Interim Results
API Group PLC
17 December 2007
17 December 2007
API GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2007
• Results in line with announcement on 19 October and reflect difficult trading
conditions and underperformance in a number of the Group's businesses
• Sales of £47.2 million (six months to 30 September 2006: £50.8 million),
reflecting contract losses in Laminates and weak demand in the US, partially
offset by growth in European Foils and Holographics
• Operating loss before exceptionals of £0.2 million (six months to 30
September 2006: profit £1.0 million)
• New China facility now substantially complete, production for export
commenced
• Appointment of new Chief Executive
• Fully underwritten Open Offer of New Ordinary Shares to raise £8.0 million
(pre expenses) to restore working capital headroom, reduce debt and ensure
continuing support of the Group's main lender
• Possible move to AIM
Commenting, API's Non-Executive Chairman Richard Wright said:
'These results are in line with our previous announcement in October.
'A successful conclusion to the Open Offer, announced today, will strengthen the
Company's financial position. This, together with potential new developments,
increased availability of foil from the new Chinese factory and the planned
overhead cost reduction program provide the basis for an improved outlook for
the Group.'
Enquiries:
Andrew Turner, Group Chief Executive Officer, API Group plc 01625 650334
Tim Spratt, Nicola Biles, Financial Dynamics 020 7831 3113
REPORT ON INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2007
Current Trading
In line with the Company's announcement of 19 October 2007, results for the six
month period to 30 September 2007 were below the Board's expectations and the
comparable period last year reflecting difficult trading conditions and
underperformance in a number of the Group's businesses.
Group sales, at £47.2 million, were 7.3 per cent. lower than last year (5.6 per
cent. at constant exchange rates) due primarily to contract losses in Laminates
and weak demand in the US, partially offset by growth in the European Foils and
Holographics businesses.
The Group recorded an operating loss, before exceptional items, of £0.2 million,
compared with an operating profit of £1.0 million for the same period in 2006
and breakeven for the 6 month period ending 31 March 2007.
Exceptional items of £0.2 million (2006: £0.4 million) related principally to
severance costs offset by a gain on the sale of the Group's site in Charlotte,
US, which was closed in 2006.
Net financing costs of £1.0 million (2006: £1.2 million) reflected an increase
of £0.4 million in the Group's interest cost as a result of the higher average
debt and interest rates compensated by a UK pension plan credit of £0.3 million
(2006: £0.3 million charge).
The pension deficit, as calculated in accordance with IAS 19, reduced from £11.0
million at 31 March 2007 to £6.1 million at 30 September 2007 on the basis of
the Company's latest actuarial assessment and an improved outlook for long term
investment returns.
Cash Flow and Borrowings
Net cash flow from operating activities was £0.6 million (2006: £1.9 million)
reflecting lower operating profits. Capital expenditure reduced to £2.7 million
(2006: £3.5 million) reflecting lower spending in China as the new facility
nears completion. In addition, the Group received net cash proceeds of £0.7
million from the sale of the property in Charlotte.
Net borrowings increased to £23.0 million at 30 September 2007 compared with
£20.8 million six months earlier and £15.5 million at the end of September 2006.
The increase in the latest 6 month period is attributable to interest costs in
excess of operating cash flow and continued investment in China.
On 21 September 2007, the Company announced a projected cash shortfall against
its borrowing facilities in the UK and the commencement of discussions with its
main lender and major shareholders. Concurrent with this Interim Announcement,
the Chairman is inviting Shareholders to support an Open Offer of New Ordinary
Shares to raise additional funds of £8.0 million (£7.2 million net of costs).
This is designed to restore the Group's working capital headroom, reduce
structural debt to a sustainable level and ensure the continuing support of the
Group's main lender.
Review of Operations Asia Pacific
Report sales for Asia Pacific were down by 3 per cent. to £5.3 million (£2006:
£5.5 million) but were unchanged before the effects of currency translation.
