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Capita Group PLC (CPI)

  Print      Mail a friend       Annual reports

Tuesday 24 July, 2007

Capita Group PLC

Interim Results

Capita Group PLC
24 July 2007


                              THE CAPITA GROUP PLC

                Interim results for the 6 months to 30 June 2007

                               STRONG PERFORMANCE

Financial Highlights
                         Interim 2007        Interim 2006        Change

Turnover                 £985m               £845m               +17%
Operating profit         £118.9m             £99.1m              +20%
Profit before tax        £103.8m             £88.3m              +18%
Earnings per share       12.13p              9.96p               +22%
Interim dividend per     4.0p                2.7p                +48%
share

Key points

   • Excellent organic growth: £1.15bn major contracts in the first 6 months
     of 2007 (first 6 months of 2006: £655m)
   • Strong bid pipeline of £3bn (Feb 2007: £2.6bn)
   • Continued margin progression: increased to 12.1% (interim 2006: 11.7%)
   • Strong free cash flow - up by 43% to £83m (interim 2006: £58m)
   • 48% increase in interim dividend to 4.0p per share
   • Returning £155m to shareholders through a special dividend of 25p per
     share
   • Markets remain highly active


Paul Pindar, Chief Executive of The Capita Group Plc, commented:

'2007 is progressing strongly. Our businesses across the Group have performed
well and we have secured a record level of new major contracts in the first 6
months of the year.

We remain very positive about future growth. Our markets continue to generate
opportunity, our sales prospects are exciting and our operational performance is
consistently strong. Our successes in 2006 and progress in the first half of
2007 mean that the ingredients for a successful year and beyond are already in
place.'


For further information:

The Capita Group Plc                             Tel: 020 7799 1525
Paul Pindar, Chief Executive
Shona Nichols, Corporate Communications Director
Capita Press Office                              Tel: 0870 2400 488

Financial Dynamics                               Tel: 020 7269 7121
Richard Mountain/Susanne Yule


                              The Capita Group Plc

                Interim results for the 6 months to 30 June 2007

2007 is progressing strongly. Our businesses across the Group have performed
well and we have secured a record level of new major contracts worth £1.15bn in
the first 6 months of the year.

In the period ended 30 June 2007, turnover increased by 17% to £985m (6 months
to 30 June 2006: £845m). Operating profit before amortisation rose by 20% to
£118.9m (2006: £99.1m) and profit before taxation and amortisation increased by
18% to £103.8m (2006: £88.3m). Earnings per share before amortisation grew by
22% to 12.13p (2006: 9.96p).

Operating cash flow rose by 19% to £145m (2006: £122m). We have increased our
interim dividend by 48% and we propose to pay a special dividend of 25p per
share accompanied by a share consolidation. We have also returned a further £29m
to shareholders through purchasing our own shares.

Building value for shareholders

To ensure we build value for shareholders on a consistent basis over the long
term, we focus on a number of key financial measures:

• Margins - We have continued our long term trend of improving operating
  margins (before amortisation) which have increased during the period to
  12.1% (2006: 11.7%). This is due to several factors including operational
  leverage, continued focus on seeking efficiencies in service delivery and
  increased use of our offshore facilities.

• Cash flow - The strength of our business model is reflected in our
  excellent underlying cash flow, with £145m (2006: £122m) generated by
  operations in the period, representing an operating profit to cash
  conversion rate of 122% (2006: 118%). Our free cash flow increased by 43% to
  £83m (2006: £58m).

We use surplus cash to add value in 3 main ways - through acquisitions, share
buybacks and dividends:

   - Acquisitions - Acquisitions help us to enter new markets where we can
     grow organically, strengthen existing market positions and build economies 
     of scale, or access a new customer base. To date in 2007, we have spent a 
     total of £63m on 7 acquisitions. We will continue with our strategy of 
     acquiring small to medium-sized businesses which are priced at a level 
     which adds value for our shareholders.

