Interim Results
London Stock Exchange Plc
03 November 2005
3 November 2005
LONDON STOCK EXCHANGE plc
ANNOUNCEMENT OF RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 AND INTENTION TO RETURN £250 MILLION
TO SHAREHOLDERS
London Stock Exchange plc today reports results for the six months ended 30
September 2005.
Financial Highlights:
• Turnover up 15 per cent to £136.1 million
before exceptional items:
• Operating profit up 24 per cent to £50.8 million
• Adjusted earnings per share increased 40 per cent to 15.7 pence per share
• Interim dividend per share doubled from 2.0 pence to 4.0 pence per share
reflecting re-setting of dividend payout and strong performance
• Intention to return £250 million to shareholders following the end of the
Offer period, or as soon as circumstances allow, and subsequent share buyback
programme, reflecting the Exchange's on-going strong trading performance and
cash generation
including exceptional items:
• Operating profit down from £45.4 million to £25.1 million, principally
reflecting a £23.1m exceptional charge for the impairment of EDX goodwill
• Basic earnings per share reduced from 12.8 pence to 9.6 pence per share
Operational Highlights:
• New issues up 43 per cent to 306, including a 57% increase in Main Market new
issues from 30 to 47
• AIM continued strong growth as the number of international companies nearly
doubled to 185, reflecting success of overseas marketing
• Broker Services benefited from 30 per cent growth in SETS bargains, helped by
success of SETSmm which doubled trading over past year
• Number of terminals receiving real time market data up 8,000 to 98,000,
including 5,000 increase in number of professional users to 85,000
• Infolect, the Exchange's new delivery system for real time market data, was
successfully implemented in September. The new system is 15 times faster,
with the capacity to support future market growth at a tenth of the
development cost of the previous system.
Commenting on the six months, Clara Furse, Chief Executive, said:
"The Exchange has made an excellent start to the year, with particularly strong
growth in Issuer and Broker Services contributing to a 15 per cent increase in
turnover. This has generated a 24 per cent rise in operating profit before
exceptional costs and a 40 per cent increase in adjusted earnings per share.
"Technology enhancements underpin our expectations of a continuation of this
strong performance. This is supported by improving operational efficiencies and
cost control which should keep costs flat next year."
Chris Gibson-Smith, Chairman of the Exchange, said:
"The Exchange has clearly demonstrated its robust strength as an independent
business, delivering strong results, despite the backdrop of an Offer period and
the significant resources this has entailed. The Exchange's excellent trading
performance, and the increasing value this creates for shareholders, reflects
the quality of the business and the actions taken to ensure we are able to
capitalise on improvements in market conditions.
"Our confidence in the prospects for the Exchange is reflected in the doubling
of the interim dividend, to four pence per share, our intention to return £250
million to shareholders following the end of the Offer period and a subsequent
ongoing share buyback programme."
Further information is available from:
London Stock Exchange John Wallace - Media 020 7797 1222
Paul Froud - Investor Relations 020 7797 3322
Lyndal Kennedy - Investor Relations 020 7797 3322
Finsbury James Murgatroyd 020 7251 3801
Simon Moyse 020 7251 3801
Chairman's statement
The Exchange has demonstrated robust strength as an independent business, making
an excellent start to the financial year, despite the backdrop of an Offer
period. We have delivered strong trading in all of the Exchange's core business
areas, reflecting our initiatives to encourage greater market activity during a
period of improving market conditions. Issuer Services saw a significant
increase in the number of new issues on both the Main Market and on AIM,
including an increase in international listings. Broker Services continued to
demonstrate impressive growth on the SETS electronic order book as daily
bargains reached new levels, helped by our development of SETSmm as well as the
incentives to greater trading provided by the volume discount initiative. A
further uplift in the number of terminals taking real time Exchange data and
SEDOL's success helped Information Services to post increased revenues.
The Exchange is capitalising on more buoyant equity markets through products and
initiatives that make our markets amongst the most attractive in the world. The
Exchange continues to develop to meet the opportunities of a changing global
exchange landscape through innovative services and close customer relationships.
Together with our upgraded technology platform, strong brand and position at the
centre of Europe's largest equity market, the Exchange will continue to grow.
Financial results
Unless otherwise stated, all figures below refer to the six months ended 30
September 2005. Comparative figures are for the corresponding period last year,
restated under International Financial Reporting Standards.
The Exchange delivered an excellent trading performance in the first six months
of the year, with turnover up 15 per cent to £136.1 million (2004: £118.3
million). Operating costs excluding exceptional items rose 10 per cent to £85.3
million (2004: £77.4 million) and, reflecting the operational gearing of the
business, operating profit (before exceptional items) increased 24 per cent to
£50.8 million (2004: £40.9 million).
Total expenses for the half year rose to £111.0 million (2004: £77.4m) with the
inclusion of £25.7 million of exceptional items incurred in the period,
comprising £2.6 million for advisers' fees in respect of potential offers for
the company, and a £23.1 million charge in respect of EDX London, principally
for the impairment of goodwill.
Adjusted earnings per share, excluding exceptional items, increased 40 per cent
to 15.7 pence per share (2004: 11.2 pence per share). Basic earnings per share
reduced to 9.6 pence per share from 12.8 pence per share.
For the half year, operating cash flows from operating activities increased
significantly to £76.0 million, up 29 per cent (2004: £59.0 million). At 30
September 2005, cash balances rose to £166.1 million (31 March 2005: £124.4
million).
Issuer Services
Issuer Services delivered a strong first half performance with revenue
increasing 34 per cent to £26.8 million (2004: £20.0 million), contributing 20
per cent to total turnover.
For the first six months of the financial year there were 306 new issues on the
Exchange's markets, a notable 43 per cent increase over the same time last year
(2004: 214). Included in this total were 82 new issues in June alone, the
highest monthly number for eight years. New issues on the Main Market increased
from 30 to 47, with the average market capitalisation of an IPO during the
period increasing to £353 million (2004: £212 million).
In total, new and further issues raised £12.4 billion of new capital (2004: £9.5
billion) in the period. The appeal of the Exchange's markets is demonstrated by
the 69 per cent share of IPOs in Western Europe (2004: 78 per cent) as companies
access the largest liquidity pool in Europe. At 30 September 2005 the number of
companies on our markets increased to 3,013 (2004: 2,765).
