team continues to work to stock turn targets and manage the fine line between reduction in stock levels and maintenance of customer supply continuity. Debtor management remains a core control and we are pleased to report that we have had no significant bad debts in the period and our debtor days remain strong at 65. Creditor days were 63. Net working capital levels were increased in the period due to the decreased level of the accounts payable. This resulted from bringing the recent acquisitions of Serco Ryan and Keba in line with Group policies to ensure supplier continuity for customers, increased purchases from Asia resulting in lower credit terms but higher gross margins, and lastly an increase in the product bought from our own factories again resulting in higher margins. Capital Expenditure As indicated last year, capital expenditure has increased on prior periods at £0.51million (2006:£0.27million), reflecting expenditure on IT Systems and investment into both our manufacturing and distribution facilities now that we have a stable distribution network from which we will grow the business. Net Financing Costs Net financing costs increased to £0.62million of which interest payable amounted to £0.69million (2006:£0.50million), reflecting both the full period of debt at current levels and increased bank base rates over the last 12 months. Earnings Per Share Basic earnings per share in the period was 3.96pence, an increase of 34% on the equivalent period last year. Interim Dividend The Directors have declared an increased interim dividend of 0.93pence per ordinary share (2006:0.77pence) reflecting the Board's confidence in the future of the Group and to further bring the dividend cover in line with our long term goal of 3 times. The interim dividend will be paid on 17 January 2008 to shareholders on the Register on 30 November 2007, with an ex dividend date of 28 November 2007. Responsibility Statement We confirm that to the best of our knowledge: (a) the condensed set of financial statements contained in this document has been prepared in accordance with International Accounting Standard 34 ("IAS 34"), "Interim Financial Reporting" as adopted by the European Union; (b) the Interim management report contained in this document includes a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules ("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) this document includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein). By order of the Board Steve Auld Stuart Lawson Chief Executive Officer Chief Finance Officer 21 November 2007 21 November 2007 Cautionary Statement The Interim Management Report has been prepared for the shareholders of the Company, as a body, and no other persons. Its purpose is to assist shareholders of the Company to assess the strategies adopted by the Company and the potential for those strategies to succeed and for no other purpose. This Interim Management Report contains forward looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated. No assurances can be given that the forward-looking statements in this Interim management report will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation. Description of Business Trifast plc is a leading international manufacturer and distributor of industrial fastenings to the assembly industries, with operations in Europe, the Americas and Asia. Condensed consolidated interim income statement Unaudited results for the six months ended 30 September 2007 Notes Six months Six months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Revenue 62,074 67,807 131,946 Cost of Sales (44,985) (50,356) (97,224) ----- ------------ ------------ ---------- Gross Profit 17,089 17,451 34,722 Other Operating Income 134 86 220 Distribution Expenses (1,394) (1,372) (2,868) -------------------------------------------------------------------------------- Administrative Expenses before (10,601) (11,508) (22,336) the following items: - Intangible Amortisation (137) (131) (274) - Restructuring Costs - (634) (2,894) - IFRS 2 Charge (153) (83) (213) -------------------------------------------------------------------------------- Total Administration Expenses (10,891) (12,356) (25,717) ----- ------------ ------------ ---------- Operating Profit 4,938 3,809 6,357 ----- ------------ ------------ ---------- Financial Income 71 69 144 Financial Expenses (690) (502) (1,175) ----- ------------ ------------ ---------- Net Financing costs (619) (433) (1,031) Share of profit of associate 141 - 100 ----- ------------ ------------ ---------- Profit before Tax 4,460 3,376 5,426 Taxation 3 (1,109) (887) (1,453) ----- ------------ ------------ ---------- Profit for the Period attributable to equity holders of the parent 3,351 2,489 3,973 ===== ============ ============ ========== Earnings per Share - Basic 5 3.96p 2.95p 4.70p - Diluted 5 3.94p 2.95p 4.70p Dividends 4 0.93p 0.77p 2.43p Condensed consolidated interim statement of recognised income and expense Unaudited results for the six months ended 30 September 2007 Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 £000 £000 £000 Foreign currency translation differences (net of tax) (95) (1,378) (1,511) Net (loss)/gain on hedge of net investment in foreign subsidiary (net of tax) (18) 12 14 ------------- ----------- --------- Net Expense Recognised Directly in Equity (113) (1,366) (1,497) ------------- ----------- --------- Profit for the Period 3,351 2,489 3,973 ------------- ----------- --------- Total Recognised Income for the Period attributable to equity holders of the parent. 3,238 1,123 2,476 ============= =========== ========= Condensed consolidated interim balance sheet Unaudited results as at 30 September 2007 Notes 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Non-current assets Property, plant and equipment 8,212 8,586 8,324 Intangible assets 23,066 24,046 23,316 Investment in associate 2,896 - 2,836 Deferred tax assets - 573 350 ----- ----------- ----------- --------- Total non-current assets 34,174 33,205 34,826 ----- ----------- ----------- --------- Current assets Stocks 25,877 24,837 25,611 Trade and other receivables 27,472 29,678 28,109 Cash and cash equivalents 9,724 7,421 6,757 ----- ----------- ----------- --------- Total current assets 63,073 61,936 60,477 ----- ----------- ----------- --------- Total assets 97,247 95,141 95,303 ----- ----------- ----------- --------- Current liabilities Bank and other loans 7,741 2,893 3,082 Trade and other payables 19,919 24,158 24,181 Tax payable 981 835 192 Dividends payable 1,406 1,248 - Deferred consideration - 2,562 - Provisions 725 166 1,624 ----- ----------- ----------- --------- Total current liabilities 30,772 31,862 29,079 ----- ----------- ----------- --------- Non-current liabilities Bank and other loans 14,953 14,152 16,394 Provisions 900 1,170 1,096 Deferred tax liabilities 406 753 509 ----- ----------- ----------- --------- Total non-current liabilities 16,259 16,075 17,999 ----- ----------- ----------- --------- Total liabilities 47,031 47,937 47,078 ----- ----------- ----------- --------- Net assets 50,216 47,204 48,225 ----- ----------- ----------- --------- Equity Share capital 4,236 4,219 4,236 Share premium 12,052 11,874 12,046 Reserves (739) (495) (626) Retained earnings 6 34,667 31,606 32,569 ----- ----------- ----------- --------- Total equity 7 50,216 47,204 48,225 ----- ----------- ----------- --------- Condensed consolidated interim statement of cash flows Unaudited results for the six months ended 30 September 2007 Six months Six months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000 Cash Flows from Operating Activities Profit for the Period 3,351 2,489 3,973 ----------- ---------- --------- Adjustments for: Depreciation, amortisation & impairment 703 746 1,445 Financial income (71) (69) (144) Financial expense 690 502 1,175 Loss/(gain) on sale of property, plant & equipment (11) 3 (7) Equity settled share based payment expense 153 83 213 Profit from associate (141) - (100) Taxation 1,109 887 1,453 ----------- ---------- --------- Operating profit before changes in working capital and provisions 5,783 4,641 8,008 Change in trade and other payables (4,441) 326 72 Change in stocks (190) (272) (1,066) Change in trade and other receivables 1,084 (562) 973 Change in provisions (1,106) (121) 1,262 ----------- ---------- --------- Cash generated from operations 1,130 4,012 9,249 Tax paid (413) (446) (1,668) ----------- ---------- --------- Net Cash from Operating Activities 717 3,566 7,581 ----------- ---------- --------- Cash Flows from Investing Activities Acquisition of subsidiaries (4) (18) (4,761) and investments net of cash Acquisition of property, plant & equipment (511) (269) (683) Dividends received 81 - - Proceeds from sale of property, plant & equipment 20 - 64 Interest