   - Share buybacks - Opportunistic share buybacks help us to maintain an
     efficient capital structure and minimise our long term cost of capital. In 
     the period to 30 June 2007, the Group has bought back 4.5m shares 
     (representing 0.7% of the issued share capital) at an average price of 
     644p. Following these buybacks, there are 620m shares in issue. 
     Shareholders renewed the Group's authority to purchase up to 10% of issued 
     share capital at our AGM in May.

   - Interim dividend - The Board has declared an interim dividend of 4.0p
     per ordinary share (2006: 2.7p), representing an increase of 48%. The 
     dividend will be payable on 19 October 2007 to shareholders on the register 
     at the close of business on 14 September 2007.

   - Special dividend - As the Group has continued to grow, its cash flow has 
     become increasingly substantial and predictable. Consequently, we have
     reviewed the Group's capital requirements, including acquisitions, and have
     concluded that there is a modest cash surplus which currently is best 
     returned directly to shareholders. Accordingly, in addition to the interim 
     dividend, we propose to return £155m to shareholders through a special 
     dividend of 25p per share. We expect to pay this dividend alongside the 
     interim dividend on 19 October 2007 to shareholders on the register at the 
     close of business on 14 September 2007. Following the payment of the 
     interim and special dividends, Group interest cover will be comfortably 
     above 7 times.

     We will also be undertaking a share consolidation of 30 new shares for 
     31 old shares. The share consolidation is subject to approval by 
     shareholders at an EGM to be held in early September.

• Capital expenditure - We aim to contain capital expenditure at or below
  4% of revenue. During the period, we met this objective with net capital
  expenditure at 3.2% (2006: 3.9%) of revenue.

• Return on capital employed - We focus on driving a steadily increasing
  return on capital. Over the last 12 months, the post tax return on average
  capital employed (including debt) has improved to 18.6% (12 months to 30
  June 2006: 17.8%). This compares to our estimated weighted average cost of
  capital which is 8.1%.

Our marketplace

The market for Business Process Outsourcing (BPO) in the UK and Ireland
continues to provide strong growth opportunities. Industry analysts estimate the
total potential market at £94.8bn per annum with only 5% of this market
outsourced in 2006 (£4.6bn).*

We are well positioned to exploit this market potential. Our increasing scale
and capability provide us with a strong competitive edge across our markets and
enable us to present compelling propositions to clients. With our recent strong
performance in securing new business, we have extended the leading positions we
hold in the majority of our markets, particularly local government and life and
pensions. We remain the clear market leader in the overall UK BPO market.
                                                                              
Generating profitable growth

We generate profitable growth by winning business from new and existing
customers in the UK and Ireland and supplement this by acquiring businesses that
broaden our skill base and extend our market reach.

Organic growth

Each of our businesses employs sales teams focused upon securing growth from
both existing and new customers. Performance has been strong in the first half
of the year, particularly in our HR and resourcing businesses, local government
services, education software, trust administration and in Capita Symonds, our
property consultancy.

Our centrally managed Major Sales Team pursues complex, long term contracts
worth over £10m which require a wide range of the Group's skills and generate
high quality, recurring revenues. Securing and renewing major contracts is an
important component of our growth.

Our sales performance to date in 2007 has been excellent. In the first 6 months,
we have secured 6 major contracts with a total value of £1.15bn (6 months to
2006: £655m):

  • Countrywide Assured - to provide administrative services for 80,000 life
    and pensions policies in a deal worth £19m over 15 years.

  • Swindon Borough Council - to deliver a wide range of local government
    services in a partnership worth £243m over 15 years (this contract had
    previously been estimated to be worth £140m over 10 years when we were
    selected as preferred supplier in October 2006). The contract commenced on 1
    February and the transition is complete. We have successfully transferred
    approximately 370 staff to Capita and we are currently implementing a
    transformation programme to improve the way in which customer services are
    delivered to the citizens of Swindon.

  • Southampton City Council - selected as preferred bidder to develop a 10
    year strategic partnership valued at approximately £290m. Final negotiations
    are currently in progress. The contract is expected to commence on 1 October
    2007.

