Interim Results

Trifast PLC 24 November 2006 24 November 2006 TRIFAST PLC Interim results for the six months ended 30 September 2006 "Solid revenue and profit growth driven by strengthened international presence" Financial and Operational Highlights: • Revenues increased by 33% to £67.8m (2005: £50.9m) • Operating profit grew by 72% to £3.8m (2005: £2.2m) • Fully diluted earnings per share increased by 59% to 2.95p (2005: 1.85p) • Interim dividend increased by 5% to 0.77p (2005: 0.73p) • Successful integration of Serco-Ryan, planned £2m cost savings achieved • Agreement to purchase 25% stake in leading Malaysian manufacturer Techfast for circa £2.8m • 55% of operating profits now being generated outside of the UK • International growth strategy in place and delivering Commenting on the interim results, Anthony Allen, Chairman, said: "The business performed strongly in the first half and delivered solid earnings and profit growth across the Group. Trifast is now truly international with over half of its profits being generated outside the UK and a growing presence in the fast growing Asian markets, as illustrated by the recent acquisition of 25% of Techfast, the leading Malaysian manufacturer of self-clinch fasteners. With its global reach, strong brand and innovative products the Group is ideally positioned to take advantage of further growth opportunities in the global industrial fastener market." Enquiries: Trifast Group plc Tel: 020 7360 4900 on 24 November only, thereafter Tel: 01825 747 366 Jim Barker, Chief Executive Officer Stuart Lawson, Group Finance Director Smithfield Consultants Tel: 020 7360 4900 / 07973 387 473 Noemie de Andia Arden Partners Tel: 020 7398 1632 Richard Day / Steve Pearce Trifast plc Interim results for the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Revenue £67.81m £50.94m £117.28m Gross profit £17.45m £12.87m £29.13m Operating profit £4.66m £2.48m £6.38m (pre-goodwill, intangible amortisation, IFRS 2 charges and restructuring costs) Operating profit £3.81m £2.22m £3.24m Pre-tax profit £4.22m £2.28m £5.69m (pre-goodwill, intangible amortisation, IFRS 2 charges and restructuring costs) Pre-tax Profit £3.38m £2.02m £2.55m Earnings per share - Basic 2.95p 1.86p 1.86p - Diluted 2.95p 1.85p 1.85p Dividend 0.77p 0.73p 2.21p Notes to Editors Trifast plc is an international manufacturer and distributor of industrial fastenings to the assembly industries, with operations in Europe, the Americas and Asia. The Company's products include micro screws, customer specific items and high tolerance fastenings. Established in the South of England in 1973, the Company has grown by acquisitions over the years and floated on the London Stock Exchange in 1994. The acquisition of Serco Ryan, the third largest UK competitor, in 2005 has transformed the Company into a major player in the industrial fastener market with ambitions to become Europe's leading brand. Trifast has a market capitalisation of £55m. For more information please visit www.trifast.com CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW The business performed strongly in the first half of the year delivering a 33% increase in revenues and a 72% operating profit improvement over the same period last year. This solid growth demonstrates the benefits of the Group's increased international presence with over half of its profits now generated outside the UK. The Global industrial fasteners industry is experiencing solid growth and the management team continues to focus on expanding the Group's market share in both Europe and Asia through an aggressive sales and marketing strategy. Operational Review These solid results were achieved despite recent shortages in raw materials, the subsequent price escalation and consolidation in the market, which forced many of our competitors to cut costs and decrease their focus on innovation and product support. We grew our revenues and profit margins, which is testimony to our strong reputation for excellent service, technical support and innovative products. We have reviewed our product pricing and increased our focus on premium-priced products during the period. In addition our diverse customer base, by market sector and geography, enabled us to mitigate the risks of sector and regional downturns. Further, our Asian manufacturing base provides us with the ability to offer all important security of supply to our customers. Operationally we have reduced our stockturn by combining the benefits of both Serco-Ryan's and Trifast's procurement processes and supply chain management systems. During the last twelve months we have completed a detailed analysis of the market-place for industrial