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Havelock Europa PLC (HVE)

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Tuesday 26 September, 2006

Havelock Europa PLC

Interim Results

Havelock Europa PLC
26 September 2006



                   HAVELOCK EUROPA PLC - INTERIM ANNOUNCEMENT


Havelock, the Education and Retail Interiors and Point of Sale Display Group,
announces an increased pre-tax profit in the first half, which is historically
much the quieter of the two periods, and good prospects for the second half,
2007 and beyond.


FINANCIAL HIGHLIGHTS


 •  Revenue increased by 5% to £42.1m.
 •  Operating profit was up 14% to £1.2m.
 •  Pre-tax profit increased by 116% to £0.46m or, excluding amortisation of
    intangibles, by 62% to £0.65m.
 •  Basic and diluted earnings per share were 0.9p (2005: 0.3p).
 •  An interim dividend per share of 1.0p is declared, up 11%.


COMMERCIAL HIGHLIGHTS


 •  Revenue from Education Furniture and Supplies increased by 21% to £13.6m.
    ESA McIntosh, the UK market leader in fitted furniture and equipment for
    schools, achieved a record order intake. Its activity level remains
    particularly buoyant.
 •  Point of Sale Display broadly maintained its revenue at £11.6m (2005:
    £11.8m) despite the loss of a major customer in Kwik Save, following its
    sale by Somerfield (referred to in the 2005 Preliminary Announcement).
    Although, as a result, this Division's contribution is likely to be lower
    than in 2005, an encouraging amount of new business has been generated and
    savings effected will, in the medium term, be highly beneficial.
 •  In the Retail Interiors Division, the level of activity has been strong,
    with slightly reduced revenue of £16.9m (2005: £17.3m) but a much increased
    order book and a high volume of work in hand at the period end. Full year
    revenues are likely to be ahead of last year, as is contribution to the
    overall Group result.


Malcolm Gourlay, Chairman, stated 'The Board remains optimistic about the
opportunities in the Group's chosen markets. Further progress is expected in the
full year with additional growth in 2007 and beyond, both organically and, where
appropriate, through acquisition.'

Enquiries:

Havelock Europa PLC                                      01383-820 044

Hew Balfour (Chief Executive)                            07801-683 851
Grant Findlay (Finance Director)                         07768-745 960

Bankside Consultants Limited

Charles Ponsonby                                         020-7367 8851

                               INTERIM STATEMENT


Havelock has increased its pre-tax profit in the first half, which is
historically much the quieter of the two periods, and has good prospects for the
second half, 2007 and beyond.


FINANCIAL REVIEW


Group revenue for the six months ended 30 June 2006 increased to £42.1 million
(2005 : £40.3 million), a rise of 4.5%. This reflected a particularly strong
performance from the educational businesses, where revenue grew by 21.6%. Group
operating profit at £1.2 million (2005 : £1.0 million) was up 14.3%. Group
profit before tax, was £462,000 (2005 : £214,000). Basic and diluted earnings
per share were 0.9 pence (2005 : 0.3 pence). Pre-tax profit, after adding back
the amortisation of intangibles, increased by 62% to £646,000 (2005 : £398,000).


Although working capital requirements increased, reflecting higher activity
levels, net debt at 30 June 2006 reduced to £21.4 million (2005 : £22.2
million). Interest cover, excluding pension scheme interest, for the half year
improved by 15% to 1.5 (2005 : 1.3) and is expected to show an improvement in
the full year (2005 : 4.0).


DIVIDEND


The Board is pleased to declare an interim dividend of 1.0 pence per share
(2005: 0.9 pence), an increase of 11%. This dividend will be paid on 27 December
2006 to shareholders on the register at 10 November 2006.