received 66 71 145 ----------- ---------- --------- Net cash from investing activities (348) (216) (5,235) ----------- ---------- --------- Cash Flows from Financing Activities Proceeds from issue of share capital 6 - 190 Proceeds from new loan - - 3,799 Repayment of long term borrowings (1,518) (1,416) (2,810) Dividends paid - - (1,899) Interest paid (672) (474) (1,090) ----------- ---------- --------- Net Cash from Financing Activities (2,184) (1,890) (1,810) ----------- ---------- --------- Net change in Cash (1,815) 1,460 536 and Cash Equivalents Cash and Cash Equivalents at start of period 6,470 6,252 6,252 Effect of exchange rate fluctuations on cash held 64 (291) (318) ----------- ---------- --------- Cash and Cash Equivalents at end of period 4,719 7,421 6,470 ----------- ---------- --------- Notes to the condensed consolidated interim financial statements Unaudited results for the six months ended 30 September 2007 1. Basis of preparation This interim statement has been prepared on the basis of accounting policies set out in the full Annual Report and Accounts for the year ended 31 March 2007. These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and International Financial Reporting Standard (IFRS) IAS 34: Interim Financial Reporting as adopted in the EU. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2007. This statement does not comprise full financial statements within the meaning of Section 240 of the Companies Act 1985. The statement is unaudited but has been reviewed by KPMG Audit Plc and their report is set out below. The comparative figures for the financial year ended 31 March 2007 are not the Company's statutory accounts for that financial year and have been extracted from the full Annual Report and Accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2. Segment reporting Segment information is presented in the condensed consolidation interim financial statements in respect of the Group's geographical segments, which are the primary basis of segment reporting. The geographical segment reporting format reflects the Group's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Business segments The Group is comprised of the following main geographical segments: Europe/America: includes UK, Norway, Sweden, France, Hungary, Southern Ireland, Holland, Turkey, Los Angeles, Phoenix and Mexico Asia: includes Malaysia, China, Singapore and Taiwan Segment revenue and result under primary reporting format for the 6 months ended 30 September 2007 and 2006 are disclosed in the table below: Europe/USA Asia Central Group 2007 2006 2007 2006 2007 2006 2007 2006 £000 £000 £000 £000 £000 £000 £000 £000 Revenue Revenue from external customers 48,551 54,769 13,523 13,038 - - 62,074 67 807 Inter segment revenue 2,635 2,689 1,617 2,080 - - 4,252 4,769 ------- ------- ------- ------- ------- ------- ------- -------- Total 51,186 57,458 15,140 15,118 - - 66,326 72,576 revenue ------- ------- ------- ------- ------- ------- ------- -------- Segment results before 2,387 2,920 3,669 2,756 (687) (1,019) 5,369 4,657 items listed below Intangible amortisation (137) (131) - - - - (137) (131) Restructuring costs - (584) - - - (50) - (634) Equity settled share based - - - - (153) (83) (153) (83) payments ------- ------- ------- ------- ------- ------- ------- -------- Segment 2,250 2,205 3,669 2,756 (840) (1,152) 5,079 3,809 Result Net financing costs (619) (433) ------- ------- ------- ------- ------- ------- ------- -------- Profit on ordinary 4,460 3.376 activities before taxation Taxation (1,109) (887) ------- ------- ------- ------- ------- ------- ------- ------- Profit for the 3,351 2,489 Period ------- ------- ------- ------- ------- ------- ------- ------- Segment net assets/ (liabil 45,288 44,465 17,516 15,077 (12,588) (12,338) 50,216 47,204 ities) ------- ------- ------- ------- ------- ------- ------- ------- Revenue is derived from the manufacture and logistical supply of industrial fasteners and Category 'C' components. 