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Capita Group PLC (CPI)

  Print      Mail a friend       Annual reports

Tuesday 25 July, 2000

Capita Group PLC

Interim Results

Capita Group PLC
25 July 2000

            Interim results for the six months to 30th June 2000


Financial highlights:

                                  Six months     Six months    Change
                               30th June 2000  30th June 1999      
Turnover                            £208m          £150m       + 38%
Operating profit*                   £19.3m         £14.0m      + 37%
Pre-tax profit*                     £18.4m         £14.1m      + 30%
Earnings per share*               6.18 pence     4.73 pence    + 31%
Total dividend per share          1.65 pence     1.2 pence     + 38%
Operating margins*                   9.3%           9.3%         -
Operating cashflow                  £19.6m         £8.4m       + 134%
*before amortising goodwill                                       

Business highlights:

-  Continued strong growth across all markets and opportunities remain  at
   record levels;
-  Largest  ever contract announced on 20th July, £400m 10 yr contract  to
   set up and run the Criminal Records Bureau for the Home Office;
-  Pioneering alliance formed with Local Government Association (LGA),  to
   offer  consultancy, managed services and back office functions to Local
   Education Authorities;
-  Acquisitions of LHR Education and IRG Plc, further strengthen  Capita's
   market position in education and the private sector;
-  Bonus share issue proposed, 2 ordinary shares for every 1 share held at
   the close of business on 18th August 2000.

Rod Aldridge, Executive Chairman of The Capita Group Plc, commented:

'The markets in which we are working remain very positive.  Organic growth
remains  strong  across  all  parts of  our  business  and  we  have  been
successful in securing a number of major contracts in recent months.   The
acquisitions of LHR and IRG have further strengthened our service offering
to  the  important Education and private sector markets and  our  recently
announced  partnership with the LGA demonstrates the way in which  we  are
helping to shape the markets we serve.

'The  Group is trading strongly, has secured a substantial volume  of  new
business  and  our  pipeline of opportunities remains highly  encouraging.
All  major contracts across the Group that were coming up for renewal have
been  extended and no major contract now falls due until 2002.  We believe
that  shareholders will be very satisfied with the results  for  the  full
year and our prospects for continued growth thereafter.'

For further information:

The Capita Group Plc                            Tel:   020 7799 1525

Rod Aldridge OBE, Executive Chairman
Paul Pindar, Chief Executive
Shona Nichols, Group Marketing Director
Hogarth Partnership Limited                     
James Longfield/John Olsen                      Tel:   020 7357 9477

                           CHAIRMAN'S STATEMENT


The  six months to 30th June 2000 have been a highly successful and active
period  for Capita.  The Group has strengthened significantly its position
as  a  market-leading  provider of professional support  services  to  the
public  and  private sectors, and is structured to take full advantage  of
the  opportunities  going forward.  Once again, the company  has  achieved
record  profits  and, as a consequence of our continued  progress,  Capita
became a FTSE 100 company on 20th March.

Group  turnover  increased by 38% to £208m (half year to 30th  June  1999:
£150m),  operating profits before goodwill amortisation  rose  by  37%  to
£19.3m  (1999:  £14.0m)  and  net profits  before  taxation  and  goodwill
amortisation  increased  by 30% to £18.4m (1999:  £14.1m).   Earnings  per
share  before amortising goodwill grew by 31% to 6.18p (1999: 4.73p).  Our
businesses  continue to produce strong cash flow with £19.6m generated  by
operations in the period.

Bonus issue

The  Board  is  recommending to shareholders a bonus issue of  2  ordinary
shares  of 2p each for every 1 share held by shareholders at the close  of
business on 18th August 2000.  If approved by shareholders at the  EGM  on
16th  August 2000, the ordinary shares comprising the bonus issue will  be
allotted on 21st August 2000.

The Board believes that the proposed bonus issue will benefit shareholders
by enhancing the marketability of shares in Capita.


The Board has declared an interim dividend of 1.65p net per existing share
(1999: 1.2p), a 38% increase. (This equates to a payment of 0.55p net  per
share  following the bonus issue).  The dividend will be payable  on  12th
October  2000 to shareholders on the register at the close of business  on
8th  September  2000.  The dividend is covered 3.7 times by  earnings  per
share before amortising goodwill.

