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Paladin Resources (PLR)

  Print      Mail a friend       Annual reports

Tuesday 16 September, 2003

Paladin Resources

Interim Results

Paladin Resources PLC
16 September 2003

                             PALADIN RESOURCES plc
                  ("Paladin" or "the Company" or "the Group")

              Interim Results for the half year ended 30 June 2003

Paladin, the oil and gas exploration and production company with interests in
the UK, Norwegian and Danish North Sea, Indonesia and Tunisia, announces its
interim results for the half year ended 30 June 2003.


•  Record interim results:

           -   Turnover increased 61% to £121.8 million (1H 2002: £75.7 million)
           -   Pre-tax profit increased 41% to £44.7 million (1H 2002: £31.6 
           -   Profit after tax increased 49% to £15.3 million (1H 2002: £10.3
           -   Earnings per share increased 19% to 4.83 pence (1H 2002: 4.05 
           -   Proposed interim dividend increased by 5% to 0.525 pence per 
              (1H 2002: 0.5 pence)

•  Operational highlights:

           -   Average production increased 42% to 38,339 boepd (1H 2002: 26,912
           -   Average price realised (excluding the effect of hedging) 
               increased to US$28.02 per boe (1H 2002: US$22.12 per boe)

•  Corporate activity:

           -   Acquisition of Montrose, Arbroath and Arkwright Fields completed 
               in May, fields now producing approximately 12,000 boepd net to 

           -   Completion of US$19 million acquisition of AGIP's 16.33% interest 
               in the Ross Field and NOK110 million acquisition of Total's 18% 
               interest in the Veslefrikk Field

           -   Disposal of remaining US oil and gas interests for US$5.4 million

           -   Awarded six blocks in the UK 21st Offshore Licensing Round

           -   Significant additions to Norwegian exploration portfolio through 
               a combination of acquisitions, farm-ins and licence awards

           -   Operatorship of Montrose, Arbroath and Arkwright Fields in the 
               UK and of exploration acreage in Norway

Malcolm Gourlay, Chairman of Paladin, commented:

"The Group has delivered another set of record results through a combination of
higher production and strong commodity prices. Our recent acquisitions are
already making a significant contribution and we anticipate that our current
investment programme will generate further growth in the future.

Paladin remains committed to achieving its targets of 100,000 boepd of
production and 250 MMboe of reserves by 2008."

                                                               16 September 2003


Paladin Resources plc                                    Tel: 020 7024 4500
Roy Franklin

College Hill                                             Tel: 020 7457 2020
James Henderson
Phil Wilson-Brown

                             PALADIN RESOURCES plc
                  ("Paladin" or "the Company" or "the Group")

              Interim Results for the half year ended 30 June 2003

                              CHAIRMAN'S STATEMENT


I am pleased to report that the first half of 2003 has been another successful
period for Paladin.

The combination of record production levels and continuing attractive commodity
prices has resulted in another set of record operating and financial results. In
May, the Group completed the acquisition of BP's and Amerada's interests in the
Montrose, Arbroath and Arkwright Fields and, as a result, took on its first
major operatorship of producing fields. Developments in the UK and Danish
sectors are proceeding well, and the Adam-1 discovery in Tunisia has been
brought into production. The Group has had exploration success in Denmark, and
has also materially increased its exploration portfolio in the UK and Norway
through a combination of new licence awards and farm-ins.


In the six months to 30 June 2003, turnover increased by 61 per cent to £121.8
million, compared to £75.7 million for the first six months of 2002. Operating
profit for the period was £46.8 million (1H 2002: £33.2 million). Net interest
paid was £2.1 million (1H 2002: £1.7 million), resulting in a pre-tax profit of
£44.7 million, as compared to £31.6 million for the same period last year, an
increase of 41 per cent. Following the enactment of new Norwegian legislation in
June 2003, tax relief is now given for abandonment, in place of the previous
system of subsidy. As explained in note 3 to the financial information, this
change had a negative impact of £1.6 million on the pre-tax profit for the
period, as a result of increased depreciation and interest charges, but has
given rise to a £1.6 million increase in profit after taxation. The profit after
taxation for the period was £15.3 million (1H 2002: £10.3 million), representing
earnings per share of 4.83 pence, as compared to 4.05 pence per share for the
first six months of 2002.