fasteners to identify our customers' future needs in terms of global manufacturing capability and innovative products and services. In line with our sales and marketing strategy to capture the opportunities identified, we have put in place a four year growth plan. Our geographic expansion strategy is progressing well with over half of the Group's profits now generated outside the UK. This diversification has been achieved during a period when we have successfully integrated Serco-Ryan into the Group and the resulting increase of our UK revenues. We expect this trend of internationalisation of the Group's profits to continue. This will be achieved through a continued focus on our unique competitive advantages which are summarised below: •Research and Development Capability, as illustrated by our innovative Hexiform screw designed and developed by our world class facility in Singapore especially for the Manganese Casting industry; •First Class Design Expertise: we continue to work with global original equipment manufacturers (OEMs) to design innovative products to meet their specifications; •Low Cost Manufacturing: our high quality low cost manufacturing facilities in Suzhou (Jiangsu province) is an example of our ability to cut manufacturing costs; •Sophisticated Inventory Systems: Trifast's Inventory System is a dynamic logistical system for managing customer's product inventory; •Branded Global Operations: Trifast operates in 37 locations in 16 countries under the distinctive brand TR. In addition the global demand for fasteners is projected to grow by 4.8% annually to approximately £29 billion in 2010 (source: Freedonia, industrial data specialists). This represents a significant growth opportunity for Trifast and we aim to build our global market share from 0.6% to 1% within five years. To achieve this the following objectives have been set and actions implemented for the following regions: Europe The European market is worth £7.2 billion (source: Freedonia, industrial data specialists) today and we plan to grow our market share from 1.8% to 3% over the next four years. We have streamlined our European operations to pursue a strategy of organic and acquisitive growth. In addition, we have re-organised our European sales force and put in place a clear recognition and reward system to drive sales growth further. We have successfully integrated Serco-Ryan and Keba Fastenings (Turkey), both acquired last year, and achieved £2 million of cost savings as forecasted. We are now in the process of re-organising our supply chain management to support future growth. We appointed a new Head of Purchasing to focus on maximising the purchasing benefits of the enlarged Group and to underpin our current and future sales drives. He has already started to rationalise our supply chain and reduce our overall stock holding and we are pleased with the early progress made in these areas. Asia Asia is one of the fastest growing industrial fasteners markets in the world and we aim to maintain our strong growth rate, currently in excess of 20% per annum, in the region. As announced in October, we have agreed the purchase, for circa £2.8m, of 25% of Techfast, the leading Malaysian manufacturer of Self Clinch fasteners, and whose manufacturing capability complements our own. Already Techfast has helped us secure new business within the lucrative LCD flat screen industry in Turkey through TR Keba which is located in the region. North America We have made good progress in turning around our North American operations, which have now moved into profitability during the period. Our aim is to establish our North American business as a provider of specialist products to the American distribution industry and we have successfully continued to expand our network of self-clinch distributors while expanding the activities of our satellite team in HP (Houston). Financial Review The results for both periods under review have been prepared using the presentation, recognition and measurement requirements of International Financial Reporting Standards (IFRS). Group revenues increased by 33% to £67.81 million (2005: £50.94 million) in the six months ended 30 September 2006. Of this increase 6% has come from organic growth with the remaining 27% attributable to the acquisition of Serco-Ryan in October 2005. Whereas organic growth is 6%, allowing for the strategic reduction of one key account, the underlying organic growth level is 12%. Our gross margin improved by 0.4% points against the comparable period last year and by 0.9% points on the overall gross margin for the year ended 31st March 2006. This margin gain reflects our continued focus on reducing all costs as well as improving our business mix and maintaining pressure on low margin accounts. European/USA revenues, which now represent 80.8% of the Group's revenue, increased by 35% over the period to £54.77 million (2005: £40.59 million). 