Interim Results
Regal Petroleum PLC
28 September 2005
For Immediate Release Wednesday 28th September 2005
REGAL PETROLEUM PLC
INTERIM RESULTS FOR THE SIX MONTHS
ENDED 30 JUNE 2005
Regal Petroleum plc ('Regal', 'the Company' or 'the Group'), the oil and gas
exploration and production company, today announces its results for the six
months ended 30 June 2005.
Operational highlights include:
Greece
• A period of industrial unrest has led to changed operational management
arrangements being put in place. No further Regal cash injections to
Greece are envisaged in the immediate term.
• Independent reserves auditors McDaniel's confirms Greece proved and
probable reserves for Prinos, Prinos North and Epsilon of 22MMbbls.
• Completion of drilling of Kallirachi 2 well - discovery of hydrocarbons,
yet poor permeability made the well uncommercial.
• Average production of 2,294 bopd during the period.
• Increased economic interest in Kavala Oil to 95%.
Ukraine
• Average production was 501 barrels of condensate and 5,648 thousand
cubic feet of gas per day (total equivalent of 1,507 boepd) with 4 wells
in production: MEX102, MEX3, GOL1 and GOL2.
• Operations remain cashflow positive and profitable during the period.
• Conclusion of independent audit of reserves by Ryder Scott is imminent.
• Peak Resources - discussions with Peak Resources are still 'open',
however the Board believes any likely outcome of these negotiations would
not be in the best interest of shareholders.
• There is an on-going appeal process in Ukraine surrounding the
distribution of the rights to property which were developed in the Joint
Venture between the Company and Chernihivnaftogasgeology (CNGG). A value
has been determined for these property rights by the Court, but this is
currently being appealed by CNGG and the hearing is scheduled for
Wednesday 5 October 2005. This legal process is not connected in any way
to the Company's licence rights in Ukraine, which are not in question.
Romania
• Suceava Block: successful completion of exploration well SE-1 in April
2005 which produced dry gas (99.4% methane) on a stable flow rate of
1.2 million standard cubic feet per day at a depth of approximately 550
metres.
• Barlad Block: 200km new infill seismic shot in second quarter and
licence ratified in the first quarter.
Egypt
• Proposal for initial exploration well accepted by the Government and
the Company is currently pursuing potential farm-out opportunities.
Board appointments
• Dr Rex Gaisford CBE appointed Chief Executive Officer on 9 June 2005.
• Richard Hardman CBE appointed Exploration Director on 15 June 2005.
• Sir Peter Heap appointed Non-Executive Chairman on 15 June 2005.
• Resignation of Frank Timis as Chairman, Bill Humphries as Non-Executive
Director and Christopher Green as Director of Exploration.
Financial highlights
• Turnover increased to $16.7m (30-Jun-04: $13.4m).
• Loss for the period of $21.7m (30-Jun-04: loss of $2.5m), with loss per
share of 19.0 cents (30-Jun-04: loss per share of 2.3 cents).
• The loss includes write downs of $9.5 million resulting principally
from the King Alexander Rig and foreign exchange losses of $7.8 million.
• Average production of 3,800 boepd during the period (30-Jun-04: 4,800
boepd).
• Placing of shares which raised £42.6 ($80.6) million net of expenses
during the period.
• Net cash of $54.0m (30-Jun-04: $65.7m) at period end and net assets of
$181.0m (30-Jun-04: $131.5m). At the date of this announcement the
Company had net cash of approximately $42.0 million.
TRADING STATEMENT
Earnings for Second Half of 2005
The Directors of Regal Petroleum plc advised on 2 September 2005 that, due to
lower than expected production of oil from their Greek operations, earnings for
the second half of 2005 will be substantially lower than previously forecast.
The lower than expected production in Greece has been caused by a period of
industrial unrest at the Kavala Oil site and disappointing results from the well
work-over programme. The industrial unrest has been resolved and production will
continue at a level necessary to support on-going costs. However, as reported
below the well workover program is suspended whilst its economic value is being
re-assessed. Similarly, no exploration or development capital expenditure is
currently contemplated on these licences in the near term.
