Interim Results
Rank Group PLC
02 September 2005
The Rank Group Plc
Interim Results for the six months ended 30 June 2005
• Revenue up 15% to £870.5m (2004: £757.7m), due largely to a 43% increase
in revenue at Blue Square
• Group operating profit of £90.6m (2004 - £90.0m before exceptional
items)
• Adjusted profit before tax* of £71.0m (2004 - £72.4m)
• Adjusted earnings per share* of 8.2p (2004 - 9.0p); basic earnings per
share of 0.7p (2004 - 3.2p)
• Gaming operating profit down 5% to £52.0m (2004 - £54.8m), due mainly to
cost increases at Mecca and weaker sportsbook margins at Blue Square
• Hard Rock operating profit up 40% to £16.4m (2004 - £11.7m), with
improved like for like sales in restaurants and increased royalties from
hotels/casinos
• Deluxe Film operating profit up 5% to £29.0m (2004 - £27.6m), reflecting
significant growth in Creative Services
• Profit after tax for the period from continuing operations was £40.7m
(2004 - £53.2m)
• Net debt increased to £736.9m (2004 year end - £637.7m), reflecting
contract advances by Deluxe Film and the impact of foreign currency
translation on US borrowings
• Interim dividend increased by 4% to 5.0p (2004 - 4.8p)
* Adjusted profits and earnings per share - Profits and earnings before
discontinued operations, exceptional items, foreign exchange on inter-company
balances and amortisation of equity component of convertible bond.
(See note 6.)
Commenting on the results, Mike Smith, Chief Executive, said:
'We achieved a significant increase in revenues during the first half reflecting
2004 acquisitions and developments and considerable growth in Blue Square.
Profits, however, were flat as weak sportsbook margins at Blue Square and cost
increases at Mecca offset solid results elsewhere.
Development across all businesses continues apace, particularly in Deluxe
Creative Services, Hard Rock hotels, and Grosvenor Casinos in the UK. We have
invested strongly in our Gaming business over the last five years in preparation
for UK gambling deregulation and we are well placed to benefit from the early
freedoms that will come into effect from October this year and those changes
that will come later.
We have continued to make progress on the separation of Deluxe from the rest of
the Group. The sale of Deluxe Media is advancing. The separation of Deluxe Film
is now more likely to be achieved by way of a sale. The sale process is
progressing but, as we have said previously, it is a complex transaction and
will only be completed on terms that the Board considers to be in the best
interest of shareholders.'
Enquiries:
The Rank Group Tel: 020 7706 1111
Mike Smith, Chief Executive
Peter Gill, Finance Director
Mike Davies, Director of Investor Relations
Press Enquiries:
The Maitland Consultancy Tel: 020 7379 5151
Angus Maitland
Suzanne Bartch
RG/15/04
Analyst Meeting, webcast and conference call details:
Friday 2 September 2005
There will be an analyst meeting at Merrill Lynch, 2 King Edward Street, London,
EC1A 1HQ, starting at 9.30am. There will be a simultaneous webcast and
conference call of the meeting. To register for the live webcast, please
pre-register for access by visiting the Group website, (www.rank.com). Details
for the conference call are given below. A copy of the webcast and slide
presentation given at the meeting will be available on the Group's web-site
later today.
An interview with Mike Smith, Chief Executive, in video/audio and text will also
be available from 7.00am GMT on 2 September 2005 on: http:// www.rank.com and on
http://www.cantos.com.
Conference call details:
Friday 2 September 2005
9.20am Please call 0800 279 9640 (UK) or +44 (0) 20 7365 1843 (International).
9.30 am Meeting starts
Forward-looking statements. This announcement includes 'forward-looking
statements'. These statements contain the words 'anticipate', 'believe',
'intend', 'estimate', 'expect' and words of similar meaning. All statements
other than statements of historical facts included in this announcement,
including, without limitation, those regarding the Company's financial position,
business strategy, plans and objectives of management for future operations
(including development plans and objectives relating to the Company's products
and services) are forward-looking statements that are based on current
expectations. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance, achievements or financial position of the Company to be materially
different from future results, performance, achievements or financial position
expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Company's operating
performance, present and future business strategies and the environment in which
the Company will operate in the future. These forward-looking statements speak
only as at the date of this announcement. Subject to the Listing Rules of the UK
Listing Authority, the Company expressly disclaims any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based. Past performance cannot be relied upon as a guide to future
performance.
CHIEF EXECUTIVE'S REVIEW
Results
Rank's first half performance was mixed. Revenue from continuing operations rose
15% to £870.5m, while adjusted operating profit remained broadly flat at £90.6m
reflecting good performances from Deluxe Film (driven by gains in its digital
services businesses - Creative Services), Hard Rock, and solid results in
casinos, offset by a slightly weaker performance in bingo.
Deluxe Film revenues increased 9% to £201.7m, due largely to a significant
increase in revenue from Creative Services. Operating profit increased by 5% to
£29.0m, as lower film processing margins in North America were offset by higher
profits in Creative Services, which benefited from the impact of acquisitions
made during the second half of last year.
Hard Rock increased revenue by 7% to £121.3m and operating profit increased by
40% to £16.4m. This performance was driven by increased food and beverage sales
in company owned cafes and a higher contribution from hotels and gaming licence
fees.
Overall, Gaming revenues grew 20% to £533.5m, driven by increases in revenues at
Blue Square and casinos. However, weak sportsbook margins at Blue Square and
lower profits at Mecca contributed to a 5% fall in operating profit to £52.0m.
Revenue in UK casinos was up 7% compared with last year driven by a 15% rise in
admissions, although handle per head fell by 7%. Provincial casinos achieved
significantly higher revenues, partially assisted by the impact of the new
Bolton and Stoke casinos that opened in the second half of last year. Operating
profit for Grosvenor Casinos increased by 6%, due mainly to strong performances
by the London based casinos.
Revenue at Mecca UK at £133.9m was level with the same period last year, as
lower admissions were offset by increased spend per head. However, operating
profit was 6% lower as a consequence of higher costs due to increases in the
minimum wage and higher energy costs. The Spanish bingo operation, Top Rank
Espana, continued to perform well, benefiting from the opening of a new club in
the second half of last year to increase revenues by 18% and operating profit by
38%.