AIM, the world's most successful market for smaller, growing companies,
delivered further strong growth in the period, with 259 companies joining the
market in the first half of the financial year (2004: 184). At 30 September 2005
the number of companies traded on AIM increased to 1,311 (2004: 936), including
185 international companies, nearly double the number last year (2004: 94). AIM
appeals to companies from a wide range of industries, covering 33 sectors, with
notable success in attracting mining and oil and gas companies, as well as
increases in chemicals, telecoms, support services and IT hardware sector
stocks.
At the beginning of October 2005 the Exchange announced AIM for Europe, its plan
to meet the demand among small and medium sized companies across Europe for
equity growth capital. To this end the Exchange is developing a network of links
with investors, advisers, intermediaries and issuers across Europe to extend the
environment that has made AIM an international success.
RNS, the Exchange's financial communications service, contributed £4.2 million
to Issuer Services' turnover (2004: £3.6 million). With over 90 companies in the
FTSE 100 continuing to use the Exchange to release regulatory announcements in
the half year, RNS has maintained a significant share of the regulatory news
distribution market.
Broker Services
Broker Services produced another excellent performance as turnover for the half
year increased 17 per cent to £56.9 million (2004: £48.6 million), accounting
for 42 per cent of total turnover.
During the period, the total number of equity bargains rose 31 per cent to 40.6
million (2004: 31.0 million), a daily average of 317,000 bargains (2004:
246,000). The daily average number of bargains traded on SETS, the electronic
order book, increased 30 per cent to 201,000 (2004: 155,000), with July a record
month as SETS bargains per day averaged 222,000. Value traded during the first
half increased 23 per cent to £523 billion (2004: £424 billion). The average
value of a SETS bargain decreased to £20,000 compared to H1 last year (2004:
£22,000) but increased slightly on the second half of last year.
A number of factors have contributed to the growth of trading on SETS, including
the increased activity on the Exchange's primary markets, use of algorithmic/
black box trading and the increasing impact of derivatives-based business
originating in the broader UK market. In addition, the growth reflects the
continued effects of the volume discount scheme introduced last year, which
lowers the cost of trading and therefore provides an incentive for greater
trading volumes.
Trading on the electronic order book also benefited from the development of
SETSmm, which trades mid-cap securities on a hybrid market structure. SETSmm
averaged 29,000 bargains per day (2004: 13,000) and has helped drive increased
liquidity and reduced spreads in the stocks traded. In July 2005 an additional
198 securities were added to SETSmm, bringing the total to 453.
During the half year, SETS contributed approximately 68 per cent of Broker
Services' income (2004: 65 per cent), with 65 per cent of eligible trades (by
value) executed on the electronic order book (2004: 62 per cent).
The total value of equity bargains for the period increased 14 per cent to £2.5
trillion (2004: £2.2 trillion), reflecting the increase in SETS trading and the
number of international bargains which rose to an average 72,000 bargains per
day (2004: 45,000). During the period, the daily average number of off book
bargains reduced slightly to 44,000 (2004: 46,000).
Information Services
Information Services' revenue rose six per cent to £45.1 million (2004: £42.4
million), contributing 33 per cent of total turnover for the half year.
The number of terminals taking the Exchange's real time market data continued
the rise seen since the start of the second half of last year, increasing to
98,000 at 30 September 2005, up 8,000 from the same point last year (2004:
90,000). Of this total, approximately 85,000 terminals were attributable to
professional users, up 2,000 on the number at the end of the last financial year
and up 5,000 on the comparable period (2004: 80,000). Proquote, the Exchange's
provider of financial market software and data, increased the number of
installed screens to 2,900 (2004: 2,300).
SEDOL Masterfile, the extension to the Exchange's securities numbering service
that provides unique identification for securities on a global basis, continues
to make good progress. The number of securities with SEDOL identification has
increased from 450,000 at end of March 2005 to over 700,000, with over 1,000
licences signed for the use of the service.
Infolect, the Exchange's new high performance delivery system that carries real
time market data to customers, was successfully tested over the summer and was
implemented in September. This marks an important milestone in the Exchange's
Technology Roadmap, a four year project to transition the Exchange's IT systems
and operations to next generation technology. Infolect provides a 15 times
faster service, with the capacity to support future market growth and increased
message volumes, at a tenth of the development cost of the previous system.
Derivatives Services
Turnover for Derivatives Services, which mainly comprises EDX London, the
Exchange's jointly owned equity derivatives business, increased to £3.9 million
in the half year (2004: £3.6 million). During the period EDX traded a total of
10.1 million contracts (2004: 9.2 million). Although development of services for
the over-the-counter equity derivatives market continued during the period, this
service does not justify further investment. Accordingly, we have recognised an
exceptional charge of £23.1m, principally in respect of the impairment of
goodwill.
Interim Dividend
The Directors have declared an interim dividend of 4.0 pence per share (2004/5:
interim 2.0 pence per share; final 5.0 pence per share). This doubling of the
interim dividend reflects a re-setting of the dividend payout, the strong
trading seen so far this financial year and the Directors' confidence in the
future prospects of the business. The level of increase is consistent with the
Exchange's desire to move the dividend payment further forward, and signals the
Company's new dividend policy of sustainable, progressive dividends. The interim
dividend will be paid to those shareholders on the register on 9 December 2005,
for payment on 6 January 2006.
Capital Return and Share Buyback Programme
Following the return to shareholders of £162.5 million by special dividend in
August 2004, the Board has kept the Exchange's capital position under regular
review. The strong trading performance and cash generation over the past year
has enabled the Board to recommend a further distribution of cash to
shareholders. Accordingly, the Exchange intends to effect a capital return of
£250 million, subject to shareholder and court approval. Implementation of
the capital return is expected to commence when the current Offer period in
respect of the Exchange expires, or as soon as circumstances allow. In addition,
the Exchange intends to commence an ongoing share buyback programme following
the return of capital.
A new company structure arising from a Scheme of Arrangement will be effected in
such a way as to maintain sufficient distributable reserves to enable payment of
dividends and possible future capital returns. The Board believes that the
Exchange has the financial flexibility to pursue opportunities for further
growth through its proposed new structure, its continued cash generation
capability, together with significant available loan facilities.
Outlook
Many of the positive trends apparent in our markets in the first half of the
financial year have continued into the second half:
• the primary market remains buoyant, with the average size of new issues on
our Main Market in October more than double last year;
• SETS continues to perform strongly, with 32% growth in daily bargains in
October over the same period last year; and
• demand for real time trading data remains encouraging.