Net production for the half year was 6.5 million barrels of oil and NGLs, and
2.5 billion standard cubic feet of gas, an average of 38,339 boepd, and an
increase of 42 per cent from 26,912 boepd over the same period in 2002.

United Kingdom

Overall, our UK interests contributed 7,893 boepd (21 per cent) to total Group
production in the first half of the year (1H 2002: 2,518 boepd).

The Bittern Field (Paladin 2.4 per cent) averaged gross production of 67,426
boepd in the first half and has exceeded expectations due to a combination of
high facilities uptime and a lower than expected increase in water cut.

The Blake Field (Paladin 2.4 per cent) has also performed better than expected,
with gross production of 31,375 bopd. An unplanned shutdown of ten days in the
first quarter for mechanical repairs was more than offset by subsequent
improvements in oil throughput capacity. Development of the Blake flank area has
progressed well; the first of two new development wells will be brought into
production imminently, whilst drilling continues on the planned water injection
well. Although Paladin's net production from the Blake Field is limited, the
Company is deriving substantial economic benefit from this out-performance
through the tariffing arrangements between the Blake Field and the Ross Field
(Paladin 30.82 per cent). Gross production from the Ross Field itself averaged
8,185 boepd during the first half, slightly below the operator's forecast due
primarily to the unplanned ten day shutdown referred to above. A further
development well to drain the northern part of the field more effectively is
currently being drilled. It is anticipated that this well will make a
significant contribution to Ross Field production once it is brought on-stream
later in the year.

Offshore hook-up and pipework activity on the Goldeneye development (Paladin 7.5
per cent, subject to redetermination) is now largely complete and the drilling
of the first of five planned production wells will begin shortly. Work on the
onshore processing module at St. Fergus is also progressing well and the field
is expected to come on-stream in mid-2004.

In December 2002, Paladin announced that it had entered into sale and purchase
agreements to acquire the interests of BP and Amerada Hess in Blocks 22/17, 22/
18, 22/22a and 22/23a, including the Montrose, Arbroath and Arkwright Fields
(Paladin 58.97 per cent) and the Wood (Paladin 100 per cent) and Carnoustie
(Paladin 58.97 per cent) discoveries. The acquisition of these interests was
completed in May at which time Paladin also became operator of the fields in
conjunction with its operations contractors, Petrofac Facilities Management and
Helix RDS. A Paladin operating office in Aberdeen is now well established and
plans are being formulated for an active investment programme in 2004 to include
infill and satellite exploration drilling activity and additional gas handling
capacity. Net production for the first half, averaged over the period, was 2,984
boepd. Current net production from the fields is approximately 12,000 boepd, as
the Company concentrates on near-term opportunities to improve facilities

The Company made a number of applications in the 21st Offshore Licensing Round
for acreage offering satellite development opportunities adjacent to existing
Paladin-owned infrastructure and was recently awarded six blocks: Blocks 22/12b,
22/16b, 22/24c and 22/25c (Paladin 100 per cent) lie adjacent to the Montrose,
Arbroath and Arkwright Fields and Blocks 13/22c and 13/27(part) (Paladin 20 per
cent) lie adjacent to the Ross Field.


Overall, our Norwegian interests contributed 19,402 boepd (51 per cent) to total
Group production in the first half of the year (1H 2002: 9,914 boepd).

The Brage Field (Paladin 20 per cent) continues to perform well with gross
production for the first half of 35,413 boepd; much of the increase in Norwegian
production over 1H 2002 is due to a full period's contribution from this field.
In the Njord Field (Paladin 15 per cent), gross production averaged 27,989 bopd,
less than anticipated due to the delayed start-up of production well A-10BY,
which was brought on-stream at the end of May. Engineering studies and the
preparation of a plan of development for a gas blowdown project on the Njord
Field continue, with a view to the project being sanctioned in early 2004. Gross
production from the Veslefrikk Field (Paladin 27 per cent) averaged 28,641
boepd, in line with the operator's forecast. A series of workovers and one new
production well are planned for the second half of the year to augment

