2Q09 part 1 of 2

RNS Number : 3637W

BP PLC

28 July 2009

 



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BP p.l.c.  Group results Second quarter and half year 2009(a)

London 28 July 2009 

FOR IMMEDIATE RELEASE

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008		%
						$ million
9,358		2,562		4,385		Profit for the period(b)				6,947		16,452
						Inventory holding (gains)
(2,612)		(175)		(1,245)		losses, net of tax				(1,420)		(3,475)
6,746		2,387		3,140		Replacement cost profit				5,527		12,977		(57)%
35.83		12.75		16.76		- per ordinary share (cents)				29.51		68.84		(57)%
2.15		0.77		1.01		- per ADS (dollars)				1.77		4.13

• BP's second quarter replacement cost profit was $3,140 million, compared with $6,746 million a year ago, a decrease of 53%. For the half year, replacement cost profit was $5,527 million compared with $12,977 million a year ago, down 57%.

• Non-operating items and fair value accounting effects for the second quarter had a net $202 million favourable impact compared to a net $1,775 million unfavourable impact in the second quarter of 2008. For the half year, the respective amounts were $8 million favourable and $1,779 million unfavourable - see further details on page 2. 

• Finance costs and net finance income or expense relating to pensions and other post-retirement benefits were $321 million for the second quarter, compared to $221 million for the same period last year. For the half year, the respective amounts were $689 million and $467 million. The net increase in cost was primarily due to a reduction in the expected return on pension plan assets.

• The effective tax rate on replacement cost profit for the second quarter and half year was 35% and 36% respectively, the same as a year ago.

• Net cash provided by operating activities for the quarter and half year was $6.8 billion and $12.3 billion compared with $6.7 billion and $17.6 billion respectively a year ago.

• Net debt at the end of the quarter was $27.1 billion. The ratio of net debt to net debt plus equity was 22% compared with 20% a year ago.

• Total capital expenditure for the second quarter and half year was $4.8 billion and $9.4 billion respectively. Capital expenditure, excluding acquisitions and asset exchanges, is expected to be less than $20 billion for the year. Disposal proceeds were $0.7 billion for the quarter and $1.0 billion for the half year.

• The quarterly dividend, to be paid in September, is 14 cents per share ($0.84 per ADS), the same as a year ago. In sterling terms, the quarterly dividend is 8.503 pence per share, compared with 7.039 pence per share a year ago, an increase of 21%. 

(a)

This results announcement also represents BP's half-yearly financial report for the purposes of the Disclosure and Transparency Rules made by the UK Financial Services Authority. In this context: (i) the condensed set of financial statements can be found on pages 10 - 15 and 19 - 23; (ii) pages 1 - 8, 16 - 18 and 24 - 26 comprise the interim management report; and (iii) the directors' responsibility statement and auditors' independent review report can be found on page 9.

(b)

Profit attributable to BP shareholders.

The commentaries above and following are based on replacement cost profit and should be read in conjunction with the cautionary statement on page 8.

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Analysis of replacement cost profit before interest and tax and reconciliation to profit for the period

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
10,771		4,320		5,046		Exploration and Production				9,366		20,843
539		1,090		680		Refining and Marketing				1,770		1,788
(314)		(761)		(583)		Other businesses and corporate				(1,344)		(527)
(221)		(405)		76		Consolidation adjustment(a)				(329)		(1,005)
10,775		4,244		5,219		RC profit before interest and tax(b)				9,463		21,099
						Finance costs and net finance income
						or expense relating to pensions and
(221)		(368)		(321)		other post-retirement benefits				(689)		(467)
(3,696)		(1,454)		(1,714)		Taxation on a replacement cost basis				(3,168)		(7,425)
(112)		(35)		(44)		Minority interest				(79)		(230)
						Replacement cost profit attributable
6,746		2,387		3,140		to BP shareholders				5,527		12,977
3,952		254		1,874		Inventory holding gains (losses)				2,128		5,278
						Taxation (charge) credit on inventory
(1,340)		(79)		(629)		holding gains and losses				(708)		(1,803)
						Profit for the period attributable to BP
9,358		2,562		4,385		shareholders				6,947		16,452

(a)	The consolidation adjustment for the first quarter of 2009 was the outcome of higher margins and volumes.
(b)	Replacement cost profit reflects the replacement cost of supplies. For further information see page 15.

