Interim Results

Arbuthnot Banking Group PLC 20 September 2005 ARBUTHNOT BANKING GROUP PLC Interim results for the six months to 30 June 2005 Key Points â€¢ Profit before tax Â£3.5 million (2004: Â£1.6 million). â€¢ Earnings per share 16.9p (2004: 7.9p). â€¢ Total operating income 10% higher at Â£27 million. â€¢ Interim dividend maintained at 10.5 pence. â€¢ Results reported under IFRS for the first time. â€¢ Board cautiously optimistic on full year outlook. Chairman, Henry Angest, commented: 'The first half of 2005 has seen continued progress by the Group. Each of our businesses has achieved increases in operating income and I am particularly encouraged by the return of Arbuthnot Securities to profitability. Trading since the half year-end has been satisfactory, although the full year results will be strongly influenced by the level of client corporate activity, economic and market conditions, as well as the political and regulatory environment. Whilst our current corporate finance pipeline is healthy, the outcome and timing of transactions are always difficult to predict. Nonetheless, the Board is cautiously optimistic about the outlook for the full year.' ________________________________________________________________________________ Press enquiries: Arbuthnot Banking Group PLC Henry Angest, Chairman and Chief Executive Tel: 020 7012 2400 Stephen Lockley, Group Finance Director Tel: 020 7012 2055 Andrew Salmon, Chief Operating Officer Tel: 020 7012 2424 College Hill: Tony Friend Tel: 020 7457 2020 Richard Pearson Tel: 020 7457 2020 CHAIRMAN'S STATEMENT I am pleased to report encouraging progress by Arbuthnot Banking Group (formerly Secure Trust Banking Group) during the six months ended 30 June 2005. Profit before tax increased to Â£3.5 million and earnings per share rose to 16.9p. To stay on the cautious side, we will maintain the interim dividend at last year's level of 10.5p. This will be paid on 28 October 2005 to shareholders on the register at 30 September 2005. These are the first results reported by the Group under International Financial Reporting Standards ('IFRS'). The profit before tax for the period under IFRS was Â£0.1 million higher than under UK generally accepted accounting principles. The comparative figures for 2004 have also been restated to comply with IFRS. Following the successful Open Offer to shareholders in January 2005, which raised Â£3.8 million net of expenses, we have continued with the investment programme in our businesses and this is reflected in the increase of 10% in operating income for the six months to Â£27.0 million. Particular progress has been achieved in Arbuthnot Securities and Arbuthnot Latham, which have additionally benefited from the consolidation of our London-based businesses into Arbuthnot House last year. Reflecting the growing importance of these businesses to the Group, shareholders approved the change of the name of the Company to Arbuthnot Banking Group PLC at the Annual General Meeting in May. At the same time, the Board decided to move the Company from the main market of the London Stock Exchange to AIM. Secure Trust Bank Secure Trust Bank has built on the developments of the last year and recorded a 4% increase in operating income. Within this, net interest income grew by 12%, reflecting a 9% increase in overall lending volumes. Fees and commissions increased by 2%, including another solid performance from our insurance activities. The development of Secure Trust Bank is underpinned by a programme of investment in both infrastructure and staff and, whilst this should deliver improved profitability in future periods, at the present time it means that costs have risen faster than income. At the same time, we have experienced some increase in the level of bad debts on consumer lending, although these remain modest in relation to the size of the loan book. The division's profit before tax was Â£2.9 million compared with Â£3.1 million in the first half of 2004. Arbuthnot Latham The private banking division continues to attract new clients, such that operating income grew by 17% and profit before tax increased to Â£0.7 million. These results reflect further healthy growth in business volumes. The number of banking clients at June 2005 was 19% higher than a year previously, whilst the loan book increased by 17% compared with the first half of 2004 and customer deposits rose by 14%. Funds under management grew by 16% and factoring volumes increased by 17%. Early 2005 saw the recruitment of a new Chief Investment Officer together with key appointments in treasury and relationship management. These hires are expected to contribute to increased business levels and profitability next year. Arbuthnot Securities Arbuthnot Securities has maintained the momentum achieved in the last quarter of 2004 and operating income