Meanwhile, the Exchange continues to focus on improving operational efficiencies
while continuing to invest in the business. Ongoing cost control should keep
costs next year at the same level as the current financial year.
Going forward, our focus on the business needs of our issuers, intermediaries
and investors, product innovation and international business development
supports our expectation of continuing strong trading performance.
Chris Gibson-Smith
Chairman
3 November 2005
Further information
The Exchange will host a presentation of its Interim Results for analysts and
institutional shareholders today at 9.30am at 10 Paternoster Square, London EC4M
7LS. The presentation will be accessible via live web cast which can be viewed
at www.londonstockexchange-ir.com. For further information, please call the
Exchange's Investor Relations department at 020 7797 3322.
Consolidated income statement
Six months ended 30 September 2005
Six months ended Year ended
30 September 31 March
2005 2004 2005
Unaudited Unaudited Unaudited
Continuing operations Notes £m £m £m
__________________________________________________________________________________________________
Revenue 2 136.1 118.3 244.4
Expenses 2 (111.0) (77.4) (166.6)
Profit on disposal of Stock Exchange Tower 3 - 4.5 6.7
__________________________________________________________________________________________________
Operating profit 25.1 45.4 84.5
__________________________________________________________________________________________________
Analysed as:
Operating profit before exceptional items 50.8 40.9 84.6
Exceptional items 3 (25.7) 4.5 (0.1)
__________________________________________________________________________________________________
Operating profit 25.1 45.4 84.5
___________________________________
Finance income 9.9 10.2 19.2
Finance costs (6.5) (6.4) (12.7)
___________________________________
Net finance income 4 3.4 3.8 6.5
Share of profit after tax of joint venture 0.6 0.6 1.1
Investment income 0.3 0.1 0.1
__________________________________________________________________________________________________
Profit before taxation 29.4 49.9 92.2
Taxation 5 (8.8) (13.8) (27.7)
__________________________________________________________________________________________________
Profit for the financial period 20.6 36.1 64.5
__________________________________________________________________________________________________
Loss attributable to minority interest (3.8) (0.2) (0.5)
Profit attributable to equity holders 24.4 36.3 65.0
__________________________________________________________________________________________________
20.6 36.1 64.5
__________________________________________________________________________________________________
Basic earnings per share 6 9.6p 12.8p 24.2p
Diluted earnings per share 6 9.5p 12.7p 23.9p
Dividend per share in respect of financial
period (excluding special dividend): 7
Dividend per share paid during the period 5.0p 3.4p 5.4p
Dividend per share proposed for the period 4.0p 2.0p 7.0p
Consolidated balance sheet
30 September 2005
30 September 31 March
2005 2004 2005
Unaudited Unaudited Unaudited
Notes £m £m £m
__________________________________________________________________________________________________
Assets
Non-current assets
Property, plant and equipment 66.2 70.6 71.7
Intangible assets 8 49.1 66.3 65.0
Available for sale investments 0.4 0.4 0.4
Investment in joint venture 9 1.8 1.7 2.2
Trade and other receivables 10 - 30.9 -
Deferred tax assets 18.4 15.8 14.8
__________________________________________________________________________________________________
135.9 185.7 154.1
__________________________________________________________________________________________________
Current assets
Trade and other receivables 10 79.1 43.6 81.9
Cash and cash equivalents 166.1 117.7 124.4
__________________________________________________________________________________________________
245.2 161.3 206.3
__________________________________________________________________________________________________
Total assets 381.1 347.0 360.4
__________________________________________________________________________________________________
Liabilities
Current liabilities
Trade and other payables 58.3 56.4 49.1
Current tax 13.2 13.2 13.0
Borrowings 2.8 3.2 2.8
Provisions 11 15.5 7.9 11.9
__________________________________________________________________________________________________
89.8 80.7 76.8
__________________________________________________________________________________________________
Non-current liabilities
Borrowings 0.5 0.5 0.5
Retirement benefit obligations 12 16.5 18.3 18.7
Provisions 11 27.1 36.0 28.1
__________________________________________________________________________________________________
44.1 54.8 47.3
__________________________________________________________________________________________________
Total liabilities 133.9 135.5 124.1
__________________________________________________________________________________________________
Net Assets 247.2 211.5 236.3
__________________________________________________________________________________________________
Equity
Capital and reserves attributable to the Company's equity holders
Share capital 13 14.9 14.9 14.9
Retained earnings 13 235.0 195.8 220.3
__________________________________________________________________________________________________
249.9 210.7 235.2
Equity minority interest 13 (2.7) 0.8 1.1
__________________________________________________________________________________________________
Total equity 247.2 211.5 236.3
__________________________________________________________________________________________________
Consolidated cash flow statement
Six months ended 30 September 2005
Six months ended Year ended
30 September 31 March
2005 2004 2005
Unaudited Unaudited Unaudited
Notes £m £m £m
__________________________________________________________________________________________________
Cash flow from operating activities
Cash generated from operations 14 76.0 59.0 95.4
Interest received 2.9 5.7 8.1
Interest paid (0.2) - (0.2)
Corporation tax paid (12.5) (11.7) (24.3)
__________________________________________________________________________________________________
Net cash inflow from operating activities 66.2 53.0 79.0
__________________________________________________________________________________________________
Cash flow from investing activities
Purchase of property, plant and equipment (2.2) (15.7) (22.3)
Purchase of intangible assets (12.2) (10.5) (18.5)
Receipts from disposal of Stock Exchange Tower - 32.9 32.3
Dividends received from joint venture 1.0 1.3 1.3
Dividends received from financial assets 0.3 0.1 0.1
__________________________________________________________________________________________________
Net cash (outflow)/inflow from investing activities (13.1) 8.1 (7.1)
__________________________________________________________________________________________________
Cash flow from financing activities
Dividends paid (12.6) (172.5) (177.6)
Issue of ordinary share capital to minority interest - - 0.2
Loans received from minority shareholder - 0.3 0.3
Redemption of loan notes - (1.5) (1.5)
Purchase of own shares by ESOP trust - - (2.5)
Proceeds from own shares on exercise of employee share options 1.2 2.4 5.7
__________________________________________________________________________________________________
Net cash outflow from financing activities (11.4) (171.3) (175.4)
__________________________________________________________________________________________________
Increase/(decrease) in cash and cash equivalents 41.7 (110.2) (103.5)
Cash and cash equivalents at beginning of period 124.4 227.9 227.9
__________________________________________________________________________________________________
Cash and cash equivalents at end of period 166.1 117.7 124.4
__________________________________________________________________________________________________
Consolidated statement of recognised income and expense
Six months ended 30 September 2005
Six months ended Year ended
30 September 31 March
2005 2004 2005
Unaudited Unaudited Unaudited
£m £m £m
__________________________________________________________________________________________________
Profit for the financial period 20.6 36.1 64.5
Defined benefit pension scheme actuarial gain/(loss), net of tax
(see note 5) 0.8 (0.9) (1.8)
__________________________________________________________________________________________________
Total recognised income and expense for the financial period 21.4 35.2 62.7
__________________________________________________________________________________________________
Attributable to minority interest (3.8) (0.2) (0.5)
Attributable to equity holders 25.2 35.4 63.2
__________________________________________________________________________________________________
21.4 35.2 62.7
__________________________________________________________________________________________________
Notes to the financial information
The interim report for the six months ended 30 September 2005 was approved by the Directors on 3 November 2005.