Operating profits declined to £0.2 million (2006: £0.5 million) as a result of a
change in sales mix to the Chinese market away from higher added value
holographic foils. Margins on exports from China were also adversely affected by
the Government's implementation of a new VAT regime which came into effect on 1
July 2007. The Company is making progress in passing on these cost increases to
customers in a number of key markets.
The new facility in Shanghai is now substantially complete, approximately 50 per
cent. of machinery has been relocated and production for export has commenced on
the new site.
North America
Reported sales in North America declined by 15 per cent. to £11.1 million (2006:
£13.1 million) and were 8 per cent. lower than last year on a local currency
basis. Weak demand in the graphics, greeting card and metallic ink sectors was
partially compensated by continued growth in labels and coding foils.
Operating profits from the region of £0.6 million were in line with the previous
6 month period but £0.4 million below 2006. The year on year movement was due to
the lower level of sales, an adverse product mix and the impact of the
unfavourable exchange rate movement.
Europe
Sales in Europe were 5 per cent. below prior year at £30.7 million (2006: £32.3
million).
In Laminates, turnover fell by 21 per cent. due to a number of contract losses
although operating results remained substantially unchanged (just below
breakeven) on prior year and the previous six month period. The impact of the
decline in volumes was mitigated by improved average margins and cost savings
arising from the restructuring measures implemented in the first quarter of
2007.
Volumes in the European foils businesses grew strongly although increased
production costs, including waste, were significantly higher leading to reduced
operating profits. Sales and profitability in European Foils have continued to
be adversely affected by the shortage of standard foil grades from China pending
the resolution of technical issues and the increase of capacity at the new site
in Shanghai.
The Company's new finishing and distribution facility in Italy made a good start
with sales growth in line with expectations.
Discontinued Operations
The Company has settled a number of disputes relating to the disposal of the
Converted Product Division in January 2005 including the Company's claim against
the purchaser for deferred consideration of £0.75 million. Legal advice
previously led the Board to anticipate a favourable outcome to the Company's
claim, although the £0.75 million was disclosed as a contingent liability in the
Interim Report for the period to 31 March 2007. In the light of new claims
brought by the purchaser in respect of the closing valuation of the Division's
net assets, the Board concluded that Shareholder's interests would be best
served by an early settlement rather than protracted court proceedings.
Consequently, the Group has taken charge of £0.9 million against the profit and
loss account comprising of £0.75 million write-off of the deferred consideration
and £0.15 million legal and other costs.
In the last six month period, the Company has been notified of an additional
claim relating to warranties given in the course of the same transaction.
Further details of these issues are set out in the notes to the accounts.
Dividend
The Board is not recommending the payment of an interim dividend (2006: none).
Outlook
The Board was pleased to announce the appointment of Andrew Turner as Group
Chief Executive with effect from 15 October 2007.
If the Group is successful in gaining the support of Shareholders for the
proposed Open Offer, it will emerge with restored cash headroom and a
significantly strengthened balance sheet.
With the possible exception of the US, there are no clear indications, at this
state, that the uncertainty in the banking sector and weakness in consumer
confidence is affecting general market demand for the Group's products.
The Group has a number of product innovations in the pipeline, which utilise the
combined technical capabilities of the European businesses. The Directors
believe that a successful outcome of one of these developments could have a
material impact on the Group's overall short-term financial performance.
Volumes have recovered somewhat in Laminates and the business is benefiting from
its lower cost base, post restructuring. European foil sales are expected to
benefit from the start-up of export production at the new site in China as well
as continued growth through the new distribution operation in Italy.
An overhead cost reduction programme has been launched by the new Group
management which is expected to fully impact results from the beginning of the
next financial year.
