Interim Results

Shanks Group PLC 05 November 2003 5 November 2003 Company Announcement Shanks Group plc - Interim Results • Trading in line with July AGM statement • Headline profit: £14.1m versus £19.1m last year • Dividend per share maintained at 1.9p • UK Waste Services showing some signs of improvement • Better performance from the Group expected in second half Financial highlights: 2003/04 2002/03 First Half First Half+ • Turnover £293m £275m • Headline profit (before taxation, exceptional items and goodwill amortisation) £14.1m £19.1m • Goodwill amortisation £(5.9)m £(5.1)m -------------------- • Profit on ordinary activities before taxation £8.2m £14.0m • Adjusted basic earnings per share (before exceptional items and goodwill amortisation) 4.1p 5.5p • Basic earnings per share 1.6p 3.3p • Interim dividend per share 1.9p 1.9p +restated Announcing the Interim Results for 2002/03 Group Chairman Mr I M Clubb made the following statement: Performance continues in line with the trading update issued at the Annual General Meeting in July with improved performances at UK Chemical Services and Belgium being more than offset by the declines anticipated in UK Waste Services and, to a lesser extent, the Netherlands. Turnover increased by £18m (7%) to £293m (2002: £275m) of which £15m was due to the strengthening of the euro on the continental revenues. The UK businesses benefited for the first time from the East London Waste Authority (ELWA) contract which contributed £13m and also from higher revenues in Power and Chemical Services. This growth was offset by a reduction in both Landfill and Collection. Profit before taxation, exceptional items and goodwill amortisation (Headline Profit) in the six months to 30 September 2003 reduced by £5.0m to £14.1m (2002: £19.1m - restated). After goodwill amortisation of £5.9m (2002: £5.1m), profit before taxation amounted to £8.2m (2002: £14.0m restated). Profit after tax was £3.8m (2002: £7.8m - restated) reflecting a tax charge of 31% (2002: 32%). Adjusted basic earnings per share (before exceptional items and goodwill amortisation) were 4.1 pence per share (2002: 5.5 pence per share - restated). Your Board has maintained the interim dividend at 1.9 pence per share. Total debt grew by £12m to £309m since 31 March 2003. The seasonal working capital phasing increased core debt by £8m to £286m, while the limited recourse debt in the Private Finance Initiative (PFI) companies rose by £4m to £23m. DIVISIONAL REVIEW United Kingdom The UK operations consist of two divisions - Waste Services, which collects and manages municipal, commercial and industrial wastes and Chemical Services, which specialises in the treatment of hazardous chemical waste and related services including recovery. Overall Waste Services trading profit (operating profit before exceptional items and goodwill amortisation) decreased to £6.3m (2002: £12.6m) reflecting the continuing difficulties in landfill, collection and recycling activities. Core landfill volumes were lower with reduced commercial and industrial inputs and the diversion of certain special waste as a result of the Landfill Directive in July 2002. Landfill prices were raised but not sufficiently to recover increased regulatory and other costs, which have in the short term eroded margins. Competitive pressures in collections continue and there have also been difficulties with certain contracts, particularly in the recycling area. The recovery plan progresses with new management now installed in both England and Scotland. Improvements are being made in both countries' operating performances by such actions as streamlining collection rounds, focusing the sales force on more profitable opportunities and withdrawing from certain poorly performing contracts. Profit accruing from the generation of electricity from landfill gas has increased by £1.3m to £5.5m following the installation of 14MW of new capacity in January 2003 and improved prices from the Renewables Order on 15MW of existing capacity. Whilst market conditions for hazardous waste remain challenging, UK Chemical Services has eliminated its trading loss and is now at breakeven (2002: £0.9m loss - restated). Better performance from the fluidised bed waste to energy plant at Fawley which processes meat and bone meal (MBM) was the main contributor to this improved performance. Belgium Belgian operations are similar to those in the UK but include specialist demolition and soil cleaning at De Paepe and an industrial cleaning activity. Trading profit increased by £1.2m to £8.2m (2002: £7.0m). This improvement was due to higher prices for electricity from landfill gas, increased business in the remediation of contaminated land and favourable currency translation. Landfill volumes, although lower than last year, continued to exceed our expectations. This underscores the urgency of repermitting additional void at our Wallonian landfill site, which is expected in the second half. Netherlands Dutch