Delivering growth

There  are three complementary strands underpinning Capita's strategy  for
growth.  First, we seek to win major contracts to deliver complex projects
that  utilise our considerable skills across the Group and which  generate
high  quality, recurring revenues.  Secondly, each of our individual areas
of business is now structured to generate incremental revenue through both
new  business wins and development of existing accounts.  Thirdly, we  are
continuing  our policy of strategic acquisitions to strengthen either  the
Group's  presence within a market or its service capability.  I am pleased
to report that we have made excellent progress during the period with this

Major contracts

In  recent months, we have announced major contract wins, including a £50m
agreement  with  the  DfEE  to administer the introduction  of  Individual
Learning  Accounts,  which is a policy central to the Government's  vision
for  a  new framework for post-16 learning.  This contract, which is being
run from three of our established business centres in Coventry, Darlington
and  Kent, has started well.  We expect to administer 10 million enquiries
in  the  first year through our customer call centres and interactive  web
based services.

We  have  also  been  awarded a £10m contract by the  Benefits  Agency  to
collaborate  in the delivery of the new Winter Fuel Payment Scheme  to  UK
citizens  aged over 60. This contract will also be run from our Darlington
business  centre  and will encompass handling customer enquiries,  issuing
claim  forms  in  paper  format and on the web,  gathering  and  verifying
essential  information  and determining eligibility.  It  is  expected  to
involve retrospective payments to 2 million people and annual winter  fuel
payments to 1.2 million individuals.

On  20th  July, the Criminal Records Bureau (CRB) announced  that  it  had
selected  Capita as the preferred bidder to undertake the  development  of
the Information Systems infrastructure and 10 year operation on behalf  of
the  new  Bureau.  Capita will operate the complete process from receiving
applications to issuing certificates.  The CRB is being established by the
Home  Office  to  improve access to criminal record checks for  employment
related  purposes.   In particular, it will support safer  recruitment  to
protect  children and vulnerable adults against those who  might  wish  to
harm them. The contract is estimated to generate revenues of approximately
£400m over 10 years, with registrations commencing in March 2001.

New business

Across   the  individual  businesses,  we  have  increased  our   business
development  resources  to  match the buoyant  demand  for  our  services.
Already,  this  strategy has led to a substantial level  of  new  business
being  secured  at  the  half year from both new and  existing  customers.
These include the renewal of our revenues and benefits contracts with East
Cambridgeshire and West Devon Councils worth £13m in aggregate over 7  and
10 year terms respectively and the signing of a revised payroll processing
and  administration contract with Kent County Council worth  £12m  over  5

Our  HR business has been particularly active in its support of Government
initiatives,   recruiting  over  6,000  staff  for  the  Immigration   and
Nationality  Directorate, the Welsh and London Assemblies,  the  Probation
Service  and  the  Passport  Office.   Across  the  private  sector,   our
recruitment,  outplacement, payroll and pensions businesses  have  secured
significant  new  business  with clients such as  Rolls  Royce,  Airtours,
British Steel Distribution and Elsevier Science.

The  Property  Services  business  has  won  a  contract  to  operate  the
commercial  management services for Railtrack during the  introduction  of
the  new  Virgin cross-country routes.  It has also been retained  by  the
Home Office to assist with the delivery of three new detention centres for
asylum  seekers  and  is  working with the City of  Bradford  Metropolitan
District  Council to redesign 109 schools.  Work in the telecommunications
area has also been very strong with wins from Ericsson, Orange, NTL and BT

Within our IT and Systems business, we have developed a relationship  with
Milk  Marque  to support its IT infrastructure and have won projects  with
Norfolk County Council, Derby City Council, Oxfordshire County Council and
Sandersons.   Columbus,  our  information  system  for  higher   education
colleges, has been successfully launched and has already taken orders from
20 colleges.


Two  significant  acquisitions have contributed to the  period.   In  late
December 1999, we acquired LHR Education for £12m. Founded in 1990, LHR is
one   of  the  leading  teacher  supply  businesses  in  the  UK.    Since
acquisition,  we  have  merged the business with Capstan  (which  we  also
acquired  last year) and reorganised the management structure  along  with
the branch network and the back office operations. The combined activities
have  been  integrated into our HR division and we are  delighted  by  the
substantial  growth  in revenue and profits now being  generated.   Capita
holds  a  prime position in this rapidly expanding market, placing  10,000
supply  teachers  a week.  We will benefit significantly  from  the  major
developments taking place within the education sector.

In  April,  we  acquired IRG Plc for a consideration of  £100m.   Now  re-
branded  Capita  IRG  Plc, this business brings 1,200 new  public  company
clients  to the Group.  It increases the brand awareness of Capita  across
the  private sector which will help us provide other outsourcing  services
to this client base.  It also gives us a significant position in corporate
and   employee   share  administration,  a  market  offering  considerable
potential.   Indeed,  we  believe the recent  budget  announcements  which
encourage   employee  share  ownership  will  stimulate  demand   further.
Although Capita IRG has only been a part of the Group for three months, we
are  very  pleased  by the manner in which it has been  integrated  within
Capita  and  its  subsequent  performance.  We  are  already  seeing  good
opportunities  to  develop the existing clients  of  Capita  IRG  for  the
benefit of Capita as a whole.