  • Official Solicitor and Public Trustee ('OSPT') - Capita Trust has been
    chosen to act as the new Trustee of an initial group of 471 private trusts
    managed by the OSPT in a contract worth £12m over 10 years.

  • Service Birmingham - In December 2005, Birmingham City Council chose
    Capita as its strategic partner to support business transformation and ICT
    within the Council. A special purpose vehicle, Service Birmingham, was set
    up by Capita and a 10 year, £475m contract to deliver ICT transformation was
    signed in April 2006. Governance arrangements were also put in place for
    additional business transformation programmes to be proposed and
    implemented. In May 2007, the Council approved the business case for the
    second of these programmes, to transform Customer Services, with a budget of
    £142m over 10 years. (The first was approved in July 2006 and related to
    Corporate Services).

  • Resolution plc - selected as strategic partner to deliver customer
    services, IT services, policy servicing, claims and new business processing
    for 4.5 million policyholders and future new business in the Phoenix Life
    Assurance (formerly Abbey National Life), Scottish Mutual, Scottish
    Provident and Phoenix Life (formerly Britannic Assurance, Britannic Unit
    Linked Assurance, Britannic Retirement Solutions and Alba Life) funds. The
    contract is worth £580 million over 12 years and involves both closed and
    open book policies. Service transition commences on 1 August 2007 and
    involves transferring around 2000 Resolution staff to Capita.

Despite record contract wins in the first 6 months, our bid pipeline has been
replenished swiftly and reflects the quality of business opportunities across
our markets. The pipeline currently stands at £3bn (February 2007: £2.6bn) and
only includes bid situations in which Capita is shortlisted as one of 4 or fewer
competitors and caps the largest bids at £500m. Behind this is an active
prospect list of opportunities which are yet to reach a shortlist stage.

We are now in the position where we have no material contracts (defined as
having annual revenue in excess of 1% of 2006 turnover) due for renewal in 2007
and 2008 and only two in 2009.

Stimulating growth through acquisition

A key element of our growth is the acquisition of small to medium sized
companies which extend our presence in existing marketplaces or provide a
footprint in a new market. We have substantial experience of integrating
acquired businesses and achieving synergies with our existing operations. To
date in 2007, we have completed 7 acquisitions including:

  • Harry Weeks, a business travel software company specialising in online
    rail ticketing solutions for corporates and travel intermediaries, was
    acquired in February for £21m. The acquisition further extends our business
    travel administration offering, following our entry into this marketplace in
    November 2005 with the acquisition of Lonsdale Travel. Travel administration
    is an area of major spend across the public and private sectors and there is
    a growing demand for outsourced support.

  • CMGL, acquired for £32m in March 2007, expands our offering and client
    base in the outsourced claims and insurance management services arena,
    particularly within the General Insurer and Corporate markets. Clients
    include FTSE quoted corporations, general insurers, Lloyd's underwriters and
    London Market companies.

  • Global Fund Administration Limited (GFA), a leading provider of fund
    administration to the hedge fund industry, has been fully integrated with
    our existing business. GFA expands our jurisdictional coverage, adding
    Gibraltar to our fund administration capability which already includes
    Dublin and the Channel Islands. As a result of this acquisition and wider
    business development, Capita Financial Group now administers over 20% of all
    open ended authorised funds in the UK market, representing an increase of
    11% in the first 6 months of the year.

  • CPFR Solutions Limited, a leading supplier of recording and assessment
    solutions to children's centres in more than 70 local authorities, enhances
    our existing offering. The integration of CPFR's eStart technology with
    Capita's existing ONE technology (currently used by 126 local authorities to
    manage children's data) is progressing well and generating new opportunities
    for the business. The additional capability brought by CPFR will support the
    development of an integrated database which will enable local authorities to
    support children as they move from birth to adulthood via a single record.

Realising the benefits of scale and operational excellence

Through contract wins and acquisitions we have developed the scale which today
enables us to produce compelling propositions for clients in terms of cost
efficiency and specialist skills. Another key strength of the Group is our
record of transitional and operational excellence. This supports high client
retention and also creates a pool of positive referees providing vital support
to new sales initiatives.