Blue Square achieved a 43% increase in revenue (where revenue is recorded on a
gross basis as settled stakes), as betting volumes were significantly higher
than in the same period last year and revenue from non-sportsbook activities
exceeded the sportsbook for the first time. However, in line with a number of
our competitors, sportsbook margins continued to be weak throughout the first
half contributing to an operating loss of £1.0m, despite an improvement in the
profitability of games.
An increased operating loss before exceptional items at Deluxe Media was
principally due to lower volumes in Distribution Services, as a result of the
previously announced loss of a major studio customer, together with increased
raw material costs in DVD manufacturing.
Strategic progress and development
We have continued to invest in the long-term growth of our businesses and there
were a number of developments across the Group during the first half of the
year.
Gaming
The pace of development in our Gaming division has accelerated during the first
half of the year. Licences for further casinos in Swansea, Dundee, Oldbury,
Acocks Green and Reading have been approved and the new casinos are expected to
open over the next two and half years. Applications for a further five casinos
are in place. The relocation of the Empire Street, Manchester casino to Bury New
Road, a larger and better located site, is expected to be completed in the early
part of 2006 and the relocation of the Ramsgate Thanet casino is also expected
to be completed in early 2007.
In Bingo, we are on track to open two new Mecca clubs in 2006, at Crewe and
Paisley, while in Edinburgh we will be relocating the existing club from
Edinburgh Palais to Fountain Park. During the first half we continued to review
our portfolio and closed clubs in Smethwick, East Ham and Blackwood. In
Blackpool we combined the Church Street club into the Talbot Road club.
Gambling Act Update
The early freedoms of UK gambling deregulation - the abolition of the 24-hour
rule for casinos and bingo clubs, the introduction of more slot machines in
casinos, and the doubling of slot machine stakes and prizes - are now expected
to come into effect in October this year. By the end of October, we expect to
have 678 jackpot and hybrid machines and 790 auto-roulettes in our UK casinos.
Combined, this will represent a 52% increase over the number available at the
beginning of the year.
Further reforms of UK gambling, including the relaxation of advertising
restrictions for casinos, are now expected to come into effect during 2007. We
have had an ongoing programme of re-investment in our Gaming estate and over the
last five years we have invested over £150m, preparing us well for UK gambling
deregulation. In addition to the new casino licences that have already been
approved and applications that are in place under the existing regulations, we
intend to apply for all 17 licences that are proposed under the new Gambling
Act.
Hard Rock
We have relocated the New York cafe to the heart of Times Square; the cafe
opened on 12 August 2005. Reassessment of the company owned estate has led to
the closure of the Choctaw Beach Club and underperforming cafes in St. Thomas
and Newport Beach. In early July, the London cafe was temporarily closed due to
a fire; the cafe is being refurbished and is scheduled to reopen in late
September. We anticipate that the profit impact of the closure will be largely
covered by insurance.
In May a new franchised cafe was opened in Caracas, Venezuela and an
underperforming franchised cafe in Reykjavik, Iceland was closed. During the
second half of the year, franchised cafe openings are planned for Gran Canaria,
Belo Horizonte and Mumbai.
In hotels, the conversion of the Hard Rock Hotel in Madrid is well underway and
is expected to reopen in 2006 as part of the joint venture agreement with Sol
Melia. The Hard Rock Hotel in San Diego, which is expected to open in 2007, has
now been expanded to be a 400 room condo hotel. We have now completed plans for
the conversion of the Paramount Hotel in New York into a flagship Hard Rock
Hotel.
Hard Rock has entered into an agreement with Intrawest Corporation to develop
lifestyle Hard Rock Hotels at select Intrawest resorts. Hard Rock and Intrawest
are finalising specific locations and will shortly announce the first lifestyle
condominium-hotel.
The Seminole hotel/casinos are performing well. The hotel/casino and cafe in
Biloxi, Mississippi were originally scheduled to open on 1 September 2005.
However, they were severely damaged by Hurricane Katrina and the opening has
been postponed. The New Orleans cafe also suffered substantial damage, and it is
targeted to reopen by the end of the year.
Deluxe Film
During the first half we acquired Fotofilm Madrid, a leading Spanish film
laboratory, and extended the capacity of our Barcelona film laboratory. We also
completed the acquisition of Film Treat, a film rejuvenation business based in
Los Angeles and New York, at the start of the year. Within Creative Services,
the integration of the acquisitions made in 2004 is complete and new facilities
have been made available in Burbank, California. Creative Services represented
24% of Deluxe Film's operating profit during the first half. We also invested
heavily in contract advances in the first half of the year and Deluxe Film now
has one of the strongest contract advance positions in its history.
Cash flow and financing
Operating cash flow decreased to £5.3m (2004 - £54.8m) due to the payment of
Deluxe Film contract advances in the first half of the year offset by lower
capital expenditure. Overall, net debt has increased since the year end to
£736.9m from £637.7m. This reflects the payment of advances, consideration on
acquisitions, and the impact of a stronger dollar on our US borrowings.
Current trading and outlook
Current trading in the period since 30 June 2005 shows a similar pattern to that
exhibited in the first half. The immediate outlook is for little change, with
further improvement in Deluxe Film and Hard Rock offset by subdued performance
in the current UK Gaming market. The impact of UK gambling deregulation from
October 2005 will be positive but is unlikely to be material in the current
year. Overall, we expect adjusted profit before tax for the year from our
continuing operations to be broadly flat on 2004.
Dividend
We are pleased to announce an increase in the interim dividend to 5.0p (2004 -
4.8p).
Group structure
In September last year we announced that Rank was reviewing the possibility of
separating Deluxe from the rest of the Group and this process remains a
priority. The planned sale of Deluxe Media is advancing. The separation of
Deluxe Film is now more likely to be achieved by way of sale. The transaction is
complex and, whilst we remain hopeful that this separation will be achieved, it
will only be completed on terms that the Board considers to be in the best
interest of shareholders.