During the first half of 2003, Paladin has also been successful in adding
significantly to its portfolio of exploration interests in Norway through a
combination of licence applications, farm-ins and acquisitions. Three production
licences comprising four exploration blocks were awarded to Paladin in April in
the Norwegian North Sea Awards 2002: a 30 per cent interest in Blocks 4/1 and 4/
2, which lie approximately 15 to 20 kilometres to the north of the Danish Nini
Field adjacent to the Norwegian-Danish median line, a 30 per cent interest in
Block 3/7, also adjacent to the Norwegian-Danish median line and a 20 per cent
interest in Block 31/4, which lies immediately to the east of the Brage Field.
There are no firm drilling commitments associated with any of these awards. As a
result of acquisitions from Norsk Hydro and Statoil, the Company now holds a 65
per cent interest, and has taken on its first Norwegian operatorship, in Block 1
/2, which contains an extension of the UK Blane discovery as well as undrilled
prospects at Tertiary and deeper levels.  Further acquisitions from the same
vendors included a 20 per cent interest in Block 7/1, where a 3D seismic survey
has recently been acquired to improve the definition of exploration leads, and a
25 per cent stake in Blocks 4/4 and 4/5 adjacent to the Norwegian-Danish median
line. Paladin has also farmed in to an eight block seismic area to the east of
the Jotun Field and will earn a 10 per cent interest in these blocks by paying
for 22.5 per cent of the cost of an exploration well which, it is anticipated,
will be drilled next year.


Overall, our Danish interests contributed 5,492 bopd (14 per cent) to total
Group production in the first half of the year (1H 2002: 7,233 bopd).

Gross production from the Siri Field (Paladin 30 per cent) averaged 13,003 bopd,
in line with expectations. Following a successful vertical appraisal well to
evaluate the southern extension of the Stine-2 Field (Paladin 30 per cent), a
second production well was drilled from the Siri platform to improve recovery
from this accumulation. The well was brought on-stream in early May and
contributed to gross average production of 5,303 bopd from Stine-2 for the first

Development of the nearby Nini and Cecilie Fields as satellites to the Siri
Field continued through the first half and first oil from these fields was
achieved in late August. The fields are currently in a run-in period and it will
be several months before plateau production levels are achieved. Although the
Group has no direct stake in either the Nini or the Cecilie Field, it will
derive significant benefit from their development through the sharing of Siri
operating costs and the receipt of tariff income. The development of the Stine-1
Field (Paladin 30 per cent) as a subsea satellite to the Siri platform is well
advanced and first production is now expected in January 2004.  The Sofie-1
exploration well (Paladin 30 per cent), drilled in May some 20 kilometres to the
northeast of the Siri Field, discovered oil in Palaeogene sandstones.
Preliminary analysis of the well results would suggest that the discovery can be
developed as a satellite to the Siri Field, although further work will be
required to confirm its economic viability.


The Group's assets in Indonesia have performed in line with expectations. Net
entitlement production averaged 5,503 boepd (1H 2002: 6,928 boepd), 14 per cent
of total Group production, the decrease from the same period last year being due
to a combination of natural production decline and higher oil prices, which
reduce the level of entitlement barrels reported. Engineering studies are
underway for the development of gas reserves in the South East Sumatra PSC area
(Paladin 7.5 per cent) and heads of terms have been signed with PLN (the
Indonesian public electricity enterprise) for the extension of the gas sales
contract relating to the North West Java PSC area (Paladin 2.45 per cent).


Following approval of the field development plan and the granting of a
production concession area, the Adam-1 discovery was brought into production in
late May 2003. The Tunisian State oil company, ETAP, has exercised its back-in
right to this field and as a result Paladin's interest has reduced from 10 per
cent to 7 per cent, in return for which the Company will be reimbursed for its
pro-rata share of past expenditure in respect of the State interest.  Since
being brought on-stream, the Adam-1 well has averaged 3,700 bopd of production
(260 bopd net to Paladin). Net production for the first half, averaged over the
period, was 49 bopd.

An Adam appraisal/production well was spudded in early June. An appraisal pilot
hole was drilled to confirm the location of the oil-water contact, following
which the well was sidetracked up-dip to be completed as a second production
well on the field. This well will be brought on-stream shortly. The Hawa-1
exploration well, on a separate prospect 25 kilometres to the south of Adam, is
expected to spud imminently.