R C Wright Non-Executive Chairman
GROUP INCOME STATEMENT
for the six months ended 30 September 2007
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
Note £'000 £'000 £'000
Continuing operations
Revenue 1 47,159 50,861 101,979
Cost of sales (38,251) (40,003) (80,656)
Gross profit 8,908 10,858 21,323
Other operating costs (9,114) (9,841) (20,329)
Operating (loss)/profit before exceptional items 1 (206) 1,017 994
Exceptional items 3 (184) (420) (863)
Operating (loss)/profit from continuing operations (390) 597 131
Finance revenue 6 34 85
Finance costs (1,303) (926) (1,698)
Other finance income/(expense) - pensions 325 (323) (311)
(972) (1,215) (1,924)
Loss on continuing activities before taxation (1,362) (618) (1,793)
Taxation -UK 5 (149) 27 (122)
-Overseas 5 (196) (321) (613)
Loss from continuing operations (1,707) (912) (2,528)
Discontinued operations
Loss from discontinued operations 6 (929) (127) (230)
Loss for the period (2,636) (1,039) (2,758)
Attributable to:
Profit attributable to minority equity interests 126 377 695
Loss attributable to equity holders of the parent (2,762) (1,416) (3,453)
Total loss for the period (2,636) (1,039) (2,758)
Earnings per share (pence)
Basic loss per share from continuing operations 4 (5.3) (3.7) (9.4)
Diluted loss per share from continuing operations 4 (5.3) (3.6) (9.1)
Basic loss per share on loss for the period 4 (8.0) (4.1) (10.1)
Diluted loss per share on loss for the period 4 (8.0) (4.0) (9.8)
GROUP BALANCE SHEET
at 30 September 2007
Unaudited Audited Unaudited
30 September 30 September 31 March
2007 2006 2007
£'000 £'000 £'000
Note
Assets
Non-current assets
Property plant and equipment 31,895 30,500 31,856
Intangible assets 6,480 6,480 6,480
Deferred tax asset on defined benefit pension plan 1,721 3,263 3,311
Financial assets 45 - 42
40,141 40,243 41,689
Current assets
Trade and other receivables 17,716 20,112 19,386
Inventories 11,798 13,195 11,907
Cash 2,103 4,909 3,236
31,617 38,216 34,529
Total assets 71,758 78,459 76,218
Liabilities
Current liabilities
Trade and other payables 19,483 22,306 20,310
Financial liabilities 7,662 1,758 5,431
Income tax payable 411 379 370
Provisions 5 306 144
27,561 24,749 26,255
Non-current liabilities
Financial liabilities 17,485 18,674 18,629
Deferred tax liabilities 639 659 659
Provisions 77 93 88
Defined benefit pension plan deficit 6,147 10,879 11,036
24,348 30,305 30,412
Total liabilities
51,909 55,054 56,667
Net assets
19,849 23,405 19,551
Equity
Called up share capital 8,642 8,612 8,612
Share premium 294 244 244
Capital redemption reserve 549 549 549
ESOP reserve (251) (251) (251)
Foreign exchange reserve (1,523) (366) (1,229)
Retained earnings 6,560 9,179 6,127
Total shareholders' equity 7 14,271 17,967 14,052
Minority interest in equity 7 5,578 5,438 5,499
Total equity 19,849 23,405 19,551
GROUP CASH FLOW STATEMENT
for the six months ended 30 September 2007
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
£'000 £'000 £'000
Operating activities
Group operating (loss)/profit (390) 597 131
Adjustments to reconcile group operating (loss)/profit to net
cash flow from operating activities
Operating loss from discontinued operations - (127) (230)
Depreciation and impairment of property, plant and equipment 1,831 1,677 3,457
Profit on disposal of property, plant & equipment (258) (11) (22)
Share-based payments 161 57 131
Difference between pension contributions paid and amounts (484) (403) (835)
recognised in the income statement
Decrease/(increase) in inventories 12 (143) (870)
Decrease/(increase) in trade and other receivables 897 (767) (523)
Increase/(decrease) in trade and other payables (685) 1,381 (1,120)
Movement in provisions (300) (32) (293)
Cash generated from/(used in) operations 784 2,229 (174)
Income taxes paid (160) (362) (656)
Net cash flow from operating activities 624 1,867 (830)
Investing activities