Total of non-operating items and fair value accounting effects(a)(b) 

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
(2,349)		469		642		Exploration and Production				1,111		(2,984)
(260)		(459)		(292)		Refining and Marketing				(751)		450
(123)		(321)		(39)		Other businesses and corporate				(360)		(204)
(2,732)		(311)		311						-		(2,738)
957		117		(109)		Taxation credit (charge)(c)				8		959
(1,775)		(194)		202						8		(1,779)

(a)	An analysis of non-operating items by type is provided on page 16 and an analysis by region is shown on pages 5, 7 and 8.
(b)	Information on fair value accounting effects is non-GAAP. For further details, see page 17.
(c)	Tax is calculated using the quarter's effective tax rate on replacement cost profit.

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Per share amounts

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						Per ordinary share (cents)(a)
49.70		13.69		23.41		Profit for the period				37.10		87.28
35.83		12.75		16.76		RC profit for the period				29.51		68.84
						Per ADS (dollars)(a)
2.98		0.82		1.40		Profit for the period				2.23		5.23
2.15		0.77		1.01		RC profit for the period				1.77		4.13

(a)	See Note 4 on page 21 for details of the calculation of earnings per share.

Net debt ratio - net debt: net debt + equity

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
30,189		34,698		36,240		Gross debt				36,240		30,189
						Less: fair value asset (liability) of
900		(323)		179		hedges related to finance debt				179		900
29,289		35,021		36,061						36,061		29,289
3,593		8,360		8,959		Cash and cash equivalents				8,959		3,593
25,696		26,661		27,102		Net debt				27,102		25,696
105,965		91,179		96,949		Equity				96,949		105,965
20%		23%		22%		Net debt ratio				22%		20%

Net debt and net debt ratio are non-GAAP measures. Net debt includes the fair value of associated derivative financial instruments that are used to hedge foreign exchange and interest rate risks relating to finance debt, for which hedge accounting is claimed. The derivatives are reported on the balance sheet within the headings 'Derivative financial instruments'. We believe that net debt and net debt ratio provide useful information to investors. Net debt enables investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. The net debt ratio enables investors to see how significant net debt is relative to equity from shareholders.

Dividends

Dividends payable

BP today announced a dividend of 14 cents per ordinary share to be paid in September. Holders of ordinary shares will receive 8.503 pence per share and holders of American Depositary Receipts $0.84 per ADS. The dividend is payable on 8 September 2009 to shareholders on the register on 14 August 2009. Participants in the Dividend Reinvestment Plan (DRIP) or the DRIP facility in the US Direct Access Plan will receive the dividend in the form of shares, also on 8 September 2009.

Dividends paid
Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						Dividends paid per ordinary share
13.525		14.000		14.000		cents				28.000		27.050
6.830		9.818		9.584		pence				19.402		13.643
81.15		84.00		84.00		Dividends paid per ADS (cents)				168.00		162.30

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Exploration and Production

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
10,819		4,286		5,062		Profit before interest and tax(a)				9,348		20,873
(48)		34		(16)		Inventory holding (gains) losses				18		(30)
						Replacement cost profit before
10,771		4,320		5,046		interest and tax				9,366		20,843
						By region
3,601		1,143		1,161		US				2,304		6,686
7,170		3,177		3,885		Non-US				7,062		14,157
10,771		4,320		5,046						9,366		20,843

(a)	Includes profit after interest and tax of equity-accounted entities.

The replacement cost profit before interest and tax for the second quarter and half year was $5,046 million and $9,366 million respectively, decreases of 53% and 55% compared to the same periods in 2008. The decreases in both periods were primarily due to lower realizations and lower earnings from equity-accounted entities, primarily TNK-BP due to lower prices and the effect of lagged tax reference prices. Additionally, the results for both periods reflected higher depreciation but benefited from the impact of higher reported volumes and lower costs, with unit production costs 12% lower than in the second quarter of 2008. 