29% of this increase comes from the acquisition of Serco-Ryan and 6% from organic growth (or 11% organic growth if adjusted as explained above). Organic growth was particularly strong in Norway, Holland, Poland and the USA, with all these countries having experienced double digit growth. This contributed to an 83.3% increase in the operating profit for the regions. Our Asian revenues were up 26.0% at £13.04 million (2005: £10.35 million), a good result reflecting sustained growth of our operations in China which continue to benefit from the movement of global customers from relatively higher cost economies to lower cost areas. This increased revenue also resulted in a 38.8% increase in operating profits confirming that we are now maintaining gross margins in this region and keeping overheads under tight control. Finally our new Chinese factory in Suzhou is now commercially operational. Asia remains a strategic region for the Group and we expect to invest a further US$0.5 million over the next 12 months. Gross profit for the six month period was £17.45 million compared to £12.87 million in 2005, an increase of 35.6% reflecting both the acquisition of Serco-Ryan and the increase in our gross margin percentage as explained above. Our increased focus on cost reductions is now delivering. Administration expenses (before amortisation, restructuring costs and IFRS 2 charge) as a percentage of revenue continued to fall over the period and now represent 17.0%. We have achieved our target of reducing the combined overheads of our UK business and Serco-Ryan by the forecasted £2.00 million annualised savings, and expect some further reductions to be realised over the next few months. Restructuring costs for the period amounted to £0.63 million representing costs of redundancy and onerous leases. The IFRS 2 charge in the period under review was £0.08 million (2005: £0.08 million). Operating profit before financing costs was £3.81 million, up 71.6% from last year's £2.22 million, an increase reflecting greater revenue, higher gross margins and lower operating costs as a percentage of revenues, all excellent trends which we expect to continue in the second half of the year. We continue to generate cash from the majority of our trading activities and the Group's gross debt has been reduced by a further £1.91 million to £17.05 million with net debt at £9.62 million at the period end, representing a gearing level of 24.2%. Cash generated from operations in the period amounted to £4.80 million before restructuring costs of £0.75 million. This has been helped by a tight management of stock levels across the Group. Stock has increased from September 2005 by £2.08 million to £24.84 million as a result of the acquisition of Serco-Ryan which brought with it £4.12 million of stock. However underlying stock movement for the period is a significant reduction of £2.04 million which reflects our sustained effort to improve stock management across the combined business. Cash flow for the second six months of the financial year is forecast to remain strong. Accordingly in October 2006 we made the final £2.00 million payment for Serco-Ryan in cash rather than issuing shares, effectively enhancing earnings per share and we will also fund the acquisition of the 25% shares in Techfast for £2.80 million with cash. These payments will be made from existing cashflow and additional debt of £3.80 million. Debtor management remains a core priority and we are pleased to report that we have had no significant bad debts in the period and our debtor days remain strong at 67. Creditor days were at 70. Capital expenditure was low at £0.27 million (2005: £0.38 million) with depreciation at £0.60 million (2005: £0.60 million). We expect these figures to increase during the second half of the year as we add further capability to our Chinese manufacturing facility. Net financing costs increased to £0.43 million of which interest payable amounted to £0.50 million (2005: £0.25 million), reflecting the cost of taking on £11.20 million of additional debt to part fund the acquisitions of Serco-Ryan and TR Keba. Profit before income tax in the period was £3.38 million (2005: £2.02 million), reflecting the positive sales growth in all regions, gross margin increases and the on-going containment of overheads as a percentage of sales. With an effective tax rate of 26.3% (2005: 33.5%) profit after tax was £2.49 million (2005: £1.34 million). Basic earnings per share in the period amounted to 2.95 pence against 1.86 pence for the 2005 equivalent period last year. Adjusting for restructuring costs, the adjusted diluted earnings per share was 3.47 pence (2005: 2.03 pence). Interim Dividend The Directors have declared an increased interim dividend of 0.77 pence per ordinary share (2005: 0.73 pence) reflecting the Board's confidence in the future of the enlarged Group. The interim dividend will be paid on 17 January 2007 to shareholders on the Register on 8 December 2006; with an ex-dividend date of 6 December 2006. Current Trading and Prospects The Group has made a good start to the second half with revenues and profits to date ahead of last year. Trifast has a strong brand, innovative products, global reach and a clear growth strategy in place and, is well positioned to grow and to capture further market share in the expanding global industrial fastening market. We believe that the Group is well positioned for further profitable growth and we are confident of a positive outcome for the year. Anthony Allen Chairman Jim Barker Chief Executive Officer Condensed consolidated interim income statement Unaudited results for the six months ended 30 September 2006 Notes Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Revenue 67,807 50,939 117,282 Cost of Sales (50,356) (38,068) (88,150) ----- ------------ ------------ ---------- Gross Profit 17,451 12,871 29,132 Other Operating Income 86 109 238 Distribution Expenses (1,372) (1,736) (3,774) ---------------------- ----- ------------ ------------ ---------- Administrative Expenses before (11,508) (8,765) (19,218) the following items: Goodwill Impairment - - (786) - Intangible Amortisation (131) - (121) - Restructuring Costs (634) (180) (2,108) - IFRS 2 Charge (83) (79) (121) ---------------------- ----- ------------ ------------ ---------- Total Administration Expenses (12,356) (9,024) (22,354) ----- ------------ ------------ ---------- Operating Profit before Financing Costs 3,809 2,220 3,242 ----- ------------ ------------ ---------- Financial Income 69 47 54 Financial Expenses (502) (251) (743) ----- ------------ ------------ ---------- Net Financing costs (433) (204) (689) Profit before Income Tax 3,376 2,016 2,553 Income Tax 3 (887) (676) (1,115) ----- ------------ ------------ ---------- Profit for the Period 2,489 1,340 1,438 ===== ============ ============ ========== Earnings per Share - Basic 5 2.95p 1.86p 1.86p - Diluted 5 2.95p 1.85p 1.85p Dividends 4 0.77p 0.73p 2.21p Condensed consolidated interim statement of recognised income and expense Unaudited results for the six months ended 30 September 2006 Six months ended Six months ended Year ended 30 September 2006 30 September 2005 31 March 2006 £000 £000 £000 Foreign exchange translation differences (loss)/gain (1,378) 677 1,470 Net gain on hedge of net investment in foreign subsidiary 12 20 4 ----------- ----------- --------- (Expense) and Income Recognised Directly in Equity (1,366) 697 1,474 ----------- ----------- --------- Profit for the Period 2,489 1,340 1,438 ----------- ----------- --------- Total Recognised Income and Expense for the Period 1,123 2,037 2,912 =========== =========== ========= Condensed consolidated interim balance sheet Unaudited results as at 30 September 2006 Notes 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Non-current assets Property, plant and equipment 8,586 8,390 9,208 Intangible assets 24,046 11,413 24,591 Deferred tax assets 573 482 573 ----- ------------ ------------ --------- Total non-current assets 33,205 20,285 34,372 ----- ------------ ------------ --------- Current assets Stocks 24,837 22,756 25,123 Trade and other receivables 29,678 22,581 30,070 Cash and cash equivalents 7,421 1,894 6,524 ----- ------------ ------------ --------- Total current assets 61,936 47,231 61,717 ----- ------------ ------------ --------- Total assets 95,141 67,516 96,089 ----- ------------ ------------ --------- Current liabilities Bank and other loans 2,893 1,899 3,280 Trade and other payables 24,158 17,250 24,404 Tax payable 835 801 365 Dividends payable 1,248 1,014 - Deferred consideration 2,562 - 2,562 Provisions 166 - 242 ----- ------------ ------------ --------- Total current liabilities 31,862 20,964 30,853 ----- ------------ ------------ --------- Non-current liabilities Bank and other loans 14,152 6,907 15,950 Provisions for liabilities and charges 1,170 181 1,215 Deferred tax liabilities 753 419 826 ----- ------------ ------------ --------- Total non-current liabilities 16,075 7,507 17,991 ----- ------------ ------------ --------- Total liabilities 47,937 28,471 48,844 ----- ------------ ------------ --------- Net assets 47,204 39,045 47,245 ----- ------------ ------------ --------- Equity Share capital 4,219 3,595 4,219 Share premium 11,874 4,598 11,873 Reserves (495) 94 871 Retained earnings 6 31,606 30,758 30,282 ----- ------------ ------------ --------- Total equity 7 47,204 39,045 47,245 ----- ------------ ------------ --------- Condensed consolidated interim statement of cash flows Unaudited results for the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Cash Flows from Operating Activities Profit for the Period 2,489 1,340 1,438 ------------ ----------- ---------- Adjustments for: 746 597 2,124 Depreciation, amortisation & impairment (69) (47) (54) Financial income 502 251 743 Financial expense 3 6 (24) Loss/(profit) on sale of property, plant & equipment - (32) - Profit on sale of investments 83 79 121 Equity settled share based payment expense 887 676 1,115 Taxation ------------ ----------- ---------- Operating profit before changes in working 4,641 2,870 5,463 capital and provisions Increase/(decrease) in trade payables 326 (1,569) (50) (Increase)/decrease in stocks (272) (905) 1,073 Increase in trade receivables (562) (26) (691) (Decrease)/increase in provisions (121) - 1,243 ------------ ----------- ---------- Cash generated from operations 4,012 370 7,038 Tax paid (446) (867) (1,738) ------------ ----------- ---------- Net Cash from Operating Activities 3,566 (497) 5,300 ------------ ----------- ---------- Cash Flows from Investing Activities (Acquisition)/disposal of subsidiaries (18) 137 (16,575) and investments net of cash Acquisition of property, plant & equipment (269) (377) (1,150) Proceeds from sale of property, plant & equipment - 1 17 Interest received 71 46 52 ------------ ----------- ---------- Net cash from investing activities (216) (193) (17,656) ------------ ----------- ---------- Cash Flows from Financing Activities Proceeds from issue of share capital - - 8,274 Expenses for issue of share capital - - (375) Proceeds from new loan - - 11,200 Repayment of long term borrowings (1,416) (900) (2,103) Dividends paid - - (1,630) Interest paid (474) (245) (618) ------------ ----------- ---------- Net Cash from Financing Activities (1,890) (1,145) 14,748 ------------ ----------- ---------- Net increase/(decrease) in Cash 1,460 (1,835) 2,392 and Cash Equivalents Cash and Cash Equivalents at start of period 6,252 3,622 3,622 Effect of exchange rate fluctuations on cash held (291) 107 238 ------------ ----------- ---------- Cash and Cash Equivalents at end of period 7,421 1,894 6,252 ------------ ----------- ---------- Notes to the condensed consolidated interim financial statements Unaudited results for the six months ended 30 September 2006 1. Basis of preparation This interim statement has been prepared on the basis of accounting policies set out in the full Annual Report and Accounts for the year ended 31 March 2006. This statement does not comprise full financial statements within the meaning of Section 240 of the Companies Act 1985. The statement is unaudited but has been reviewed by KPMG Audit Plc and their report is set out below. The comparative figures for the financial year ended 31 March 2006 have been extracted from the full Annual Report and Accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2. Segment reporting Segment information is presented in the condensed consolidation interim financial statements in respect of the Group's geographical segments, which are the primary basis of segment reporting. The geographical segment reporting format reflects the Group's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Business segments The Group is comprised of the following main geographical segments: Europe includes UK, Norway, Sweden, France, Hungary, Southern Ireland, Holland and Turkey Asia: includes Malaysia, China, Singapore and Taiwan America: includes Los Angeles, Phoenix and Mexico Segment revenue and result under primary reporting format are disclosed in the table below: Europe Asia America Central Group 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Revenue Revenue from external customers 55,618 41,551 15,118 12,778 1,840 1,438 - - 72,576 55,767 Inter segment revenue (2,670) (2,374) (2,080) (2,433) (19) (21) - - (4,769) (4,828) ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Total revenue 52,948 39,177 13,038 10,345 1,821 1,417 - - 67,807 50,939 ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Segment results before items 2,911 1,508 2,756 1,986 9 (107) (1,019) (908) 4,657 2,479 listed below Intangible amortisation (131) - - - - - - - (131) 0 Restructuring costs (584) (180) - - - - (50) - (634) (180) Equity