Interim Results
Tribal Group PLC
21 November 2007
Tribal Group plc
Interim results for the six months ended 30 September 2007
'...Encouraging improvement in performance with profits and earnings
significantly ahead...'
Strone Macpherson, Chairman
Highlights
• Organic revenue growth of 12%
• Adjusted profit before tax up 124% to £5.6m (2006: £2.5m)
• Adjusted diluted EPS up 134% to 4.22p (2006:1.80p)
• Interim dividend increased by 10% to 1.15p
• Overall strong performance; weaker trading in resourcing
• Strategy review concluded
• Profit on disposal of Mercury Health of £27m
• Net debt reduced substantially to £6.9m
Financial summary:
Normalised results Six months Six months
ended ended
30 September 30 September
2007 2006
Turnover £120.4m £107.2m +12%
Revenue £97.1m £86.9m +12%
Adjusted operating profit £6.0m £4.4m +36%
Adjusted operating margins 6.2% 5.1%
Adjusted profit before tax £5.6m £2.5m +124%
Adjusted diluted earnings per share 4.22p 1.80p +134%
Operating profit to cash conversion 55% (17%)
Proposed interim dividend 1.15p 1.05p +10%
Note: Adjusted results are presented to provide a better indication of overall
financial performance of the continuing operations and to reflect how the
business is managed and measured on a day-to-day basis. The adjusted operating
profit excludes goodwill impairment of £9.0m (see below for details) (2006:
£2.0m), intangible asset amortisation of £0.2m (2006: £0.2m), share option costs
of £0.3m (2006: £0.2m). The adjusted profit before tax and diluted earnings per
share exclude the financial instrument charge of £nil (2006: £nil).
Statutory results Six months Six months
ended ended
30 September 30 September
2007 2006
Turnover £120.4m £107.2m +12%
Revenue £97.1m £86.9m +12%
Operating (loss)/profit (£3.4m) £2.0m
(Loss)/profit before tax (£3.8m) £0.1m
Loss after tax (£5.6m) (£0.5m)
Basic loss per share (6.90)p (1.00)p
Profit for the period £21.7m £0.9m
Both the normalised and statutory results, with the exception of profit for the
period are for continuing operations only and so exclude the discontinued
operations of Mercury Health.
For further information contact:
Peter Martin Chief Executive Tribal Group plc Tel: 020 7323 7110
Simon Lawton Group Finance Director Tribal Group plc Tel: 020 7323 7110
Colin Browne/ Maitland Tel: 020 7379 5151
Anthony Silverman
A copy of the presentation on these results, to be made to analysts this morning
at 9.30am, will be available on the Group's website. www.tribalgroup.co.uk,
shortly afterwards.
Chairman's statement
The six month period to 30 September 2007 has seen an encouraging improvement in
performance with profits and earnings significantly ahead of the corresponding
period last year.
We are pleased by the level of organic revenue growth (12 per cent.) and the
recovery in operating margins from 5.1 per cent. to 6.2 per cent. The period
also saw the successful sale of Mercury Health, realising a profit of £27
million and allowing us to reduce substantially our level of debt to £6.9
million.
Overall, our markets remain buoyant and we continue to see good demand for our
services. Generally, our businesses have performed well, with particularly
strong performances from consulting and architectural services. However, our
resourcing business has suffered further margin erosion in its core advertising
business as clients continue to move away from the use of traditional media to
the internet.
Following the appointment of Peter Martin as Chief Executive in June 2007, we
have undertaken a review of the Group's core competencies, competitive strengths
and growth opportunities. Tribal has an extensive range of skills and
capabilities and deep knowledge of its chosen markets that together provide the
Group with a distinct competitive advantage. We have concluded that the Group is
well-placed to take advantage of opportunities to grow through the provision of
consultancy, support and delivery services that improve the delivery of public
services.
The key elements of our future strategy will be:
•A focus on our core markets of education, health, housing and
regeneration, local government and central government;
•Development of more integrated service offerings to meet the requirements
of our clients;
•A target of increasing the proportion of revenue from support and
delivery to 60 per cent. of annual revenue by 2010;
•Focused investment in key areas to take advantage of emerging
opportunities; and
•Small, selective acquisitions that support the strategic development of
the Group.
Over the next 12 months, we will be introducing measures to improve
profitability, including applying stricter commercial criteria to our new
business activity. We will also be developing systems and processes that will
encourage greater collaboration and accelerate growth across the Group.
As part of our review, we have given careful consideration to goodwill carrying
values and, in the light of the trading weakness in our resourcing business, we
have taken an impairment charge of £9m in respect of this activity.
Our financial goals are to drive significant earnings growth over the
medium-term through double digit organic increases in annual revenue and
progressive improvement in operating margins. We will ensure that our operations
have the necessary investment and management resource to provide a robust
platform for growth in 2008 and beyond.
