Interim Results
1 August 2001
ELEMENTIS plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
* Sales £296.7 million (2000: £288.0 million)
* Operating profit £17.5 million* (2000: £32.2 million*)
* Profit before tax £15.1 million* (2000: £29.5 million*)
* Earnings per share 3.0 pence* (2000: 5.6 pence*)
*before goodwill amortisation and exceptionals
Jonathan Fry, Chairman of Elementis plc, said:
'The half year results reflect the tough global economic climate emanating from
the US. As previously indicated, these conditions, combined with substantially
higher energy costs, have resulted in a sharp fall in operating profit. The
outlook for the US economy, and the resulting impact on the global economy, is
the most significant factor in determining short-term prospects for the Group.
'Our immediate focus is on managing the short-term trading position.
Nevertheless, we continue to explore options to maximise shareholder value
including the evaluation of acquisition opportunities against the Group's
strict criteria of price and fit with our major businesses.'
- Ends -
Enquiries
Elementis 020 7398 1400
Jonathan Fry Chairman
George Fairweather Group Finance Director
Anna Passey Head of Corporate Communications
Brunswick 020 7404 5959
Andrew Fenwick
Rupert Young
Overview and financial results
The half year results reflect the tough global economic climate emanating from
the US. As previously indicated, these conditions, combined with substantially
higher energy costs, have resulted in a sharp fall in operating profit.
Sales increased in sterling terms by 3 per cent on the first half of 2000,
reflecting the strengthening of the US dollar. On a constant currency basis,
sales declined by a similar amount. Excluding Chemical Distribution, sales on a
constant currency basis in
North America declined by 9 per cent.
Operating profit before goodwill amortisation and exceptionals was £17.5
million, compared to £32.2 million in the first half and £31.2 million in the
second half of 2000. On a constant currency basis, the impact on operating
profit of the sales decline in North America, excluding Chemical Distribution,
was approximately £5 million. Higher energy costs adversely impacted operating
profit by £7.3 million versus the first half of 2000 on a comparable basis.
Currency transaction and translation effects favourably impacted operating
profit before goodwill amortisation and exceptionals by approximately £1.6
million compared to the first half of 2000.
Profit before goodwill amortisation, exceptionals and tax was £15.1 million
compared to
£29.5 million in the first half of 2000 and £28.9 million in the second half.
Basic earnings
per share before goodwill amortisation and exceptionals was 3.0 pence (2000:
5.6 pence).
Net exceptional charges before tax were £5.1 million (2000: £2.8 million) of
which
£4.6 million comprised costs incurred in preparing and marketing the Company
for sale.
Net cash inflow from operating activities was £0.4 million (2000: £18.1
million).
Net borrowings at the end of June were £72.5 million (2000: £57.7 million).
Dividends and issue of redeemable B shares
The Board has not declared an interim ordinary dividend. Instead, it will
continue with the programme, started in 2000, of issuing and redeeming
redeemable B shares. The Board intends to issue further redeemable B shares to
ordinary shareholders on the register on
29 October 2001, such that they receive redeemable B shares with a total
nominal value of 2.1 pence for each ordinary share held; this is the same as
the comparable issue last year. The issue will be coupled with an offer to
redeem the new shares for cash at their nominal value on 2 November 2001. A
further offer will also be made to existing holders of redeemable B shares to
redeem these shares for cash at their nominal value on the same date.
By not paying an interim dividend on ordinary shares, Elementis estimates that
it will be able to recover £2.3 million of advance corporation tax previously
paid.
A circular providing full details of the issue and redemption of redeemable B
shares will be posted to all ordinary shareholders on 28 September 2001.
The Board
In July, Lyndon Cole resigned, by mutual consent, as Group Chief Executive. The
process to seek a new Chief Executive is underway but it is too early to give a
timescale for the appointment. Jonathan Fry has temporarily become Executive
Chairman until the new appointment is made.
Strategy
Following the announcement in May that Elementis had terminated discussions
with potential purchasers, the Board continues to explore options to maximise
shareholder value.
The current difficult economic conditions, particularly weak demand and high
energy costs in the US, necessitate our immediate focus on managing the
short-term trading position. Nevertheless, we continue to seek and evaluate
acquisition opportunities against the Group's strict criteria of price and fit
with our major businesses.