settled share based (22) (30) - - - - (61) (49) (83) (79) payments ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Operating profit/(loss) 2,174 1,298 2,756 1,986 9 (107) (1,130) (957) 3,809 2,220 before financing cost Net financing costs (433) (204) ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Profit on ordinary 3.376 2,016 activities before taxation Taxation (887) (676) ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Profit for the Period 2,489 1,340 ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Segment net assets/(liabil ities) 42,264 26,261 15,077 13,220 2,201 2,353 (12,338) (2,789) 47,204 39,045 ---------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Revenue is derived from the manufacture and logistical supply of industrial fasteners and Category 'C' components. 3. Taxation The charge for tax is an estimate based on the anticipated effective rate of tax for the year ending 31 March 2007, adjusted for prior year items as shown below: Six months Six months ended ended 30 September 2006 30 September 2005 £000 £000 Current tax on income for the period UK Tax 170 63 Foreign Tax 797 622 Adjustments in respect of prior years (80) (9) ------------- ------------ 887 676 ============= ============ 4. Dividends The dividend payable figure of £1.25 million represents the final dividend recommended at the March 2006 Year End and approved at the AGM in September 2006. The Directors have declared an interim dividend of 0.77 pence per ordinary share to be paid on 17 January 2007 to shareholders on the register on 8 December 2006. 5. Earnings per share The calculation of earnings per 5p ordinary share is based on profit for the period after taxation and the weighted average number of shares in the period of 84,380,807 (September 2005: 71,891,969; March 2006: 77,516,115). The calculation of the fully diluted earnings per 5p ordinary share is based on profit for the period after taxation. In accordance with IAS 33 the weighted average number of shares in the period has been adjusted to take account of the effects of all dilutive potential ordinary shares. The number of shares used in the calculation amount to 84,441,564 (September 2005: 72,354,246; March 2006: 77,639,682). The adjusted diluted earnings per share for the six months ended 30 September 2006 is as follows: Six months Six months Year ended ended ended 31 March 2006 30 September 2006 30 September 2005 £000 £000 £000 Profit for the period 2,489 1,340 1,438 Goodwill impairment - - 786 Restructuring costs 634 180 2,108 Tax effect (190) (54) (632) ------------- ------------- --------- Adjusted Profit 2,933 1,466 3,700 ============= ============= ========= Basic EPS 2.95p 1.86p 1.86p Diluted Basic EPS 2.95p 1.85p 1.85p Adjusted Diluted EPS 3.47p 2.03p 4.76p 6. Retained Earnings Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Opening balance 30,282 30,353 30,353 Retained profit for 2,489 1,340 1,438 period Equity-settled share 83 79 121 based payment transactions Dividends (1,248) (1,014) (1,630) ------------- ------------- --------- Closing Balance 31,606 30,758 30,282 ============= ============= ========= 7. Reconciliation of Movements in Total Equity Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £000 £000 £000 Profit for the financial 2,489 1,340 1,438 period Net issue of ordinary shares 1 - 7,899 Equity settled share based payment transactions 83 79 121 Exchange differences (1,366) 697 1,474 Dividends (1,248) (1,014) (1,630) ------------- ------------ ---------- Net addition to Total Equity (41) 1,102 9,302 Opening Total Equity 47,245 37,943 37,943 ------------- ------------ ---------- Closing Total Equity 47,204 39,045 47,245 ============= ============ ========== Independent review report by KPMG Audit Plc to Trifast plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 September 2006, which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Recognised Income and Expense, the Consolidated Cash Flow Statement 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. This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim report in accordance with the Listing Rules which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual financial statements 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 UK. 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 International Statements on Auditing and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2006. KPMG Audit Plc Chartered Accountants 1 Forest Gate Brighton Road Crawley West Sussex RH11 9PT 23 November 2006 This information is provided by RNS The company news service from the London Stock Exchange

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