Interest received 12 34 85
Purchase of property, plant and equipment (2,682) (3,459) (6,140)
Sale of property, plant and equipment 698 244 244
Payments to acquire investments (5) - -
Sale of subsidiary undertakings 54
Net cash flow from investing activities (1,923) (3,181) (5,811)
Financing activities
Interest paid (1,229) (1,225) (2,047)
Dividends paid to minority interests - (487) (487)
Proceeds from share issues 80 - 53
New borrowings 756 - 1,956
Repayment of borrowings - (950)
Net cash flow from financing activities (393) (2,662) (525)
Decrease in cash and cash equivalents (1,692) (3,976) (7,166)
Effect of exchange rates on cash and cash equivalents 160 (4) 116
Cash and cash equivalents at the beginning of the period (1,763) 7,326 10,396
Cash and cash equivalents at the end of the period (3,295) 3,346 3,346
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENDITURE for the six months ended 30 September 2007
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
£'000 £'000 £'000
Exchange differences on retranslation of foreign (341) (1,345) (972)
operations
Actuarial gains/(losses) on defined benefit pension 4,454 (2,183) (1,311)
plans
Tax on actuarial gains/(losses) on defined benefit (1,420) 635 393
pension plans
Net income/(expense) recognised directly in equity 2,693 (2,893) (1,890)
Loss for the period (2,636) (1,039) (2,758)
Total recognised income and expense relating to the 57 (3,932) (4,648)
period
Attributable to:
Equity holders of the parent (22) (3,989) (5,176)
Minority equity interests 79 57 528
57 (3,932) (4,648)
NOTES
1. SEGMENTAL ANALYSIS
Primary reporting format - geographic segments: At 30 September 2007, the Group
is organised into three distinct independently managed geographic segments, Asia
Pacific, North America and Europe. The following table presents revenue and
profit information for these segments.
6 months to 6 months to 6 months to 6 months to
30 September 30 September 30 September 30 September
2007 2006 2006 2006
£'000 £'000 £'000 £'000
Continuing and Total Continuing Discontinued Total
By Geographical segment
Total revenue by origin
Asia Pacific 5,894 6,261 - 6,261
North America 11,222 13,255 7 13,262
Europe 35,601 38,202 - 38,202
52,717 57,718 7 57,725
Inter-segmental sales
Asia Pacific 569 787 - 787
North America 130 160 - 160
Europe 4,859 5,910 - 5,910
5,558 6,857 6,857
External sales by origin
Asia Pacific 5,325 5,474 - 5,474
North America 11,092 13,095 7 13,102
Europe 30,742 32,292 - 32,292
47,159 50,861 7 50,868
External sales by destination
UK 15,549 17,345 - 17,345
Continental Europe 14,208 13,480 - 13,480
Americas 10,358 12,836 7 12,843
Asia Pacific 6,196 5,610 - 5,610
Rest of World 848 1,590 - 1,590
47,159 50,861 7 50,868
Profit/(loss) from operations
Asia Pacific 229 540 - 540
before exceptional items
exceptional items - - - -
229 540 540
North America 610 984 45 1,029
before exceptional items
exceptional items 258 (242) (172) (414)
868 742 (127) 615
Europe 15 490 - 490
before exceptional items
exceptional items (61) (198) - (198)
(46) 292 292
Central costs (1,060) (997) - (997)
before exceptional items
exceptional items (381) 20 - 20
(1,441) (977) (977)
Total (loss)/profit from operations before (206) 1,017 45 1,062
exceptional items
Total (loss)/profit from operations (390) 597 (127) 470
2. PRESENTATION OF INTERIM FINANCIAL STATEMENTS
Authorisation of financial statements
The consolidated financial statements of API Group plc for the six months ended
30 September 2007 were authorised for issue in accordance with a resolution of
the directors on 14 December 2007. API Group plc is a public limited company
incorporated in the United Kingdom whose shares are publicly traded.
Basis of preparation
These consolidated interim financial statements are presented in sterling and
all values are rounded to the nearest thousand (£'000) except when otherwise
indicated.