The interim dividend is being raised by 10 per cent. to 1.15p. Tribal has the
authority to buy back its own shares and the Board regularly reviews the merits
of this course of action.
As previously announced, we have taken the decision to change our year end to 31
December. Our businesses have continued to enjoy good trading conditions in
October and November and the Board remains confident that the results for the
nine months to December 2007, before impairment charges, will be significantly
ahead of the corresponding period last year.
Strone Macpherson
Chairman
21 November 2007
Interim management report
Chief Executive's statement
Results for the six months ended 30 September 2007
We are pleased to report a strong overall set of results for the six months
ended 30 September 2007. The Group's revenue from continuing operations was up
12 per cent. at £97.1m (2006: £86.9m), operating profit* increased by 36 per
cent. to £6.0m (2006: £4.4m) and the operating margin* improved to 6.2 per cent.
(2006: 5.1 per cent.). Adjusted profit before tax* was up 124 per cent. at £5.6m
(2006: £2.5m) and the adjusted diluted earnings per share* increased by 134 per
cent. to 4.2p (2006: 1.8p).
The statutory loss before tax of £3.8m (2006: profit of £0.1m) is after an
impairment charge of £9.0m (2006: £2.0m). Retained profit for the period was
£21.7m (2006: £0.9m), reflecting the profit of £27m realised on the disposal of
Mercury Health.
Cash inflow from continuing operating activities for the six months to
30 September 2007 was £3.3m before tax (2006: outflow £0.7m) representing an
operating profit* to cash conversion of 55 per cent. (2006: outflow 17% per
cent.).
Net debt at 30 September 2007 was £6.9m (2006: £84.3m) representing gearing of 4
per cent. Interest was covered 14 times by operating profit*.
* The operating profit, operating margin, adjusted profit before tax and
adjusted diluted earnings per share are stated before goodwill impairment of
£9.0m (2006: £2.0m), intangible asset amortisation of £0.2m (2006: £0.2m), share
option costs of £0.3m (2006: £0.2m) and, in the case of adjusted profit before
tax and adjusted diluted earnings per share, financial instrument charge of £nil
(2006: £nil).
Dividend
The interim dividend is being increased by 10 per cent. to 1.15p per share
(2006: 1.05p). This will be paid on 16 January 2008 to shareholders on the
register on 14 December 2007.
Markets
Overall, our markets have remained buoyant as evidenced by the double digit
growth in revenue in the six months to 30 September 2007. Our core business is
working in partnership with our client organisations to improve the delivery of
public services. We remain confident that the scale of the Government's reform
agenda, the changing role of public sector organisations, the drive for improved
standards and the pressure to deliver better value for money will create
increasing demand for our services.
The Comprehensive Spending Review announced on 9 October 2007 confirmed an
overall increase in public spending of 2.1 per cent. per annum in the period to
2011, with education and health receiving above average awards of 5.6 per cent.
and 4 per cent. per annum respectively. Whilst the overall level of spending on
public services is important, Tribal's growth is principally determined by our
ability to position ourselves to support the implementation of specific
initiatives.
In education, our businesses are working to support the training and skills
agenda, offender learning programmes, schools inspections, the development of
new academies and 'Building Schools for the Future'. In health, we have been
closely involved in Connecting for Health (the national IT programme) and
capital investment projects across England and Wales and we have recently been
appointed to the new commissioning framework supporting the work of primary care
trusts. In housing and regeneration, we are providing services to the social and
affordable housing sector, urban regeneration projects and the built
environment. In local government, we are working with local authorities across
the country to fill capacity and capability gaps that are arising as these
organisations face significant changes in their structure and role. Our work in
central government supports a wide range of departments as they implement the
Government's priorities of improved delivery and productivity, more effective
procurement and commissioning and the introduction of shared services.
Operating review
Following the disposal of Mercury Health, we are reporting our results under
three business streams, Education, Consulting and Support services, in order to
provide a clearer focus on our underlying activities and to reflect our
operating and management structure. Support services comprises our
communications and PR, architectural design and resourcing businesses. All three
business streams have increased revenue and operating profit* during the period
under review.
Note: the segmental operating profit and operating profit margin figures are
stated in accordance with the business segment information in note 3.
Education
6 months 6 months
ended ended
30 September 30 September
2007 2006
£000 £000
Revenue 38,269 35,748
Operating profit 4,361 4,327
Operating profit margin 11.4% 12.1%
Education revenues grew 7 per cent. in the period to £38.3m (2006: £35.7m),
representing 39 per cent. of total group revenue. Operating margins reflect
investment in new products and services and the increased competitive
environment for our software products.
Tribal is one of the leading education businesses in the UK, providing a wide
range of services that support the delivery of education and learning in
schools, further and higher education and the wider community through
relationships with adult learning organisations and private training providers.