operations are similar to those in Belgium but include a computer refurbishment operation and exclude any landfill activity. Despite the favourable currency translation, trading profits declined by £1.2m to £11.6m (2002: £12.8m) due to the economic slow down particularly affecting solid waste from the construction industry. The ATM hazardous waste unit has improved with its thermal soil cleaning activity showing good growth. However the computer refurbishment business suffered from the decline in new PC equipment prices. Industrial cleaning activities performed well although not quite at last year's exceptional level. Developments Planning permissions have been granted for the two mechanical biological treatment (MBT) plants developed with our Italian partner Ecodeco for the ELWA contract. This significant achievement demonstrates the attractiveness of this technology as a deliverable alternative to incineration for local authorities. Discussions continue with Dumfries & Galloway where the Group is preferred bidder for a 25 year PFI contract, again using this technology. These contracts and other similar opportunities which Shanks is pursuing will provide predictable long term profit streams. Success in major contaminated site remediation in Belgium reinforces the Group's unique capability in this area. Further similar opportunities are expected to arise both in Belgium and Northern France. The installation of 4MW new electricity generating capacity is nearing completion at our landfill in Wallonia. In the Netherlands, the permit to restart the ATM pyrolysis plant was obtained in late August and operations have now recommenced. The ATM soil cleaner is also being expanded to take advantage of opportunities, now the national specification for cleaned soil has been clarified. The enhanced capacity should be commissioned in the fourth quarter of the current year. A waste wood processing plant is also in the later stage of construction near Utrecht. Outlook The UK Waste Services performance, although unsatisfactory, is now showing some signs of improvement in response to management action. The ELWA project is progressing well and it is hoped that the Dumfries & Galloway project will proceed to financial close in the second half. UK Chemical Services is expected to improve despite the difficult market conditions. In Belgium the focus away from dependence on landfill is delivering good results and profits from the new electricity generating capacity should commence shortly. In the Netherlands the solid waste business remains difficult, however ATM should benefit from higher throughputs from both the pyrolysis plant and our soil cleaning activity. As a result, barring unforeseen circumstances, the Group expects a better performance in the second half of the year. Notes: 1. This announcement is available at the company's website (www.shanks.co.uk) as will the presentation being made today to financial institutions. 2. Copies of the Interim Report will be posted to shareholders by 24 November 2003, after which they will be available, on request, from the company at Astor House, Station Road, Bourne End, Bucks, SL8 5YP, or at the company website. 3. The interim dividend of 1.9 pence per share will be paid on 14 January 2003 to shareholders on the register at close of business on 19 December 2003. For further information contact: Ian Clubb; Chairman, Shanks Group plc Michael Averill; Group Chief Executive David Downes; Group Finance Director Or John Shaughnessy; Group Head of External Relations On 5th November 2003, telephone: +44 (0)20 7678 8000 Thereafter, telephone: +44 (0)1628 524523 Consolidated Profit and Loss Account. First Half ended 30 September 2003 2003/04 2002/03 2002/03 Note First First Full Year Half Half ------------------------------------------------------------------------------- Before exceptional Exceptional items items Total restated* restated* restated* £m £m £m £m £m -------------------------------------------------------------------------------- Turnover: Group and share of joint ventures 297.5 279.0 558.5 - 558.5 Less: share of turnover of joint ventures (4.9) (4.4) (7.1) - (7.1) -------------------------------------------------------------------------------- Group turnover 2 292.6 274.6 551.4 - 551.4 Cost of sales 1,3 (241.5) (223.2) (450.4) (3.2) (453.6) -------------------------------------------------------------------------------- Gross profit 51.1 51.4 101.0 (3.2) 97.8 ================================================================================ Group operating profit before goodwill amortisation 3 23.4 29.0 53.9 (4.4) 49.5 Goodwill amortisation (5.9) (5.1) (10.6) - (10.6) -------------------------------------------------------------------------------- Group operating profit 17.5 23.9 43.3 (4.4) 38.9 Share of operating profit of joint ventures 0.9 0.6 1.4 - 1.4 -------------------------------------------------------------------------------- Total operating profit 2 18.4 24.5 44.7 (4.4) 40.3 