As a result of our scale and broad capability, we are increasingly winning major
integrated service transformations across the public and private sectors.

  • We are working with a growing number of local authorities to help them
    deliver extensive transformation programmes across the entire back office
    and customer service infrastructure, including recent clients Birmingham
    City Council and Swindon Borough Council.

  • Since our entry into the life and pensions market in 2002, we have
    created a business employing 7000 people administering over 15 million
    policies, with our group pensions business administering a further 3.5m
    policies. Over the past 18 months, we have accelerated our growth in this
    area, securing a number of large contracts with clients including Zurich,
    Prudential (Belfast) and Resolution.

  • We entered the HR market in 1996 and have expanded our service offering
    mainly through acquisitions. The scale and breadth of the business now
    positions us well to provide clients with extensive outsourced and managed
    services solutions. An example of this is our integrated HR services
    contract with the BBC.

Development of our blended onshore/offshore delivery model provides further
flexibility and benefits to our clients and the Group. Our offshore operation in
India continues to develop strongly both in scale and scope of services. We now
have 1000 staff working across our 2 sites in Mumbai and we are securing a
3rd site in Chennai, chosen for its excellent infrastructure and large supply of
highly skilled, experienced BPO staff.

By the end of 2007, we anticipate employing around 1500 staff in India with the
figure rising to 3000 by 2009. We are steadily moving our own backoffice
functions offshore and successfully running blended onshore/offshore models of
service delivery for existing and new clients. The recent new business wins,
with clients such as Resolution, will add further scale to our offshore
operations and provide us with the opportunity to leverage this for the benefit
of the Group and our clients.

Valuing our people

Our people are the engine room driving our achievements. Their enthusiasm, hard
work and commitment to service delivery are vital to meeting client expectations
and supporting our growth. The culture that we have created across the Group is
a key differentiator from our competitors and our people are valuable
ambassadors. We also offer a warm welcome to the employees that have joined us
since the beginning of 2007 through direct recruitment, contracts and
acquisitions. The Board would like to thank everyone across the Group for the
role they play in Capita's success.

Future prospects

We remain very positive about future growth. Our markets continue to generate
opportunities, our sales prospects are exciting and our operational performance
is consistently strong.

Our successes in 2006 and progress in the first half of 2007 mean that the
ingredients for a successful year and beyond are already in place.


                                     -Ends-


                                                            *Source: Ovum 2006                           

The Capita Group Plc is the UK's leading provider of integrated professional
support service solutions. The Group's service capabilities encompass business 
process outsourcing (BPO), customer services, administration and support, human
resources, ICT, property consultancy, finance & treasury and consultancy
delivered to both public sector and private organisations. With 27,800 employees
at more than 250 offices across the UK, Channel Islands, Ireland and India,
Capita is quoted on the London Stock Exchange (CPI.L), and is a constituent of
the FTSE100 with revenues for 2006 of £1,739 million.

Further information on The Capita Group Plc can be found at: www.capita.co.uk


The Capita Group Plc

Interim results for the 6 months to 30 June 2007

Interim condensed consolidated income statement
for the 6 months to 30 June 2007

                                                               30                                   30
                                                             June                                 June
                                                             2007                                 2006

                                   Before                                 Before   
                             amortisation   Amortisation    Total   amortisation   Amortisation  Total
                       Notes           £m             £m       £m             £m             £m     £m