We welcome all the employees of our newly acquired businesses into Capita,
along with those that have joined us through contract wins.

Divisional structure

In  the  light  of  Capita's  continued strong growth,  we  have  recently
reviewed  our  internal structure.  The most significant changes  we  have
made  are first to merge our Systems and Strategic Services division  with
our Software Services activities to form one enlarged division.  This will
offer substantial benefits of scale to our customers while allowing us  to
consolidate areas of expertise within the company.

Secondly,  we  have  introduced a Commercial Services division  that  will
house  newly  acquired  Capita IRG Plc, our  recent  31.5%  investment  in
myshares-online  and our Treasury and Financial advisory  businesses.   We
will  continue  to  report the results of each of our  five  divisions  to

We  believe  that the changes we have made promote a structure which  will
encourage  and nurture some of the exceptional talent we have  across  the
Capita Group.

Market review

The  environment  in which we are working remains very positive.   In  the
case of the public sector, we are shaping the market place by constructing
new ways of delivering services.  It remains important to select carefully
which  opportunities we pursue and, equally important, which  we  do  not.
Central  to  our  approach  is to operate through  our  infrastructure  of
regional business centres enabling us to provide finance, human resources,
IT,  administrative  services and customer contact activities  to  a  wide
range  of  public bodies and private sector organisations.  Currently,  we
have  seven centres and the plan is to increase this further over the next
two years.

Local  government  remains a key market to us.  The  duty  of  best  value
became  statutory  from April 2000 and this requires  every  authority  to
undertake a fundamental review of its services and activities over a five-
year  cycle.   These reviews will be subjected to external inspection  and
are  based on the 4 'c's of challenge, consult, compare and compete,  with
the   expectation  that  authorities  will  test  most  services  in  open
competition.   This  has  already led to a number of  authorities  seeking
private  sector partners for long term strategic partnerships for a  range
of  business support services - activities which reflect Capita's  service
portfolio.   There  is  a  growing demand for e-government  solutions  and
customer  contact  centres  similar to the one  we  have  established  for
Hertfordshire  County  Council.  Our ten-year strategic  partnership  with
Norfolk  County Council to deliver a range of services is also  attracting
much  interest from Government and is recognised as leading  edge  in  the

On  24th  July, we launched a strategic alliance with the Local Government
Association  (LGA),  the representative body of all local  authorities  in
England  and Wales, and the Improvement and Development Agency (IDeA)  for
local  government.  This is the first relationship that the  LGA  has  had
with  the private sector and it chose Capita because it felt that  we  had
the  best expertise and experience to make a real difference to standards.
Initially,  the Alliance will address all 172 local education  authorities
(LEAs) offering consultancy, managed services of back office functions  of
education,  other business support services and interim management.   This
market  is  estimated  to  spend £3 billion per annum.  This  relationship
further  strengthens  the  Group's position in local  government  and  the
education market place.

The  education  sector continues to provide significant opportunities  for
our  integrated support services and individual businesses.  In  addition,
our  work with LEAs, the Government's reform of post-16 learning  and  the
introduction   of   the  Learning  and  Skills  Council  creates   further
opportunities for our services. There will be a significant number of  new
processes,  administrative  and  customer relationship  service  needs  to
support  these new initiatives.  The Teacher Training Agency  has  quality
assured  our Learning Network product designed to improve the  ICT  skills
for teachers and we have received high commendation, the only supplier  to
obtain  this.   Sales are going well and in some LEAs, more  than  75%  of
primary  teachers  are  booked onto the programme.  Our  payroll  business
recently won a contract with a consortium of 53 schools in Hackney and  we
expect to secure further such contracts.

In  February,  we  announced our intention to develop in association  with
Microsoft a dedicated education internet portal which will co-ordinate and
deliver  all  aspects  of  e-learning,  e-assessment,  e-commerce  and  e-
services.   This  initiative is progressing to plan with a  range  of  new
products released.  We expect to be in a position to implement the  portal
by the end of this year.

Our  central  government  market  is also expanding  with  the  Government
continuing   to   pursue  its  targets  of  making  all  public   services
electronically  accessible  by  2005.  This  plays  to  our  strengths  in
customer  relationship management and the application of IT.  We expect  a
significant  number of new business opportunities to  be  created  as  the
'Modernisation  of  Government'  agenda is  developed  with  a  number  of
activities currently provided by government departments or agencies  being
the subject of public-private partnerships.