SUMMARY OF RESULTS (from continuing operations)
Revenue Profit before
exceptional items
2005 2004 2005 2004
£m £m £m £m
Gaming 533.5 443.9 52.0 54.8
Hard Rock 121.3 112.9 16.4 11.7
Deluxe Film 201.7 185.4 29.0 27.6
US Holidays 14.0 15.5 1.1 1.4
Central costs and other - - (7.9) (5.5)
-------- -------- -------- --------
870.5 757.7 90.6 90.0
Net (loss) income from associates and joint
ventures - post tax (0.1) 0.2
Managed businesses' interest (19.5) (17.8)
-------- --------
Adjusted profit before tax 71.0 72.4
Foreign exchange on inter-company balances (9.3) (1.4)
Amortisation of equity component of
convertible bond (1.5) -
-------- --------
Profit before tax and exceptional 60.2 71.0
items
Exceptional items - (4.1)
-------- --------
Profit before tax 60.2 66.9
======== ========
Adjusted earnings per share 8.2p 9.0p
Basic earnings per share - continuing operations
before exceptional items 6.4p 9.6p
Dividend per share 5.0p 4.8p
Group revenue from continuing operations, as reported, was up 15%, driven by an
increase in revenue at Blue Square.
Group operating profit before exceptional items was 1% above 2004. Deluxe Film
reported increased profits as a consequence of growth in its Creative Services
business. Hard Rock achieved significantly higher profits due to a large
increase in the contribution from hotels/gaming and an improved performance in
company owned cafes. Gaming profits were lower despite higher revenues because
of increased costs at Mecca UK and weaker sportsbook margins in Blue Square.
Central costs have increased to £7.9m (2004: £5.5m) due to increased compliance
costs.
The interest charge was £1.7m higher than in 2004 due both to higher levels of
debt and increased US dollar interest rates.
The effective tax rate on adjusted profit is 26.6% (2004 - 26.3%). The
rate has benefited from the availability of overseas tax losses.
Adjusted Group profit before tax was £71.0m, 2% below last year. Adjusted
earnings per share, before exceptional items, was 8.2p (2004 - 9.0p) reflecting
the change in tax rate and an increase in the average number of shares in issue.
In line with IFRS accounting, foreign exchange movements on certain
inter-company loans are recognised in the income statement as financial gains or
losses. In this interim period a charge of £9.3m has been made (2004 - a £1.4m
charge). The amortisation of the convertible bond's equity component has
resulted in a £1.5m charge being recognised in the income statement in line with
IAS 32 & 39, which have been applied from 1st January 2005.
The interim dividend per share has been increased by 4% to 5.0p (2004 - 4.8p).
The following table sets out the divisional results and profit before tax after
exceptional items.
Profit before tax
2005 2004
£m £m
Gaming 52.0 54.8
Hard Rock 16.4 11.7
Deluxe Film 29.0 27.6
US Holidays 1.1 1.4
Central costs and other (7.9) (9.6)
------------ ------------
Continuing operations 90.6 85.9
Net (loss) income from associates and joint ventures (0.1) 0.2
Financing charge (30.3) (19.2)
------------ ------------
Profit before tax 60.2 66.9
============ ============
GAMING
Revenue Operating profit (loss)
2005 2004 2005 2004
£m £m £m £m
Mecca Bingo
UK 133.9 133.9 34.4 36.5
Spain 15.4 13.0 4.7 3.4
---------- ---------- ---------- ----------
149.3 146.9 39.1 39.9
Grosvenor Casinos
UK 94.3 88.4 13.4 12.7
Belgium 6.0 6.0 0.5 1.0
---------- ---------- ---------- ----------
100.3 94.4 13.9 13.7
Blue Square 283.9 198.2 (1.0) 1.3
---------- ---------- ---------- ----------
533.5 439.5 52.0 54.9
Rank Leisure Machine - 4.4 - (0.1)
Services
---------- ---------- ---------- ----------
533.5 443.9 52.0 54.8
========== ========== ========== ==========
Mecca Bingo
2005 2004 Change
%
UK Bingo statistics
Admissions ('000s) 10,122 10,710 (5)%
Spend per head (£) 13.23 12.50 6 %
Revenue at Mecca UK was flat at £133.9m. Admissions were down 5.5%, due to a
lower frequency of visits by active members, although this was compensated for
by higher spend per head which rose 5.8% compared with the first half last year.
Operating profit at Mecca UK fell 5.8% to £34.4m due mainly to an increase in
energy costs and the impact of the introduction of the higher minimum wage. This
weaker performance was partly offset by a 38.2% increase in operating profit at
Top Rank Espana, due to the acquisition of a club in Sabadell in the second half
of 2004 and a change in a local gaming tax.
The split of revenue by activity is shown below.
Analysis of UK bingo revenue 2005 2004 Change
£m £m %
Main stage bingo 27.4 27.0 1%
Interval games 63.2 64.2 -2%
Gaming machines 30.9 30.1 3%
Food, beverage & other 12.4 12.6 -2%
------------- ----------- -----------
133.9 133.9 0%
============= =========== ===========
Grosvenor Casinos
Revenue Operating profit
2005 2004 2005 2004
£m £m £m £m
UK
London - upper 10.8 11.6 2.1 1.7
London - other 27.6 25.9 4.4 4.2
Provincial 49.4 45.8 10.8 11.0
Hard Rock 6.5 5.1 0.1 (0.5)
Overheads - - (4.0) (3.7)
----------- ----------- ----------- -----------
94.3 88.4 13.4 12.7
=========== =========== =========== ===========
Grosvenor Casinos in the UK enjoyed a solid first half. Overall revenues were up
6.7% at £94.3m and operating profit at £13.4m was 5.5% ahead of last year,
driven by bad debt recoveries at London upper casinos and stronger performance
at our other London casinos. These factors were partly offset by lower overall
win margins in Provincial casinos.
Admissions Handle per head Win %
('000s) (£)
2005 2004 2005 2004 2005 2004
UK
London - upper 26 25 2,320 2,366 17.7 19.1
London - other 301 305 480 466 17.7 17.1
Provincial 1,587 1,319 159 178 16.3 16.7
Hard Rock 192 182 157 141 18.0 16.5
Overall, at the Group's London casinos, handle was up 1.6% and win margin was
level at 17.7%, resulting in revenue being 2.4% higher at £38.4m. At the Group's
two London upper casinos, the Clermont and the Park Tower, handle was up 0.5%
and admissions were 4.0% higher, although win margin fell from 19.1% to 17.7%,
driven primarily by a lower win margin at the Clermont. Bad debt recoveries of
£0.8m contributed to a 23.5% improvement in operating profit.