Continuing operations:
Revenue                  3          985.0              -    985.0          845.0              -  845.0
Operating profit         3          118.9          (4.1)    114.8           99.1          (3.2)   95.9
Finance costs                      (15.1)              -   (15.1)         (10.8)              - (10.8)
Profit from continuing              
operations before
taxation                            103.8          (4.1)     99.7           88.3          (3.2)   85.1
Income tax expense                 (28.8)            1.7   (27.1)         (24.8)            0.9 (23.9)
Profit for the period                75.0          (2.4)     72.6           63.5          (2.3)   61.2
Attributable to:
Equity holders of the                
parent                               75.0          (2.4)     72.6           63.6          (2.3)   61.3
Minority interest                       -              -        -          (0.1)              -  (0.1)
                                     75.0          (2.4)     72.6           63.5          (2.3)   61.2
Earnings per share       
(EPS) - Basic            4         12.13p        (0.38)p   11.75p          9.96p        (0.36)p  9.60p
      - Diluted          4         11.85p        (0.37)p   11.48p          9.78p        (0.35)p  9.43p


Interim condensed consolidated statement of recognised income and expense
for the 6 months to 30 June 2007

                                                          30           30
                                                        June         June
                                                        2007         2006
                                                          £m           £m

Actuarial gain on defined benefit pension               
schemes                                                 34.9         19.7
Exchange differences on translation of                 
foreign operations                                     (0.1)        (0.3)
Gain on available for sale investments                   1.5            -
Tax on items taken directly to equity                  (9.2)        (5.5)
Net income recognised directly in equity                27.1         13.9
Profit for the period                                   72.6         61.2
Total income and expense for the period                 99.7         75.1
Attributable to:
Equity holders of the parent                            99.7         75.2
Minority interest                                          -        (0.1)
                                                        99.7         75.1

Interim condensed consolidated balance sheet
at 30 June 2007
                                                   30 June       30 June
                                                      2007          2006
                                          Notes         £m            £m

Non-current assets
Property, plant and equipment                        183.4         163.3
Intangible assets                                    699.1         605.0
Financial assets                                      38.7          17.3
Deferred taxation                                      7.8          15.0
Employee benefits                                     11.0             -
                                                     940.0         800.6
Current assets
Trade and other receivables                          496.7         435.9
Total assets                                       1,436.7       1,236.5
Current liabilities
Trade and other payables                             554.1         451.3
Financial liabilities                                 66.9         128.9
Income tax payable                                    42.4          34.4
                                                     663.4         614.6
Non-current liabilities
Financial liabilities                                384.3         354.8
Provisions                                             1.4           4.0
Employee benefits                                        -          22.0
                                                     385.7         380.8
Total liabilities                                  1,049.1         995.4
Net assets                                           387.6         241.1
Capital and reserves
Issued capital                             8          12.5          12.6
Share premium                              8         334.5         269.2
Treasury shares                            8             -         (0.4)
Capital redemption reserve                 8           1.8           1.1
Foreign currency translation               8         (0.5)             -
Retained earnings                          8          39.2        (41.5)
Equity shareholders' funds                           387.5         241.0
Minority interest                          8           0.1           0.1
Total equity                                         387.6         241.1


Interim condensed consolidated cash flow statement
for the 6 months to 30 June 2007

                                                               30 June    30 June
                                                                  2007       2006
                                                    Notes           £m         £m

Cash flows from operating activities
Operating profit on continuing activities before                 
interest and taxation                                            114.8       95.9
Depreciation                                                      21.5       21.2
Amortisation of intangible assets                                  4.1        3.2
Share based payment expense                                        4.1        4.1
Pension charge                                                     7.3        7.7
Pension contributions                                           (10.3)      (8.9)
Movement in provisions                                           (0.6)        0.7
Movement in debtors and creditors                                  4.4      (2.4)
Cash generated from operations                                   145.3      121.5
Income tax paid                                                 (15.2)     (20.0)
Net interest paid                                               (15.1)     (10.8)
Net cash generated from operating activities                     115.0       90.7
Net cash used in investing activities
Purchase of property, plant and equipment                       (31.7)     (31.9)
Purchase of intangible fixed assets                                  -      (1.4)
Acquisition of subsidiary undertakings and                      
businesses                                                      (54.0)     (14.6)
Investment                                                           -     (12.5)
Cash acquired with subsidiary undertakings                         2.4      (0.3)
Purchase of trade investments in insurance                       
captives                                                         (4.6)      (5.2)
                                                                (87.9)     (65.9)
Net cash used in financing activities
Issue of ordinary share capital                       8           26.7       11.2
Share buybacks                                        8         (29.4)    (214.5)
Share transaction costs                               8          (0.1)      (0.8)
Dividends                                             5         (39.2)     (31.7)
Capital element of finance lease rental payments      7          (0.2)      (0.1)
Asset based securitised financing                     7            8.3        3.9
Repayment of loan notes and long term loans           7         (33.2)      (3.2)
Proceeds on issue of bonds                            7              -      102.8
                                                                (67.1)    (132.4)
Net decrease in cash and cash equivalents                       (40.0)    (107.6)
Cash and cash equivalents at the beginning of the                  
period                                                             9.2     (19.3)
Cash and cash equivalents at 30 June                            (30.8)    (126.9)
Cash and cash equivalents comprise:
Overdraft                                             7         (30.8)    (126.9)
Total                                                           (30.8)    (126.9)