Non-operating exceptional items: - on disposal of operations 3 - - - (0.6) (0.6) -------------------------------------------------------------------------------- Profit before finance charges and tax 18.4 24.5 44.7 (5.0) 39.7 Finance charges - interest (8.9) (9.4) (18.7) - (18.7) Finance charges - other 4 (1.3) (1.1) (2.3) (0.5) (2.8) -------------------------------------------------------------------------------- Profit on ordinary activities before tax 2 8.2 14.0 23.7 (5.5) 18.2 Tax 5 (4.4) (6.2) (10.6) 1.5 (9.1) -------------------------------------------------------------------------------- Profit on ordinary activities after tax and profit for the period 1 3.8 7.8 13.1 (4.0) 9.1 Equity dividends paid and proposed 6 (4.4) (4.4) (13.3) -------------------------------------------------------------------------------- Retained (loss) profit transferred to reserves (0.6) 3.4 (4.2) ================================================================================ Earnings per share - basic 7 1.6p 3.3p 3.9p - adjusted basic before exceptional items and goodwill amortisation 7 4.1p 5.5p 10.1p - diluted basic 7 1.6p 3.3p 3.9p Dividend per share 6 1.9p 1.9p 5.7p ================================================================================ All of the above relates to continuing operations. *2002/03 figures have been restated following the change of accounting policy in respect of capitalisation of interest. See Note 1 for details. Consolidated Balance Sheet. At 30 September 2003 At At At 30 September 30 September 31 March 2003 2002 2003 restated* restated* Note £m £m £m £m £m £m -------------------------------------------------------------------------------- Fixed assets Intangible 194.4 181.9 198.0 assets Tangible assets 1 328.5 303.3 325.2 Investments 1.2 1.1 1.1 Investments in joint ventures: Share of gross 12.1 11.6 13.6 assets Share of gross (7.6) (7.2) (8.4) liabilities ------- ------- ------ Share of net 4.5 4.4 5.2 assets Loans to joint 3.9 2.6 2.9 ventures ------ ------ ------- Total investment in 8.4 7.0 8.1 joint ventures -------------------------------------------------------------------------------- Total fixed 532.5 493.3 532.4 assets Current assets Stocks 7.5 6.8 7.0 Debtors 134.9 141.2 129.6 Cash at bank 16.1 12.8 20.5 and in hand ----- ------ ----- 158.5 160.8 157.1 ----- ------ ----- Creditors: amounts falling due within one year Borrowings (4.7) (35.4) (4.9) Other creditors (152.9) (133.5) (159.1) -------- -------- --------- (157.6) (168.9) (164.0) -------- -------- --------- Net current assets 0.9 (8.1) (6.9) (liabilities) -------------------------------------------------------------------------------- Total assets less current 533.4 485.2 525.5 liabilities Creditors: amounts falling due after more than one year Borrowings (320.8) (272.5) (313.1) Other creditors (0.2) (0.3) (0.2) -------- ------- ------- (321.0) (272.8) (313.3) Provisions for liabilities 8 (68.3) (66.8) (68.4) and charges -------------------------------------------------------------------------------- Net assets 144.1 145.6 143.8 ================================================================================ Capital and reserves Called up share 23.4 23.4 23.4 capital Share premium 93.1 93.1 93.1 account Profit and loss 1 27.6 29.1 27.3 account -------------------------------------------------------------------------------- Equity 9 144.1 145.6 143.8 shareholders' funds ================================================================================ *2002/03 figures have been restated following the change of accounting policy in respect of capitalisation of interest. See Note 1 for details. Consolidated Cash Flow Statement. First Half ended 30 September 2003 2003/04 2002/03 2002/03 First Half First Half Full Year restated* restated* Note £m £m £m £m £m £m -------------------------------------------------------------------------------- Net cash flow from operating 10 37.8 43.2 120.9 activities Returns from investments and servicing of finance Net interest paid (10.1) (9.6) (18.7) Tax paid (3.2) (2.4) (11.6) Capital expenditure and financial investment Purchase of tangible fixed (26.5) (26.0) (59.8) assets Sale of tangible 2.3 3.4 6.9 assets ------ ------ ------ (24.2) (22.6) (52.9) Acquisitions and 0.2 0.1 (9.8) disposals Equity dividends paid (8.9) (8.9) (13.3) -------------------------------------------------------------------------------- Net cash flow before financing (8.4) (0.2) 14.6 Financing Issue of ordinary share - 0.1 0.1 capital Debt financing 4.2 8.0 11.2 -------------------------------------------------------------------------------- (Decrease) increase in (4.2) 7.9 25.9 cash ================================================================================ Reconciliation of net cash flow to movement in net debt (Decrease) increase in (4.2) 7.9 25.9 cash Debt financing (4.2) (8.0) (11.2) -------------------------------------------------------------------------------- Change in net debt resulting (8.4) (0.1) 14.7 from cash flows