Current trading and outlook
Market conditions continue to be in line with those in the first half. The
outlook for the US economy, and the resulting impact on the global economy, is
the most significant factor in determining short-term prospects for the Group.
Energy costs in the second half remain an issue although the impact is expected
to be less severe than in the first half of 2001.
We currently estimate that the Group's energy costs in the second half will
increase by around £2.5 million versus the second half of 2000 on a comparable
basis.
Benefits from ongoing business improvement projects should be increasingly
apparent as the year progresses, particularly when the first phase of Six Sigma
projects are completed.
Review of operations
for the six months to 30 June 2001
2001 2000
Sales Operating Sales Operating
profit* profit*
£million £million £million £million
Chromium 68.2 4.2 65.8 12.0
Pigments & Specialties 119.7 10.5 118.7 15.6
Chemical Distribution 87.3 1.9 78.7 3.0
Specialty Rubber 25.3 0.9 28.2 1.6
Inter-group (3.8) - (3.4) -
296.7 17.5 288.0 32.2
*before goodwill amortisation and exceptionals
Chromium
Operating profit was £4.2 million, compared to £12.0 million in the first half
of 2000, on sales up 4 per cent to £68.2 million. On a constant currency basis,
sales decreased by approximately 2 per cent with volume down by 3 per cent.
Global demand for chromium chemicals is estimated by Elementis to be around the
same as in the first half of 2000. Strong demand for chromic oxide, for use in
metal alloys, was offset by lower US demand for pigmentary applications and
lower demand for chrome sulphate for use in leather tanning, particularly in
the UK.
Sales volume of chromic acid continued to grow, based on the success of the
superior handling properties of our CA21â„¢ chromic acid product. Sales volume of
CA21â„¢ increased by just under 30 per cent compared to the first half of 2000.
Sales volumes of other product categories were lower. Average pricing in
currency of invoice was also down, reflecting increased competition from
Russia.
Higher energy costs adversely impacted operating profit by £5.0 million versus
the first half of 2000 on a comparable basis.
These costs were also £2.0 million higher than in the second half of last year.
Early in 2001, headcount reduced by more than 10 per cent as a result of a
business process re-engineering exercise at Corpus Christi, Texas. The one-off
cost of £2.3 million will largely be recouped over the balance of the year.
A new gas cleaning system for the chromic oxide plant at Eaglescliffe, UK was
commissioned in the first quarter costing £2.6 million. This will further
enhance the business's environmental performance standards. Some production
capacity of chromic oxide for use in metal alloys was unavailable during the
period as a result of the project.
Pigments & Specialties
Operating profit before goodwill amortisation and exceptionals was £10.5
million compared to £15.6 million in the first half of 2000, on sales up 1 per
cent to £119.7 million. On a constant currency basis sales decreased by
approximately 4 per cent.
At Elementis Pigments, sales and operating profit before exceptionals
decreased, mainly as a result of slow overall demand for iron oxide pigments
for coatings, construction and chemicals applications in North America;
profitability of zinc products, carboxylates and catalysts was also lower.
Sales of construction grade Ferrispecâ„¢ granular product increased
significantly.
Margins were under pressure largely as a result of higher US energy costs.
Additional production equipment was installed at the Shenzhen facility in
China, further enhancing the business's operating capabilities.
At Elementis Specialties, sales in the first half of 2001 increased as a result
of the stronger US dollar. On a constant currency basis, sales were at a
similar level. Lower sales for coatings applications, particularly in North
America, were offset by very significant growth in rheological additives sales
for the oil exploration market, wet process organoclays being particularly
successful. Sales into the inks market were unchanged. Overall European trading
remained relatively robust compared to North America and Asia. Rheolateâ„¢ sales
volumes for aqueous coatings applications were maintained at the same level as
the first half of last year.
Operating profit before goodwill amortisation and exceptionals was lower than
in the first half of 2000, primarily as a result of higher energy and
quarternary amine costs not recouped through pricing and expenditure on
upgrading sales and marketing capabilities, including
e-commerce.
Thixatrol® Max, a new thixotrope rheological additive, was launched in Europe
during the period. This is targeted at solvent based coatings applications.
Chemical Distribution
Operating profit was £1.9 million, compared to £3.0 million in the first half
of 2000, on sales up 11 per cent to £87.3 million. On a constant currency
basis, sales increased by approximately 3 per cent.