Peak Resources
The Company advises that it is continuing discussions with Peak Resources
Limited of Hong Kong ('Peak Resources') in connection with the possible sale of
its subsidiary company which holds the Company's Ukraine assets. Whilst the
discussion with Peak Resources could be described as 'open' the Board believes
these negotiations would not be in the best interest of the shareholders. The
Company has never regarded a complete 'sell out' of 100% of its assets in the
Ukraine to be the right course of action and remains keen to pursue its original
and preferred course of carrying out the full field development and production
of this asset. The Company continues to receive legal advice and considers the
option and any further extensions to be invalid and unenforceable.
Greece (working interest 95%)
Following recent industrial unrest the Company has agreed that the operational
management of Kavala Oil SA, including the economics of operations, shall be
undertaken by Greek local management, with the assistance of the unionised
workforce with the aim of making the operation economic and successful. Regal's
participation will continue as the majority shareholder of Kavala Oil SA.
The Kavala Oil SA Board has asserted that it will continue its production
operations on the Prinos field as previously and without incurring operational
losses. Regal is not intending to fund any well work-over programme at present,
and will consider the economic viability of further investment in Kavala Oil SA
including development of currently undeveloped but discovered oil, and pursuing
exploration potential, once the economics of the operation under Greek local
management have been assessed.
A positive relationship has been maintained with the Greek Government throughout
this difficult period.
Average production in Greece for the first six months was 2,294 bopd and current
production is approximately 1,900 bopd.
Reserves Report - Greece
Updated from 1 July 2005, auditors McDaniel & Associates Consultants Ltd ('
McDaniel's') have now completed the scope of their audit for the Greece licence
areas, which consist of the three fields: Prinos, Prinos North and Epsilon and
the Directors are able to provide the following results:
Details of the McDaniel's report are summarised as follows:
Prinos
Prinos North Proven +
and Epsilon Proven Probable Probable
Oil MMbbls 7 15 22
Total MMbbls 7 15 22
The Company believes that this report compares with the previously produced
reserves estimate prepared by Troy Ikoda and published in June 2003. The results
of the audit by Troy Ikoda were used in the 2004 Annual Report and Accounts
reserves table and are summarised below. Between June 2003 and the issue of the
McDaniel's report approximately 2MMbbl of production has occurred.
Prinos
Prinos North Proven +
and Epsilon Proven Probable Probable
Oil MMbbls 11 13 24
Total MMbbls 11 13 24
Ukraine (working interest 100%)
The Ukraine 'pilot production' operations continue to be profitable and generate
positive cashflow for the Group.
The Company holds a 100% interest in two concession areas in Ukraine. These are
20 year production and development licences for the concessions which were
awarded to Regal in June 2004. The liquidation of the Company's previous Joint
Venture, with its partner ChernigivNaftoGazGeologiya (CNGG) is being determined
by a court process in Ukraine. This court process was initiated by the Company
and the Court has initially found in Regal's favour. This ruling has been
appealed by CNGG and the hearing has been adjourned to Wednesday 5 October 2005.
Average production in Ukraine for the first six months was 5,648 thousand cubic
feet of gas per day and 501 barrels per day of condensate, the current
production in Ukraine is 5,500 thousand cubic feet of gas per day and 550
barrels per day of condensate from four wells on production: MEX102, MEX3, GOL1
and GOL2. Regal will continue to increase production by exploiting western oil
technology and by performing well simulations on the MEX/GOL field.
Regal engaged the independent reserve auditors Ryder Scott Company, L.C. ('Ryder
Scott') to estimate the remaining reserves in its Ukraine licence. On 1 July
2005 the Company announced that the 'B' reservoir had proved and probable
reserves of 174 MMboe. Ryder Scott is completing the work on the 'T'
reservoirs, as well as more accurately modelling the development plan around the
currently producing wells. The Company has been advised that the work will be
finalised in a few days as the progress of the report has been disrupted by the
effect of Hurricane Rita on the operations of Ryder Scott.
Romania (working interest 100%)
Suceava Block
A full seismic interpretation of the Suceava Block has been carried out on 800km
of 2D seismic shot in 2004 identifying a number of lead and prospect areas. The
first commitment well (SE-1) was completed in the north-west of the Suceava
block in April 2005 as a shallow biogenic gas discovery in the Sarmatian
interval. This well resulted in the discovery of dry gas (99.4% methane) on a
stable flow rate of 1.2 million standard cubic feet per day at a depth of
approximately 550 metres.