Amortisation of loan (0.4) (0.2) (0.5) fees Exchange rate loss on net (3.1) (5.3) (22.2) debt -------------------------------------------------------------------------------- Movement in net debt in the period (11.9) (5.6) (8.0) Net debt at 31 March (297.5) (289.5) (289.5) 2003 -------------------------------------------------------------------------------- Net debt at 30 September (309.4) (295.1) (297.5) 2003 ================================================================================ Net debt represents total borrowings less cash in hand. *2002/03 figures have been restated following the change of accounting policy in respect of capitalisation of interest. See Note 1 for details. Analysis of Net Debt. At 30 September 2003 At At At 30 September 30 September 31 March 2003 2002 2003 £m £m £m -------------------------------------------------------------------------------- Principal Group net borrowings 286.3 291.1 278.4 Private Finance Initiative company net borrowings 23.1 4.0 19.1 -------------------------------------------------------------------------------- 309.4 295.1 297.5 ================================================================================ Notes to the Interim Financial Statements. 1 Basis of preparation of financial statements and change in accounting policy The interim financial statements have been prepared on the basis of the accounting policies set out in the published accounts of the Group for the year ended 31 March 2003 with the exception of capitalisation of interest on capital projects. Capitalisation of interest on capital projects has been adopted for the first time in these interim financial statements. This change in accounting policy has been dealt with as a prior year adjustment and previously reported figures have been restated accordingly. The reported cost of sales and profit after tax for the six months period ended 30 September 2002 have been reduced by £0.1m and for the year ended 31 March 2003 have been reduced by £0.2m. Tangible fixed assets have been increased by £1.0m and £0.9m, deferred tax provision by £0.3m and £0.3m and equity shareholders' funds increased by £0.7m and £0.6m respectively. 2 Segmental analysis 2003/04 2002/03 2002/03 First Half First Half Full Year restated restated £m £m £m -------------------------------------------------------------------------------- (a) Turnover by origin and destination of service United Kingdom: - Waste Services 123.4 118.6 233.6 - Chemical Services 19.1 17.5 36.6 -------------------------------------------------------------------------------- United Kingdom 142.5 136.1 270.2 Belgium 51.3 47.3 95.2 The Netherlands 98.8 91.2 186.0 -------------------------------------------------------------------------------- Group turnover 292.6 274.6 551.4 ================================================================================ Share of joint venture turnover 4.9 4.4 7.1 ================================================================================ (b) Operating profits and profit on ordinary activities before tax Trading profits: United Kingdom: - Waste Services 6.3 12.6 19.7 - Chemical Services - (0.9) (1.4) -------------------------------------------------------------------------------- United Kingdom 6.3 11.7 18.3 Belgium 8.2 7.0 14.5 The Netherlands 11.6 12.8 25.9 Central Services (1.8) (1.9) (3.4) -------------------------------------------------------------------------------- Operating profit before exceptional items and goodwill amortisation 24.3 29.6 55.3 Exceptional operating items - - (4.4) Goodwill amortisation (5.9) (5.1) (10.6) -------------------------------------------------------------------------------- Total operating profit 18.4 24.5 40.3 ================================================================================ United Kingdom: - Waste Services 4.9 11.5 13.1 - Chemical Services - (1.0) (1.8) -------------------------------------------------------------------------------- United Kingdom 4.9 10.5 11.3 Belgium 7.8 6.8 13.9 The Netherlands 7.6 9.2 18.7 Central Services (1.9) (2.0) (3.6) -------------------------------------------------------------------------------- Total operating profit 18.4 24.5 40.3 Non-operating exceptional items - - (0.6) -------------------------------------------------------------------------------- Profit before finance charges 18.4 24.5 39.7 Finance charges - interest (8.9) (9.4) (18.7) Finance charges - other (1.3) (1.1) (2.3) Finance charges - exceptional - - (0.5) -------------------------------------------------------------------------------- Profit on ordinary activities before tax 8.2 14.0 18.2 ================================================================================ Notes to the Interim Financial Statements. continued 2 Segmental analysis continued At At At 30 September 30 September 31 March 2003 2002 2003 restated restated £m £m £m -------------------------------------------------------------------------------- (c) Net assets United Kingdom: - Waste Services 173.7 