In addition, the second quarter and half year benefited from net non-operating gains of $507 million and $818 million respectively, primarily related to gains on the sale of operations and fair value gains on embedded derivatives. The corresponding periods in 2008 included net non-operating losses of $1,976 million and $2,352 million respectively. In the second quarter and half year, fair value accounting effects had favourable impacts of $135 million and $293 million respectively compared with unfavourable impacts of $373 million and $632 million in the same periods of last year.

Reported production for the quarter was 4,005mboe/d, more than 4% higher than the second quarter of 2008. After adjusting for entitlement impacts in our production-sharing agreements (PSAs) and the effect of OPEC quota restrictions, the increase was also 4%. This primarily reflects the continued ramp-up of production from major projects that started up in 2008 and the first half of 2009. As previously indicated we expect production in 2009 to be higher than 2008. The actual growth rate will depend on a number of factors including the impact of oil price in PSAs and OPEC quota restrictions. We expect the quarterly phasing of underlying production during the year to reflect the normal seasonal effects associated with turnaround activity. Reported production for the half year was 4,011mboe/d, more than 3% higher than the same period of 2008. After adjusting for the effect of entitlement changes in our PSAs and the effect of OPEC quota restrictions, production was 4% higher.

During the quarter we announced that production had commenced from the Dorado (BP 75% and operator) and King South (BP 100%) projects in the Gulf of Mexico. Both projects are subsea tiebacks to the existing Marlin Platform.

On 27 May, Sonangol and BP announced the Oberon oil discovery in ultra-deepwater Block 31, offshore Angola (BP 26.67% and operator). This is the eighteenth discovery made by BP in Block 31.

In Egypt, the Egyptian Natural Gas Holding Company awarded BP two blocks in the 2008 International bid round. North Tineh Offshore is in a deepwater offshore area of the Nile Delta, will be operated by BP (100%) and was ratified in June.  North Damietta Offshore is an adjacent block that BP will operate with Shell and Petronas, with one third working interest each. In Iraq's first licensing round on 30 June, BP (operator) and China National Petroleum Corporation were awarded the rights to redevelop the Rumaila oilfield. 

During the quarter, we sold our wholly-owned subsidiary, BP West Java Limited (BPWJ), to PT Pertamina (Persero). Pertamina purchased BPWJ for a consideration of $278 million.

Shortly after the end of the quarter, BP, as operator on behalf of the Tangguh project partners, announced that the first cargo of liquefied natural gas (LNG) had been lifted from the Tangguh LNG project (BP 37.16% and operator) in Papua Barat, Indonesia. We also announced, together with SOCAR (the State Oil Company of the Republic of Azerbaijan), that we have signed a memorandum of understanding to jointly explore and develop the Shafag and Asiman structures in the Azerbaijan sector of the Caspian Sea. In the Gulf of Mexico we announced the drilling of a successful appraisal well in a previously untested southern segment of the Mad Dog field (BP 60.5% and operator).

Finally, in line with UK regulatory requirements, the following is a summary of the principal disclosures made in our first-quarter results announcement. In the Gulf of Mexico, production from Thunder Horse continued to ramp up as wells in Thunder Horse North came onstream. In Russia, TNK-BP announced that it had commenced commercial production from the Urna and Ust-Tegus fields in the Uvat area of the Tyumen region. Offshore Angola, Sonangol and BP announced the Leda oil discovery in ultra-deepwater Block 31 (BP 26.67% and operator).