Notes to the interim condensed consolidated financial statements
at 30 June 2007

 1 Corporate information
   The Capita Group Plc is a public limited company incorporated and domiciled in England whose
   shares are publicly traded. The interim condensed consolidated financial statements of the
   company and its subsidiaries ('the Group') were authorised for issue in accordance with a
   resolution of the Directors on 23 July 2007.

 2 Basis of preparation and accounting policies
   Basis of preparation
   The interim condensed consolidated financial statements for the 6 months to 30 June 2007 have
   been prepared on the basis of the accounting policies set out in the Group's latest annual
   financial statements for the year ended 31 December 2006. These accounting policies are drawn
   up in accordance with International Accounting Standards (IAS) and International Financial
   Reporting Standards (IFRS) as issued by the International Accounting Standards Board, with
   the exception of IAS 34 Interim Financial Reporting which has not been applied in these
   interim condensed consolidated financial statements.

   The interim condensed consolidated financial statements do not include all the information
   and disclosures required in the annual financial statements and should be read in conjunction
   with the Group's annual financial statements as at 31 December 2006.

   The interim condensed consolidated financial statements for the 6 months to 30 June 2007 have
   not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on
   Review of Interim Financial Information.

   Significant accounting policies
   The accounting policies adopted in the preparation of the interim condensed consolidated
   financial statements are consistent with those followed in the preparation of the Group's
   annual financial statements for the year ended 31 December 2006, except for the adoption of
   new standards and interpretations, noted below. Adoption of these Standards and
   Interpretations did not have any effect on the financial position or performance of the
   Group.

      • IFRS 7 Financial Instruments: Disclosures

   In the current financial year, the Group will adopt this standard for the first time. This
   standard requires disclosures that enable users to evaluate the significance of the Group's
   financial instruments and the nature and extent of risks arising from those financial
   instruments. As IFRS 7 is a disclosure standard, there is no impact of that change in
   accounting policy on the interim condensed consolidated financial statements. Full details of
   the change will be disclosed in our annual report for the year ended 31 December 2007.

      • IFRIC 9 Reassessment of Embedded Derivatives

   The Group adopted this interpretation as of 1 January 2007, which states that the date to
   assess the existence of an embedded derivative is the date that an entity first becomes party
   to the contract, with reassessment only if there is a change to the contract that
   significantly modifies the cash flows.

      • IFRIC 10 Interim Financial Reporting and Impairment

   The Group adopted IFRIC Interpretation 10 as of 1 January 2007, which requires that an entity
   must not reverse an impairment loss recognised in a previous interim period in respect of
   goodwill or an investment in either an equity instrument or a financial asset carried at
   cost.

   The Group has also early adopted the following Interpretation.

      • IFRIC 11 IFRS 2 - Group and Treasury Share Transactions

   The Group has elected to adopt IFRIC Interpretation 11 as of 1 January 2007. This
   interpretation requires arrangements whereby an employee is granted rights to an entity's
   equity instruments to be accounted for as an equity-settled scheme, even if the entity buys
   the instruments from another party, or the shareholders provide the equity instruments
   needed. The adoption of this Interpretation did not have any effect on the financial position
   or performance of the Group.