167.3 158.3 - Chemical Services 30.9 37.3 33.6 ------------------------------------------------------------------------------- United Kingdom 204.6 204.6 191.9 Belgium 24.6 32.0 23.1 The Netherlands 240.7 220.9 237.9 ------------------------------------------------------------------------------ Net operating assets 469.9 457.5 452.9 Unallocated net assets (liabilities): Assets under the course of construction 10.0 13.4 18.2 Net debt (309.4) (295.1) (297.5) Other unallocated net liabilities (26.4) (30.2) (29.8) -------------------------------------------------------------------------------- Net assets 144.1 145.6 143.8 ================================================================================ Other unallocated net liabilities include debtors and creditors relating to taxation and dividends, and an element of capitalised goodwill. 3 Exceptional items The operating exceptional costs in the year to 31 March 2003 of £4.4m include £3.2m in relation to the regulatory requirement to reduce historic leachate levels at United Kingdom landfill sites and £1.2m in relation to United Kingdom restructuring costs. The tax effect of these exceptional costs is to reduce the current tax charge by £1.3m. The non-operating exceptional loss in the year to 31 March 2003 of £0.6m arose on the disposal of non-performing assets and surplus property. There is no tax effect arising in respect of this loss. 4 Finance charges - other Other finance charges relate to the unwinding of discount on long term landfill liabilities of £0.9m (2002/03: £0.9m) and the amortisation of bank fees of £0.4m (2002/03: £0.2m). An exceptional finance cost of £0.5m in the year to 31 March 2003 arose on the modification of the Group's banking covenants. The tax effect of this exceptional cost is to reduce the current tax charge by an additional £0.2m. 5 Taxation 2003/04 2002/03 2002/03 First Half First Half Full Year £m £m £m -------------------------------------------------------------------------------- UK corporation tax at 30%: - Current year 3.9 (0.2) 3.7 - Prior year - - (1.8) - Double tax relief (3.9) - (4.2) Overseas tax 5.8 5.8 11.1 Deferred tax (1.6) 0.4 (0.1) Joint ventures 0.2 0.2 0.4 -------------------------------------------------------------------------------- 4.4 6.2 9.1 ================================================================================ The taxation rate for the first half of the current year is based on the estimated taxation charge for the full year. 6 Interim dividend The interim dividend of 1.9p per share (2002/03: 1.9p per share) will be paid on 14 January 2004 to shareholders on the register at close of business on 19 December 2003. 7 Earnings per share Basic earnings per share are calculated by dividing the profit for the period by the average number of shares in issue during the period. 2003/04 2002/03 2002/03 First Half First Half Full Year restated restated -------------------------------------------------------------------------------- Calculation of basic and adjusted basic earnings per share Profit for the period (£m) 3.8 7.8 9.1 Exceptional items (net of tax) (£m) - - 4.0 Goodwill amortisation (£m) 5.9 5.1 10.6 -------------------------------------------------------------------------------- Earnings before exceptional items and goodwill amortisation (£m) 9.7 12.9 23.7 ================================================================================ Average number of shares in issue during the period 234.0m 234.0m 234.0m Basic earnings per share (pence) 1.6p 3.3p 3.9p Adjusted basic earnings per share before exceptional items and goodwill amortisation (pence) 4.1p 5.5p 10.1p ================================================================================ Calculation of diluted basic earnings per share Average number of shares in issue during the period 234.0m 234.0m 234.0m Effect of share options in issue - 0.8m 0.2m -------------------------------------------------------------------------------- Total 234.0m 234.8m 234.2m ================================================================================ Diluted basic earnings per share (pence) 1.6p 3.3p 3.9p ================================================================================ The Directors believe that adjusting the earnings per share for the effect of exceptional items and goodwill amortisation enables a comparison with historical data calculated on the same basis. 