SALE OF INVESTMENT IN MIDDLE EASTERN ASSOCIATE


The Group disposed of its remaining 17% investment in Havelock AHI Holdings
Limited, during the first half of the year, resulting in a non-taxable gain on
sale of £98,000 and net proceeds after costs of £943,000. The business was
established in 1998 as a 50/50 joint venture with a Bahraini-based retailer,
aimed at exploiting the opportunities in the emerging storefitting and hotel
refurbishment markets. A partial divestment took place in 2003, generating a
non-taxable gain in that year of £0.9m and net proceeds of £2.6m, when HSBC
Private Equity Middle East (HPEME) took a controlling stake in the business. The
sale of Havelock's remaining interest to HPEME marks a natural conclusion to
this process.


TRADING REVIEW


Education Furniture and Supplies

ESA McIntosh, the UK market leader in fitted furniture and equipment for
schools, achieved record order intake, both in the core 'direct to schools'
market and in the PFI sector, which augurs well for the second half results.
TeacherBoards, specialising in classroom accessories, traded in a similar range
to last year; whilst sales at Clean Air, which manufactures fume cupboards,
benefited from a strong showing in the university market. Revenue within
Education rose to £13.6 million (2005 : £11.2 million), an increase of 21.6%.



Point of Sale Display

The Point of Sale Display Division broadly maintained its revenue at £11.6
million (2005 : £11.8 million) despite the loss of a major customer as a result
of the sale of Kwik Save by Somerfield, during the first quarter of the year,
which was referred to in the Preliminary Announcement of 4 April 2006. Early
action was undertaken to consolidate the two Print operations at Letchworth and
Bristol under the management team of Showcard Print. An extensive redundancy
programme has now been completed which will generate significant savings in the
second half and this, together with the rationalisation of both property and
plant, will help to mitigate the effect on profit of the reduction in revenue .
At Letchworth, both orders and sales have run at a substantially higher level
than last year as a result of the addition of new customers.


Retail Interiors

In the Retail Interiors Division, the level of activity has been strong,
maintaining revenue broadly at the same level as last year at £16.9 million
(2005 : £17.3 million) but with a much increased order book and a high volume of
work in hand at the period end . Marks & Spencer has returned as a significant
customer. Activity in the financial services area has been robust, with a major
inflow of work from Bank of Scotland (Ireland) and substantially enhanced levels
of business with The Royal Bank of Scotland. The diversification of the customer
base within this Division and the entry, last year, into the healthcare market
have created a wider spread of opportunity and some lowering of exposure to
retail volatility.



PROSPECTS


As pointed out on earlier occasions, the requirement under IFRS to recognise
revenue after completion of the installation process, particularly in the
education businesses, continues to weight the seasonal bias towards the second
half of the year, during which period substantially all of the Group's pre-tax
profit will be earned.


Within the education businesses, ESA McIntosh's level of activity remains
particularly buoyant. Order flow in the core 'direct to schools' market has
continued at good levels into the second half, whilst, within the PFI sector,
work is well underway on 15 projects. In addition, a further PFI project is
being handled by the Retail Interiors Division, making 16 in all. Of these
projects, seven are likely to have additional work for 2007. Whilst the start of
the 'Building Schools for the Future' (BSF) programme in England has been
delayed, with only a small amount of revenue likely to be available during 2007,
the volume of work under Phase II of the PFI programme for Scotland continues to
rise and prospects for 2007 are encouraging.


At TeacherBoards, revenues are likely to be modestly up on the prior year but
more substantially so at Clean Air, which, like ESA McIntosh, is benefiting from
the marked uplift in PFI activity. New management teams are in place within both
businesses, following the retirement of the vendors.


July and August have proved brisker months in the point of sale sector than in
previous years. Although the level of contribution from this Division is likely
to be lower in 2006, compared to 2005, as a consequence of the reduction in
business with Somerfield, following its sale of Kwik Save, and the cost of the
resulting redundancy programme at Bristol, there has been an encouraging amount
of new business generated at both plants and within the Display operation at
Letchworth. The savings generated from the integration of the management teams
of the two print businesses, along with property rationalisation at both Bristol
and Letchworth, will, in the medium term, be highly beneficial.


The Retail Interiors Division is performing strongly, as a result of continuing
success in financial services and the diversification of its customer base.
Revenues are likely to be ahead of last year, as is contribution to the overall
Group result. The integration of the accounting and manufacturing disciplines of
the Retail Interiors Division at Dalgety Bay with those of the education
furniture business at Kirkcaldy, is continuing to improve the procurement of raw
materials, productivity and capacity utilisation at both plants.