3. Taxation The charge for tax is an estimate based on the anticipated effective rate of tax for the year ending 31 March 2008, adjusted for prior year items as shown below: Six months Six months ended ended 30 September 2007 30 September 2006 £000 £000 Current tax on income for the period UK Tax 178 170 Foreign Tax 971 797 Adjustments in respect of prior years (40) (80) ------------- ------------ 1,109 887 ============= ============ 4. Dividends The dividend payable figure of £1.41 million represents the final dividend recommended at the March 2007 Year End and approved at the AGM in September 2007. The Directors declared an interim dividend of 0.93 pence per ordinary share to be paid on 17 January 2008 to shareholders on the register on 30 November 2007. In accordance with IAS10 no accrual has been made in these interims statements. 5. Earnings per share The calculation of earnings per 5p ordinary share is based on profit for the period after taxation and the weighted average number of shares in the period of 84,715,325 (September 2006: 84,380,807; March 2007: 84,459,931). The calculation of the fully diluted earnings per 5p ordinary share is based on profit for the period after taxation. In accordance with IAS 33 the weighted average number of shares in the period has been adjusted to take account of the effects of all dilutive potential ordinary shares. The number of shares used in the calculation amount to 85,069,832 (September 2006: 84,441,564; March 2007: 84,584,980). The adjusted diluted earnings per share for the six months ended 30 September 2007 is as follows: Six months Six months Year ended ended ended 31 March 2007 30 September 30 September £000 2007 2006 £000 £000 Profit for the period 3,351 2,489 3,973 Restructuring costs - 634 2,894 Tax effect - (190) (698) ------------- ------------- --------- Adjusted Profit 3,351 2,933 6,169 ============= ============= ========= Basic EPS 3.96p 2.95p 4.70p Diluted Basic EPS 3.94p 2.95p 4.70p Adjusted Diluted EPS 3.94p 3.47p 7.29p 6. Retained Earnings Six months Six months Year ended ended ended 31 March 2007 30 September 30 September £000 2007 2006 £000 £000 Opening balance 32,569 30,282 30,282 Retained profit for period 3,351 2,489 3,973 Equity-settled share 153 83 213 based payment transactions Dividends (1,406) (1,248) (1,899) ------------- ------------- --------- Closing Balance 34,667 31,606 32,569 ============= ============= ========= 7. Reconciliation of Movements in Total Equity Six months Six months Year ended ended ended 31 March 30 September 30 September 2007 2007 2006 £000 £000 £000 Profit for the financial period 3,351 2,489 3,973 Net issue of ordinary shares 6 1 190 Equity settled share based payment transactions 153 83 213 Exchange differences (113) (1,366) (1,497) Dividends (1,406) (1,248) (1,899) ------------- ------------ ---------- Net addition to/(reduction in) Total Equity 1,991 (41) 980 Opening Total Equity 48,225 47,245 47,245 ------------- ------------ ---------- Closing Total Equity 50,216 47,204 48,225 ============= ============ ========== 8. Related party transactions Key management personnel compensation In addition to their salaries, the Group also provides non-cash benefits to directors and executive officers, and contributes to a non-contributory defined contribution pension plan on their behalf. Executive officers also participate in the Group's share option programme. Key management represented by the Main Board, European Board and the Asian Board whose personnel compensation including termination payments amounted to £969k (2006: £1,136k). 9. Cash and Cash Equivalents at end of period. Six months Six months Year ended ended ended 31 March 30 September 30 September 2007 2006 2007 £000 £000 £000 Cash and cash equivalents 9,724 7,421 6,757 Bank overdraft (5,005) - (287) ------------- ------------ ---------- Net cash and cash 4,719 7,421 6,470 equivalents ============= ============ ========== Independent review report by KPMG Audit Plc to Trifast plc Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Recognised Income and Expense, the Consolidated Cash Flow Statement and the related explanatory 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. This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this 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 reached. 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 DTR of the UK FSA. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 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 UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA. KPMG Audit Plc Chartered Accountants 1 Forest Gate Brighton Road Crawley West Sussex RH11 9PT 20 November 2007 This information is provided by RNS The company news service from the London Stock Exchange

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