8 Provisions for liabilities and charges At At 31 March Provided in Utilised in 30 September 2003 period period Exchange 2003 restated* £m £m £m £m £m -------------------------------------------------------------------------------- Site restoration 18.6 1.6 (1.0) 0.1 19.3 Aftercare 26.4 2.1 (0.4) 0.1 28.2 Leachate 3.2 - (0.8) - 2.4 Reorganisation 0.6 - (0.3) - 0.3 Onerous leases 0.4 - - - 0.4 Deferred taxation - restated* 19.2 (1.6) - 0.1 17.7 -------------------------------------------------------------------------------- 68.4 2.1 (2.5) 0.3 68.3 ================================================================================ *2002/03 figures have been restated following the change of accounting policy in respect of capitalisation of interest. See Note 1 for details. Notes to the Interim Financial Statements. continued 9 Reconciliation of movements in equity shareholders' funds 2003/04 2002/03 2002/03 First Half First Half Full Year restated* restated* £m £m £m -------------------------------------------------------------------------------- Profit for the period 3.8 7.8 9.1 Equity dividends (4.4) (4.4) (13.3) -------------------------------------------------------------------------------- Retained profit transferred to reserves (0.6) 3.4 (4.2) Issue of share capital - 0.1 0.1 Currency translation gain (loss) 1.7 1.8 12.4 Tax attributable to currency translation - - (0.3) Currency translation adjustment on goodwill (0.8) (1.2) (5.7) -------------------------------------------------------------------------------- Net movement in equity shareholders' funds 0.3 4.1 2.3 -------------------------------------------------------------------------------- Opening equity shareholders' funds - as previously reported 143.8 140.7 140.7 Prior year adjustment (see Note 1) - 0.8 0.8 -------------------------------------------------------------------------------- Opening equity shareholders' funds - restated 143.8 141.5 141.5 -------------------------------------------------------------------------------- Closing equity shareholders' funds 144.1 145.6 143.8 ================================================================================ *2002/03 figures have been restated following the change of accounting policy in respect of capitalisation of interest. See Note 1 for details. 10 Net cash flow from operating activities 2003/04 2002/03 2002/03 First Half First Half Full Year Before exceptional Exceptional Total items items restated restated restated £m £m £m £m £m -------------------------------------------------------------------------------- Total operating profit 18.4 24.5 44.7 (4.4) 40.3 Amortisation of intangible assets 5.9 5.1 10.6 - 10.6 Depreciation of fixed assets 23.3 21.9 42.3 - 42.3 Provision for site restoration and aftercare 2.8 1.2 2.8 - 2.8 -------------------------------------------------------------------------------- Earnings before interest, taxation, depreciation and amortisation (EBITDA) 50.4 52.7 100.4 (4.4) 96.0 Loss (profit) on sale of fixed assets (0.4) 0.1 0.1 - 0.1 Decrease (increase) in working capital (8.8) (4.9) 32.0 0.5 32.5 Exceptional provision cost - - - 3.2 3.2 Utilisation of provisions (2.5) (4.1) (9.5) - (9.5) Share of profits of joint (0.9) (0.6) (1.4) - (1.4) ventures -------------------------------------------------------------------------------- Net cash flow from operating activities 37.8 43.2 121.6 (0.7) 120.9 ================================================================================ 11 Contingent liabilities The Group is subject to a number of claims including one for £25m in respect of the use of minerals at the Group's Greengairs landfill site in Scotland. The Directors' are strongly resisting these claims. At the present time the outcome to the Group cannot be determined and the potential liabilities cannot be quantified. However, it is the opinion of the Directors that the outcome of these disputes is unlikely to have a material effect on the Group's financial position. 12 Status of financial information The interim financial information, which was approved by the Directors on 5 November 2003, is unaudited but has been reviewed by the auditors and their report is set out on page 13. The financial information for the year ended 31 March 2003 does not comprise financial statements within the meaning of section 240 of the Companies Act 1985, and has been extracted from the Group's 2003 published financial statements which have been filed with the Registrar of Companies. The auditors' opinion on those financial statements was unqualified and did not include a statement under section 237 (2) or (3) of the Companies Act 1985. Independent Auditors' Review Report to Shanks Group plc. Introduction We have been instructed by Shanks Group plc ('the Group') to review the financial information which comprises the profit & loss account, the balance sheet, the cash flow statement, the statement of total recognised gains and losses 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 which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. 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 accounting policies and presentation have been consistently applied unless otherwise disclosed. 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 performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. 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 2003. PricewaterhouseCoopers LLP Chartered Accountants London 5 November 2003 This information is provided by RNS The company news service from the London Stock Exchange

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