During the period, our three education businesses have continued to win
significant new business.
Our Learning and Publishing business is well-placed to address the Government's
agenda for skills and has developed strong relationships with key delivery
organisations. In the past six months, we have won contracts worth over £5m to
deliver literacy, language and numeracy programmes for the Quality Improvement
Agency and to develop the national strategy for adult numeracy for the
Department for Innovation Universities and Skills (DIUS). In addition, we won
employee skills training contracts from Ford Motor Company and the London
Borough of Barking and Dagenham. As previously announced, we have acquired the
outstanding minority interest in Sportsvine, allowing us to accelerate the
integration of our publishing activities.
Our core Software business of providing student administration systems has
performed well, winning a number of new contracts including New College, Swindon
and Highbury College in further education (FE) and the University of Nottingham
and Queen Mary University of London in higher education (HE). In HE, we are the
market leader. In work based learning, we remain the leading supplier and have
added new clients such as South Tees Hospital NHS Trust, Whitbread Group and the
Jaguar and Land Rover Academy. We continue to develop new solutions both for our
existing markets and new areas such as children's services. Our asset management
software has won several new clients, including English Heritage and London Fire
and Emergency Planning Authority, and our information management business has
won important new business with private sector organisations such as Total and
Microsoft and with public sector clients such as Transport for London. We are
also seeing increasing interest in our products from overseas.
In Services, our core schools inspection contracts continued to perform well
during the period. We were appointed to the new Department for Children, Schools
and Families (DCSF) Academies framework and have subsequently won two
significant project management contracts for academies in Birmingham. Our
benchmarking services had a busy period that included winning a major national
FE contract in New Zealand, launching an improved product in the UK and winning
several new clients in the HE sector, including the University of East Anglia.
We also made significant progress in Building Schools for the Future, both on
the client side and working with consortia.
Consulting
6 months 6 months
ended ended
30 September 30 September
2007 2006
£000 £000
Revenue 31,818 25,912
Operating profit 2,237 1,536
Operating profit margin 7.0% 5.9%
Our consulting businesses had a very good start to the year with revenues up 23
per cent. to £31.8m (2006: £25.9m), representing 33 per cent. of group revenue,
and a considerable improvement on the disappointing results of last year.
Operating profit increased by 46 per cent. to £2.2m (2006: £1.5m) and operating
margins rose to 7.0 per cent. (2006: 5.9 per cent.). The performance reflects
the importance of accessing and developing government framework contracts such
as Catalist.
Our health business saw good demand for its services, particularly in growth
areas such as health informatics, service improvement and organisational
development. We recently won important extensions to our contracts that support
the national IT programme. During the period, we secured a major new framework
contract with the Department of Health, the Framework for External Support of
Commissioning (FESC). The new framework positions Tribal as a major player in
one of our key growth markets and we are working on some early opportunities.
Elsewhere, the practice is seeing success in exporting its services to countries
such as the Republic of Ireland, and Qatar. We also won a number of new
framework contracts with government organisations.
We have now brought together our housing and regeneration businesses in order to
better align Tribal's offering with the needs of our clients. The combined
practice has continued to strengthen its market position in the social housing
market, working with a wide range of clients implementing their housing
transfer, funding and development plans. We are also supporting new government
initiatives such as the merger of English Partnerships and the Housing
Corporation and the 'First time buyer' initiative to tackle housing
affordability. Our regeneration business has continued to support a number of
development projects in England and Scotland. Our planning advisory practice is
seeing buoyant market conditions and recently won a landmark planning
application on behalf of Center Parcs for a new development in Bedfordshire.
Our central government businesses continue to experience strong growth with the
development of key NHS, Home Office and Foreign and Commonwealth accounts. We
are seeing significant opportunities to develop our procurement and supply chain
offerings. We won places on the MoD and HM Revenue and Customs consulting
frameworks and are exploring ways in which our specific skills and capabilities
currently deployed in central government can be extended into other sectors. Our
rate of growth is determined by our ability to recruit capable staff and we are
very pleased by the quality of people now joining our businesses.
We see significant opportunities to develop our local government consulting
practice. We are currently restructuring the business to ensure we are
positioned to take advantage of market growth. We have made a new appointment of
a Group business development director for local government and we have also
recently recruited one of the country's leading children's services directors
who will be supporting our initiatives in local government.
Support services
6 months 6 months
ended ended
30 September 30 September
2007 2006
£000 £000
Revenue 27,925 26,322
Operating profit 2,386 1,697
Operating profit margin 8.5% 6.4%
Our support services businesses have increased revenue by 6 per cent. to £27.9m
(2006: £26.3m), representing 28 per cent. of group revenue. Overall, operating
profit increased by 41 per cent. to £2.4m (2006: £1.7m) with margins rising to
8.5 per cent. (2006: 6.4 per cent.). The profit outturn was buoyed by the £1.25m
of fees earned for reaching financial close on the Peterborough PFI hospital
project in July.