Volume grew by 5 per cent due to strong weather-related demand for rock salt in
the northeast of America. Excluding rock salt, volume decreased by 5 per cent,
primarily as a result of the slow-down in the US economy.
Margins narrowed due to difficulties in recovering increased purchase costs
through higher pricing; these increases were primarily energy related. Fixed
costs remained tightly controlled.
Specialty Rubber
Operating profit before exceptionals was £0.9 million, compared to £1.6 million
in the first half of 2000, on sales down 10 per cent to £25.3 million.
The sales decline occurred primarily in North America. This was due to output
reductions by West Coast mining customers because of high energy costs, and the
exit of unprofitable sales lines. Strong sales growth was achieved in South
Africa and Asia. Sales in Europe were impacted by disruption caused by the
aircraft crash at the Yateley, UK, facility
last December and by the decision taken early in the year not to pursue major
new process technology equipment contracts.
Rubber sheet sales recorded double digit growth, reflecting the business's
increased focus on the core Linatex rubber brand. In May, a new product,
LinaCrepeâ„¢, was launched. This form of uncured rubber can be moulded into shape
and is particularly suitable for belting, hoses and roller covering
applications.
The programme announced 18 months ago to refocus and simplify the Linatex
business was completed in February 2001 with the closure of the final site in
Montreal. Over the course of the half year, headcount reduced by 81.
The £4.0 million continuous rubber sheet press is on schedule to be installed
in Malaysia by the end of 2001, to reduce operating costs and further enable
Linatex sheet to be produced within tighter thickness tolerances for new
applications and with enhanced bonding capabilities.
Six Sigma
Six Sigma business improvement methodology has now been launched across the
Group. The 13 `blackbelt' team leaders completed their training in July and
training for the next level participants is planned for later in the year. The
first phase of Six Sigma projects cover manufacturing and logistics and will be
completed in the third quarter.
Health, safety and the environment
Compared to the first half of 2000, lost time accident frequency reduced by 42
per cent due to the increased focus on safety and the introduction of a new
incident investigation reporting system which identifies the root causes of
reportable incidents and `near misses'.
Non-compliance with environmental consents rose from 11 to 18 in the first half
of 2001. Each of these is thoroughly investigated and the Board is committed to
reversing this position.
Exceptionals
Exceptional charges before tax were £5.1 million, comprising £4.6 million of
costs incurred in preparing and marketing the Company for sale and £0.5 million
of additional inventory write downs relating to the Specialty Rubber
restructuring completed in the first half of the year. This compared to £2.8
million of net exceptional charges in the first half of 2000.
Cash flow and balance sheet
Net cash inflow from operating activities was £0.4 million, compared to £18.1
million in
the first half of 2000, the decrease being largely a result of lower operating
profit.
Working capital outflow was £21.0 million, compared to £18.5 million in the
first half of 2000. Inventories increased by £5.1 million over the half year.
Programmes are now in place to reverse this trend in the second half. Debtors
increased by £9.5 million, most of which is the normal seasonal effect with
trade debtor days increasing by 3 days. Creditors decreased by £6.4 million,
trade creditor days reducing by 5 days partially due to a change in source of a
significant raw material.
Cash expenditure on fixed assets totalled £7.5 million (2000: £14.9 million),
compared with depreciation of £9.4 million. Major projects were the Elementis
Chromium oxide gas cleaning plant and the Linatex continuous sheet press.
Capital expenditure for the full year is still likely to be modestly ahead of
depreciation.
Net borrowings at the end of June were £72.5 million compared to £41.7 million
at the end of December 2000. Shareholders' funds at the half year were £414.5
million compared to £411.2 million at the end of December 2000.