1. Basis of preparation and accounting policies
The Group's financial statements for the year ended 31 March 2005 were presented under UK Generally Accepted Accounting
Principles (UK GAAP).
To comply with European Union (EU) legislation the Group is required to prepare its consolidated financial statements
for the year ending 31 March 2006 in accordance with International Financial Reporting Standards (IFRS). Accordingly,
this interim financial information has been prepared using the IFRS accounting policies which management expects to
apply in the Group's first IFRS financial statements for the year ending 31 March 2006. The Directors have assumed that
the EU will endorse the amendments to IAS 19 Employee Benefits published by the IASB in December 2004 allowing
actuarial gains and losses to be recognised in full through equity.
The interim financial information is prepared under the historic cost convention and on the basis of the principle
accounting policies set out below. These policies are consistent with those adopted for the restatement of the Group's
financial statements for the year ended 31 March 2005, which was published on 21 July 2005. The financial information
consolidates the financial information of the Company and its subsidiaries, with all intercompany balances and
transactions eliminated. IFRS currently in issue are subject to ongoing amendment by the IASB and subsequent
endorsement by the EU and are therefore subject to change. The Group's IFRS financial statements for the year ending 31
March 2006 may, therefore, be prepared in accordance with some different accounting policies from the information
presented here.
The interim financial information is unaudited and does not constitute statutory financial statements within the
meaning of section 240 of the Companies Act 1985.
The Group's statutory consolidated financial statements for the year ended 31 March 2005 were presented under UK GAAP,
carried an unqualified audit report and have been delivered to the Registrar of Companies. Comparative figures for the
year ended 31 March 2005 presented here are an abridged version of the Group's full accounts and have been adjusted to
reflect the transition to IFRS and are unaudited.
Accounting Policies
Revenue
Revenue represents the total amount receivable for the provision of goods and services, excluding value added tax.
Revenue is recognised in the period when the service or supply is provided:
(a) annual fees are recognised over the 12 month period to which the fee relates;
(b) admission fees are recognised at the time of admission to trading; and
(c) data, transaction and Exchange charges are recognised in the month in which the data is provided or the
transaction is effected.
Foreign currencies
The consolidated financial information is presented in sterling, which is the Group's presentation and functional
currency. Transactions in foreign currencies and currency balances at the period end are converted at the rate ruling
at the transaction date or period end date respectively, with any gains or losses recognised in the income statement.
Intangible assets
(a) Goodwill arising on the acquisition of subsidiaries represents the excess of consideration paid over the fair
value of net assets acquired. Goodwill is tested annually for impairment and carried at cost less accumulated
impairment losses.
(b) Third party software costs for the development and implementation of systems which enhance the services provided
by the Group are capitalised and amortised over their estimated useful lives, which is an average of three years.
Property, plant and equipment
(a) Freehold properties, including related fixed plant, are included in the financial information at cost less
accumulated depreciation and any provision for impairment. Freehold buildings and related fixed plant are
depreciated to residual value, based on cost at the beginning of the year plus subsequent additions, over their
estimated economic lives. The economic lives of properties are for approximately 50 years, the estimated useful
lives of fixed plant range from five to 20 years;
(b) Leasehold properties and improvements are included at cost and depreciated to residual value over the shorter of
the period of the lease or the economic life of the asset;
(c) Plant and equipment is stated at cost and is depreciated to residual value on a straight line basis over the
estimated useful lives of the assets, which are mainly in the range from three to five years; and
(d) The Group selects its depreciation rates based on expected economic lives, taking into account the expected rate
of technological developments, market requirements and expected use of the assets. The selected rates are
regularly reviewed to ensure they remain appropriate to the Group's circumstances. Residual values and economic
lives are reviewed at each balance sheet date.
Joint ventures
Investments in joint ventures are accounted for under the equity method and are initially recognised at cost. The
Group's share of profits or losses after tax from joint ventures is included in the consolidated income statement.
Cumulative post-acquisition movements are adjusted against the carrying amount of the investment in the Group's
balance sheet.
Cash and cash equivalents
Cash and cash equivalents comprises cash at bank and term deposits that are readily convertible to known amounts of
cash and are subject to insignificant risk of changes in value.
Financial instruments
(a) Investments (other than fixed deposits and interests in joint ventures and subsidiaries) are designated as
available for sale and are recorded on trade date at fair value with changes in fair value recognised in equity.
Where the fair value is not reliably measurable, the investment is held at cost.
(b) Foreign currency derivatives are recorded at fair value. The method of recording gains or losses depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item hedged. The Group
designates foreign currency derivatives where they meet the relevant IAS 39 criteria as cash flow hedges with the
movement in fair value recognised in equity. Amounts recognised in equity are transferred to the income statement
when the hedged item is recognised in the income statement.
(c) The Company's own shares held by the ESOP trust are deducted from equity until they vest unconditionally in
employees.
(d) Consideration paid in respect of Treasury shares is deducted from equity until the shares are cancelled, reissued
or disposed of.
Provisions
A provision is recognised where there is a present obligation, whether legal or constructive, as a result of a past
event for which it is probable that a transfer of economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Operating leases
Rental costs for operating leases are charged to the income statement when incurred. Lease incentives are spread over
the term of the lease. Provision is made in the accounts for lease commitments, less income from sub-letting, for
property space which is surplus to business requirements.