rose by 21%. At the same time, costs were reduced and I am pleased to be able to report a profit before tax of Â£0.5 million for the first half of the year. From this profitable base, we now intend to invest in the business and have recently added analyst coverage of the financials, mining, property and IT sectors. We have continued to increase our market share in institutional stockbroking and revenues derived from this activity grew by 51%. The corporate finance team successfully completed 7 transactions during the first half-year and have concluded a further 3 deals since 1 July. Outlook Overall, trading since the half year-end has been satisfactory. July and August have seen favourable conditions for Arbuthnot Securities but, on a less positive note, the level of bad debts in consumer lending at Secure Trust Bank has continued to be worse than last year, in common with the experience reported by many other lenders. Looking forward, the full year results will be strongly influenced by the level of client corporate activity, economic and market conditions, as well as the political and regulatory environment. Whilst our current corporate finance pipeline is healthy, the outcome and timing of transactions are always difficult to predict. Nonetheless, the Board is cautiously optimistic about the outlook for the full year. Henry Angest Chairman CONSOLIDATED INCOME STATEMENT 6 months to 6 months to Year to 30.6.05 30.6.04 31.12.04 Â£000 Â£000 Â£000 Interest and similar income 8,809 6,901 15,016 Interest expense and similar charges (4,199) (2,582) (6,285) ___________________________________________ Net interest income 4,610 4,319 8,731 ___________________________________________ Fee and commission income 21,708 19,978 40,436 Fee and commission expense (730) (189) (578) ___________________________________________ Net fee and commission income 20,978 19,789 39,858 ___________________________________________ Net trading income 1,379 343 1,158 ___________________________________________ Operating income 26,967 24,451 49,747 ___________________________________________ Impairment losses on loans and advances (815) (762) (1,235) Operating expenses (22,690) (21,690) (43,700) Exceptional operating expenses - (441) (1,386) ___________________________________________ Profit before tax 3,462 1,558 3,426 Taxation (1,074) (530) (557) ___________________________________________ Profit for the period 2,388 1,028 2,869 ___________________________________________ Attributable to: Equity holders of the Company 2,384 1,024 2,852 Minority interest 4 4 17 ___________________________________________ 2,388 1,028 2,869 ___________________________________________ Earnings per share for profit attributable to the equity holders of the Company during the year (expressed in pence per share): - basic and fully diluted 16.9p 7.9p 22.0p - adjusted (Note 3) 16.9p 10.3p 29.5p CONSOLIDATED BALANCE SHEET 30.6.05 30.6.04 31.12.04 Â£000 Â£000 Â£000 ASSETS Cash 203 226 139 Loans and advances to banks and building societies 41,028 50,478 52,367 Trading securities 6,027 3,541 5,899 Loans and advances to customers 137,459 118,095 129,809 Debt securities held-to-maturity 60,823 35,500 50,500 Intangible assets 3,633 3,639 3,643 Property, plant and equipment 31,912 30,524 32,125 Current tax asset 427 687 1,224 Other assets 34,150 27,730 14,680 ___________________________________________ Total assets 315,662 270,420 290,386 ___________________________________________ LIABILITIES Deposits from banks 12,550 21,209 30,830 Trading securities 1,177 985 1,159 Due to customers 223,827 184,741 202,996 Debt securities in issue 7,817 7,953 7,923 Other liabilities 39,971 31,090 20,311 Deferred tax liabilities 1,077 499 1,077 ___________________________________________ Total liabilities 286,419 246,477 264,296 ___________________________________________ EQUITY Share capital 143 130 130 Share premium account 17,115 13,370 13,370 Retained earnings 8,501 8,253 9,106 Other reserves 3,395 2,114 3,395 ___________________________________________ Capital and reserves attributable to the Company's equity holders 29,154 23,867 26,001 Minority interest 89 76 89 ___________________________________________ Total equity 29,243 23,943 26,090 ___________________________________________ ___________________________________________ Total equity and liabilities 315,662 270,420 290,386 ___________________________________________ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the Company ______________________________________________ Share Share Other Retained Minority Total capital Premium Reserves earnings Interest Account Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Balance at 1 January 2004 130 13,370 2,314 9,684 77 25,575 Profit for 6 months ended 30 June 2004 - - - 1,024 4 1,028 Final dividend relating to 2003 - - - (2,655) (5) (2,660) Transfer