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Exploration and Production

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
						Non-operating items
(8)		71		118		US				189		(16)
(1,968)		240		389		Non-US				629		(2,336)
(1,976)		311		507						818		(2,352)
						Fair value accounting effects(a)
(236)		208		92		US				300		(378)
(137)		(50)		43		Non-US				(7)		(254)
(373)		158		135						293		(632)
						Exploration expense
47		44		235		US				279		119
71		75		112		Non-US				187		292
118		119		347						466		411
						Production (net of royalties)(b)
						Liquids (mb/d) (net of royalties)(c)
534		643		661		US				652		544
226		212		201		Europe				206		230
825		822		837		Russia				830		821
823		827		827		Rest of World				827		836
2,408		2,504		2,526						2,515		2,431
						Natural gas (mmcf/d) (net of royalties)
2,140		2,335		2,339		US				2,337		2,144
744		838		645		Europe				741		870
546		642		555		Russia				598		529
4,818		4,952		5,041		Rest of World				4,997		4,813
8,248		8,767		8,580						8,673		8,356
						Total hydrocarbons (mboe/d)(d)
903		1,046		1,064		US				1,055		914
354		357		312		Europe				334		381
919		933		933		Russia				933		913
1,654		1,680		1,696		Rest of World				1,689		1,663
3,830		4,016		4,005						4,011		3,871
						Average realizations(e)
109.95		41.26		52.33		Total liquids ($/bbl)				46.84		100.66
6.63		3.63		2.86		Natural gas ($/mcf)				3.25		6.25
75.39		31.40		35.02		Total hydrocarbons ($/boe)				33.22		68.85

(a)	These effects represent the favourable (unfavourable) impact relative to management's measure of performance. Further information on fair value accounting effects is provided on page 17.
(b)	Includes BP's share of production of equity-accounted entities.
(c)	Crude oil and natural gas liquids.
(d)	Natural gas is converted to oil equivalent at 5.8 billion cubic feet = 1 million barrels.
(e)	Based on sales of consolidated subsidiaries only - this excludes equity-accounted entities.
Because of rounding, some totals may not agree exactly with the sum of their component parts.

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Refining and Marketing

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
4,430		1,417		2,536		Profit before interest and tax(a)				3,953		7,003
(3,891)		(327)		(1,856)		Inventory holding (gains) losses				(2,183)		(5,215)
						Replacement cost profit
539		1,090		680		before interest and tax				1,770		1,788
						By region
(401)		308		(326)		US				(18)		(247)
940		782		1,006		Non-US				1,788		2,035
539		1,090		680						1,770		1,788

(a)	Includes profit after interest and tax of equity-accounted entities.

The replacement cost profit before interest and tax for the second quarter and half year was $680 million and $1,770 million respectively. The results in the equivalent periods of 2008 were $539 million and $1,788 million. The second quarter's result included a net non-operating charge of $166 million, compared to a net charge of $99 million a year ago. For the half year, the net non-operating charge was $516 million, primarily relating to restructuring, compared to a net gain of $510 million a year ago. Fair value accounting effects had unfavourable impacts of $126 million in the second quarter and $235 million for the half year. A year ago, there were unfavourable impacts of $161 million and $60 million respectively. 

After adjusting for non-operating items and fair value accounting effects, both the second quarter and half-year results were stronger than in 2008, despite a weaker refining environment. The turnaround of the segment continues to deliver significantly lower costs. Improved operational performance has also contributed to the year-on-year improvement, particularly for the half year. For the first half these two factors have more than offset the adverse impact of weaker refining margins. The first half also benefited from a much stronger supply and trading contribution, which returned to a more normal level in the second quarter after the particularly strong first-quarter performance. The weakening of the US dollar and the increase in crude prices also created a gain on in-transit barrels in the second quarter.

Within our Fuels Value Chains, BP's actual refining margins in the first half decreased even more year on year than the global indicator margin, as our highly upgraded facilities were impacted by a very narrow light-heavy crude spread and the collapse of gasoil cracks due to the weakening economy. Marketing volumes of refined products were down 5% in the first half, compared to the same period in 2008.

The International Businesses continued to perform well with some recovery in petrochemicals margins, despite volumes that were depressed by more than 24% in the first half compared to a year ago, and sustained delivery in Lubricants.

Refining throughput for the quarter was 2,269mb/d compared to 2,239mb/d for the same period a year ago and for the half year it was 2,257mb/d compared to 2,202mb/d in 2008. Solomon availability, at 93.6%, was 1.3 percentage points above the first quarter of 2009 and 5.3 percentage points higher than the second quarter of 2008. The year-on-year increase was principally driven by improvements at the Texas City refinery.