It is pleasing to report that changes made in the last 15 months to the Group's
senior management structure have had a positive impact on performance and leave
the Group well placed to manage further expansion.


The Board remains optimistic about the opportunities in the Group's chosen
markets. The temporary hiatus in the PFI education sector, which followed the
withdrawal of Jarvis, in late 2004, is now over and there appear to be good
indications from Government of continuing commitment towards the refurbishment
and renewal of education infrastructure well beyond 2008.


Further progress is expected in the full year with additional growth in 2007 and
beyond, both organically and, where appropriate, through acquisition.


Malcolm Gourlay

Chairman                                                 26 September 2006



                         CONSOLIDATED INCOME STATEMENT

                for the 6 months ended 30 June 2006 (unaudited)



                                                   Unaudited Unaudited  Audited
                                                    6 months  6 months     year
                                                       ended     ended    ended
                                                    30.06.06  30.06.05 31.12.05
                                                        £000      £000     £000
                                             Note

 Revenue                                              42,122    40,310  100,194
 Cost of sales                                      (34,065)   (32,949) (78,790)
                                                     _______   _______  _______
 Gross profit                                          8,057     7,361   21,404
 Administrative expenses                             (6,967)   (6,322) (15,290)
 Non-recurring pension curtailment                         -         -    1,389
                                                     _______   _______  _______
 Operating profit before financing costs and       
 gain on disposal of associate                         1,090     1,039    7,503

 Gain on sale of interest in associate         9          98         -        -
                                                     _______   _______  _______
 Operating profit before financing costs               1,188     1,039    7,503

 Expected return on defined benefit pension           
 plan assets                                             730       623    1,259
 Financial expenses - on bank borrowings and         
 finance leases                                        (750)     (807)  (1,616)
 Interest on defined benefit pension scheme         
 liabilities                                           (730)     (711)  (1,411)
                                                     _______   _______  _______
 Net financing costs                                   (750)     (895)  (1,768)

 Share of profit of associate                             24        70      294
                                                     _______   _______  _______
 Profit before tax                                       462       214    6,029

 Income tax expense                            2       (141)     (117)  (1,839)
                                                     _______   _______  _______
 Profit for the period attributable to             
 equity holders of the parent                            321        97    4,190
                                                     _______   _______  _______

 Basic earnings per share                      3        0.9p      0.3p    12.3p

 Diluted earnings per share                    3        0.9p      0.3p    12.1p



            CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

                for the 6 months ended 30 June 2006 (unaudited)



                                            Unaudited Unaudited   Audited
                                             6 months  6 months      year
                                                ended     ended     ended
                                             30.06.06  30.06.05  31.12.05
                                                 £000      £000      £000

Exchange differences on translation of        
overseas associate                                  -        40        63
Actuarial gain/(loss) on defined benefit      
pension plan                                    2,173   (1,357)   (1,039)
Tax on actuarial (gain)/loss                    (668)       407       312
Cash flow hedges:
Effective portion of changes in fair value        211     (235)     (153)
                                              _______   _______   _______
Net income/(expense) recognised directly in   
equity                                          1,716   (1,145)     (817)

Profit for the period                             321        97     4,190
                                              _______   _______   _______
Total recognised income and expense for the
period attributable to equity holders of 
the parent                                      2,037   (1,048)     3,373
                                              _______   _______   _______



                           CONSOLIDATED BALANCE SHEET

                         as at 30 June 2006 (unaudited)



                                                Unaudited Unaudited   Audited
                                                    as at     as at     as at
                                                 30.06.06  30.06.05  31.12.05
                                                     £000      £000      £000
                                         Note
Assets