Our architectural design practice has performed particularly well during the
period. Besides the Peterborough PFI hospital, we reached financial close on
another significant PFI hospital scheme in North Middlesex. We are also working
on a wide range of other health projects and see significant opportunities to
grow, particularly in Wales where we are members of one of only three consortia
in a £1.8bn health framework. The significant capital investment in the further
education sector continues to provide opportunities and we have won a number of
important new assignments including Bedford College and Liverpool City Council.
We are implementing our expansion plans with the opening of a Belfast office and
the extension of our business in South Africa.
Our communications and PR business has had a strong six months, securing some
significant work from central government and corporate clients. We achieved
considerable organic growth from existing client accounts in terms of extended
contracts and additional spend and also had success in winning new business from
government departments and agencies.
The market for our resourcing business has seen a further marked shift to
on-line media, a significant reduction in senior vacancies year-on-year and
increased competition. This challenging trading environment has significantly
impaired profitability beyond the level we anticipated previously. We have had
to make further staff reductions and review our cost structure and competitive
strengths. We have developed and are executing a plan to improve margins and we
expect results to improve in 2008 with a stronger management structure and
increasing demand for our new service offerings in interim management,
recruitment process outsourcing and e-resourcing. Despite the actions taken
during the period, a detailed review of the carrying value of goodwill has
highlighted the impact of the structural and competitive changes in the sector
and so we have therefore concluded that an impairment charge of £9m should be
recorded.
Strategy review
During the past few months, we have undertaken a review of the Group's core
competencies, competitive strengths and market opportunities. In summary, the
key outcomes of the review are as follows:
• Tribal's core business is improving the delivery of public services;
• We will primarily focus on the significant opportunities for growth in
our existing markets of education, health, housing and regeneration, local
government and central government;
• The Group will offer a range of services spanning consulting, support
and delivery;
• We will be looking to increase the proportion of revenue from support
and delivery in order to raise progressively the level of committed income
to 60 per cent. of annual revenue by 2010 (circa 40% in 2007);
• Our businesses will increasingly focus on intra-group collaboration in
order to deliver integrated service offerings for our clients and to
maximise the revenue potential of our client base; and
• We will selectively market our services to take advantage of
opportunities in the private sector and overseas.
Growth strategy
The Group's principal financial targets are to generate double digit organic
increases in annual revenue and to raise progressively operating margins in
order to drive significant growth in earnings. The Group will look to increase
revenue and profits in the following ways:
• Ensuring that we focus our development efforts on key government
initiatives;
• A rigorous approach to new business to ensure that resources are
deployed effectively and opportunities are properly qualified;
• A re-engineering of our pricing and delivery model to ensure that
acceptable margins are achieved across all businesses;
• Focused investment in key areas to take advantage of emerging
opportunities;
• Organic expansion of our core businesses; and
• Selective acquisitions that support the strategic development of the
Group.
Education
Annual revenue of circa £90m. The key elements of our education strategy are as
follows:
• Continued investment in our student administration systems to generate
organic growth in our core markets and to allow development into related
areas such as children's services. In 2008, we will be investing
approximately £1.7m in software development. We will also be selectively
targeting international opportunities, particularly in higher education;
• Acquisition of strategically complementary software and other education
and learning businesses that will enable us to provide clients with
increasingly comprehensive solutions;
• Development of integrated service offerings to address key initiatives
such as city academies, 'Building Schools for the Future' and the skills
agenda;
• Establishing a strong competitive proposal to take advantage of the next
wave of large-scale offender learning outsourcing contracts that will be
tendered in 2009 (the total value of the opportunity is estimated to be in
excess of £35m over three years); and
• Diversification of our inspections business both in the UK and overseas
and the development of a strong proposition to ensure retention of a
significant market share when the existing Ofsted contracts are re-tendered
in 2009.
Consulting
Annual revenue of circa £60m. The key features of our consulting strategy are as
follows:
• A strong focus on gaining and retaining access to framework agreements.
These agreements are increasingly the principal gateway to public sector
consulting assignments (for example, we recently won a place on the HMRC
consulting, MOD technical support and the DIUS frameworks);
• Development of strong 'horizontal' service capabilities in areas such as
procurement, supply chain, performance management and IT strategy to
complement our 'vertical' market expertise;
• Organic growth through the continuing recruitment of high quality
consultants;
• Rigorous review of our business model to ensure that we generate
consistently high margins; and
• Investment in developing a strong commissioning capability to support
emerging opportunities in health. We will be investing approximately £0.5m
in 2008 to take advantage of anticipated commissioning opportunities that
collectively are expected to be worth several million pounds a year.