At our other London casinos, a 3.0% increase in handle per head resulted in a
6.6% increase in revenue. The increase in revenue, combined with a higher win
margin of 17.7% contributed to a 4.8% increase in operating profit to £4.4m.
Provincial casinos achieved a 7.9% increase in revenue, driven by a 20.3% rise
in attendance and the opening of Bolton and Stoke in 2004, although a 10.7%
reduction in handle per head and a lower win margin of 16.3% resulted in
operating profit falling by 1.8% to £10.8m.
The two Hard Rock casinos achieved a 27.5% increase in revenue. The London
casino enjoyed a particularly strong first half more than offsetting a weaker
performance at the Manchester casino. Overall, a prior year operating loss of
£0.5m was turned into a first half operating profit of £0.1m, reflected the
steady profits now being made in London.
Blue Square
Revenue Gross win
2005 2004 2005 2004
£m £m £m £m
Online 250.9 168.2 10.8 10.8
Telephone 33.0 30.0 2.1 2.4
----------- ----------- ----------- -----------
283.9 198.2 12.9 13.2
=========== =========== =========== ===========
Blue Square achieved a 43% increase in revenue compared with the same period
last year, with revenue from games exceeding the sportsbook for the first time.
The casinos/games business experienced strong first half revenue growth on a
like-for-like basis. In sportsbook, which now has over 156,000 active customers,
a significant increase in revenue was driven principally by higher bet volumes.
However, in line with competitors, sportsbook margins remained weak throughout
the period. Overall, the business made an operating loss of £1.0m (2004 - profit
£1.3m).
In Blue Square, we continue to invest in marketing and games development.
Several new games were introduced during the first half and both poker and bingo
products are now fully operational.
HARD ROCK
Revenue Operating profit
2005 2004 2005 2004
£m £m £m £m
Company operated
Cafes 110.2 105.9 12.7 11.2
Third party operated
Cafes 2.6 2.2 2.1 2.0
Hotels/casinos 6.2 2.4 5.8 2.4
Territory sales/other 2.3 2.4 0.6 (0.3)
Equity distributions - - 2.5 2.0
Overheads - - (7.3) (5.6)
--------- --------- --------- ---------
121.3 112.9 16.4 11.7
========= ========= ========= =========
Hard Rock had a good first half, increasing revenue by 7.4% to £121.3m and
operating profit by 40.2% to £16.4m. At constant exchange rates, revenue grew by
8.8% and operating profit grew by 42.4%. Improved performance in food and
beverage sales in company owned cafes and a higher contribution from gaming
drove the overall positive performance. Overheads increased to £7.3m from £5.6m,
reflecting Hard Rock's investment in brand development, advertising, and
improving franchise operational standards.
Hard Rock like for like cafe sales %
Food and Merchandise Total
Beverage
To 30 June 2005
North America 1.1% -6.3% -1.4%
Europe 4.9% 6.3% 5.4%
Total 2.2% -3.0% 0.4%
Revenue in company owned cafes increased by 4.1%, with sales particularly strong
in locations with heavy tourist footfall, including Barcelona, New York, Rome,
and San Francisco. Like for like sales in company owned cafes were up 0.4%
overall, with restaurant sales up 2.2%. Merchandise sales were down 3.0%,
despite a strong uplift in Europe. Overall, sales performance in Europe outpaced
North America and cafe profits were enhanced by ongoing successful initiatives
to reduce labour and product costs.
Revenue from hotels/casinos rose to £6.2m from £2.4m last year and operating
profit to £5.8m from £2.4m, as the Hard Rock Florida casinos, which opened last
year, made a positive impact.
Territory sales and other were down slightly, although this was more than offset
by higher hotel retail profits.
Equity distributions from our 25% share in three hotels in Orlando were £0.5m
higher, reflecting the strong operating performance of those properties.
DELUXE FILM
Revenue Operating profit
2005 2004 2005 2004
£m £m £m £m
Film Laboratories and physical 165.2 166.0 21.9 23.8
distribution
Creative Services 36.5 19.4 7.1 3.8
---------- ---------- ---------- ----------
201.7 185.4 29.0 27.6
========== ========== ========== ==========
Volumes at the Film Laboratories business were marginally stronger than in the
first half last year, rising 0.9% to 2.3 billion feet of film processed. Major
titles produced during the first half included Star Wars III - Revenge of the
Sith, Mr and Mrs Smith, Sin City, and War of the Worlds. Operating profit was
5.1% higher than last year at £29.0m, as lower overall margins in film
laboratories were more than offset by a significant rise in profits from
Creative Services, which benefited from the impact of acquisitions made during
the second half of last year and accounted for 24.5% of Deluxe Film's operating
profit. Since the half year, volumes have remained strong. Major titles that
have been produced since the half year include The Fantastic Four and Wedding
Crashers, with Memoirs of a Geisha and The Legend of Zorro due for release later
in the second half.
During the first half net Film contract advance payments of £53.0m were made;
these payments mainly related to contracts won in prior years. These significant
investments in securing major contracts have left Deluxe Film with one of the
strongest contract advance positions in its history. Customers comprising 82% of
2004 volume are now under contract until at least the end of 2007.
Since the start of the year, Deluxe has acquired Fotofilm Madrid, a leading
Spanish film laboratory, and extended the capacity of its Barcelona film
laboratory. Deluxe also completed the acquisition of Film Treat, a film
rejuvenation business based in Los Angeles and New York, at the start of the
year. The acquisitions have not been presented separately in the income
statement as they are not material to the Group results.
US HOLIDAYS
US Holidays' operating profit was £1.1m (2004 - £1.4m). The business generated
net cash of £3.6m (2004 - £5.7m).
Central costs and other
2005 2004*
£m £m
Central costs (7.9) (6.0)
Other income - 0.5
-------------- --------------
(7.9) (5.5)
============== ==============
*excluding exceptional items
Central costs increased on 2004 due largely to increased compliance fees
associated with the adoption of IFRS and compliance with the Sarbanes Oxley Act.