Product Prices/Hedging

Realised prices in the first half of 2003 averaged US$28.02 per boe before any
impact from oil price swaps, compared to US$22.12 per boe over the same period
in 2002.

The Company entered into a number of oil price swaps based on dated Brent for
the first half of 2003 as part of its overall risk management programme. 300,000
bbl per month were swapped for January to June 2003 at an average price of
US$24.38 per bbl.

Further oil swaps have been entered into for the period between July 2003 and
December 2005 as detailed below:

Period                                                            Average price
                                                 bbl                US$ per bbl

2003, second half                          1,950,000                      23.78
2004                                       3,750,000                      23.20
2005                                         900,000                      23.41


Operating cash flow, being defined as earnings before interest, tax and
depletion (and after allowing for movements in working capital), increased to
£63.9 million for the first half, compared to £35.3 million in the first half of
2002. After payment of £105.6 million for acquisitions (inclusive of
adjustments), capital expenditure of £36.4 million (1H 2002: £10.1 million),
cash taxes of £19.2 million (1H 2002: £6.6 million) and net interest payments of
£0.8 million (1H 2002: £1.0 million), net debt at 30 June 2003 was £115.6
million, compared with £61.6 million at 31 December 2002.

Issue of Additional Share Capital

On 12 December 2002, the Company announced its intention to raise additional
share capital by way of a placing and open offer at 66 pence per share on the
basis of one new share for every four existing shares, in order partially to
finance the acquisition of BP's and Amerada's interests in the Montrose,
Arbroath and Arkwright Fields and the Carnoustie and Wood discoveries. The new
shares were admitted to trading on 10 January 2003 and the proceeds of the
issue, which amounted to £42 million (£40.4 million net of expenses), were
initially applied to reduce existing bank debt.


In September 2002, your Board decided to commence payment of a dividend and
stated at that time that the level of future payments would be progressive in
real terms but also sustainable in a lower oil price environment.

In line with that policy statement, your Board has decided that an interim
dividend of 0.525 pence per share (1H 2002: 0.5 pence per share) will be paid on
24 October to those shareholders on the register on 3 October 2003.

Business Development

As discussed above, on 20 May the Company completed the US$153 million
acquisition from BP and Amerada of producing interests in the Montrose, Arbroath
and Arkwright Fields and surrounding acreage, including the Carnoustie and Wood

In February, the Company completed the US$19 million acquisition of AGIP's 16.33
per cent interest in the Ross Field, the NOK110 million acquisition of Total's
18 per cent interest in the Veslefrikk Field, and the sale of its only remaining
oil and gas interests onshore USA for US$5.4 million.

Earlier this year the Company set new targets for continued growth, namely to
increase production and reserves to 100,000 boepd and 250 MMboe respectively by
2008. In the first half a number of potential acquisitions were screened, some
of which were reviewed in detail. The discipline in the evaluation and pricing
of potential acquisitions that has served shareholders well to date remains a
keystone in the application of the Company's strategy. Whilst no new deals were
agreed in the first half, the asset trading market continues to be active, and
we remain confident that there will be further opportunities to acquire assets
on terms which will contribute to the further development of the Group and to
the achievement of the above targets for the benefit of our shareholders.

As noted above, the Group successfully expanded its exploration portfolio in the
first half, focussing in particular on acreage adjacent to existing
Paladin-owned infrastructure with satellite development opportunities.
Exploration remains an important element of the Group's strategy and further
opportunities to broaden the existing portfolio are under active review.


Net production is expected to increase in the coming months as a result of the
development activities described above in the Blake and Ross Fields in the UK,
in Veslefrikk in Norway, and in Stine-1 in Denmark. Annualised net production
for the full year is likely to lie in the range 42,000 to 45,000 boepd dependent
on the timing of new wells being brought on-stream, the impact of planned
workovers and third party tie-in work, and on oil prices for the balance of the
year applied in the calculation of Indonesian entitlement barrels.