Following this discovery a second prospect was identified in the D lead area,
along trend from the SE-1 well at a distance of 45km. A further 200km of 2D
seismic was shot in second quarter of 2005 over the lead D area to further
delineate this prospect. Regal's second commitment well is due to spud fourth
quarter of 2005 to test this D prospect. This is planned to be a shallow well
targeting Sarmatian plays and investigating Eocene and Cretaceous prospectivity.
Surface geochemical analysis is being undertaken over the lead E area (SE-1
well locality) to aid investigation of further prospectivity in this area.
Barlad Block
Since ratification of the Barlad Block in January 2005 Regal has reprocessed a
1,000km grid of 1980's and 1990's vintage seismic and shot 200km new infill
seismic in second quarter of 2005. The interpretation of this data to identify
lead areas is currently underway and should be completed in the fourth quarter
of 2005. Surface geochemical analysis is underway in the north of the block
where no seismic data exists. The results of the seismic interpretation and
surface geochemical analysis will aid positioning of 800km seismic to be
acquired in 2006 as part of Regal's commitment on the block.
Egypt (working interest 100%)
The Company's preferred well location has been approved by the Egyptian General
Petroleum Corporation, drilling materials have been purchased and the Company is
currently co-operating with other operators to secure long-term use of a
drilling rig. It is anticipated that drilling will commence toward the end of
the first quarter of 2006. The dry hole cost of the well is expected to be less
than $4 million.
In accordance with the Company's asset rationalisation policy, the Company is
considering whether to reduce its working interest in its present acreage, and
expand into further concessions.
Liberia (working interest 25%)
The Production Sharing Contracts for Blocks 8 and 9 were finalised and signed by
the National Oil Company of Liberia in June 2005. The Production Sharing
Contracts are now awaiting ratification by the Liberian Government.
Definitions:
MMcf Millions of cubic feet
MMbbls Millions of barrels
MMboe Millions of barrels oil equivalent
Bopd Barrels of oil per day
Boepd Barrels of oil equivalent per day
For further information, please contact:
Regal Tel: 020 7408 9500
Roger Phillips, Group Finance Director
Buchanan Communications Tel: 020 7466 5000
Bobby Morse / Ben Willey
Attached Chairman's Statement
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Notes to the Accounts
CHAIRMAN'S STATEMENT
Dear Shareholder
The first half of 2005 saw a significant turning point in the affairs and
management of Regal Petroleum plc. In the first months of the year considerable
resources and management effort were focused on the drilling of the Kallirachi 2
well in the Company's licence area in Greece. During this period a successful
share placing, in April, significantly increased the capital available to the
Company. When in May the Kallirachi 2 well proved unsuccessful (a common enough
experience in the oil industry, but in this case expectations had been raised to
a high level) the Company's share price plummeted. It was clear that radical
changes were urgently required for the Company to retain its equilibrium. Mr
Frank Timis, the then CEO and Chairman of the Company, stepped down, as did
other executive and Non-Executive directors. Mr Timis was replaced by Dr Rex
Gaisford as CEO and by myself as Non-Executive Chairman, and other new directors
and senior management were brought in, all experienced oil industry
professionals. The new management team at once began the process of
re-evaluating and planning the development of the Company's assets in Greece,
the Ukraine, Romania, Egypt and Liberia. Progress and developments in these
areas in the following months are summarised in the attached Trading Statement.
Notwithstanding the remaining commercial and industrial uncertainties associated
with our operations in Greece and Ukraine which have absorbed an enormous and
disproportionate amount of management time, the Company now looks ahead to a
period of consolidation. Whereas production results in Greece have so far been
disappointing, other areas continue to look promising, with drilling starting or
continuing in the Ukraine, Romania and, next year, in Egypt. In all these areas
the Company will explore the possibility of bringing in new partners to share
risks and costs, as is normal practise in the oil industry. We will also be
looking for new opportunities in other areas. The consolidation period is likely
to last into 2006, after which we confidently expect to move forward with
enhanced oil and gas production and greater profitability in our existing and
possibly also new concession areas. The purported option of Peak Resources over
our Ukraine assets remains unresolved, but the Board still believes these
negotiations not to be in the best interests of shareholders.