Support services
Annual revenue of circa £45m. In each of our three areas of operation, we see
opportunities to grow and develop as follows:
• Our communications business will focus on organic growth, expanding the
range of services that it offers and ensuring that we are represented on an
increasing number of framework agreements for public sector PR work;
• Our architectural design business is now the largest in the UK
specialising in health, education and science and is well placed to take
advantage of the continuing investment in public sector infrastructure. For
example, in further education, approximately £5bn will be invested in
capital projects over the next five years. We will also be seeking
acquisitions in order to develop a more broadly-based design business.
• Our resourcing business will continue to refocus its operations to take
account of the maturity of its core advertising market. There are
significant opportunities to develop its newer areas of activity,
particularly recruitment process outsourcing, and focused investment will be
made in these initiatives in order to drive future growth.
People
The Group now employs 2,000 staff and our success is a reflection of the hard
work and commitment of all our employees. I would like to take this opportunity
to thank them for their contribution. I am very pleased to announce that
Virginia Rothwell has joined our executive management team as Group HR Director.
Virginia has held a number of senior HR posts during a highly successful career
at BT. She will be working with me to develop the leadership of the Group and to
establish attractive recruitment and retention policies.
Risks and uncertainties
As required under IAS 34 'Interim reporting' and the new UKLA Disclosure and
Transparency rules ('DTR'), the Board is providing a description of the
principal risks and uncertainties for the remainder of the accounting period.
The Board considers risk assessment, identification of mitigating actions and
internal controls to be fundamental to achieving the Group's strategic
objectives. The principal risks that the Group manages are as follows:
•Reputational risk
•Changes in government policy and spending
•Operational risks - competition, pricing policy
•Financial risks - funding, credit risk, interest rate risk.
Our risk management policies are more fully documented in the Group's annual
report and accounts for the year ended 31 March 2007.
A further factor to report under the DTR is that the Group has changed its year
end to 31 December and will be reporting results for the nine months to 31
December 2007. Since the Group's formation, trading has been very seasonally
weighted to the second half of its financial year to 31 March due to government
spending patterns. Accordingly, there is a degree of uncertainty over the impact
the change to a December period end may have on the Group's performance over the
remaining three months of the current financial period.
Prospects
Trading conditions have remained favourable across the Group during October and
November and the forward order book of the Group now stands at £133m (2006:
£112m). The Board is confident that the Group's performance in the nine month
period to 31 December 2007, before impairment charges, will be significantly
ahead of the corresponding period last year.
We believe that successful execution of our strategy will deliver significant
medium-term growth in earnings. Our principal financial goals are to achieve
double digit increases in annual revenue and a progressive improvement in
operating margins. We are currently working to ensure that all of the Group's
businesses have the required investment and management resources to realise
their growth plans. The Board believes that this investment in people, systems
and new and enhanced services will allow the Group to make good progress in 2008
and provide a robust platform for accelerated growth in 2009 and 2010.
Peter Martin
Chief Executive
21 November 2007
Condensed consolidated income statement
For the six months to 30 September 2007
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
Note £000 £000 £000
Continuing operations
Turnover 120,419 107,182 234,462
Direct agency costs (23,330) (20,265) (40,406)
---------- ---------- ----------
Revenue 3 97,089 86,917 194,056
Cost of sales (57,953) (54,976) (114,633)
---------- ---------- -----------
Gross profit 39,136 31,941 79,423
Administrative expenses before
amortisation of IFRS 3 intangibles, (33,103) (27,567) (64,957)
goodwill impairment and share ---------- ---------- ----------
option costs
Operating profit before
amortisation of IFRS 3
intangibles, goodwill impairment 3 6,033 4,374 14,466
and share
option costs
Amortisation of IFRS 3 intangibles (160) (160) (320)
Goodwill impairment 4 (9,000) (2,000) (14,429)
Share option costs (271) (171) (4)
Total administrative expenses (42,534) (29,898) (79,710)
---------- ---------- ----------
Operating (loss)/profit (3,398) 2,043 (287)
Investment revenues 5 1,017 549 1,225
Finance costs 6 (1,443) (2,446) (5,279)
--------- --------- ---------
(Loss)/profit before tax (3,824) 146 (4,341)
Tax 7 (1,744) (611) (2,846)
--------- ------- ---------
Loss after tax from continuing (5,568) (465) (7,187)
operations
Discontinued operations
Profit/(loss) from discontinued 8 27,254 1,346 (1,421)
operations -------- ------- ---------
Profit/(loss) for the period 21,686 881 (8,608)
-------- ----- ---------
Attributable to:-
Equity holders of the parent 21,412 544 (9,379)
Minority interest 274 337 771
-------- ----- ---------
21,686 881 (8,608)
-------- ----- ---------
Condensed consolidated income statement (continued)
For the six months to 30 September 2007