Associates and joint ventures - post tax
2005 2004
£m £m
Hard Rock Hotel joint venture (0.7) -
Deluxe associate and joint venture 0.6 0.2
-------------- ---------------
(0.1) 0.2
============== ===============
Financing charges
2005 2004
£m £m
Interest payable and other charges 22.4 24.9
Interest receivable (2.9) (7.1)
-------------- ---------------
Managed businesses' interest 19.5 17.8
Foreign exchange on inter-company balances 9.3 1.4
Amortisation of equity component of convertible 1.5 -
bond -------------- ---------------
30.3 19.2
============== ===============
Taxation
The effective tax rate on adjusted group profit is 26.6% (2004 - 26.3%) and post
foreign exchange on inter-company balances and amortisation of the convertible
bond the rate is 32.4%. The rate has benefited from the availability of overseas
tax losses.
Dividend
An interim dividend of 5.0p per Ordinary share (2004 - 4.8p) will be paid on 14
October 2005 to those shareholders on the register on 16 September 2005.
Exchange rates
The net translation effect of changes in average exchange rates between 2004 and
2005 was to decrease revenue by £1.6m and operating profit by £0.7m. The average
rates and the impact on divisional results are shown below:
Average
exchange rate Impact on H1 2005
2005 2004 Revenue Operating
profit
£m £m
US dollar 1.86 1.82 (4.0) (0.7)
Canadian dollar 2.27 2.36 2.3 -
Euro 1.46 1.46 0.1 -
---------- ----------
(1.6) (0.7)
========== ==========
Gaming - -
Hard Rock (1.5) (0.3)
Deluxe Film 0.2 (0.4)
US Holidays (0.3) -
---------- ----------
(1.6) (0.7)
---------- ----------
Managed businesses' interest 0.2
----------
Net impact on adjusted profit
before tax (0.5)
----------
Discontinued operations
Deluxe Media Services (DMS) is classified as a business held for sale. As a
result, DMS is reported as a discontinued operation. The results of DMS are
analysed below.
Analysis of
discontinued
operations
2005 2004
Operating (loss) profit before exceptional items £m £m
Video duplication (2.1) (4.3)
DVD/CD replication (6.9) (5.2)
Distribution services (3.4) 0.4
---------- ----------
(12.4) (9.1)
Exceptional items (13.2) (27.9)
---------- ----------
Operating loss (25.6) (37.0)
Net finance costs (0.8) (0.2)
---------- ----------
Loss before tax (26.4) (37.2)
Tax (9.2) 3.0
---------- ----------
Loss after tax (35.6) (34.2)
========== ==========
Exceptional items
2005 2004
£m £m
DMS restructuring (13.2) (27.9)
Loss on disposal - (4.1)
---------- ----------
(13.2) (32.0)
Tax on exceptional items 0.7 0.4
---------- ----------
(12.5) (31.6)
========== ==========
The exceptional charge in 2005 relates to Deluxe Media Services. These charges
mainly relate to the closure of VHS manufacturing operations in the UK, Spain,
Sweden and the US, and the closure of the German business. The exceptional
charge of £13.2m comprises redundancy and other staff costs of £7.6m, asset
impairments of £3.6m, onerous leases of £1.6m and other costs of £0.4m.
Prior year exceptional items also mainly relate to Deluxe Media Services, which
in the first half of 2004 was informed by a major studio that it would be
transferring its business to another supplier. An exceptional charge of £23.9m,
comprising an impairment charge of £18.8m, onerous lease provisions of £3.8m and
other costs of £1.3m, was recorded. An exceptional charge of £4.0 relating to a
Deluxe Media Services restructuring programme begun in 2003 was also incurred in
the first half of 2004. A £4.1m exceptional loss was also recognised principally
on the disposal of the Rank Leisure Machine Services business at the start of
2004.
Cash flow
2005 2004
£m £m
Cash flow from operating activities
Before Deluxe contract advances 85.8 91.6
Deluxe contract advances, net of repayments (50.9) 17.9
---------- ----------
34.9 109.5
Capital expenditure (30.6) (55.3)
Fixed asset disposals 1.0 0.6
---------- ----------
Operating cash flow 5.3 54.8
Acquisitions and investments (21.0) (14.9)
Disposals & refinancing proceeds 18.1 29.9
---------- ----------
2.4 69.8
Interest, tax and dividend payments (81.1) (57.4)
---------- ----------
Cash (outflow) inflow (78.7) 12.4
========== ==========
Cash inflow from operating activities was £74.6m lower than 2004. This is
largely due to a net outflow of £50.9m in respect of contract advances in
Deluxe.
Capital expenditure was £30.6m and is analysed below:
2005 2004
£m £m
Gaming 7.5 29.6
Hard Rock 6.3 5.8
Deluxe Film 12.6 5.3
US Holidays 0.3 0.9
---------- ----------
26.7 41.6
Deluxe Media 3.9 13.7
---------- ----------
30.6 55.3
========== ==========
Acquisitions and investments principally relate to cash paid to acquire Fotofilm
and Film Treat and deferred consideration on the prior period acquisitions of
Ritek, ETS, Disctronics, and Capital FX. Refinancing proceeds within cash flow
relate to £18.1m received on refinancing the hotel joint venture in Orlando.
The Group has incurred £13m of transaction costs up to June 2005, relating to
the planned separation of Deluxe Film and Deluxe Media. These have been carried
as deferred costs on the balance sheet.
Interest, tax and dividends are £23.7m higher than 2004, largely reflecting a
net tax outflow of £2.3m compared with a net tax inflow of £17.4m in the same
period last year.
Net debt
Net debt at 30 June 2004 was £736.9m compared to £696.8m at the time of last
year's interim report and £637.7m as at 31 December 2004. The increase is due
principally to contract advances at Deluxe Film and foreign exchange translation
of US debt as a consequence of a stronger US dollar.