Review of Results
The financial results for the six months ended 30 June 2005 are lower than our
earlier expectations and reflect largely the problems encountered in Greece as
described in the accompanying Trading Statement.
In April 2005 Regal successfully placed 11.5 million new ordinary shares and
raised £42.6 ($80.6) million (net of expenses) to develop assets in Greece,
Romania and Egypt.
Turnover for the six months was $16.7 million (30-Jun-04: $13.4 million) which
is mainly attributable to oil sales in Greece and gas and condensate sales in
Ukraine. During the first six months of 2005 the Group achieved an average
daily production of 3,800 boepd at an average sales price of $28/boe.
The operating loss after minority interests for the six months was $21.7 million
(30-Jun-04: $2.5 million). Included in this operating loss:
• In cost of sales is the write down of the King Alexander Rig of $7.8
million, as its value is not certain. Also included in cost of sales is
increased depreciation in relation to Greece and Ukraine of $3.0 million;
due to the write down of reserves in Greece earlier in the year and revised
future capital expenditure plans for the Ukraine at year end.
• Included in Administration expenses are write offs, due to their
uncertainty, of unrecoverable VAT in the Ukraine of $0.9 million,
feasibility studies and consultancy fees connected with energy projects of
$0.8 million and unrealised foreign exchange losses of $7.8 million.
As at 30 June 2005 the Group had no external borrowings. Total interest
receivable for the six months was $0.5 million (30-Jun-04: $0.8 million)
reflecting successful cash management for the period.
The net capital expenditure and financial investment outflow of $36.4 million
(30-Jun-04: $22.8 million) represented the aggressive investment toward
development and exploration, particularly in Greece.
Board appointments
On 1 May 2005 Dr Rex Gaisford CBE was appointed to the Regal Board of Directors
as a Non-Executive Director and on 9 June 2005 Dr Gaisford was appointed Chief
Executive Officer. Dr Gaisford is a qualified mechanical engineer with over 30
years experience in the oil and gas industry, where he specialised in large
scale project development, operations and business development, including 12
years at Amerada Hess Corporation, where he was Executive Vice-President and
Director before retiring in 2000, 3 years as Managing Director of Beatrice
Resources Limited and 7 years as General Manager of Britoil PLC.
On 15 June 2005 I was appointed Non-Executive Chairman and Richard Hardman was
appointed Exploration Director. I have worked as an adviser to numerous
companies including HSBC Investment Bank, Amerada Hess plc and the BOC Group
after a career in the Foreign Office. Richard Hardman is an renowned
explorationist and one of the industry's foremost geologists with over 40 years
industry experience with oil majors including 10 years at BP, 11 years at AMOCO,
3 years at Superior Oil and 18 years at Amerada Hess.
Outlook
During the second half of 2005 Regal will concentrate its exploration and
development efforts in Romania and the Ukraine, and will be monitoring closely
the performance of its subsidiary, Kavala Oil SA, in Greece. Exploration and
development in the Ukraine will be subject to the resolution one way or the
other of the approach from Peak Resources described in the attached Trading
Statement; the Company recognises that the uncertainty that this approach has
caused is delaying the proper development of its assets in the Ukraine, and is
determined to see this matter resolved as rapidly as possible. The drilling of
an exploratory well in Egypt, earlier forecast for later this year, is now
likely to be delayed until 2006, because of the difficulty of obtaining a
drilling rig.
With strong and experienced new management, a healthy cash balance, and good
quality in-the-ground assets, the Company believes that it can look forward to
the future with confidence.
Sir Peter Heap
Chairman
Regal Petroleum plc
Consolidated profit and loss account for the six months ended 30 June 2005
Six months Six months Year
ended ended ended
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
Note $000 $000 $000
Turnover 2 16,743 13,433 42,459
Cost of sales (21,044) (7,518) (48,371)
Gross profit (4,301) 5,915 (5,912)
Other income 995 41 3,386
Administrative expenses (18,117) (9,378) (15,517)
Operating Loss (21,423) (3,422) (18,043)
Interest receivable 517 840 1,244
Loss on sale of fixed assets -
continuing operations (106) - (36)
Interest payable and similar
charges (144) (33) (325)
Loss on ordinary activities before
taxation (21,156) (2,615) (17,160)
Tax on profit on ordinary
activities (567) - (884)
Minority interest - 117 4,363
Loss for the financial period (21,723) (2,498) (13,681)
Loss per ordinary share (cents)
Basic 3 (19.0c) (2.3c) (12.4c)
Diluted (19.0c) (2.3c) (12.4c)
All amounts for the six months ended 30 June 2005 and 2004 relate to continuing
activities.