Pension costs
The Group operates defined benefit and defined contribution pension schemes. For the defined benefit scheme the service
cost, representing benefits accruing to employees, is included as an operating expense, and the expected return on
scheme assets and interest cost from unwinding of the discount on scheme obligations are included as finance income and
finance costs respectively. Actuarial gains and losses arising from experience adjustments, changes in actuarial
assumptions or differences between actual and expected returns on assets are recognised at each period end in the
statement of recognised income and expense. The net asset or liability recognised on the balance sheet comprises the
present value of pension obligations and the fair value of scheme assets. For defined contribution schemes, the expense
is charged to the income statement as incurred.
Deferred taxation
Full provision is made, using the liability method, for temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial information. Deferred taxation is determined using tax
rates expected to apply when the asset is realised or liability settled.
Deferred tax assets are recognised to the extent it is probable that they will be recoverable against future
taxable profits.
Share based compensation
The Group operates a number of equity settled share based compensation plans for employees. The charge to the income
statement is determined by the fair value of the options granted or shares awarded at the date of grant and recognised
over the vesting period.
IFRS 1 transitional arrangements
The following exemptions have been applied to the financial information:
(a) Business combinations
The Group has chosen not to restate business combinations prior to the transition date, 1 April 2004;
(b) Fair value or revaluation at deemed cost
The Group has chosen to restate freehold properties, other than the Stock Exchange Tower which has since been
sold, to fair value as deemed cost at the transition date;
(c) Employee benefits
The Group has chosen to recognise all cumulative pension scheme actuarial gains and losses in equity at the
transition date; and
(d) Share based payments
The Group has chosen to apply IFRS 2 Share-based payments to awards granted after 7 November 2002.
2. Segment information
Segmental disclosures for the six months ended 30 September 2005 are as follows:
Issuer Broker Information Derivatives
Services Services Services Services Other Corporate Group
£m £m £m £m £m £m £m
________________________________________________________________________________________________________________________
Revenue 26.8 56.9 45.1 3.9 3.4 - 136.1
________________________________________________________________________________________________________________________
Expenses
Depreciation and amortisation (1.3) (7.0) (4.1) (0.6) (0.1) (0.3) (13.4)
Exceptional impairment of
goodwill and other exceptional
costs (see note 3) - - - (23.1) - (2.6) (25.7)
Other expenses (15.3) (21.4) (22.3) (5.3) (3.4) (4.2) (71.9)
________________________________________________________________________________________________________________________
Total (16.6) (28.4) (26.4) (29.0) (3.5) (7.1) (111.0)
________________________________________________________________________________________________________________________
Operating profit 10.2 28.5 18.7 (25.1) (0.1) (7.1) 25.1
Share of profit after tax of joint
venture - - 0.6 - - - 0.6
________________________________________________________________________________________________________________________
Comparative segmental disclosures for the six months ended 30 September 2004 are as follows:
Issuer Broker Information Derivatives
Services Services Services Services Other Corporate Group
£m £m £m £m £m £m £m
________________________________________________________________________________________________________________________
Revenue 20.0 48.6 42.4 3.6 3.7 - 118.3
________________________________________________________________________________________________________________________
Expenses
Depreciation and amortisation (1.3) (6.0) (5.0) (0.4) (0.3) (0.2) (13.2)
Other expenses (12.8) (18.2) (21.9) (5.2) (2.0) (4.1) (64.2)
________________________________________________________________________________________________________________________
Total (14.1) (24.2) (26.9) (5.6) (2.3) (4.3) (77.4)
________________________________________________________________________________________________________________________
Profit on disposal of Stock
Exchange Tower - - - - - 4.5 4.5
Operating profit 5.9 24.4 15.5 (2.0) 1.4 0.2 45.4
Share of profit after tax of joint
venture - - 0.6 - - - 0.6
________________________________________________________________________________________________________________________
The Other segment represents property letting and activities not directly related to the main four business segments.
Corporate expenses are for corporate services which cannot reasonably be allocated to business segments.
Principal operations of the Group are in the United Kingdom.
3. Exceptional items
Six months ended Year ended
30 September 31 March
2005 2004 2005
£m £m £m
__________________________________________________________________________________________________
Fees in respect of potential offers for the Company (2.6) - (6.8)
Impairment of goodwill and provision in respect of EDX London
Ltd (see notes 8 and 11) (23.1) - -
Profit on disposal of Stock Exchange Tower - 4.5 6.7
__________________________________________________________________________________________________
Total exceptional items (25.7) 4.5 (0.1)
__________________________________________________________________________________________________
4. Net finance income
Six months ended Year ended
30 September 31 March
2005 2004 2005
£m £m £m
__________________________________________________________________________________________________
Finance income
Bank deposit and other interest 4.5 5.1 9.0
Expected return on defined benefit pension scheme assets
(see note 12) 5.4 5.1 10.2
__________________________________________________________________________________________________
9.9 10.2 19.2
__________________________________________________________________________________________________
Finance costs
Interest on discounted provision for leasehold properties
(see note 11) (0.8) (0.9) (1.7)
Defined benefit pension scheme interest cost (see note 12) (5.6) (5.4) (10.7)
Interest payable on other loans (0.1) (0.1) (0.3)
__________________________________________________________________________________________________
(6.5) (6.4) (12.7)
__________________________________________________________________________________________________
Net finance income 3.4 3.8 6.5
__________________________________________________________________________________________________
5. Taxation
Six months ended Year ended
30 September 31 March
2005 2004 2005
Taxation charged to the income statement £m £m £m
__________________________________________________________________________________________________
Current tax:
Corporation tax for the period at 30% (2004: 30%) 13.9 12.7 25.1
Adjustments in respect of previous years (1.2) - -
__________________________________________________________________________________________________
12.7 12.7 25.1
Deferred taxation (3.9) 1.1 2.6
__________________________________________________________________________________________________
Taxation charge 8.8 13.8 27.7
__________________________________________________________________________________________________
Six months ended Year ended
30 September 31 March
2005 2004 2005
Taxation on items charged to equity £m £m £m
__________________________________________________________________________________________________
Deferred tax:
Defined benefit pension scheme actuarial gains/losses 0.3 (0.3) (0.8)
__________________________________________________________________________________________________
Factors affecting the tax charge for the period
The income statement tax charge assessed for the period differs from the standard rate of corporation
tax in the UK of 30% (2004: 30%).