 3 Segmental reporting
   Analysis of segment revenue:
                                                                              Restated
                                                                Six months  Six months
                                                                to 30 June  to 30 June
                                                                      2007        2006
   Continuing                                                           £m          £m

   HR solutions                                                      123.3       101.2
   Property consultancy                                              112.3       101.1
   Insurance and specialist services                                 149.3       139.9
   Financial services                                                 74.8        60.5
   Integrated services                                               152.4       151.2
   ICT and advisory services                                         142.9       102.9
   Life & pensions                                                   102.0        91.8
   Professional services                                             128.0        96.4

                                                                     985.0       845.0
   Analysis of segment result:

   Continuing
   HR solutions                                                       12.0         8.8
   Property consultancy                                                8.9         4.7
   Insurance and specialist services                                  13.6        12.6
   Financial services                                                 16.5        14.6
   Integrated services                                                20.7        21.8
   ICT and advisory services                                          15.7        10.5
   Life & pensions                                                    11.2        10.4
   Professional services                                              20.3        15.7

                                                                     118.9        99.1

   The comparative figures have been restated due to a reorganisation of the Group's business
   divisions during the period. The directors decided this was necessary to best manage the 
   growth in the business and to enhance service provision across the Group.

 4 Earnings per share
   Earnings per share have been calculated in accordance with IAS 33 Earnings per share. The
   average number of shares in issue during the period was 618.1m (30 June 2006: 638.6m). The
   diluted earnings per share have been calculated on the diluted profit for the period of
   £72.6m (30 June 2006: £61.3m) and an average diluted number of shares of 632.7m (30 June
   2006: 649.9m). As at 23 July 2007, there were 620.1m shares in issue.

 5 Dividends paid and proposed
   The interim dividend of 4.00p (2006: 2.70p) per share (not recognised as a liability at 30
   June 2007) will be payable on 19 October 2007 to ordinary shareholders on the register at
   the close of business on 14 September 2007. The dividend disclosed in the cash flow
   statement represents the final ordinary dividend of 6.3p (2006: 4.9p) per share as proposed
   in the 31 December 2006 financial statements and approved at the Group's AGM (not recognised
   as a liability at 31 December 2006).

   In addition to the interim dividend, it is proposed to return £155m to shareholders through
   a special dividend of 25p per share. It is expected that this dividend will be paid
   alongside the interim dividend on 19 October 2007 to shareholders on the register at the
   close of business on 14 September 2007.

 6 Business combinations
   The Group has made a number of acquisitions in the period which are shown in aggregate. The
   book and fair values of the assets acquired are disclosed in the table below:

                                                                                Book Fair value
                                                                              values   to Group
                                                                                  £m         £m

   Intangible assets                                                               -       11.9
   Property, plant and equipment                                                 1.7        1.5
   Deferred tax                                                                  1.9        1.9
   Debtors                                                                       2.9        2.5
   Cash and short term deposits                                                  2.4        2.4
   Creditors                                                                  (11.2)     (11.4)
   Corporation tax                                                             (0.1)      (0.1)
   Long term loans                                                            (11.0)     (11.0)
   Net assets                                                                 (13.4)      (2.3)
   Goodwill arising on acquisition                                                         56.2
                                                                                           53.9
   Discharged by:
   Cash                                                                                    48.0
   Loan notes                                                                               5.9
                                                                                           53.9

   The full exercise to determine the intangible assets acquired is still to be completed, thus
   the above numbers are provisional; this exercise will be finalised for the full year
   financial statements. Further cash consideration was paid in respect of previous
   acquisitions of £6.0m, including deferred consideration, of which £4.0m had been accrued in
   the previous year. The net impact was an increase in goodwill of £2.0m. As required by IAS
   12, deferred taxation has been calculated on intangible assets provisionally recognised. The
   impact of this is to create a deferred tax liability of £3.8m and to increase goodwill by
   the same amount.