On 26 June, BP announced the sale of the ground fuels marketing business in Greece, to Hellenic Petroleum for €359 million subject to various adjustments at closing. The deal is subject to regulatory approval and certain conditions, but is expected to complete before the end of 2009.

Indicator refining margins in the third quarter to date have been lower than in the second quarter and substantially below 2008 levels. Refining availability is expected to remain higher than in 2008, but otherwise the outlook continues to be challenging with high distillate inventories and continuing low demand.

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 Refining and Marketing

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
						Non-operating items
(16)		(134)		(27)		US				(161)		758
(83)		(216)		(139)		Non-US				(355)		(248)
(99)		(350)		(166)						(516)		510
						Fair value accounting effects(a)
53		65		(46)		US				19		148
(214)		(174)		(80)		Non-US				(254)		(208)
(161)		(109)		(126)						(235)		(60)
						Refinery throughputs (mb/d)
1,189		1,164		1,188		US				1,176		1,133
753		783		763		Europe				773		764
297		299		318		Rest of World				308		305
2,239		2,246		2,269		Total throughput				2,257		2,202
88.3		92.3		93.6		Refining availability (%)(b)				92.9		88.1
						Oil sales volumes (mb/d)
						Refined products
1,498		1,402		1,431		US				1,417		1,477
1,551		1,529		1,457		Europe				1,493		1,558
716		617		634		Rest of World				625		704
3,765		3,548		3,522		Total marketing sales				3,535		3,739
2,017		2,170		2,085		Trading/supply sales				2,127		2,032
5,782		5,718		5,607		Total refined product sales				5,662		5,771
1,848		1,844		1,994		Crude oil				1,919		1,854
7,630		7,562		7,601		Total oil sales				7,581		7,625
						Global Indicator Refining Margin ($/bbl)(c)
7.46		4.67		3.10		NWE				3.88		6.12
8.59		6.69		6.00		USGC				6.34		7.40
6.53		7.03		8.54		US Midwest				7.79		3.82
9.94		9.96		7.14		USWC				8.54		7.92
9.41		2.51		(0.11)		Singapore				1.19		7.09
8.19		6.20		4.98		BP Average				5.59		6.38
						Chemicals production (kte)
1,022		713		745		US				1,458		2,058
821		788		867		Europe				1,655		1,790
1,598		1,119		1,035		Rest of World				2,154		3,129
3,441		2,620		2,647		Total production				5,267		6,977

(a)	These effects represent the favourable (unfavourable) impact relative to management's measure of performance. Further information on fair value accounting effects is provided on page 17.
(b)	Refining availability represents Solomon Associates' operational availability, which is defined as the percentage of the year that a unit is available for processing after subtracting the annualized time lost due to turnaround activity and all planned mechanical, process and regulatory maintenance downtime.
(c)	The Global Indicator Refining Margin (GIM) is the average of regional indicator margins weighted for BP's crude refining capacity in each region. Each regional indicator margin is based on a single representative crude with product yields characteristic of the typical level of upgrading complexity. The regional indicator margins may not be representative of the margins achieved by BP in any period because of BP's particular refinery configurations and crude and product slate.

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Other businesses and corporate

Second		First		Second
quarter		quarter		quarter						First half
2008		2009		2009						2009		2008
						$ million
(301)		(800)		(581)		Profit (loss) before interest and tax(a)				(1,381)		(494)
(13)		39		(2)		Inventory holding (gains) losses				37		(33)
						Replacement cost profit (loss) before
(314)		(761)		(583)		interest and tax				(1,344)		(527)
						By region
(185)		(279)		(129)		US				(408)		(337)
(129)		(482)		(454)		Non-US				(936)		(190)
(314)		(761)		(583)						(1,344)		(527)
						Results include
						Non-operating items
(33)		(116)		(33)		US				(149)		(82)
(90)		(205)		(6)		Non-US				(211)		(122)
(123)		(321)		(39)						(360)		(204)

(a)	Includes profit after interest and tax of equity-accounted entities.

Other businesses and corporate comprises the Alternative Energy business, Shipping, the group's aluminium asset, Treasury (which includes interest income on the group's cash and cash equivalents), and corporate activities worldwide.