The variations are explained below:
Six months ended Year ended
30 September 31 March
2005 2004 2005
£m £m £m
__________________________________________________________________________________________________
Profit before taxation 29.4 49.9 92.2
__________________________________________________________________________________________________
Profit multiplied by standard rate of corporation tax in the
UK of 30% 8.8 15.0 27.7
Expenses disallowed for the purpose of tax provision
(primarily professional fees and profit on disposal of Stock
Exchange Tower) 1.0 (1.0) 0.3
Share of joint venture consolidated at profit after tax (0.2) (0.2) (0.3)
Adjustments in respect of previous years (0.8) - -
__________________________________________________________________________________________________
Taxation charge 8.8 13.8 27.7
__________________________________________________________________________________________________
Factors that may affect future tax charges
The disposal of properties at their deemed cost amount would not give rise to a tax liability.
6. Earnings per share
Earnings per share is presented on three bases: basic earnings per share; diluted earnings per
share; and adjusted basic earnings per share. Basic earnings per share is in respect of all
activities and diluted earnings per share takes into account the dilution effects which would
arise on the conversion or vesting of share options and share awards under the Employee Share
Ownership Plan (ESOP). Adjusted basic earnings per share excludes exceptional items to enable
comparison of the underlying earnings of the business with prior periods.
Six months ended Year ended
30 September 31 March
2005 2004 2005
__________________________________________________________________________________________________
Basic earnings per share 9.6p 12.8p 24.2p
Diluted earnings per share 9.5p 12.7p 23.9p
Adjusted basic earnings per share 15.7p 11.2p 24.2p
£m £m £m
__________________________________________________________________________________________________
Profit for the financial period attributable to
equity holders 24.4 36.3 65.0
Adjustments:
Exceptional items 25.7 (4.5) 0.1
Tax effect of exceptional items (6.6) - -
Exceptional items and taxation attributable to minority
interest (3.7) - -
__________________________________________________________________________________________________
Adjusted profit for the financial period attributable to
equity holders 39.8 31.8 65.1
__________________________________________________________________________________________________
Weighted average number of shares - million 253.9 284.5 269.0
Effect of dilutive share options and awards - million 2.7 2.0 2.9
__________________________________________________________________________________________________
Diluted weighted average number of shares - million 256.6 286.5 271.9
__________________________________________________________________________________________________
The weighted average number of shares excludes those held in the ESOP, reducing the weighted
average number of shares to 253.9m (September 2004: 284.5m; March 2005: 269.0m).
The tax effect of exceptional items for September 2005 includes a tax credit of £6.6 million in
respect of the impairment loss and provision for EDX London Ltd.
7. Dividends
Six months ended Year ended
30 September 31 March
2005 2004 2005
__________________________________________________________________________________________________
Final dividend - 5.0p (2004: 3.4p) per Ordinary share 12.6 10.0 10.0
Interim dividend - 4.0p (2004: 2.0p) per Ordinary share - - 5.1
Special interim dividend - 55p per Ordinary share - 162.5 162.5
__________________________________________________________________________________________________
12.6 172.5 177.6
__________________________________________________________________________________________________
An interim dividend relating to the six months ended 30 September 2005 of 4.0p, amounting to £10.2m
is proposed. This interim dividend, which is due to be paid in January 2006, is not reflected in this
financial information.
8. Intangible assets
Goodwill Software Total
£m £m £m
__________________________________________________________________________________________________
Cost:
1 April 2005 31.2 80.2 111.4
Additions during the period - 9.6 9.6
Revised estimate of contingent consideration (see note 11) 0.7 - 0.7
Disposals - (4.8) (4.8)
__________________________________________________________________________________________________
30 September 2005 31.9 85.0 116.9
__________________________________________________________________________________________________
Amortisation and accumulated impairment:
1 April 2005 1.7 44.7 46.4
Charge for the period - 6.8 6.8
Impairment loss 19.1 0.3 19.4
Disposals - (4.8) (4.8)
__________________________________________________________________________________________________
30 September 2005 20.8 47.0 67.8
__________________________________________________________________________________________________
Net book value:
30 September 2005 11.1 38.0 49.1
__________________________________________________________________________________________________
An impairment review of goodwill and intangible assets of EDX London Ltd has been carried out in
accordance with IAS 36 Impairment of assets.
As part of that review, the future business plan for EDX London Ltd was considered, taking account of
(i) developments to date in EDX London's business; (ii) management's assessment of current market
requirements and future developments; and (iii) management's view that the new over-the-counter
clearing service does not justify further investment. The business plan covered the next five years with
a growth rate of 2.25 per cent beyond that and cash flows discounted using a pre-tax discount rate of 13
per cent.
The carrying value of goodwill and intangible assets was not supported by the estimated net present
value of future cash flows and, accordingly, an exceptional impairment loss of £19.4m has been
recognised.
9. Investment in joint venture
The Group owns 50 per cent of the 1,000 £1 issued equity shares in FTSE International Ltd, a company
incorporated in Great Britain which distributes financial information. FTSE International Ltd is a joint
venture owned together with The Financial Times Ltd, a subsidiary of Pearson plc. The Group investment
of £1.8m (30 September 2004: £1.7m, 31 March 2005: £2.2m) represents the Group's share of the joint
venture's net assets. The Group is entitled, under a shareholders' agreement, to receive royalties from
FTSE International Ltd, see below.
Summary financial information for FTSE International Ltd:
Six months ended Year ended
30 September 31 March
2005 2004 2005
£m £m £m
__________________________________________________________________________________________________
Revenue 16.8 14.9 30.7
Profit after taxation 1.2 1.1 2.1
Total equity at period end 4.5 3.3 4.5
__________________________________________________________________________________________________
Amounts recognised in the financial
information of the Group:
Royalties receivable 2.1 2.0 4.1
Dividends receivable 1.0 1.3 1.3
__________________________________________________________________________________________________
10. Trade and other receivables
30 September 31 March
2005 2004 2005
£m £m £m
__________________________________________________________________________________________________
Current assets
Trade receivables 17.3 14.4 17.2
Deferred consideration on disposal of Stock
Exchange Tower - due December 2005 32.8 - 31.8
Other receivables 0.4 1.7 5.5
Prepayments and accrued income 28.6 27.5 27.4
__________________________________________________________________________________________________
79.1 43.6 81.9
__________________________________________________________________________________________________
Non-current assets
Deferred consideration on disposal of Stock
Exchange Tower - due December 2005 - 30.9 -
__________________________________________________________________________________________________
Total trade and other receivables 79.1 74.5 81.9
__________________________________________________________________________________________________
11. Provisions
Contingent
Property consideration Other Total
£m £m £m £m
__________________________________________________________________________________________________
1 April 2005 34.8 5.2 - 40.0
Exceptional charge during the period - - 3.4 3.4
Utilised during the period (2.3) - - (2.3)
Interest on discounted provision 0.8 - - 0.8
Revised estimate of contingent consideration - 0.7 - 0.7
__________________________________________________________________________________________________
30 September 2005 33.3 5.9 3.4 42.6
__________________________________________________________________________________________________
Non-current 27.1 - - 27.1
Current 6.2 5.9 3.4 15.5
__________________________________________________________________________________________________
33.3 5.9 3.4 42.6
__________________________________________________________________________________________________
Property
The property provision represents the estimated net present value of future costs for lease rentals
and dilapidation costs less the expected receipts from sub-letting space which is surplus to business
requirements. The leases have between nine and 23 years to expiry.