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
Note
Earnings/(loss) per share
From continuing and discontinued
operations
Basic 9 25.27p 0.67p (11.5)p
Diluted 9 25.24p 0.65p (11.5)p
Adjusted basic before amortisation
of IFRS 3
intangibles, goodwill impairment,
share
option costs, profit on disposal of
Mercury 9 4.27p 3.52p 10.4p
Health, Mercury Health disposal
costs and
financial instrument charge/(credit)
Adjusted diluted before amortisation
of IFRS 3
intangibles, goodwill impairment,
share
option costs, profit on disposal of
Mercury 9 4.26p 3.39p 10.3p
Health, Mercury Health disposal
costs and
financial instrument charge/(credit)
From continuing operations
Basic 9 (6.90)p (1.00)p (9.8)p
Diluted 9 (6.90)p (1.00)p (9.8)p
Adjusted basic before amortisation
of IFRS3
intangibles, goodwill impairment,
share 9 4.22p 1.88p 8.1p
option costs and financial
instrument
charge/(credit)
Adjusted diluted before amortisation
of IFRS3
intangibles, goodwill impairment,
share 9 4.22p 1.80p 8.0p
option costs and financial
instrument
charge/(credit)
Condensed consolidated balance sheet
At 30 September 2007
30 Sept 30 Sept 31 March
2007 2006 2007
Note £000 £000 £000
Non-current assets
Goodwill 183,086 204,950 192,099
Other intangible assets 3,894 3,407 3,786
Property, plant and equipment 11 7,356 46,000 45,056
Investments 155 150 149
Amounts recoverable on contracts - 7,266 11,833
Deferred tax assets 1,429 823 772
--------- --------- ---------
195,920 262,596 253,695
--------- --------- ---------
Current assets
Inventories 1,508 1,453 1,298
Trade and other receivables 12 59,323 55,356 63,205
Amounts recoverable on contracts 288 2,583 2,840
Cash and cash equivalents 15,293 16,264 33,483
Collateralised cash 199 1,131 949
--------- --------- ---------
76,611 76,787 101,775
-------- -------- ---------
Total assets 272,531 339,383 355,470
-------- -------- ---------
Current liabilities
Trade and other payables 13 (63,590) (62,795) (81,499)
Tax liabilities (4,942) (2,754) (2,742)
Obligations under finance leases (5) (91) (98)
Bank loans and loan notes (337) (1,690) (5,530)
Provisions 14 (706) (150) (450)
Shares to be issued - (5,304) (489)
-------- -------- ---------
(69,580) (72,784) (90,808)
-------- -------- ---------
Net current assets 7,031 4,003 10,967
------- ------- --------
Non-current liabilities
Bank loans (22,076) (99,500) (102,307)
Pension liabilities 15 (1,260) (1,977) (1,436)
Deferred tax liabilities (1,260) (1,034) (2,358)
Obligations under finance leases (2) (378) (327)
Shares to be issued - (973) -
-------- -------- ---------
(24,598) (103,862) (106,428)
-------- -------- ---------
Total liabilities (94,178) (176,646) (197,236)
-------- -------- ---------
Net assets 178,353 162,737 158,234
-------- ----- ---------
Equity
Share capital 4,239 4,073 4,234
Share premium account 74,750 81,749 74,633
Other reserves 67,714 62,307 67,823
Retained earnings 29,786 13,396 9,941
-------- -------- -------
Equity attributable to equity holders
of 16 176,489 161,525 156,631
the parent
Minority interest 1,864 1,212 1,603
--------- --------- ---------
Total equity 178,353 162,737 158,234
--------- --------- ----------
Condensed consolidated statement of recognised income and expense
For the six months to 30 September 2007
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Actuarial gain on defined benefit plans - - 436
Transfer to cash flow hedge reserve (48) 472 1,194
Deferred tax 10 (141) (489)
-------- -------- ---------
Net (expense)/income recognised directly to
equity (38) 331 1,141
Profit/(loss) for the period 21,686 881 (8,608)
-------- -------- ---------
Total recognised income and expense for the
period 21,648 1,212 (7,467)
-------- -------- ---------
Attributable to:
Equity holders of the parent 21,374 875 (8,238)
Minority interest 274 337 771
-------- -------- ---------
21,648 1,212 (7,467)
-------- -------- ---------
Condensed consolidated cash flow statement
For the six months to 30 September 2007
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
Note £000 £000 £000
Net cash from operating activities 17 1,854 2,514 24,280
-------- -------- ---------
Investing activities
Interest received 919 197 1,873
Proceeds on disposal to minorities 159 1 2
Disposal of subsidiary 36,251 - -
Proceeds on disposal of property, 236 28 213
plant and
equipment
Purchases of property, plant and (1,926) (8,865) (12,196)
equipment
Expenditure on product development (942) (612) (1,564)
Acquisitions (204) (275) (556)
Purchase of trading investments (6) - -
-------- -------- ---------
Net cash inflow/(outflow) from
investing 34,487 (9,526) (12,228)
activities -------- --------- ----------
Financing activities
Interest paid (1,336) (2,216) (7,905)
Equity dividend paid - - (2,685)
Dividends to minorities (100) - (95)
Issue of shares 122 515 487
Repayment of borrowings (53,966) (1,217) (2,352)
Repayments of obligations under (1) (39) (83)
finance leases
New bank loans - 2,944 10,576
Movements in collateralised cash 750 261 443
Purchase of own shares - (122) (105)
Loan to third party repaid - 535 535
-------- -------- ---------
Net cash (used in)/from financing (54,531) 661 (1,184)
activities --------- ------- ---------
Net (decrease)/increase in cash and
cash (18,190) (6,351) 10,868
equivalents
Cash and cash equivalents at
beginning of 33,483 22,615 22,615
period -------- -------- --------
Cash and cash equivalents at end of 18 15,293 16,264 33,483
period -------- -------- --------
Notes to the condensed consolidated financial information for the six months
ended 30 September 2007
1 General information
The condensed consolidated financial information for the six months ended 30
September 2007 was approved by the Board of Directors on 21 November 2007.