GROUP INCOME STATEMENT - INTERIM (unaudited)
2005 2004
Before Before
Exceptional Exceptional Exceptional Exceptional
Items Items Total Items Items Total
£m £m £m £m £m £m
-------- -------- -------- -------- -------- -------
Continuing operations
Revenue 870.5 - 870.5 757.7 - 757.7
Cost of sales (689.7) - (689.7) (588.8) - (588.8)
-------- -------- -------- -------- -------- --------
Gross profit 180.8 - 180.8 168.9 - 168.9
Other
operating costs (45.2) - (45.2) (39.9) - (39.9)
Other
operating income 5.1 - 5.1 4.7 - 4.7
General and
administration (50.1) - (50.1) (43.7) - (43.7)
Exceptional
items - Loss on
disposal of - - - - (4.1) (4.1)
business
-------- -------- -------- -------- -------- --------
Operating profit 90.6 - 90.6 90.0 (4.1) 85.9
Net finance costs (21.0) - (21.0) (17.8) - (17.8)
Foreign exchange
loss on inter-
company loans (9.3) - (9.3) (1.4) - (1.4)
Share of post
tax (losses)
profits in
associates and
joint ventures (0.1) - (0.1) 0.2 - 0.2
-------- -------- -------- -------- -------- --------
Profit (loss)
before tax 60.2 - 60.2 71.0 (4.1) 66.9
Taxation (note 3) (19.5) - (19.5) (13.7) - (13.7)
-------- -------- -------- -------- -------- --------
Profit (loss)
for the period
from continuing 40.7 - 40.7 57.3 (4.1) 53.2
operations
Discontinued operations
Operations held
for sale (note 2) (23.1) (12.5) (35.6) (6.7) (27.5) (34.2)
-------- -------- -------- -------- -------- --------
Profit (loss)
for the period 17.6 (12.5) 5.1 50.6 (31.6) 19.0
======== ======== ======== ======== ======== ========
Profit (loss)
attributable
to minority 0.6 - 0.6 0.1 (0.5) (0.4)
interest
Profit (loss)
attributable
to equity 17.0 (12.5) 4.5 50.5 (31.1) 19.4
shareholders
-------- -------- -------- -------- -------- --------
17.6 (12.5) 5.1 50.6 (31.6) 19.0
======== ======== ======== ======== ======== ========
Basic earnings
per share 0.7p 3.2p
Diluted earnings 0.7p 3.3p
per share
Further earnings per share information is provided in Note 5
GROUP INCOME STATEMENT (unaudited)
6 months to 6 months to Year to
30.6.05 30.6.04 31.12.04
£m £m £m
Continuing operations
Revenue 870.5 757.7 1,568.2
Cost of sales (689.7) (588.8) (1,187.5)
---------- ----------- ---------
Gross profit 180.8 168.9 380.7
Other operating costs (45.2) (39.9) (90.3)
Other operating income 5.1 4.7 8.1
General and administration (50.1) (43.7) (102.6)
Operating exceptional costs - (4.1) (41.5)
---------- ----------- ---------
Operating profit 90.6 85.9 154.4
Net finance costs (21.0) (17.8) (39.9)
Foreign exchange (loss) gain on
inter-company loans (9.3) (1.4) 11.4
---------- ----------- ---------
Total finance costs (30.3) (19.2) (28.5)
Share of post tax (losses) profits in (0.1) 0.2 -
associates and joint ventures
Profit before tax 60.2 66.9 125.9
Taxation (note 3) (19.5) (13.7) (22.1)
---------- ----------- ---------
Profit after tax 40.7 53.2 103.8
Operations held for sale (note 2) (35.6) (34.2) (118.1)
---------- ----------- ---------
Profit (loss) for the period 5.1 19.0 (14.3)
========== =========== =========
Basic earnings (loss) per share 0.7p 3.2p (2.5)p
Diluted earnings (loss) per share 0.7p 3.3p (1.7)p
Further earnings per share information is provided in Note 5.
GROUP BALANCE SHEET (unaudited)
30.6.05 30.6.04 31.12.04
£m £m £m
Non-current assets
Intangible assets 259.1 248.8 252.3
Tangible assets 580.7 633.0 577.1
Investments 52.5 55.2 55.3
Other receivables 228.4 202.7 293.3
---------- ----------- ---------
1,120.7 1,139.7 1,178.0
---------- ----------- ---------
Current assets
Inventories 62.3 62.4 51.7
Trade and other receivables 303.6 494.6 232.1
Cash and deposits 114.9 117.0 75.6
Assets held for sale 122.3 - 174.0
---------- ----------- ---------
603.1 674.0 533.4
Current liabilities
Loan capital and borrowings (32.2) (245.2) (19.8)
Trade and other payables (207.7) (365.8) (271.2)
Current tax liabilities - (38.9) (9.5)
Liabilities held for sale (98.6) - (142.8)
---------- ----------- ---------
(338.5) (649.9) (443.3)
Net current assets 264.6 24.1 90.1
---------- ----------- ---------
Non-current liabilities
Loan capital and borrowings (820.1) (568.6) (692.1)
Other non-current liabilities (164.8) (99.7) (139.6)
Provisions (31.9) (45.5) (36.4)
---------- ----------- ---------
(1,016.8) (713.8) (868.1)
========== =========== =========
Net assets 368.5 450.0 400.0
========== =========== =========
Shareholders' equity
Called up share capital 62.5 60.1 62.4
Share premium account 90.0 25.9 88.3
Other reserves 206.0 349.0 240.6
---------- ----------- ---------
Shareholders' funds 358.5 435.0 391.3
Equity minority interests 10.0 15.0 8.7
---------- ----------- ---------
368.5 450.0 400.0
========== =========== =========
GROUP CASH FLOW (unaudited)
6 months 6 months Year to
to 30.6.05 to 30.6.04 31.12.04
£m £m £m
Cash flows from operating activities (note 4)
Cash generated from operations 34.9 109.5 263.3
Interest paid (17.5) (18.6) (44.2)
Income tax (paid) received (2.3) 17.4 11.9
---------- ---------- ---------
Net cash from operating activities 15.1 108.3 231.0
Cash flows from investing activities
Acquisition of subsidiaries (17.9) (14.7) (70.5)
Purchase of property, plant and equipment (30.6) (55.3) (115.6)
Proceeds from sale of property, plant and
equipment 1.0 0.6 7.4
Net cash acquired on acquisition of
subsidiaries 1.0 (0.4) 0.9
Investments in associates and joint
ventures (4.1) (0.2) (5.1)
Sale of businesses (net of cash disposed) - 30.3 29.9
Purchase of investments - - (0.1)
Capital distribution from trade asset
investment 18.1 - -
---------- ---------- ---------
Net cash used in investing activities (32.5) (39.7) (153.1)
Cash flows from financing activities
Dividends paid to Company shareholders (61.2) (55.5) (84.5)
Dividends paid to minority interests (0.1) (0.6) (1.9)
Issue (redemption) of share capital 1.8 1.9 2.8
Net draw down of debt 113.0 (56.2) (69.0)
Finance lease principal payments (2.5) (3.5) (5.1)
---------- ---------- ---------
Net cash used in financing activities 51.0 (113.9) (157.7)
---------- ---------- ---------
Net increase (decrease) in cash and cash
equivalents 33.6 (45.3) (79.8)
Cash and cash equivalents at beginning of
period 65.5 146.5 146.5
Exchange gains (losses) on cash 0.1 (3.5) (1.2)
---------- ---------- ---------