Non-current assets
Property, plant and equipment                      13,131    13,066    12,902
Intangible assets                          5       12,630    14,321    12,852
Investments in associates                               -       722         -
Deferred tax asset                                  1,650     3,000     2,318
                                                  _______   _______   _______
Total non-current assets                           27,411    31,109    28,072
                                                  _______   _______   _______
Current assets
Inventories                                6       15,361    13,337     8,923
Trade and other receivables                7       22,334    16,596    20,261
Cash and cash equivalents                               -         -     2,089
                                                  _______   _______   _______
Total current assets                               37,695    29,933    31,273
Non-current asset classified as held      
for sale                                                -         -       842
                                                  _______   _______   _______
Total assets                                       65,106    61,042    60,187
                                                  _______   _______   _______
Liabilities
Current liabilities
Bank overdraft                                    (5,675)   (5,385)         -
Other interest-bearing loans and                 
borrowings                                        (2,997)   (2,418)   (6,817)
Derivative financial instruments                    (107)     (400)     (318)
Income tax payable                                  (518)     (947)     (590)
Trade and other payables                   8     (23,234)  (18,558)  (22,069)
                                                  _______   _______   _______
Total current liabilities                        (32,531)  (27,708)  (29,794)
                                                  _______   _______   _______
Non-current liabilities
Interest-bearing loans and borrowings            (12,686)  (14,431)   (9,331)
Retirement benefit obligations                    (5,500)  (10,000)   (7,725)
Deferred tax liabilities                          (1,072)     (742)   (1,072)
                                                  _______   _______   _______
Total non-current liabilities                    (19,258)  (25,173)  (18,128)
                                                  _______   _______   _______
Total liabilities                                (51,789)  (52,881)  (47,922)
                                                  _______   _______   _______
Net assets                                         13,317     8,161    12,265
                                                  _______   _______   _______
Equity
Issued share capital                                3,484     3,476     3,479
Share premium                                       2,017     1,971     1,987
Other reserves                                      3,072     3,177     2,881
Revenue reserves                                    4,744     (463)     3,918
                                                  _______   _______   _______
Total equity attributable to equity       
holders of the parent                     10       13,317     8,161    12,265
                                                  _______   _______   _______



                      CONSOLIDATED STATEMENT OF CASH FLOWS

                for the 6 months ended 30 June 2006 (unaudited)



                                              Unaudited  Unaudited    Audited
                                               6 months   6 months       year
                                                  ended      ended      ended
                                               30.06.06   30.06.05   31.12.05
                                                   £000       £000       £000

Cash flows from operating activities
Profit before tax                                   462        214      6,029
Adjustments for:
Depreciation                                        912        940      1,826
Amortisation of intangible assets                   222        236        510
Loss/(gain) on sale of property, plant and       
equipment                                            11          -       (26)
Net financing costs                                 750        895      1,768
Share of profit of associate                       (24)       (70)      (294)
Gain on sale of interest in associate              (98)          -          -
                                                _______    _______    _______
Operating cash flows before changes in           
working capital                                   2,235      2,215      9,813

(Increase)/decrease in trade and other          
receivables                                     (2,073)        181    (3,484)
(Increase)/decrease in inventories              (6,438)    (3,708)        706
Increase/(decrease) in trade and other             
payables                                            432    (2,508)      2,954
Movement relative to defined benefit pension       
scheme                                             (52)       (55)    (1,924)
IFRS 2 charge                                         -          -         70
                                                _______    _______    _______
Cash (absorbed by)/generated from operations    (5,896)    (3,875)      8,135
                                                _______    _______    _______
Interest paid                                     (761)      (737)    (1,768)
Income taxes paid                                 (213)      (231)    (1,392)
                                                _______    _______    _______
Net cash from operating activities              (6,870)    (4,843)      4,975
                                                _______    _______    _______
Cash flows from investing activities
Proceeds from sale of property, plant and          
equipment                                            35          -         26
Proceeds from sale of interest in associate         993          -          -
Acquisition of property, plant and equipment    (1,187)      (320)    (1,041)
Acquisition of intangible assets                      -       (88)      (125)
Repayment of loan notes and deferred            
consideration                                     (778)    (1,274)    (1,185)
Dividends received from associate                     -          -        127
                                                _______    _______    _______
Net cash from investing activities                (937)    (1,682)    (2,198)
                                                _______    _______    _______
Cash flows from financing activities
Proceeds from the issue of share capital             35        210        228
Increase in bank loans                              782      1,255      1,244
Purchase of own shares and proceeds from         
exercise of share options                          (59)      (291)      (374)
Repayment of bank borrowings                      (625)      (625)    (1,250)
Repayment of finance lease liabilities             (36)       (36)       (72)
Dividends paid                                        -          -    (1,145)
                                                _______    _______    _______
Net cash from financing activities                   97        513    (1,369)
                                                _______    _______    _______
Net (decrease)/increase in cash and cash      
equivalents                                     (7,710)    (6,012)      1,408
Cash and cash equivalents at 1 January            2,035        627        627
                                                _______    _______    _______
Cash and cash equivalents at end of period      (5,675)    (5,385)      2,035
                                                _______    _______    _______