The notes on pages 13 to 15 form part of these interim accounts
Regal Petroleum plc
Consolidated balance sheet at 30 June 2005
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
Note $000 $000 $000
Fixed assets
Intangible assets 11,178 2,754 6,183
Tangible assets 108,877 56,081 97,877
Investments 431 576 -
120,486 59,411 104,060
Current assets
Stocks 20,669 14,241 10,166
Debtors 17,895 10,171 14,919
Investments 359 3,000 3,342
Cash at bank and in hand 54,016 65,739 25,643
92,939 93,151 54,070
Creditors: amounts falling
due within one year (29,605) (15,912) (30,777)
Net current assets 63,334 77,239 23,293
Total assets less current
liabilities 183,820 136,650 127,353
Creditors: amounts falling
due after more than one year (605) - (682)
Provisions for liabilities and charges (2,170) (1,302) (1,854)
Minority interest - (3,831) -
Net assets 181,045 131,517 124,817
Capital and reserves
Called up share capital 10,827 9,568 9,678
Share premium 216,125 131,417 134,254
Other Reserves 630 4,273 5,036
Profit and loss account deficit (46,537) (13,741) (24,151)
Shareholders' funds - equity 181,045 131,517 124,817
The notes on pages 13 to 15 form part of these interim accounts
Regal Petroleum plc
Consolidated cash flow statement for the six months ended 30 June 2005
Six months Six months Year
ended ended ended
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
Note $000 $000 $000
Net cash outflow from
operating
activities 4 (15,482) (10,325) (5,901)
Returns on investments and
servicing of finance
Interest received 510 840 1,241
Interest paid (50) (100) (324)
Net cash inflow from returns on
investments and servicing of
finance 460 740 917
Taxation (567) - (771)
Capital expenditure and
financial investment
Purchase of tangible fixed assets (36,440) (22,825) (71,586)
Net cash inflow from expenditure
and financial investment (36,440) (22,825) (71,586)
Acquisition and disposals (1,186) (58) -
Cash outflow before use of liquid
resources and financing (53,215) (32,468) (77,341)
Management of liquid
resources and financing
Purchase of current asset investments (179) - (119)
Sale of current asset investments 3,000 - -
2,821 - (119)
Financing
Proceeds from borrowings - 21 1,080
Repayment of borrowings (1,080) (724) -
Issues of ordinary share capital 83,020 70,404 73,350
81,940 69,701 74,430
Increase/(decrease) in cash 31,546 37,233 (3,030)
Regal Petroleum plc
Consolidated statement of total recognised gains and losses
for the six months ended 30 June 2005
Six months Six months Year
ended ended ended
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
restated
$000 $000 $000
Loss for the financial year (21,723) (2,498) (13,681)
Gross exchange differences on the
retranslation of net investments (5,069) (389) 1,147
Total recognised gains and losses
relating to the financial year (26,792) (2,887) (12,534)
Reconciliation of movements in shareholders' funds
for the six months ended 30 June 2005
Six months Six months Year
ended ended ended
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
restated
$000 $000 $000
Retained loss for the
financial period (21,723) (2,498) (13,681)
Other recognised gains and losses
relating to the year (5,069) (389) 1,147
New share capital subscribed
(net of issue costs) 83,020 70,404 73,351
Net addition to shareholders' funds 56,228 67,517 60,817
Opening shareholders' funds -
previously reported 124,817 64,203 64,203
Prior year adjustment - (203) (203)
Opening shareholders' funds -
restated 124,817 64,000 64,000
Closing shareholders' funds 181,045 131,517 124,817
Regal Petroleum plc
Notes forming part of the financial statements for the six months ended 30 June
2005
1 Basis of preparation
The interim financial information set out on pages 9 to 15 has been prepared on
the same basis and using the same accounting policies as were applied in
preparing the Group's statutory financial statements for the year ended 31
December 2004.