Cash and cash equivalents at end of
period 99.2 97.7 65.5
========== ========== =========
STATEMENT OF RECOGNISED INCOME AND EXPENSE
6 months 6 months Year to
to 30.6.05 to 30.6.04 31.12.04
£m £m £m
Profit (loss) for the financial period 5.1 19.0 (14.3)
Currency translation differences on
foreign currency net investments 12.5 6.8 (21.2)
Actuarial (loss) gain on defined benefit
pension scheme (22.7) 29.0 29.6
Movement on deferred tax relating to
defined benefit pension scheme 6.8 (8.9) (8.6)
Revaluation of available for sale
securities 7.4 - -
---------- ----------- ---------
Total recognised gains and losses for
period 9.1 45.9 (14.5)
========== =========== =========
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
6 months 6 months Year to
to 30.6.05 to 30.6.04 31.12.04
£m £m £m
Profit (loss) attributable to equity
shareholders 4.5 19.4 (15.0)
Dividends (61.2) (55.5) (84.5)
Credit in respect of employee share
schemes 1.9 1.5 2.5
Other recognised gains and losses (net) 4.0 26.9 (0.2)
Adjustment to purchase price on
acquisition (goodwill) - - (18.8)
New share capital subscribed 1.8 9.0 73.6
---------- ----------- ---------
Net movement in shareholders' equity (49.0) 1.3 (42.4)
Opening shareholders' equity as
previously stated 391.3 433.7 433.7
Adoption of Financial Instruments IAS
32/39 16.2 - -
---------- ----------- ---------
Opening shareholders' equity as
restated 407.5 433.7 433.7
---------- ----------- ---------
Closing shareholders' equity 358.5 435.0 391.3
========== =========== =========
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
1. Accounting policies
The Group adopted International Financial Reporting Standards (IFRS) on 1
January 2005. The principal accounting policies adopted under IFRS and applied
in the preparation of the interim financial statements are available on the
Group's website, www.rank.com.
For the year ended 31 December 2005, the Group is required to prepare its annual
financial statements in accordance with accounting standards adopted for use in
the European Union ('EU'). As such those financial statements will take account
of the requirements and options in IFRS 1 'First-time adoption of International
Financial Reporting Standards' as they relate to the 2004 comparatives included
therein.
Certain requirements and options in IFRS 1 relating to comparative financial
information presented on first-time adoption may result in a different
application of accounting policies in the 2004 financial information to that
which would apply if the 2004 financial statements were the first financial
statements the Group prepared in accordance with IFRS. The financial statements
are based on the IFRS expected to be applicable at 31 December 2005 and the
interpretations of those standards. The IFRS and IFRIC interpretations that will
be applicable at 31 December 2005 are not known with certainty. These financial
statements are based on management's understanding of issued standards and
interpretations and current facts and circumstances, which may change. For
example, amended or additional standards or interpretations may be issued by the
IASB. IFRS is currently being applied in the United Kingdom and in a large
number of other countries simultaneously for the first time. Due to a number of
new and revised standards issued after December 2003 there is not yet a
significant body of established practice on which to draw in forming opinions
regarding interpretation and application of IFRS. Accordingly practice is
continuing to evolve. At this preliminary stage, therefore, the full financial
effect of reporting under IFRS as it will be applied and reported for the year
ended 31 December 2005 cannot be determined with certainty.
The accounting policies have been consistently applied to all periods presented,
except those relating to the classification and measurement of financial
instruments. As permitted by IFRS 1, the Group has not restated its 2004
comparatives to reflect IAS 32, 'Financial Instruments: Disclosure and
Presentation' and IAS 39, 'Financial Instruments: Recognition and Measurement'.
The adoption of IAS 32 and 39 on 1 January 2005 increased shareholders' equity
by £16.2m.
The Group has not adopted IAS 34 'Interim Financial Reporting' in these interim
financial statements.
The financial information contained in this report has not been audited and does
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. The statutory accounts for 2004, which were prepared under
UK GAAP, have been delivered to the Registrar of Companies. The auditors opinion
on these accounts was unqualified and does not contain a statement made under
Section 237(2) and Section 237(3) of the Companies Act 1985.
Reconciliations from UK GAAP to IFRS of the Group's net assets at 1 January
2004, 30 June 2004 and 31 December 2004, and of the Group's net profit or loss
for the 6 months ended 30 June 2004 and year ended 31 December 2004, are also
available on the Group's website.
In conjunction with the rest of the Gaming industry, the Group is continuing to
assess the impact of IAS 32 and 39 on the Group's accounting policy for Gaming
revenue recognition. Any changes to this policy will not materially impact
operating profit.
2. Discontinued operations
The Deluxe Media Services business meets the IFRS criteria required to be
classified as a discontinued operation. As a result, Deluxe Media Services
revenue is excluded from the income statement and the results of the business,
including any associated exceptional costs, are recorded in a single line on a
post-tax basis.
A breakdown of the results of discontinued operations is shown below.
6 months 6 months Year to
to 30.6.05 to 30.6.04 31.12.04
£m £m £m
Revenue 136.8 173.7 385.1
========= ========= =========
Operating (loss) profit before
exceptional items (12.4) (9.1) 9.6
Exceptional operating costs (13.2) (27.9) (127.0)
--------- --------- ---------
Operating loss (25.6) (37.0) (117.4)
Net interest (0.8) (0.2) 0.1
--------- --------- ---------
Loss before tax (26.4) (37.2) (117.3)
Tax (9.2) 3.0 (0.8)
--------- --------- ---------
Net loss (35.6) (34.2) (118.1)
--------- --------- ---------
Assets and liabilities relating to the discontinued operations are as follows.