                       NOTES TO THE FINANCIAL STATEMENTS



1. Principal accounting policies


Havelock Europa PLC is a company domiciled in the United Kingdom. The
consolidated interim financial statements for the six months ended 30 June 2006
comprise the Company and its subsidiaries (together referred to as the Group)
and the Group's interest in its associate. The directors approved the
consolidated interim financial statements on 26 September 2006.


Basis of preparation


This interim financial information has been prepared applying the accounting
policies and presentation that were applied in the preparation of the Company's
published consolidated financial statements for the year ended 31 December 2005.



Status of financial information


The figures for the financial year ended 31 December 2005 are not the Company's
statutory accounts for that financial year. The statutory accounts for the year
ended 31 December 2005, which were prepared in accordance with International
Financial Reporting Standards ('IFRSs') as adopted by the EU, have been reported
on by the Company's auditors and delivered to the Registrar of Companies. The
report of the auditors (i) was unqualified, (ii) did not include references to
any matters to which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain statements under section 237
(2) or (3) of the Companies Act 1985.



2. Income tax


A charge for current taxation has been included at 30% (2005: 33%), being the
effective rate likely to be applied to the result for the full year to 31
December 2006. The results of the associate, being a Middle East entity, are not
subject to taxation.



3. Earnings per share


Basic earnings per share


The calculation of basic earnings per share for the period ended 30 June 2006
was based on the profit attributable to ordinary shareholders of £321,000 (2005:
£97,000) and a weighted average number of ordinary shares outstanding during the
period ended 30 June 2006 of 34,173,249 (2005:33,832,907 ), calculated as
follows:


Profit attributable to ordinary shareholders

                                           Unaudited     Unaudited      Audited
                                            6 months      6 months         year
                                               ended         ended        ended
                                            30.06.06      30.06.05     31.12.05
                                                £000          £000         £000

Profit for the period                            321            97        4,190
                                             _______       _______      _______

Weighted average number of ordinary shares
In thousands of shares

Issued ordinary shares at 1 January           34,789        34,300       34,300
Effect of own shares held                      (656)         (691)        (673)
Effect of shares issued in 2005                    -           224          351
Effect of shares issued in 2006                   40             -            -
                                             _______       _______      _______
Weighted average number of ordinary  
shares at end of period                       34,173        33,833       33,978
                                             _______       _______      _______



Diluted earnings per share


The calculation of diluted earnings per share at 30 June 2006 was based on
profit attributable to ordinary shareholders of £321,000 (2005: £97,000) and a
weighted average number of dilutive ordinary shares outstanding during the
period ended 30 June 2006 of 34,560,754 (2005: 34,529,434), calculated as
follows:

Weighted average number of ordinary
shares
In thousands of shares
Weighted average number of ordinary shares    34,173        33,833       33,978
Effect of share options on issue                 388           696          713
                                             _______       _______      _______
Weighted average number of ordinary        
shares (diluted) at end of period             34,561        34,529       34,691
                                             _______       _______      _______


4. Equity dividends


The directors declared an interim dividend per equity share of 1.0p after the
balance sheet date. In accordance with IFRS accounting requirements, this
dividend has not been accrued in the interim consolidated financial statements.