Consolidated profit & loss account
for the six months to 30 June 2001
Before
goodwill 2001 2000 2000
amortisation Goodwill Six Six Year
& amortisation Exceptionals months months to 31
exceptionals to 30 to 30 Dec
June June
Note £ £million £million £ £ £
million million million million
Turnover - continuing 3 296.7 - - 296.7 288.0 573.8
operations
Group operating profit
Before goodwill amortisation 17.5 - - 17.5 32.2 63.4
and exceptionals
Goodwill amortisation - (6.9) - (6.9) (6.4) (13.3)
Exceptionals - - (5.1) (5.1) (2.8) (3.0)
3 17.5 (6.9) (5.1) 5.5 23.0 47.1
Associates - - - - - - 0.1
continuing operations
Operating profit - 17.5 (6.9) (5.1) 5.5 23.0 47.2
continuing operations
Net interest payable (2.4) - - (2.4) (2.7) (5.1)
Profit on ordinary
activities before tax
Before goodwill amortisation 15.1 - - 15.1 29.5 58.4
and exceptionals
Goodwill amortisation - (6.9) - (6.9) (6.4) (13.3)
Exceptionals - - (5.1) (5.1) (2.8) (3.0)
15.1 (6.9) (5.1) 3.1 20.3 42.1
Tax on profit on 4 (2.1) - - (2.1) (5.1) (7.8)
ordinary activities
Profit on ordinary 13.0 (6.9) (5.1) 1.0 15.2 34.3
activities after tax
Minority interests - (0.1) - - (0.1) (0.1) (0.1)
equity
Profit for the 12.9 (6.9) (5.1) 0.9 15.1 34.2
financial period
Dividends - non-equity - - - - - (0.1)
Amount transferred to 12.9 (6.9) (5.1) 0.9 15.1 34.1
reserves
Earnings per ordinary 5
share
Basic and diluted 0.2p 3.5p 7.9p
Basic before goodwill 3.0p 5.6p 11.6p
amortisation and
exceptionals
Diluted before goodwill 3.0p 5.6p 11.5p
amortisation and
exceptionals
Consolidated balance sheet
at 30 June 2001
2001 2000 2000
30 June 30 June 31 Dec
£million £ £
million million
Fixed assets
Goodwill 233.5 232.5 228.8
Tangible assets 195.7 192.6 192.1
Investment in associated undertakings 2.1 1.9 2.0
431.3 427.0 422.9
Current assets
Stocks 84.6 75.5 76.7
Debtors 118.6 117.3 109.2
Cash at bank and in hand 28.3 72.6 51.2
231.5 265.4 237.1
Creditors: amounts falling due within one year
Borrowings 12.1 9.3 7.3
Creditors 99.6 111.5 106.2
111.7 120.8 113.5
Net current assets 119.8 144.6 123.6
Total assets less current liabilities 551.1 571.6 546.5
Creditors: amounts falling due after more than one
year
Borrowings 88.7 121.0 85.6
Government grants 0.6 0.7 0.6
89.3 121.7 86.2
Provisions for liabilities and charges 44.7 49.0 46.6
134.0 170.7 132.8
417.1 400.9 413.7
Capital and reserves
Called up share capital 24.4 23.3 23.6
Share premium 1.1 1.1 1.1
Capital redemption reserve 33.8 11.6 20.4
Profit and loss account 355.2 362.4 366.1
Shareholders' funds 414.5 398.4 411.2
Minority interests 2.6 2.5 2.5
417.1 400.9 413.7
Shareholders' funds
Equity 411.7 396.7 409.2
Non-equity 2.8 1.7 2.0
414.5 398.4 411.2
Net borrowings (72.5) (57.7) (41.7)
Cash flow statement
for the six months to 30 June 2001
2001 2000 2000
Six Six Year
months months to 31
to 30 to 30 Dec
June June
Note £ £ £
million million million
Net cash inflow from operating activities 0.4 18.1 58.4
Returns on investments and servicing of
finance
Interest received 3.7 4.4 9.3
Interest paid (6.5) (6.1) (14.4)
Taxation (4.6) (2.0) (4.5)
Capital expenditure and financial investment
Purchase of fixed assets (7.5) (14.9) (22.1)
Disposal of fixed assets 0.1 6.1 6.7
Acquisitions and disposals
Disposal of businesses in prior years (0.2) (0.4) (1.0)
Cash (outflow)/inflow before use of liquid (14.6) 5.2 32.4
resources and financing
Financing and management of liquid resources 6 10.7 (6.4) (35.7)
Decrease in cash 7 (3.9) (1.2) (3.3)
Reconciliation of operating profit to net cash inflow from operating activities
for the six months to 30 June 2001
2001 2000 2000
Six Six Year
months months to 31
to 30 to 30 Dec
June June
£ £ £