The financial information for the six months ended 30 June 2005 and 30 June 2004
is unaudited. In the opinion of the directors the financial information for
these periods present fairly the financial position, results of operations and
cash flows for the periods in conformity with generally accepted accounting
principles consistently applied.
These interim financial statements do not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985. Those accounts have been
reported on by the Group's auditors and delivered to the Registrar of Companies.
The auditor's report on those accounts was unqualified and did not contain any
statement under section 237(2) or (3) of the Companies Act 1985.
There have been no changes to the Group's accounting policies during the period.
The accounting polices are set out in the Annual Report and Accounts for the
year ended 31 December 2004, a copy of which has been filed with the Registrar
of Companies at Companies House in the United Kingdom.
2 Turnover
Six months Six months Year
ended ended ended
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
$000 $000 $000
Analysis of turnover by activity:
Oil sales 9,342 9,527 33,420
Gas sales 3,721 1,616 2,968
Condensate sales 3,215 1,596 4,665
Other 465 694 1,406
16,743 13,433 42,459
Analysis of turnover by geographical origin:
Greece 9,807 10,221 34,826
Ukraine 6,936 3,212 7,633
16,743 13,433 42,459
Regal Petroleum plc
Notes forming part of the financial statements for the six months ended 30 June
2005
3 Loss per ordinary share
The calculation of basic and diluted loss per ordinary share has been based on
the loss for the period and 114,129,877 ordinary shares, being the average
number of shares in issue for the period to 30 June 2005.
4 Reconciliation of operating loss to operating cash flow
Six months Six months Year
ended ended ended
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
$000 $000 $000
Operating loss (21,423) (3,422) (18,043)
Depreciation and amortisation 5,343 902 7,696
Exchange differences 6,641 2,017 (349)
Movement in provisions 316 49 601
(Increase)/decrease in stocks (10,503) (10,615) (6,541)
(Increase)/decrease in debtors (2,976) (2) (4,750)
Decrease/(increase) in creditors (93) 471 14,256
Loss on gift of shares to minority interest 682
Impairment of fixed assets 7,213
Current asset investment -
expiration of oil hedge put options 275 547
Net cash outflow from operating
activities (15,482) (10,325) (5,901)
Regal Petroleum plc
Notes forming part of the financial statements for the six months ended 30 June
2005
5 Reconciliation of net cash flow to movement in net funds
Six months Six months Year
ended ended ended
30-Jun-05 30-Jun-04 31-Dec-04
(unaudited) (unaudited) (audited)
$000 $000 $000
Increase / (Decrease) in cash in
the period 31,546 (37,233) (3,030)
Cash inflow/(outflow) from
increase/(decrease)
in funds and lease financing 1,080 703 (1,080)
Cash outflow from increase in
liquid resources (2,821) - 119
Change in net funds resulting from
cash flows 29,805 37,936 (3,991)
Translation differences (3,173) (6) 134
Other non-cash movements (85) (268) (1,229)
Movements in net funds in the
period 26,547 37,662 (5,086)
Net funds at the start of the period 27,223 32,309 32,309
Net funds at the end of the period 53,770 69,971 27,223
6 Analysis of net funds
At Other non At
beginning Cash cash Exchange end of
of period flow movements movements period
$000 $000 $000 $000 $000
Cash in hand and at
bank 25,643 31,546 (3,173) 54,016
Overdrafts (1,080) 1,080
Current asset
investments 3,342 (2,821) (162) 359
Debt due after one year (682) 77 (605)
Total 27,223 29,805 (85) (3,173) 53,770
Independent review report by KPMG Audit Plc to Regal Petroleum plc.
Introduction
We have been engaged by the Company to review the financial information set out
on pages 9 to 15 and we have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
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 AIM
Rules which require that the interim report must be presented and prepared in a
form consistent with that which will be adopted in the Company's annual accounts
having regard to the accounting standards applicable to such annual accounts.
Review work performed
We conducted our review having regard to the guidance contained in Bulletin 1999
/4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of 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 is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express and 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 2005.
KPMG Audit Plc
Chartered Accountants
London
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