from general banking reserves - - (200) 200 - - _______________________________________________________________________ At 30 June 2004 130 13,370 2,114 8,253 76 23,943 Surplus on revaluation of freehold properties net of deferred tax - - 1,666 - - 1,666 Profit for 6 months ended 31 December 2004 - - - 1,828 13 1,841 Interim dividend relating to 2004 - - - (1,360) - (1,360) Transfer from general banking reserves - - (385) 385 - - At 31 December 2004/ _______________________________________________________________________ 1 January 2005 130 13,370 3,395 9,106 89 26,090 Issue of shares 13 3,745 - - - 3,758 Profit for 6 months ended 30 June 2005 - - - 2,384 4 2,388 Final dividend relating to 2004 - - - (2,989) (4) (2,993) _______________________________________________________________________ At 30 June 2005 143 17,115 3,395 8,501 89 29,243 _______________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT 6 months to 6 months to Year to 30.6.05 30.6.04 31.12.04 Â£000 Â£000 Â£000 Cash flows from operating activities Interest received 8,809 6,901 15,016 Interest paid (4,199) (2,582) (6,285) Fees and commissions received 20,978 19,789 39,858 Net trading and other income 1,379 343 1,158 Recoveries on loans previously written off - - 14 Cash payments to employees and suppliers (21,645) (21,198) (43,226) Taxation paid (277) (798) (1,499) ___________________________________________ Cash flows from operating profits before changes in operating assets and liabilities 5,045 2,455 5,036 Changes in operating assets and liabilities: - net increase in trading securities (110) (1,911) (4,095) - net increase in loans and advances to customers (8,465) (8,195) (20,395) - net increase in other assets (19,470) (16,609) (3,559) - net decrease in deposits from other banks (18,280) 3,055 12,676 - net increase in amounts due to customers 20,831 (2,554) 15,701 - net increase in other liabilities 19,660 13,668 2,889 ___________________________________________ Net cash used in operating activities (789) (10,091) 8,253 ___________________________________________ Cash flows from investing activities Investment in subsidiaries - (54) - Purchase of property, equipment and computer software (822) (3,976) (5,060) Proceeds from sale of property and equipment - 36 914 Net sales/( purchases) of debt securities 19,880 7,500 (6,736) ___________________________________________ Net cash from investing activities 19,058 3,506 (10,882) ___________________________________________ Cash flows from financing activities Issue of shares 3,758 - - Repayments of borrowed funds and debt securities (106) (132) (162) Dividends paid (2,993) (2,660) (4,020) ___________________________________________ Net cash from financing activities 659 (2,792) (4,182) ___________________________________________ Net increase in cash and cash equivalents 18,928 (9,377) (6,811) Cash and cash equivalents at beginning of period 71,770 78,581 78,581 ___________________________________________ Cash and cash equivalents at end of period 90,698 69,204 71,770 ___________________________________________ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 1. Basis of presentation The Group's consolidated interim financial statements have been prepared in accordance with those International Financial Reporting Standards (IFRS) presently in force. They do not constitute a complete set of financial statements under IFRS and do not comply fully with the requirements of IAS 34 ' Interim Financial Reporting'. Under IFRS, only a complete set of financial statements comprising a balance sheet, income statement, statement of changes in equity, cash flow statement, together with comparative financial information and financial notes, can provide a fair presentation of the company's financial position, results of operations and cash flow. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain fixed assets and financial assets and financial liabilities held at fair value through profit or loss. These consolidated interim financial statements, which have been neither audited nor reviewed by the auditors, are the first financial statements prepared by the Group in accordance with IFRS. The impact of the change from UK Generally Accepted Accounting Policies ('UK GAAP') is summarised in Note 1. The Group has elected not to restate business combinations that took place prior to 1 January 2004. Comparative information for 2004 has been restated to comply with IFRS. The statements were approved by the Board of Directors on 19 September 2005. 2. Consolidation Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's shares of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. 3. Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. 