Contingent consideration
Contingent consideration relates to the equity derivatives business acquired from OM London
Exchange. The contingent consideration has been estimated at £5.9m and can be up to a maximum
of £11.2m, payable by March 2006.
Other
Other provisions relate to onerous operating contracts in respect of EDX London Ltd.
12. Retirement benefit obligations
The Group operates separate defined benefit and defined contribution schemes. The assets of the
defined benefit and defined contribution schemes are held separately from those of the Group.
30 September 31 March
2005 2004 2005
Defined benefit assets and obligations £m £m £m
__________________________________________________________________________________________________
Fair value of assets 208.5 181.8 191.3
Present value of funded obligations (225.0) (200.1) (210.0)
__________________________________________________________________________________________________
Balance sheet liability (16.5) (18.3) (18.7)
__________________________________________________________________________________________________
Six months ended Year ended
30 September 31 March
2005 2004 2005
Movement in defined benefit net liability during the period £m £m £m
__________________________________________________________________________________________________
1 April 2005 (18.7) (18.4) (18.4)
Current service cost (0.7) (0.7) (1.5)
Net finance cost (0.2) (0.3) (0.5)
Contributions paid 2.0 2.3 4.3
Actuarial gain / (loss) 1.1 (1.2) (2.6)
__________________________________________________________________________________________________
30 September 2005 (16.5) (18.3) (18.7)
__________________________________________________________________________________________________
13. Consolidated statement of changes in equity
Attributable to
equity holders of
the Company
Share Retained Minority Total
capital earnings interest equity
£m £m £m £m
____________________________________________________________________________________________________________
1 April 2004 14.9 329.7 1.0 345.6
Total recognised income and expense for the financial period - 35.4 (0.2) 35.2
Final dividend relating to the year ended 31 March 2004 - (10.0) - (10.0)
Special interim dividend paid August 2004 - (162.5) - (162.5)
Employee share schemes and own shares - 3.2 - 3.2
____________________________________________________________________________________________________________
30 September 2004 14.9 195.8 0.8 211.5
Total recognised income and expense for the financial period - 27.8 (0.3) 27.5
Interim dividend relating to the period ended 30 September 2004 - (5.1) - (5.1)
Employee share schemes and own shares - 1.8 - 1.8
Issue of share capital in subsidiary undertaking - - 0.6 0.6
____________________________________________________________________________________________________________
31 March 2005 14.9 220.3 1.1 236.3
Total recognised income and expense for the financial period - 25.2 (3.8) 21.4
Final dividend relating to the year ended 31 March 2005 - (12.6) - (12.6)
Employee share schemes and own shares - 2.1 - 2.1
____________________________________________________________________________________________________________
30 September 2005 14.9 235.0 (2.7) 247.2
____________________________________________________________________________________________________________
The minority shareholder has committed to subscribe additional equity in excess of this
negative balance of £2.7m as at 30 September 2005.
14. Net cash flow generated from operations
Six months ended Year ended
30 September 31 March
2005 2004 2005
£m £m £m
__________________________________________________________________________________________________
Profit before taxation 29.4 49.9 92.2
Depreciation and amortisation 13.4 13.2 28.7
Impairment loss and provision for EDX London Ltd 23.1 - -
Profit on disposal of Stock Exchange Tower - (4.5) (6.7)
Net finance income (3.4) (3.8) (6.5)
Investment income (0.3) (0.1) (0.1)
Share of profit after tax of joint venture (0.6) (0.6) (1.1)
Decrease/(increase) in trade and other receivables 4.4 (2.4) (8.2)
Increase in trade and other payables 12.7 9.6 3.4
Defined benefit pension obligation - contributions in
excess of expenses charged (1.3) (1.6) (2.8)
Provisions utilised during the period (2.3) (1.5) (5.3)
Share scheme expense 0.9 0.8 1.8
__________________________________________________________________________________________________
Cash generated from operations 76.0 59.0 95.4
__________________________________________________________________________________________________
15. Transition disclosures
Set out below are reconciliations between UK GAAP and IFRS for total equity at 1 April 2004 (date of
transition to IFRS), 30 September 2004 and 31 March 2005. In addition, reconciliations are provided
between profit attributable to equity holders under UK GAAP and IFRS for six months ended 30 September
2004 and year ended 31 March 2005.
More detailed reconciliations of the comparative balance sheets and income statements were published in the
IFRS restatement on 21 July 2005.
1 April 30 September 31 March
2004 2004 2005
Reconciliation of total equity Notes £m £m £m
__________________________________________________________________________________________________
Total equity - UK GAAP 365.7 235.5 251.6
Employee benefits (a) (22.9) (22.9) (23.2)
Freehold properties (b) (6.6) (6.0) (5.2)
Leases (c) (0.8) (1.3) (1.7)
Goodwill (d) - 0.8 1.7
Share based payments (e) 0.2 0.3 0.5
Dividends (f) 10.0 5.1 12.6
__________________________________________________________________________________________________
Total equity - IFRS 345.6 211.5 236.3
__________________________________________________________________________________________________
Six months ended Year ended
30 September 31 March
Reconciliation of profit attributable 2004 2005
to equity holders Notes £m £m
__________________________________________________________________________________________________
Profit attributable to equity holders - UK GAAP 34.8 62.2
Employee benefits (a) 0.9 1.5
Freehold properties (b) 0.6 1.4
Leases (c) (0.5) (0.9)
Goodwill (d) 0.7 1.5
Share based payments (e) (0.2) (0.7)
__________________________________________________________________________________________________
Profit attributable to equity holders - IFRS 36.3 65.0
__________________________________________________________________________________________________
Explanation of reconciling differences between UK GAAP and IFRS
(a) IAS 19 Employee benefits
The Group has elected to recognise the defined benefit pension scheme deficit in full in the Group
balance sheet at transition date (1 April 2004). The charge to the income statement is the current period's
service charge and a financing charge for unwinding the discount applied to obligations and the expected
return on pension scheme assets.