million million million
Operating profit 5.5 23.0 47.2
Goodwill amortisation 6.9 6.4 13.3
Depreciation (less grants credited) 9.4 8.5 17.3
Share of profits of associated undertakings - - (0.1)
Profit on disposal of fixed assets - (0.2) -
Exceptionals in operating profit 5.1 2.8 3.0
Cash outflow on exceptionals (4.3) (2.2) (3.9)
Increase in stocks (5.1) (1.0) (1.8)
Increase in debtors (9.5) (14.8) (8.4)
Decrease in creditors (6.4) (2.7) (2.2)
Decrease in provisions (1.2) (1.7) (6.0)
Net cash inflow from operating activities 0.4 18.1 58.4
Statement of total recognised gains and losses
for the six months to 30 June 2001
2001 2000 2000
Six Six Year
months months to 31
to 30 to 30 Dec
June June
£ £ £
million million million
Profit for the financial period 0.9 15.1 34.2
Currency translation differences 17.1 16.5 19.4
Taxation on currency translation differences (1.3) (1.7) (2.0)
on foreign currency borrowings
Total recognised gains for the financial 16.7 29.9 51.6
period
Reconciliation of movements in shareholders' funds
for the six months to 30 June 2001
2001 2000 2000
Six Six Year
months months to 31
to 30 to 30 Dec
June June
£ £ £
million million million
Profit for the financial period 0.9 15.1 34.2
Dividends - redeemable B shares - - (0.1)
Amounts transferred to reserves 0.9 15.1 34.1
Redemption of redeemable B shares (including (13.4) (11.9) (20.7)
issue costs)
Currency translation differences 17.1 16.5 19.4
Taxation on currency translation differences (1.3) (1.7) (2.0)
on foreign currency borrowings
Net increase in shareholders' funds 3.3 18.0 30.8
At beginning of the financial period 411.2 380.4 380.4
At end of the financial period 414.5 398.4 411.2
Notes to the financial statements
* Accounting policies
Basis of preparation The financial information for the first six months of 2001
and 2000, which is unaudited but has been reviewed by the Company's auditors,
does not constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985 and it is presented on the basis of accounting policies set
out in the financial statements of Elementis plc for the year ended 31 December
2000.
* Exchange rates
For the six months to 30 June 2001, the average sterling exchange rate was
$1.44 and €1.61 (2000: $1.57 and €1.64, year to 31 December 2000: $1.52 and €
1.64). The sterling exchange rate at 30 June 2001 was $1.41 and €1.66 (2000:
$1.51 and €1.58, 31 December 2000: $1.49 and €1.59).
* Segmental information
*
Group turnover Group operating profit
2001 2000 2000 2001 2000 2000
Six Six Year Six Six Year
months months months months
to 30 to 30 to 31 to 30 to 30 to 31
June June Dec June June Dec
£ £ £ £ £ £
million million million million million million
Analysis by
activity
Chromium
Before 68.2 65.8 131.7 4.2 12.0 23.7
exceptionals
Inter-group (3.8) (3.4) (6.9) - - -
turnover
Exceptionals - - - - - 0.7
64.4 62.4 124.8 4.2 12.0 24.4
Pigments &
Specialties
Before
goodwill 119.7 118.7 234.9 10.5 15.6 31.1
amortisation
and
exceptionals
Goodwill - - - (6.9) (6.4) (13.3)
amortisation
Exceptionals - - - - (1.4) (1.4)
119.7 118.7 234.9 3.6 7.8 16.4
Chemical 87.3 78.7 160.0 1.9 3.0 6.0
Distribution
Specialty
Rubber
Before 25.3 28.2 54.1 0.9 1.6 2.6
exceptionals
Exceptionals - - - (0.5) (1.4) (2.3)
25.3 28.2 54.1 0.4 0.2 0.3
Group - - - (4.6) - -
exceptionals
Total
Before
goodwill 296.7 288.0 573.8 17.5 32.2 63.4
amortisation
and
exceptionals
Goodwill - - - (6.9) (6.4) (13.3)
amortisation
Exceptionals - - - (5.1) (2.8) (3.0)
296.7 288.0 573.8 5.5 23.0 47.1
Group turnover and operating profit are derived from continuing operations.
Group exceptionals comprise costs incurred in preparing and marketing the
Company for sale.