 7 Movement in net debt

                                        Debt at 1              Other cash               Debt at
                                          January Acquisitions       flow     Non cash  30 June
                                             2007    in period  movements    movements     2007
                                               £m           £m         £m           £m       £m

   Cash and cash equivalents                  9.7            -      (9.7)            -        -
   Overdrafts                               (0.5)          2.4     (32.7)            -   (30.8)
   Cash                                       9.2          2.4     (42.4)            -   (30.8)
   Loan notes                              (22.2)            -       22.2        (5.9)    (5.9)
   Long term debt                               -       (11.0)       11.0            -        -
   Bonds                                  (372.0)            -          -         29.3  (342.7)
   Currency swaps                           (6.4)            -          -       (28.5)   (34.9)
   Interest rate swaps                          -            -          -        (0.8)    (0.8)
   Finance leases                           (0.5)            -        0.2            -    (0.3)
   Sub-total net debt                     (391.9)        (8.6)      (9.0)        (5.9)  (415.4)
   Asset based securitised financing       (27.5)            -      (8.3)            -   (35.8)
                                          (419.4)        (8.6)     (17.3)        (5.9)  (451.2)

                                        Debt at 1              Other cash               Debt at
                                          January Acquisitions       flow     Non cash  30 June
                                             2006    in period  movements    movements     2006
                                               £m           £m         £m           £m       £m

   Overdrafts                              (19.3)        (0.3)    (107.3)            -  (126.9)
   Cash                                    (19.3)        (0.3)    (107.3)            -  (126.9)
   Loan notes                              (22.7)            -        0.2            -   (22.5)
   Long term debt                               -        (2.9)        2.9            -        -
   Bonds                                  (197.6)            -    (102.8)          2.0  (298.4)
   Currency swaps                           (2.6)            -          -        (1.9)    (4.5)
   Interest rate swaps                        1.6            -          -        (0.8)      0.8
   Finance leases                           (0.2)            -        0.1            -    (0.1)
   Sub-total net debt                     (240.8)        (3.2)    (206.9)        (0.7)  (451.6)
   Asset based securitised financing       (28.2)            -      (3.9)            -   (32.1)
                                          (269.0)        (3.2)    (210.8)        (0.7)  (483.7)

8  Capital and reserves - reconciliation of movements in equity

                                                                    Profit   
                                                  Capital  Foreign     and         
                        Share Treasury   Share redemption currency    loss         Minority   Total
                      capital   shares premium    reserve  reserve reserve   Total interest  equity
                           £m       £m      £m         £m       £m      £m      £m       £m      £m

  At 1 January 2006      13.4    (0.4)   258.1        0.2      0.3   125.8   397.4      0.2   397.6
  Total recognised          
  income and
  expense for the
  period                    -        -       -          -    (0.3)    75.5    75.2    (0.1)    75.1
  Dividends                 -        -       -          -        -  (31.7)  (31.7)        -  (31.7)
  Share buybacks        (0.9)        -       -        0.9        - (215.3) (215.3)        - (215.3)
  Issue of share          
  capital                 0.1        -    11.1          -        -       -    11.2        -    11.2
  Share based payment       -        -       -          -        -     4.2     4.2        -     4.2
  At 30 June 2006        12.6    (0.4)   269.2        1.1        -  (41.5)   241.0      0.1   241.1
  At 1 January 2007      12.3        -   308.1        1.7    (0.4)     4.0   325.7      0.1   325.8
  Total recognised          
  income and
  expense for the
  period                    -        -       -          -    (0.1)    99.8    99.7        -    99.7
  Dividends                 -        -       -          -        -  (39.2)  (39.2)        -  (39.2)
  Share buybacks        (0.1)        -       -        0.1        -  (29.5)  (29.5)        -  (29.5)
  Issue of share          
  capital                 0.3        -    26.4          -        -       -    26.7        -    26.7
  Share based payment       -        -       -          -        -     4.1     4.1        -     4.1
  At 30 June 2007        12.5        -   334.5        1.8    (0.5)    39.2   387.5      0.1   387.6




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