6 months
to 30.6.05
£m
Inventories 10.5
Debtors 111.8
----------
Assets held for sale 122.3
Creditors within one year (85.2)
Provisions (13.4)
----------
Liabilities held for resale (98.6)
----------
Net assets held for sale 23.7
==========
Cash flows relating to the discontinued operations are as follows
6 months 6 months 12 months
to 30.6.05 to 30.6.04 to 31.12.04
£m £m £m
Cash flow from operating activities 9.6 (7.5) (8.8)
========= ========= =========
Cash flow from investing activities (11.2) (19.0) (16.6)
========= ========= =========
Cash flow from financing activities - - -
========= ========= =========
3. Tax
The tax charge, including amounts disclosed within discontinued operations may
be analysed as follows:
6 months 6 months 12 months
to 30.06.05 to 30.06.04 to 31.12.04
£m £m £m
Rank subsidiaries - continuing
operations
Adjusted profit 18.9 19.1 41.2
Foreign exchange on inter-company 0.6 (5.4) (8.8)
loans
Amortisation of equity component of - - -
convertible bond
--------- ---------- ---------
Charge for continuing operations 19.5 13.7 32.4
Discontinued operations 9.9 (2.6) 2.7
--------- ---------- ---------
Total
pre-exceptional tax charge 29.4 11.1 35.5
========= ========== =========
Exceptional tax credit (0.7) (0.4) (12.2)
========= ========== =========
Taxation has been provided at an estimated effective rate of 26.6% on adjusted
profit (2004 full year - 26.3%).
4. Reconciliation of operating profit to cash flow
6 months 6 months Year to
to 30.6.05 to 30.6.04 31.12.04
£m £m £m
Operating profit 90.6 85.9 154.4
DMS operating loss (25.6) (37.0) (117.4)
Exceptional operating costs charged 13.2 32.5 168.7
Cash payments in respect of exceptional (7.8) (14.4) (29.4)
items and provisions
Depreciation and amortisation 34.6 36.1 73.7
Contract advance payments (net of (50.9) 17.9 17.8
amortisation)
Increase in working capital (22.1) (16.0) (11.4)
Other items 2.9 4.5 6.9
--------- ---------- ---------
Net cash inflow from operating activities 34.9 109.5 263.3
--------- ---------- ---------
5. Earnings per share
6 months 6 months Year to
to 30.6.05 to 30.6.04 31.12.04
Basic earnings (loss) per share
before exceptional items 2.7p 8.5p 25.3p
after exceptional items 0.7p 3.2p -2.5p
Basic earnings per share - continuing
operations
before exceptional items 6.4p 9.6p 24.1p
after exceptional items 6.4p 9.0p 17.2p
Basic earnings (loss) per share -
discontinued operations
before exceptional items -3.7p -1.1p 1.2p
after exceptional items -5.7p -5.7p -19.7p
Diluted earnings (loss) per share
before exceptional items 2.7p 8.0p 24.1p
after exceptional items 0.7p 3.3p -1.7p
Diluted earnings per share - continuing
operations
before exceptional items 6.4p 9.0p 23.0p
after exceptional items 6.4p 8.5p 16.6p
Diluted earnings (loss) per share -
discontinued operations
before exceptional items -3.7p -1.0p 1.1p
after exceptional items -5.7p -5.1p -18.3p
Basic adjusted earnings per
share - continuing
operations 8.2p 9.0p 18.8p
The weighted average number of shares used in the calculation of basic earnings
(loss) per share is 623.8m (2004 first half: 595.9m, full year: 598.7m). For
diluted earnings (loss) per share the weighted average number of shares used in
the calculation is 625.3m (2004 first half: 666.0m, full year: 645.7m).
6. Adjusted net profit
Adjusted net profit is derived as follows:
6 months 6 months 6 months
to 30.6.05 to 30.6.04 to 31.12.04
£m £m £m
Net profit attributable to equity
shareholders 4.5 19.4 (15.0)
Discontinued operations 35.6 34.2 118.1
Exceptional items - 4.1 41.5
Foreign currency losses (gains) on
inter-company balances 9.3 1.4 (11.4)
Interest on convertible bond 1.5 - -
Tax on adjusted items 0.5 (5.4) (20.7)
--------- --------- ---------
Adjusted net profit 51.4 53.7 112.5
========= ========= =========
7. Exchange rates
The US$/£ exchange rates for the relevant accounting periods are:
US$/£ 6 months 6 months 6 months
to 30.6.05 to 30.6.04 31.12.04
Average 1.86 1.82 1.84
Period-end 1.79 1.81 1.92
8. Borrowings to net debt reconciliation
Under IFRS, accrued interest is classified as borrowings. In addition, net debt
which is part of the assets and liabilities held for sale is disclosed
separately. A reconciliation of net borrowings disclosed in the balance sheet to
the Group's net debt position is provided below:
6 months 6 months Year to
to 30.6.05 to 30.6.04 31.12.04
£m £m £m
Borrowings, net of cash (737.4) (696.8) (636.3)
Amounts disclosed within Deluxe Media
Services (11.9) - (1.4)
Accrued interest 12.4 - -
---------- --------- ----------
Net debt (736.9) (696.8) (637.7)
========== ========= ==========
Independent review report to The Rank Group Plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2005 which comprises consolidated interim balance
sheet as at 30 June 2005 and the related consolidated interim statements of
income, cash flows, statement of recognised income and expenses and changes in
shareholders' equity for the six months then ended and 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 accounting standards adopted for use in the
European Union. This interim report has been prepared in accordance with the
basis set out on the Group's website, www.rank.com.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained on the Group's
website, 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 accounting standards adopted for use in
the European Union. The IFRS standards and IFRIC interpretations that will be
applicable and adopted for use in the European Union at 31 December 2005 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 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 June 2005.
PricewaterhouseCoopers LLP
London
2 September 2005
This information is provided by RNS
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