The information for the year ended 31 March 2007 does not comprise statutory
accounts within the meaning of Section 240 of the Companies Act 1985. A copy of
the statutory accounts for the year ended 31 March 2007 has been filed with the
Registrar of Companies. The auditors' report on those accounts was not qualified
and did not contain statements under section 237 (2) or (3) of the Companies Act
1985.
2 Accounting policies
The condensed consolidated financial information for the six months ended 30
September 2007 has been prepared using accounting policies consistent with
International Financial Reporting Standards (IFRS) and in accordance with IAS 34
'Interim Financial Reporting'.
The same accounting policies, presentation and methods of computation are
followed in the condensed consolidated financial information as applied in the
Group's latest annual audited financial statements.
Change in accounting policies
In the current period, the Group will adopt IFRS 7 'Financial Instruments:
Disclosures' for the first time. As IFRS 7 is a disclosure standard, there is no
impact of that change in accounting policy on the half-yearly financial report.
Full details of the change will be disclosed in our report for the nine months
ended 31 December 2007.
3 Segmental analysis
The Group is currently organised into three business segments - Consulting,
Education and Support services.
Principal activities are as follows:
Consulting one of the largest consulting businesses operating in the public
- sector providing a broad range of management consultancy services.
Education one of the largest providers of education services to the public
- sector including software, managed services, school inspection
services, consultancy, benchmarking, publishing and training.
Support support services businesses largely operate in the public sector
services providing a range of PR and communications, resourcing and property
- services.
The Group previously included Mercury Health, a healthcare delivery business as
a separate segment - that operation was discontinued with effect from 20 April
2007 (see note 8). As part of the business review, following the disposal of
Mercury Health, the Group has realigned its reporting structure, splitting out
part of its Consulting segment into a separate Support services segment.
Accordingly, the business segment information for the year ended 31 March 2007
and the six months ended 30 September 2006 has been restated to show the current
business segment structure. As a result, there has been an adjustment to
inter-segment sales.
3 Segmental analysis (continued)
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Revenue
Consulting 31,818 25,912 63,040
Education 38,269 35,748 78,700
Support services 27,925 26,322 54,917
Inter segment (923) (1,065) (2,601)
------- --------- ---------
Continuing operations 97,089 86,917 194,056
Discontinued operations (Mercury Health) 2,346 17,576 37,795
------- -------- --------
Total revenue 99,435 104,493 231,851
-------- --------- ---------
Operating profit before amortisation of
IFRS 3 intangibles, goodwill impairment and
share option costs
Consulting 2,237 1,536 2,953
Education 4,361 4,327 14,102
Support services 2,386 1,697 3,844
Unallocated corporate expenses (2,951) (3,186) (6,433)
--------- --------- ---------
Continuing operations 6,033 4,374 14,466
Discontinued operations (Mercury Health) 186 1,795 3,785
-------- ------- -------
Total operating profit before amortisation of
IFRS 3 intangibles, goodwill impairment and 6,219 6,169 18,251
share option costs ------- ------- --------
4 Goodwill impairment
The Group tests goodwill annually for impairment or more frequently if there are
indications that goodwill might be impaired.
Following the disappointing performance of the Resourcing business stream in the
six months ended 30 September 2007, due to a significant decline in local
government recruitment spend, reduced recruitment advertising spend and pressure
on advertising margins, a review of the goodwill carrying value has resulted in
an impairment charge of £9.0m (2006: £2.0m) being provided.