5. Intangible assets

                                             Unaudited   Unaudited     Audited
                                                 as at       as at       as at
                                              30.06.06    30.06.05    31.12.05
Carrying amount                                   £000        £000        £000

Computer software                                  144         238         184
Goodwill                                        11,173      12,403      11,173
Brands                                             601         675         638
Customer relationships                             260         389         323
Contracted customer relationships                   42          64          53
Non-compete clauses                                 48         144          96
Design rights                                      362         408         385
                                               _______     _______     _______
                                                12,630      14,321      12,852
                                               _______     _______     _______


The amortisation charge in the consolidated income statement in respect of these
items was £222,000 (June 2005: £236,000; December 2005: £510,000).


6. Inventories

                                             Unaudited   Unaudited     Audited
                                                 as at       as at       as at
                                              30.06.06    30.06.05    31.12.05
                                                  £000        £000        £000

Raw materials and consumables                    3,615       3,545       3,371
Work in progress                                 6,233       2,442       2,176
Finished goods                                   5,513       7,350       3,376
                                               _______     _______     _______
                                                15,361      13,337       8,923
                                               _______     _______     _______


7. Trade and other receivables

                                             Unaudited   Unaudited     Audited
                                                 as at       as at       as at
                                              30.06.06    30.06.05    31.12.05
                                                  £000        £000        £000

Trade debtors                                   20,320      15,076      18,761
Other debtors                                      446         560         336
Prepayments                                      1,568         960       1,164
                                               _______     _______     _______
                                                22,334      16,596      20,261
                                               _______     _______     _______



8. Trade and other payables

                                             Unaudited   Unaudited     Audited
                                                 as at       as at       as at
                                              30.06.06    30.06.05    31.12.05
                                                  £000        £000        £000

Amounts disclosed in current liabilities
Trade creditors                                 15,299      12,156      15,222
Other taxes and social security                  1,568       1,330       3,441
Accruals                                         5,427       2,787       3,160
Dividends                                          940         823           -
Deferred consideration relating to        
business combination                                 -       1,462         246
                                               _______     _______     _______
                                                23,234      18,558      22,069
                                               _______     _______     _______



9. Sale of interest in associate


On 27 April 2006, the Group sold its remaining investment in Havelock AHI
Holdings Limited to HSBC Private Equity Middle East. The gain on sale was
calculated as follows:


                                    £000     

 Investment at 1 January 2006        842     
                                
 Share of profit for the period       24       
                            
                                    ____      

 Investment at disposal              866      
                                    ____     

 Proceeds of sale less expenses      943      
                           
 Release of translation reserve       21       
                                    ____     

 Gain on sale                         98       
                                    ____     




10. Reconciliation of changes in equity



                                            Unaudited Unaudited   Audited
                                             6 months  6 months      year
                                                ended     ended     ended
                                             30.06.06  30.06.05  31.12.05
                                                 £000      £000      £000

Total equity at beginning of period            12,265    10,278    10,278
Implementation of IAS 32 and 39                     -     (165)     (165)
                                              _______   _______   _______
Adjusted equity at beginning of period         12,265    10,113    10,113
                                              _______   _______  ________
Total recognised income and expense for the     
period                                          2,037  (1,048)      3,373
Ordinary dividends                              (940)     (823)   (1,145)
Issue of ordinary shares                           35       210       228
Release of translation reserve on disposal     
of interest in associate                         (21)         -         -
Movements relating to share-based payments    
and ESOP trust                                   (59)     (291)     (304)
                                              _______   _______   _______
Total equity at end of period                  13,317     8,161    12,265
                                              _______   _______   _______





Independent review report to Havelock Europa PLC


Introduction

We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises the Consolidated Income
Statement, the Group Balance Sheet, the Group Cash Flow Statement, the Group
Statement of Recognised Income and Expense and the related notes. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.

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

Review work performed

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

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 2006.


KPMG Audit Plc
Chartered Accountants
191 West George Street
Glasgow
G2 2LJ
26 September 2006



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