The replacement cost loss before interest and tax for the second quarter and half year was $583 million and $1,344 million respectively, compared with losses of $314 million and $527 million a year ago. The increased charge in both periods was primarily due to negative foreign exchange effects and a much weaker business environment for Shipping and Alternative Energy, partially offset by the continued reduction in corporate costs. The net non-operating charge for the second quarter and half year was $39 million and $360 million respectively, compared with net charges of $123 million and $204 million a year ago. 

In Alternative Energy, our BP Solar business and RGE Energy AG of Germany announced a partnership to build one of the world's largest solar projects in Germany. The planned solar system is expected to deliver around 43,000 megawatt hours per year of green electricity. Solar sales in the second quarter and half year were 27MW and 42MW respectively, compared to 39MW and 73MW in the same periods of last year, reflecting ongoing demand weakness in the market.

On 1 July, US Department of Energy Secretary Steven Chu announced that Hydrogen Energy LLC, a 50:50 joint venture between BP and Rio Tinto, has been selected for up to $308 million in project funding from the American Recovery and Reinvestment Act. 

In wind generation, BP's net capacity(b) at the end of the second quarter was 678MW, compared to 172MW a year ago.

Finally, in line with UK regulatory requirements, the following is a summary of the principal disclosures made in our first-quarter results announcement. We announced the completion of phase I of the 100MW Flat Ridge Wind Farm in Barber County, Kansas, US, a 50:50 joint venture between BP and Westar Energy, Inc. In addition, commercial operations commenced at the Fowler Ridge Wind Farm in Benton County, Indiana, the largest in the US Midwest at 400MW, where BP and Dominion are equal partners in a total capacity of approximately 300MW. In solar manufacturing, we announced our intention to phase out module assembly at Frederick, Maryland, in the US, and to close our cell manufacturing and module assembly facilities in Madrid, Spain. 

(b)	Net wind capacity is the sum of the rated capacities of the assets/turbines that have entered into commercial operation, including BP's share of equity-accounted entities.

Cautionary statement regarding forward-looking statements: The foregoing discussion contains forward-looking statements particularly those regarding capital expenditure, production, phasing of production, operatorship of new projects, expected timing of completion of sale of Greek fuels marketing business, refining availability, outlook for the Refining and Marketing segment and expected delivery of green electricity. By their nature, forward-looking statements involve risk and uncertainty and actual results may differ from those expressed in such statements depending on a variety of factors including the following: the timing of bringing new fields onstream; industry product supply; demand and pricing; operational problems; general economic conditions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; exchange rate fluctuations; development and use of new technology; the success or otherwise of partnering; the actions of competitors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism or sabotage; and other factors discussed in this Announcement. For more information you should refer to our Annual Report and Accounts 2008 and our 2008 Annual Report on Form 20-F filed with the US Securities and Exchange Commission. The full text of BP p.l.c.'s 2009 half-yearly financial report is also available at www.bp.com/second_quarter_2009_results

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Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, the condensed set of financial statements on pages 10 - 15 and 19 - 23 has been prepared in accordance with IAS 34 'Interim Financial Reporting', and that the interim management report on pages 1 - 8, 16 - 18 and 24 - 26 includes a fair review of the information required by the Disclosure and Transparency Rules.

The directors of BP p.l.c. are listed in BP Annual Report and Accounts 2008, with the exception of Sir Tom McKillop who retired from the board on 16 April 2009 and R W Dudley who joined the board on 6 April 2009.

By order of the board

Tony Hayward	Byron Grote
Group Chief Executive	Chief Financial Officer
27 July 2009	27 July 2009

Independent review report to BP p.l.c.

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the group income statement, group balance sheet, group statement of comprehensive income, group statement of changes in equity, condensed group cash flow statement, the related tables on pages 14 and 15, and Notes 1 to 9. We have read the other information contained in the half-yearly financial report 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 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 (ISRE 2410). 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 half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European Union (EU). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as issued by the IASB and as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with ISRE 2410. 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 half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as issued by the IASB and as adopted by the EU and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

London

27 July 2009

 

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