Given near-term commodity prices and this production outlook, the Company is set
for a strong second half financial performance to complement the first half

                                                              J. Malcolm Gourlay
                                                               16 September 2003

Group Profit and Loss Account

                                                              Six months ended Six months ended       Year ended
                                                                  30 June 2003     30 June 2002 31 December 2002
                                                         Note             £000             £000             £000
Turnover                                                    2          121,820          75,732           170,247
Cost of sales

Production costs                                                      (49,443)         (25,545)         (65,054)
Depletion and depreciation                                  3         (23,798)         (15,643)         (32,068)
Exploration expenditure written off                                          -                -            (982)
Gross profit                                                            48,579           34,544           72,143
Administrative expenses                                                (1,760)          (1,340)          (2,431)
Operating profit                                            2           46,819           33,204           69,712

Interest                                                    3          (2,099)          (1,651)          (3,738)
Profit before taxation                                                  44,720           31,553           65,974

Taxation                                                  3,4         (29,427)         (21,299)         (45,825)
Profit after taxation                                                   15,293           10,254           20,149

Dividend                                                    5          (1,673)          (1,271)          (4,449)

Retained profit for the period                                          13,620            8,983           15,700

Earnings per share                                                       4.83p            4.05p            7.76p

Dividend per ordinary share                                 5            0.52p            0.50p            1.50p

Weighted average number of shares (thousands)                          316,449          253,172          259,631

Group Statement of Total Recognised Gains and Losses

                                                              Six months ended Six months ended       Year ended
                                                                  30 June 2003     30 June 2002 31 December 2002
                                                         Note             £000             £000             £000

Profit for the period                                                   15,293           10,254           20,149
Unrealised foreign exchange differences                     6           (5,622)          (9,141)         (11,022)
Total recognised gains for the period                                    9,671            1,113            9,127

Group Summarised Balance Sheet

                                                               At 30 June       At 30 June      At 31 December
                                                                     2003             2002                2002
                                                                     £000             £000                £000
Fixed assets                                                      371,938          192,229             233,387

Current assets

Stock                                                               6,565            1,315               7,543
Debtors                                                            26,732           39,264              30,251
Cash at bank and in hand                                            1,456                -               1,164
                                                                   34,753           40,579              38,958
Creditors: amounts falling due within one year
Trade creditors                                                  (14,705)         (10,885)            (20,123)
Overseas taxes                                                   (32,530)         (27,290)            (24,355)
Other creditors                                                   (9,057)          (1,427)            (27,646)
Obligations under finance leases                                  (1,023)                -             (1,052)
                                                                 (57,315)         (39,602)            (73,176)
Net current (liabilities)/assets                                 (22,562)              977            (34,218)

Total assets less current liabilities                             349,376          193,206             199,169

Creditors: amounts falling due after one year

Long term debt                                                  (109,364)         (62,614)            (54,717)
Obligations under finance leases                                  (6,648)          (8,273)             (7,014)
                                                                (116,012)         (70,887)            (61,731)
Provisions for liabilities and charges                           (77,813)         (21,440)            (31,447)

Net assets                                                        155,551          100,879             105,991

Capital and reserves

Called up share capital                                            32,113           25,325              25,426
Share premium                                                      79,231           44,181              44,356
Profit and loss account                                            44,207           31,373              36,209
Equity shareholders' funds                                        155,551          100,879             105,991

Group Cash Flow Statement
                                                                Six months ended     Six months       Year ended
                                                                         30 June          ended      31 December
                                                                            2003   30 June 2002             2002
                                                                            £000           £000             £000
Operating profit                                                          46,819        33,204            69,712

Depletion and depreciation charge                                         23,798        15,643            32,068

Increase in working capital                                              (7,482)       (13,515)          (6,863)

Exploration expenditure written off                                            -              -              982

Increase in provisions                                                       798              -              376

Net cash flow from operating activities                                   63,933        35,332            96,275

Returns on investments and servicing of finance                            (837)          (972)          (4,052)

Taxation                                                                (19,186)        (6,575)         (27,481)

Capital expenditure and financial investments

Ongoing capital expenditure (excludes capitalised interest)             (36,364)       (10,137)         (30,179)

Proceeds from sale of oil and gas interests and rights                     3,168              -            6,000