3 Segmental information (continued)
Group turnover Group operating profit
2001 2000 2000 2001 2000 2000
Six Six Year Six Six Year
months months months months
to 30 to 30 to 31 to 30 to 30 to 31 Dec
June June Dec June June
£million £million £million £million £million £million
Analysis by area of
operations
North America 200.5 194.5 389.0 6.2 17.6 33.4
Europe 84.7 83.1 163.4 (1.1) 4.6 12.2
Rest of the World 11.5 10.4 21.4 0.4 0.8 1.5
296.7 288.0 573.8 5.5 23.0 47.1
2001 2000 2000
Six Six Year
months months to 31 Dec
to 30 to 30 £million
June June
£million £million
Group turnover analysed by geographical markets
North America 191.5 183.7 368.3
Europe 72.4 72.9 143.0
Rest of World 32.8 31.4 62.5
296.7 288.0 573.8
* Taxation
The tax charge of £2.1 million (2000: £5.3 million) is based on an estimated
effective tax rate on profit before goodwill amortisation and exceptionals for
the year to 31 December 2001 of 14 per cent (2000: 18 per cent). The rate is
lower than the standard UK corporation tax rate for a number of reasons
including tax relief on purchased US goodwill and the utilisation of surplus
ACT. Tax on exceptional charges was £nil million
(2000: £0.2 million credit).
* Earnings per ordinary share
*
2000 2000
2001 Six Year
Six months months to 31
to 30 June to 30 Dec
pence June pence
per share pence per
per share
share
Basic earnings per ordinary share 0.2 3.5 7.9
Goodwill amortisation 1.6 1.5 3.1
Exceptionals net of taxation 1.2 0.6 0.6
Basic earnings per ordinary share before goodwill 3.0 5.6 11.6
amortisation and exceptionals
Basic earnings per ordinary share are based on profit for the period of £0.9
million (2000: £15.1 million, year to 31 December 2000: £34.1 million) and on
the weighted average number of ordinary shares in issue during the period of
431.5 million (2000: 431.5 million, year to 31 December 2000: 431.5 million).
Basic earnings per ordinary share before goodwill amortisation and exceptionals
are based on earnings of £12.9 million (2000: £24.1 million, year to 31
December 2000: £50.0 million).
Diluted earnings per ordinary share are based on an adjusted weighted average
number of shares of 435.0 million (2000: 433.5 million,
year to 31 December 2000: 434.1 million).
* Financing and management of liquid resources
*
2000
2000
2001 Six Year
Six months to 30 June months
£million to 30 to 31
June Dec
£million
£million
Redemption of B shares (including issue (13.4) (11.9) (20.7)
costs)
Increase/(decrease) in net borrowings 24.1 5.5 (15.0)
10.7 (6.4) (35.7)
Redeemable B shares, of nominal value £14.2 million, were issued for nil
consideration during the period (2000: £13.3 million; year to
31 December 2000 £22.4 million).
* Reconciliation of net cash flow to movement in net borrowings
*
2000 2000
2001 Six Year
Six months months to 31
to 30 June to 30 Dec
£million June £million
£million
Change in net borrowings resulting from cash flows:
Decrease in cash in the period (3.9) (1.2) (3.3)
(Increase)/decrease in borrowings (5.0) 0.7 40.4
Decrease in liquid resources (19.1) (6.2) (25.4)
(28.0) (6.7) 11.7
Currency translation differences (2.8) (5.5) (7.9)
(Increase)/decrease in net borrowings (30.8) (12.2) 3.8
Net borrowings at beginning of the financial period (41.7) (45.5) (45.5)
Net borrowings at end of the financial period (72.5) (57.7) (41.7)
* Contingent liabilities
The Group was notified of a potential warranty claim in 1998, under the
contract for the sale of Pauls Malt Limited, relating to export refunds from
the Intervention Board for Agricultural Produce. Should such a claim
materialise, this will be vigorously defended and, in any event, in the opinion
of the directors, this will not have a significant effect on the financial
position of the Group.
Independent review report to Elementis plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2001, comprising the consolidated profit and loss
account, balance sheet, cash flow statement, statement of total recognised
gains and losses, reconciliation of movements in shareholders' funds and
related notes. We have read the other information contained in the Interim
Report for any apparent misstatements or material inconsistencies with the
financial information.
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 financial statements
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. A review consists principally of
making enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a
lower level of assurance than an audit. Accordingly, we do not express an audit
opinion on the financial 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 2001.
PricewaterhouseCoopers, London
Chartered Accountants
1 August 2001
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