The financial information contained in this interim statement is unaudited and
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985 and therefore does not include all the information and
disclosures required in the annual financial statements and should be read in
conjunction with the Group's latest annual financial statements as at 30
September 2006 which were prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The audited annual financial
statements for the year ended 30 September 2006, which represent the statutory
accounts for that year, and on which the auditors gave an unqualified opinion,
have been filed with the Registrar of Companies.
Accounting policies
The accounting policies adopted are consistent with the annual financial
statements for the year ended 30 September 2006, which were prepared in
accordance with International Financial Reporting Standards as adopted by the
EU.
3. EXCEPTIONAL ITEMS
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
£'000 £'000 £'000
Exceptional items charged against operating (loss)/
profit comprise
Redundancy and restructuring costs (442) (239) (651)
Charlotte factory closure 258 (242) (242)
London office provision release/(closure costs) - 24 (7)
Release of provision for vacant property - 37 37
(184) (420) (863)
Exceptional items are material items which derive from events or transactions
that fall within the ordinary activities of the Group and which need to be
disclosed by virtue of their size or incidence.
Redundancy and restructuring costs
During the period, the group provided for severance costs of £442,000.
Comparative figures are in respect of restructuring costs, mainly as a result of
redundancy and relocation of employees in the United Kingdom.
Charlotte factory closure
During the period the Charlotte factory site was sold, realising a profit of
£258,000. The comparative figures relate to the costs associated with the
closure of the factory.
4. EARNINGS PER SHARE
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
£'000 £'000 £'000
Net loss attributable to equity holders of the (1,833) (1,289) (3,223)
parent company - continuing operations
Loss attributable to equity holders of the parent (929) (127) (230)
company - discontinued operations
Net loss attributable to equity holders of the (2,762) (1,416) (3,453)
parent company
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
No No No
Basic weighted average number of ordinary 34,412,276 34,391,292 34,359,671
shares
Dilutive effect of employee share options - 903,820 903,820
Diluted weighted average number of ordinary 34,412,276 35,295,112 35,263,491
shares
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
Earnings per share pence pence pence
Continuing operations
Basic loss per share (5.3) (3.7) (9.4)
Diluted loss per share (5.3) (3.6) (9.1)
Discontinued operations
Basic loss per share (2.7) (0.4) (0.7)
Diluted loss per share (2.7) (0.4) (0.7)
Total
Basic loss per share (8.0) (4.1) (10.1)
Diluted loss per share (8.0) (4.0) (9.8)
The weighted average number of shares excludes the shares owned by the API Group
plc No.2 Employee Benefit Trust.
Under IAS 33, the weighted average number of ordinary shares in issue used for
calculating the diluted earnings per share is adjusted by the number of share
options which are contingently issuable and which satisfy the conditions
attached to the share options at the balance sheet date. At 30 September 2007,
the conditions attached to all share options outstanding at that date have not
been met, so no adjustment has been made to the weighted average number of
shares. Consequently, the diluted earnings per share for the 6 months ended 30
September 2007 are identical to the basic earnings per share.
5. TAXATION
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
£'000 £'000 £'000
Current income tax
Overseas tax (196) (321) (613)
Total current income tax (196) (321) (613)
Deferred tax
Origination and reversal of temporary (149) (253) (402)
differences
Adjustment to previous year - 280 280
Total deferred tax (149) 27 (122)
Total charge in the income statement (345) (294) (735)
6. DISCONTINUED OPERATIONS
6 months to 6 months to 12 months to
30 September 30 September 30 September
2007 2006 2006
£'000 £'000 £'000
Revenue - 7 129
Expenses - (134) (359)
Operating loss and loss after tax for the - (127) (230)
period for discontinued operations
Loss on disposal of discontinued (929) - -
operations
Total charge in the income statement (929) (127) (230)
The loss on disposal of discontinued operations relates to the sale of the
Converted Products division in January 2005. Following settlement of a number of
disputes with the purchaser, deferred consideration of £750,000, previously held
in other debtors, has now been written off and other settlement costs payable to
the purchaser and related legal fees have been provided.
Discontinued operations in prior periods represent the results of Chromagem, a
subsidiary which ceased trading in 2006.