Acquisition of oil and gas fixed assets                                (105,582)       (43,799)         (62,189)

Investment in own shares                                                   (396)          (248)            (486)

Total capital expenditure and financial investments                    (139,174)       (54,184)         (86,854)

Equity dividend paid                                                     (3,048)              -          (1,264)

Net cash flow before financing                                          (98,312)       (26,399)         (23,376)


Increase in borrowings                                                    57,567         21,807           15,628
Proceeds from lease financing                                                  -          4,396            9,052

Finance lease payments                                                     (525)              -            (420)

Issue of shares                                                           41,562             68              344

Total financing                                                           98,604         26,271           24,604

Increase/(decrease) in cash in the period                                    292          (128)            1,228

Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash for the period                                   292          (128)            1,228

Increase in borrowings                                                  (57,567)       (21,807)         (15,628)
Proceeds from lease financing                                                  -        (4,396)          (9,052)
Finance lease payments                                                       525              -              420

Change in net debt resulting from cash flows                            (56,750)       (26,331)         (23,032)

Exchange differences                                                       2,790         3,832             5,821
Lease financing proceeds outstanding                                           -        (4,136)                -
Movement in net debt in the period                                      (53,960)       (26,635)         (17,211)

Net debt at the start of the period                                     (61,619)       (44,408)         (44,408)

Net debt at the end of the period                                      (115,579)       (71,043)         (61,619)

(forming part of the interim statement)

1          Basis of preparation

The financial information contained herein does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
unaudited interim financial information has been prepared on the basis of the
accounting policies set out in the Group's accounts for the year ended 31
December 2002. The figures for the year ended 31 December 2002 have been
extracted from the accounts. Those accounts have been filed with the Registrar
of Companies and contained an unqualified report. The Company's auditors, Ernst
& Young LLP, have reviewed the interim financial information for the six months
ended 30 June 2003 and their report is set out on page 13.

2          Segmental analysis
                                                Continuing operations                       Total
                                                                       North   Rest of
                                      UK   Scandinavia   Indonesia   America     World    
                                    £000          £000        £000      £000      £000       £000
Six months ended 30 June 2003
Turnover                          24,664        81,647      15,359         -       150    121,820
Operating profit                   1,552        38,490       6,740         -        37     46,819
Six months ended 30 June 2002
Turnover                           7,349        50,230      17,329       824         -     75,732
Operating profit                   2,619        23,981       6,534        70         -     33,204
Year ended 31 December 2002
Turnover                          16,126       122,675      29,963     1,483         -    170,247
Operating profit/(loss)            2,905        57,891       9,744       154     (982)     69,712

3          Effect of change in Norwegian legislation

Following the enactment of new Norwegian legislation in June 2003, tax relief is
now given for abandonment, in place of the previous system of subsidy. This
change has given rise to an increase of £12 million in the provision for
decommissioning costs and an equivalent increase in the carrying value of the
related fixed assets. As a consequence, the depreciation and interest charges
for the period have increased by £1.1 million and £0.5 million respectively, but
this is more than offset by a reduction of £3.2 million in the tax charge. £0.8
million of the tax charge relates to prior periods, but is accounted for in the
current period in accordance with UK Financial Reporting Standards.

4          Taxation

The provision for taxation is based upon the estimated effective tax rate for
the full year.

5          Dividend

The Directors recommend the payment of an interim dividend of 0.525 pence per
share (1H 2002: 0.5 pence per share).

6          Unrealised foreign exchange differences

The exchange differences arise mainly as a result of the translation of dollar
denominated fixed asset balances at the 30 June 2003 rate of US$1.65:£1.00,
compared to the 31 December 2002 rate of US$1.60:£1.00. The rate at 30 June 2002
was US$1.53:£1.00, and at 31 December 2001, US$1.45:£1.00.

Independent Review Report to Paladin Resources plc


We have been instructed by the Company to review the financial information for
the six months ended 30 June 2003 which comprises the Group Profit and Loss
Account, the Group Statement of Total Recognised Gains and Losses, the Group
Summarised Balance Sheet and the Group Cash Flow Statement. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.

This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information', issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review excludes audit procedures such as test of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.

                                                               Ernst & Young LLP
                                                               16 September 2003

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