4. Foreign currency translation (a) Functional and presentation currency All Group entities operate primarily in the United Kingdom and items included in their financial statements are measured using pounds sterling ('the functional currency'). The consolidated financial statements are presented in pounds sterling, which is the Company's functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. 5. Interest income and expense Interest income and expense are recognised in the income statement using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group takes into account all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. 6. Fee and commission income Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan commitment fees are deferred and recognised as an adjustment to the effective interest rate on the loan. Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third party - such as the issue or the acquisition of shares or other securities or the purchase or sale of businesses - are recognised on completion of the underlying transaction. Asset and other management, advisory and service fees are recognised based on the applicable service contracts, usually on a time-apportioned basis. The same principle is applied for financial planning and insurance services that are continuously provided over an extended period of time. 7. Financial assets The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. Management determines the classification of its investments at initial recognition. (a) Financial assets at fair value and through profit or loss This category comprises financial assets held for trading. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. (c) Held-to-maturity Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. (d) Available-for-sale Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. The Group held no such assets during the 6 months to 30 June 2005 or the year to 31 December 2004. Purchases and sales of financial assets at fair value through profit or loss are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Loans are recognised when cash is advanced to the borrowers. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are included in the income statement in the period in which they arise. The fair values of quoted investments in active markets are based on current bid prices for long positions and offer prices for short positions (adjusted for any discount based on the size and liquidity of the holding). 8. Impairment of financial assets The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. When a loan is uncollectable, it is written off against the related provision for loan impairment. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment in the income statement. 9. Intangible assets (a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. (b) Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful lives (three to five years). Costs associated with developing or maintaining computer software programs are recognised as an expense as incurred. 10. Property, plant and equipment Land and buildings comprise mainly branches and offices and are stated at valuation with subsequent additions at cost less depreciation. Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Land is not depreciated. Depreciation on other assets is calculated using the straight-in-line method to allocate their cost to their residual values over their estimated useful lives, applying the following annual rates: Freehold buildings 2% Office equipment 5% to 15% Computer equipment 20% to 33% Motor vehicles 25% Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. 11. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months' maturity from the date of acquisition, including cash, loans and advances to banks and building societies and short-term highly liquid debt securities. 12. Post-retirement benefits The Group contributes to a defined contribution scheme and to individual defined contribution schemes for the benefit of certain employees. The schemes are funded through payments to insurance companies or trustee-administered funds at the contribution rates agreed with individual employees. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. There are no post-retirement benefits other than pensions. 13. Deferred tax Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised where it is probable that future taxable profits will be available against which the temporary differences can be utilised. 14. Borrowings Borrowings are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between proceeds net of transaction costs and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. 