Our people

Paul Pindar and I have recently concluded a series of Roadshows around the
United  Kingdom where we have had an opportunity to talk directly  to  and
hear from a significant proportion of our 7,500 staff.  We were enormously
gratified  by  the level of enthusiasm and commitment to  Capita  that  we
encountered  throughout our presentations.  An open and  positive  culture
has  developed within the Group which places a high priority on delivering
what  we  promise  to both colleagues and customers  alike.   One  of  the
products of this culture is the high level of operational success that our
teams  achieve.   In  virtually all cases, the level  of  service  we  are
delivering  exceeds  the level that we inherited  and  in  many  cases  is
materially  ahead.  This gives great confidence to our customers  enabling
them  to achieve a step change in service delivery.  I would like to place
on  record  the Board's thanks to all the staff who continue to contribute
to the Group's progress.

We believe the business is well placed to grow significantly in the future
and we would like to give all employees the opportunity to participate  in
this  success.  Accordingly, we will be asking shareholders at the EGM  on
16th  August to approve the introduction of a Sharesave scheme,  available
to  all employees within the Group and to those who subsequently join  it.
Not  only  do we hope that this will provide direct benefit to  colleagues
within the Group, we also believe that the adoption of such a scheme  will
provide significant competitive advantage to Capita when bidding for major
outsourcing contracts. In the event of being successful with a bid,  staff
joining  the Group will feel a part of it from the outset, confirming  the
style  of  company that we are and the partnership approach that we  adopt
with our customers.


During  the  period,  the Group has secured a substantial  volume  of  new
business   and  the  future  pipeline  of  opportunities  remains   highly
encouraging.  All major contracts across the Group coming up  for  renewal
have  been  extended.  No major contract now falls due  until  2002.   The
Group  is trading strongly and we believe that shareholders will  be  very
satisfied  with  the  results  for the full year  and  our  prospects  for
continued growth thereafter.

R.M. Aldridge OBE
Executive Chairman



                            Six months                 Six months
                        to 30th June 2000           to 30th June 1999
                                                      (As restated)
                      Before Goodwill    Total    Before Goodwill    Total
                    Goodwill   amort-           Goodwill   amort-
                              isation                     isation
              Notes  £'000's  £'000's  £'000's £ '000's   £'000's   £'000's
Turnover        1                                                  
Continuing          193,831        -  193,831  150,227         -   150,227
Acquisitions         13,972        -   13,972        -         -         -
                    207,803        -  207,803  150,227         -   150,227
Continuing           17,300   (2,517)  14,783   13,965    (1,146)   12,819
Acquisitions          1,898   (1,357)     541        -         -         -
Group                19,198   (3,874)  15,324   13,965    (1,146)   12,819
Share of                102        -      102       82         -        82
profit in
Amortisation              -     (773)    (773)       -      (385)     (385)
of goodwill
arising on
of associate
Total           1    19,300   (4,647)  14,653   14,047    (1,531)   12,516
Group and
of associate
Net interest           (882)       -     (882)      16         -        16
(payable) /
Profit on                 -        -        -       52         -        52
disposal of
fixed asset
Profit               18,418   (4,647)  13,771   14,115    (1,531)   12,584
Taxation              5,305        -    5,305    4,526         -     4,526
Profit after         13,113   (4,647)   8,466    9,589    (1,531)    8,058
Minority                 24        -       24       22         -        22
Profit for           13,089   (4,647)   8,442    9,567    (1,531)    8,036
the period
Dividends             3,578        -    3,578    2,481         -     2,481
Retained              9,511   (4,647)   4,864    7,086    (1,531)    5,555
profit for
the period
Earnings per    3     6.18p  (2.19)p    3.99p    4.73p   (0.76)p     3.97p
Diluted         3     6.01p  (2.13)p    3.88p    4.59p   (0.73)p     3.86p
earnings per
Dividend per    4                       1.65p                        1.20p
                                      ========                     ========



                                               30th June      30th June
                                                  2000           1999
                                                            (As restated)
                                                £'000's        £'000's
Fixed assets                                                
Intangible assets                               201,569         61,210
Tangible assets                                  27,980         20,165
Investments                                      31,178         28,097
                                                260,727        109,472
Current assets                                              
Trade investments                                   254            299
Debtors                                          97,103         85,297
Cash at bank                                     30,945          3,593
                                                128,302         89,189
Creditors: Amounts falling due within one       159,468         93,199
Net current liabilities                         (31,166)        (4,010)
Total assets less current liabilities           229,561        105,462
Creditors: Amounts falling due after more         4,773          6,183
than one year
Provision for charges and liabilities               973          1,889
                                                223,815         97,390
Shareholders' funds                                         
Called up share capital - Ordinary                4,337          4,133
Share premium and other reserves                218,878         92,582
Minority interests                                  600            675
                                                223,815         97,390