The impact on the income statement is to increase operating profit for the year ended 31 March 2005 by
£2.7m (six months ended 30 September 2004: £1.6m) and reduce net finance income for the year ended
31 March 2005 by £0.5m (six months ended 30 September 2004: £0.3m). After the associated tax there
is an increase in profit attributable to equity holders for the year ended 31 March 2005 of £1.5m (six
months ended 30 September 2004: £0.9m).
The impact on the balance sheet is to reduce total equity at 31 March 2005 by £23.2m (30 September
2004: £22.9m; 1 April 2004: £22.9m).
(b) IAS 16 Freehold properties
Under the transitional arrangements set out in IFRS 1 the Group has elected to restate freehold
properties other than the Stock Exchange Tower to their fair value at the date of transition, resulting in a
reduction in the balance sheet carrying amount. This lower carrying amount, together with the
requirement to update residual values to reflect current prices, has the effect of reducing depreciation
compared with UK GAAP.
The impact on the income statement is to reduce the depreciation charge in respect of remaining freehold
properties for the year ended 31 March 2005 by £1.7m (six months ended 30 September 2004: £0.7m).
In relation to the Stock Exchange Tower, there is a reduction in depreciation charge and corresponding
reduction to the profit on sale of the Tower for the year ended 31 March 2005 and six months ended 30
September 2004 of £0.5m. After the associated tax there is an increase in profit attributable to equity
holders for the year ended 31 March 2005 of £1.4m (six months ended 30 September 2004: £0.6m).
Total equity is £5.2m lower at 31 March 2005 (30 September 2004: £6.0m; 1 April 2004: £6.6m) as a
result of the restated values of freehold properties as at 1 April 2004, partly offset by the lower
depreciation charge in the year ended 31 March 2005.
(c) IAS 17 Leases
All leases have been reviewed and remain as operating leases. Lease incentives under IFRS are spread
over the term of the lease, whereas, under UK GAAP they were spread over the period to the first rent
review. This results in an increased charge to the income statement and consequent higher balance
sheet accrual.
The impact on the income statement is to reduce operating profit for the year ended 31 March 2005 by
£1.3m (six months ended 30 September 2004: £0.7m). After the associated tax there is a reduction in
profit attributable to equity holders for the year ended 31 March 2005 of £0.9m (six months ended 30
September 2004: £0.5m).
Total equity at 31 March 2005 is £1.7m lower (30 September 2004: £1.3m; 1 April 2004: £0.8m).
(d) IFRS 3 Goodwill
Under IFRS 3, goodwill is not amortised but is tested annually for impairment. On the balance sheet,
under IFRS, goodwill is held at the UK GAAP carrying amount at transition date less any subsequent
impairments.
The effect is to increase operating profit for the year ended 31 March 2005 by £2.0m (six months ended
30 September 2004: £0.9m). After the associated tax and minority interest, the increase in profit
attributable to equity holders for the year ended 31 March 2005 is £1.5m (six months ended 30
September 2004: £0.7m).
The impact on the balance sheet is to increase total equity at 31 March 2005 by £1.7m (30 September
2004: £0.8m; 1 April 2004: nil).
(e) IFRS 2 Share based payments
Under IFRS, charges to the income statement are based on the fair value of the instrument granted
determined using an option pricing model. Under UK GAAP, the charge was based on the difference
between the market price on the date of grant and the exercise price. The balance sheet is adjusted to
reflect the additional deferred tax arising from the increased charge to the income statement.
This reduces operating profit for the year ended 31 March 2005 by £1.0m (six months ended 30
September 2004: £0.3m). After the associated tax there is a reduction in profit attributable to equity
holders for the year ended 31 March 2005 of £0.7m (six months ended 30 September 2004: £0.2m).
Recognition of deferred tax on the additional charge to the income statement results in an increase in
total equity at 31 March 2005 of £0.5m (30 September 2004: £0.3m; 1 April 2004: £0.2m).
(f) IAS 10 Dividends
Under IAS 10, dividends are recognised in the financial statements when declared rather than in the
period to which they relate.
The impact on the balance sheet is to increase total equity by the amount of dividends declared after 31
March 2005 of £12.6m (30 September 2004: £5.1m; 1 April 2004: £10.0m).
Explanation of adjustments to the cash flow statement
Under UK GAAP the cash flow statement presented the movement in cash balances, analysed between
nine categories of cash flow. Under IFRS, the cash flow statement presents the movement in cash and
cash equivalents, analysed between operating, investing and financing activities. The principal
consequences of these differences are that cash and cash equivalents under IFRS includes term
deposits which were included in management of liquid resources under UK GAAP, and corporation tax
paid, interest received and interest paid are classified within operating activities for IFRS purposes.
As software developments are reported as intangible assets under IFRS, expenditure on these is
separately reported in the cash flow statement as purchase of intangible assets.
Independent review report to London Stock Exchange plc
Introduction
We have been instructed by the company to review the financial information for the six months ended 30
September 2005 which comprises the consolidated interim balance sheet as at 30 September 2005 and
the related consolidated interim statements of income, cash flows and recognised income and expense
for the six months then ended and the related notes. 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.
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.
As disclosed in note 1, the next annual financial statements of the group will be prepared in accordance
with International Financial Reporting Standards (IFRS). This interim financial information has been
prepared in accordance with the basis set out in the IFRS restatement document which was published on 21 July 2005.
The accounting policies are consistent with those that the directors intend to use in the next annual
financial statements. As explained in note 1, there is, however, a possibility that the directors may
determine that some changes are necessary when preparing the full annual financial statements for the
first time in accordance with IFRS. The IFRS standards and IFRIC interpretations that will be applicable
and adopted for use in the European Union at 31 March 2006 are not known with certainty at the time of
preparing this interim financial information.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the
Auditing Practices Board for use in the United Kingdom. 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 disclosed accounting policies have been
applied. 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 and therefore provides a lower level of
assurance. Accordingly we do not express an audit opinion on the financial information. This report,
including the conclusion, has been prepared for and only for the company for the purpose of the Listing
Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report,
accept or assume responsibility for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
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 September 2005.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London
3 November 2005
This information is provided by RNS
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