NOTES (continued)
7. CHANGES IN EQUITY
Shareholders' Minority Total
equity Interest equity
£'000 £'000 £'000
Balance at 1 October 2005 22,959 5,460 28,419
Total recognised income and expense for the period (1,187) 471 (716)
Exercise of employee share options 53 - 53
Share based payment 74 - 74
Balance at 31 March 2006 21,899 5,931 27,830
Total recognised income and expense for the period (3,989) 57 (3,932)
Dividends - (550) (550)
Share based payment 57 - 57
Balance at 30 September 2006 17,967 5,438 23,405
Total recognised income and expense for the period (4,001) 61 (3,940)
Share based payment 86 - 86
Balance at 31 March 2007 14,052 5,499 19,551
Total recognised income and expense for the period (22) 79 57
Exercise of employee share options 80 - 80
Share based payment 161 - 161
Balance at 30 September 2007 14,271 5,578 19,849
8. CONTINGENT LIABILITIES
In the Interim Report for the 6 months ending 31 March 2007, a contingent
liability of £0.75 million was disclosed. This related to deferred consideration
arising from the sale of the Converted Products Division in January 2005, which
was withheld by the purchaser. At the time of announcing the March results, the
Directors were of the opinion, in accordance with legal advice received, that a
successful recovery of this amount was probable and consequently no provision
was made against the recoverability of the outstanding deferred consideration.
In September 2007 substantial claims were made by the purchaser following an
unfavourable outcome to expert determination proceedings relating to the closing
valuation of the Division's net assets. After taking further legal advise and in
view of the high level of legal fees required to pursue recovery of the deferred
consideration and disputing the additional claims, the Board concluded that an
early settlement was in the best interests of Shareholders. The terms of the
settlement achieved included agreement by the Company not to pursue its claim
for the deferred consideration in exchange for withdrawal of claims by the
purchaser relating to the net asset position. Accordingly, the deferred
consideration of £0.75 million has now been written off and provision has been
made for the agreed settlement relating to the completion balance sheet and
related legal fees. These items have been included in Discontinued Operations
within the Income Statement for the 6 months ending 30 September 2007 - see Note
6.
During the 6 months ended 30 September 2007, the Group also received a claim in
respect of alleged breach of warranties from the purchaser of the Converted
Products Division. The purchaser has acknowledged that the maximum amount which
it may recover in connection with the material element of the claim is capped at
£3.1 million. The Directors consider that any amount which may be recovered by
the purchaser would be substantially lower than the capped amount of this claim
and they believe that the Group has a strong basis upon which the claim can be
defended. Accordingly, no provision has been made in the accounts in respect of
this claim.
INDEPENDENT REVIEW REPORT TO API GROUP PLC Introduction
We have been engaged by the company to review the condensed set of financial
statements in the interim financial statements for the 6 months ended 30
September 2007 which comprises the Group Income Statement, Group Balance Sheet,
Group Cash Flow Statement, Group Statement of Recognised Income and Expenditure,
and the related notes 1 to 8. We have read the other information contained in
the interim financial statements and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial statements.
This report is made solely to the company in accordance with guidance contained
in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed
by the Independent Auditor of the Entity' issued by the Auditing Practices
Board. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our work, for this report,
or for the conclusions we have formed.
Directors' Responsibilities
The interim financial statements are the responsibility of, and have been
approved by, the directors. The Directors are responsible for preparing the
interim financial statements in accordance with the Listing Rules of the United
Kingdom's 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.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards as
adopted by EU. The financial information included in this interim financial
statement has been prepared in accordance with the Listing Rules of the United
Kingdom's Financial Services Authority.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the interim financial statement based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the interim financial
statements for the 6 months ended 30 September 2007 is not prepared, in all
material respects, in accordance with the accounting policies outlined in Note
2, which comply with International Financial Reporting Standards and which the
group intends to apply in its financial statements for the period ended 31 March
2008 and in accordance with the Listing Rules of the United Kingdom's Financial
Services Authority.
Ernst & Young LLP Manchester
17 December 2007
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