                                                Six months     Six months
                                               to 30th June   to 30th June
                                                   2000           1999
                                                 £'000's         £'000's
Cashflow from operating activities               19,558           8,373
Returns on investment and servicing of             (657)             24
Taxation paid                                    (3,103)           (539)
Capital expenditure and financial investment     (8,412)         (6,300)
Subscription for loan notes                           -          (6,500)
Acquisitions and disposals                      (74,201)        (38,017)
Equity dividends paid                            (5,426)         (3,761)
Net cash flow before financing                  (72,241)        (46,720)
Financing                                       101,476          46,671
Increase / (Decrease) in cash in the period      29,235             (49)


                                               Six months     Six months
                                              to 30th June   to 30th June
                                                  2000           1999
                                                            (As restated)
                                                £'000's        £'000's
Profit attributable to the members of the         8,442          8,036
parent undertaking
Exchange adjustment                                  (2)             1
Total recognised gains and losses                 8,440          8,037


1.    Analysis of turnover by division:         Six months    Six months
                                               to 30th June  to 30th June
                                                   2000          1999
                                                             (As restated)
                                                  £'000's       £'000's
     Continuing     Customer Services              37,205        40,981
                    Human Resources                76,860        40,377
                    Property Services              26,352        20,496
                    Software, Systems and          49,830        43,767
                    Strategic Services
                    Commercial Services             3,584         4,606
     Acquisitions   Human Resources                 3,766             -
                    Commercial Services            10,206             -
                                                  207,803       150,227
     Analysis of operating profit (before                    
     goodwill amortisation):
     Continuing     Customer Services               2,812         2,713
                    Human Resources                 6,189         4,035
                    Property Services               2,627         2,131
                    Software, Systems and           4,976         4,635
                    Strategic Services
                    Commercial Services               696           451
     Acquisitions   Human Resources                   281             -
                    Commercial Services             1,617             -
     Associated                                       102            82
     Operating                                     19,300        14,047

     The  results  of  the Group are reported under five  divisions  which
     differ  from  those  reported in the full  year  accounts.   Software
     Services and  Systems and Strategic Services have been merged to take
     advantage  of  the  synergies available within the  businesses.   The
     Commercial  Services  division,  a  new  division  formed  after  the
     acquisition  of  IRG,   includes some businesses previously  reported
     under  Systems and Strategic Services. The effect of this  adjustment
     has  been  to  increase  the 1999 Commercial Services  division,  and
     correspondingly  reduced  Software, Systems  and  Strategic  Services
     division by turnover of £4,606,000 and operating profit of £451,000.
2.   The  interim financial statements have been prepared on the basis  of
     the  accounting  policies  set  out in  the  Group's  1999  statutory
     accounts.  The  statements were approved  by  a  duly  appointed  and
     authorised  committee of the Board of Directors on  24th  July  2000.
     The  full  year  accounts, on which the auditors gave an  unqualified
     report  have been filed with the Registrar of Companies. The  figures
     for the six months to 30th June 1999 and 2000 are unaudited.
3.   Earnings  per  share  have been calculated on an  average  number  of
     shares  in  issue during the period of 211,753,000 (30th  June  1999:
     202,252,000). The diluted earnings per share have been calculated  on
     the  diluted  profit  for the period of £8,466,000  (30th  June  1999
     (restated):  £8,058,000) and an average diluted number of  shares  of
     218,227,000  (30th  June 1999: 208,862,000). As at  24th  July  2000,
     there were 216,848,000 shares in issue.
4.   The  interim dividend of 1.65p per share will be payable on the  12th
     October 2000 to Ordinary shareholders on the register at the close of
     business on 8th September 2000.
5    As  reported in the 1999 Annual report and accounts the Group changed
     its accounting policy for goodwill arising on acquisitions made on or
     after 1st January 1998.  Consequently the comparative figures for the
     period  to  30th  June 1999 have been restated. The impact  of  these
     changes for the period to 30th June 1999 is to reduce reported profit
     before  tax  for  the  period to 30th June 1999  by  £1,531,000,  and
     shareholders'  funds  as  at  30th June  1999  from  that  previously
     reported by £2,517,000.




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