15. Share capital (a) Share issue costs Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds. (b) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved. 16. Fiduciary activities The Group commonly acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group. NOTES 1. Reconciliation of UK GAAP to IFRS The differences between IFRS and UK GAAP which affect the Group were set out in the document 'Update on the Adoption of International Financial Reporting Standards' which was published on 14 July 2005 and is available on the Company's website. Profit Set out below is the reconciliation of the profit reported under IFRS to the profit reported under UK GAAP for the six months ended 30 June 2004 and the year ended 31 December 2004: 6 months to Year to 30.6.04 31.12.04 Â£000 Â£000 Profit for the period - UK GAAP 1,318 3,370 Effect of transition to IFRS: Timing of revenue recognition, net of tax effect (167) (81) Calculation of specific loan loss provisions, net of tax effect (29) (37) Elimination of goodwill amortisation 106 202 Release of general bad debt provision (200) (585) _____________________________ Profit for the period - IFRS 1,028 2,869 _____________________________ Equity Set out below is the reconciliation of equity reported under IFRS to equity reported under UK GAAP as at 1 January 2004, 30 June 2004 and 31 December 2004: 1.1.04 30.6.04 31.12.04 Â£000 Â£000 Â£000 Total equity - UK GAAP 23,569 23,587 24,965 Effect of revenue recognition, net of tax effect (380) (547) (461) Calculation of specific loan loss provisions, net of tax effect (121) (150) (159) Elimination of goodwill amortisation - 106 202 Release of general bad debt provision 585 385 - Deferred taxation on unrealised revaluation surplus (733) (733) (1,446) Dividends approved since the period-end removed from liabilities 2,655 1,295 2,989 ___________________________________ Total equity - IFRS 25,575 23,943 26,090 ___________________________________ 2. Segmental Analysis of Profits 6 months to 30.6.05 Personal Private Investment Subordinated Head Group financial banking banking loan stock office total services property Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Segment profit 2,871 726 492 - (311) 3,778 Subordinated loan note interest - - - (316) - (316) ______________________________________________________________________________ Profit before exceptional items 2,871 726 492 (316) (311) 3,462 Exceptional items - - - - - - ______________________________________________________________________________ Profit before tax 2,871 726 492 (316) (311) 3,462 ______________________________________________________________________________ 6 months to 30.6.04 Personal Private Investment Subordinated Head Group financial banking banking loan stock office total services property Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Segment profit 3,277 141 (839) - (300) 2,279 Subordinated loan note interest - - - (280) - (280) ______________________________________________________________________________ Profit before exceptional items 3,277 141 (839) (280) (300) 1,999 Exceptional items (206) (235) - - - (441) ______________________________________________________________________________ Profit before tax 3,071 (94) (839) (280) (300) 1,558 ______________________________________________________________________________ Year to 31.12.04 Personal Private Investment Subordinated Head Group financial banking banking loan stock office total services property Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Segment profit 6,728 1,176 (1,622) - (887) 5,395 Subordinated loan note interest - - - (583) - (583) ______________________________________________________________________________ Profit before exceptional items 6,728 1,176 (1,622) (583) (887) 4,812 Exceptional items (214) (431) (741) - - (1,386) ______________________________________________________________________________ Profit before tax 6,514 745 (2,363) (583) (887) 3,426 ______________________________________________________________________________ 3. Earnings per ordinary share Basic and fully diluted Earnings per ordinary share are calculated on the net basis by dividing the profit attributable to shareholders of Â£2,384,00 (30.6.04: Â£1,024,000; 31.12.04: Â£2,852,000) by the weighted average number of ordinary shares 14,099,619 (30.6.04: 12,951,974; 31.12.04: 12,951,974) in issue during the period. Adjusted The exceptional operating expenses do not relate to the profitability of the Group on an ongoing basis. Therefore, an adjusted basic and fully diluted earnings per share is presented as follows: 6 months to 6 months to Year to 30.6.05 30.6.04 31.12.04 Â£000 pence Â£000 pence Â£000 pence Basic and fully diluted 2,384 16.9 1,024 7.9 2,852 22.0 Exceptional items - - 309 2.4 970 7.5 _____________________________________________________________ Earnings excluding exceptional items and adjusted earnings per share 2,384 16.9 1,333 10.3 3,822 29.5 _____________________________________________________________ This information is provided by RNS The company news service from the London Stock Exchange

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