5 Investment revenues
Continuing operations
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Interest on bank deposits 919 373 810
Gain arising on derivatives 98 176 415
1,017 549 1,225
6 Finance costs
Continuing operations
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Finance charges
Interest on bank overdrafts and loans 1,260 2,223 4,894
Interest on loan notes 23 31 66
Interest on obligations under finance - - 1
leases
Net finance cost of retirement benefit
obligations 15 13 30
------- ------ ------
Total borrowing costs 1,298 2,267 4,991
Financial instruments
Loss arising on derivatives 134 45 124
Discounting charge for deferred
consideration 11 134 164
------- ------ ------
145 179 288
------- ------ ------
1,443 2,446 5,279
------- ------ ------
7 Tax
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Continuing operations
Current tax
UK corporation tax 1,536 659 3,282
Adjustments in respect of prior years (8) - (828)
------- ------ ------
1,528 659 2,454
Deferred tax
Current year 216 (48) 392
------- ------ ------
Tax charge 1,744 611 2,846
------- ------ ------
Discontinued operations
Current tax
UK corporation tax - 366 130
Adjustments in respect of prior years - (1,095) (1,095)
------- ------ ------
- (729) (965)
Deferred tax
Current year - - 589
Tax credit - (729) (376)
------- ------ ------
8 Discontinued operations
The Group disposed of its healthcare delivery business, Mercury Health, to Care
UK on 20 April 2007; its results are presented in this condensed half-yearly
financial information as discontinued operations. The gross sale proceeds were
£76.2m, which after deduction of net debt of £15.8m and disposal costs of £4.9m
equates to net cash consideration of £55.5m.
Details of net assets disposed and disposal proceeds are as follows:
£000
Non-current assets:
Property, plant and equipment 37,567
Amounts recoverable on contracts 11,833
Other non-current assets 219
Current assets 9,516
Cash and cash equivalents 16,646
Current liabilities (13,436)
Share option reserve 7
Equity reserve 249
Deferred tax liabilities (1,961)
Bank loans (32,398)
--------
Net assets disposed 28,242
Profit on disposal 27,217
--------
Consideration 55,459
--------
Net cash flow arising from disposal £000
Cash consideration 55,459
Cash disposed (16,646)
Payment of prior period liabilities (2,562)
--------
Cash inflow from disposal 36,251
--------
The results of the discontinued operations which have been included in the
condensed consolidated income statement were as follows:
Period Six months Year
ended ended ended
20 April 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Revenue 2,346 17,576 37,795
-------- -------- --------
Operating profit before share option costs
and disposal costs 186 1,795 3,785
Share option costs and disposal costs - (6) (3,306)
-------- -------- --------
Operating profit 186 1,789 479
Net finance costs (149) (1,172) (2,276)
-------- -------- --------
Profit/(loss) before tax 37 617 (1,797)
Attributable tax credit - 729 376
Profit on disposal of discontinued operations 27,217 - -
-------- -------- --------
Net profit/(loss) attributable to
discontinued 27,254 1,346 (1,421)
operations -------- -------- --------
Operating cash flows for discontinued
operations (2,132) 5,825 10,274
Investing cash flows for discontinued
operations 35,834 (7,512) (9,086)
Financing cash flows for discontinued
operations (149) 2,979 10,010
-------- -------- --------
Total cash flows 33,553 1,292 11,198
-------- -------- --------
A profit of £27.2m arose on the disposal of Mercury Health, being the net
proceeds of disposal less the carrying amount of the subsidiary's net assets. It
is not anticipated that any tax will be payable on this profit as the directors
believe that the substantial shareholder exemption will apply. Accordingly no
provision has been made.
9 Earnings per share
Earnings per share and diluted earnings per share are calculated by reference to
a weighted average number of ordinary shares calculated as follows:
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
thousands thousands thousands
Basic weighted average number of shares in
issue 84,725 80,595 81,889
Employee share options 88 285 176
Shares to be issued in respect of deferred
consideration - 3,008 410
-------- -------- --------
Weighted average number of diluted shares
outstanding 84,813 83,888 82,475
-------- -------- --------
From continuing and 30 September 2007 30 September 2006 31 March 2007
discoutinued operations
Earnings Earnings Earnings Earnings Earnings Earnings
£000 per share £000 per share £000 per share
pence pence pence
Basic and adjusted basic
earnings per share:-
Profit and basic
earnings per share 21,412 25.27p 544 0.67p (9,379) (11.5)p
Adjustments:
Goodwill impairment 9,000 10.62p 2,000 2.48p 14,429 17.6p
Amortisation of IFRS 3
intangibles (net of tax) 115 0.14p 102 0.13p 224 0.3p
Share option costs 271 0.32p 177 0.22p 10 -
Profit on disposal of
Mercury Health (27,217) (32.12)p - - - -
Mercury Health
disposal costs - - - - 3,300 4.0p
Financial instruments
charge/(credit)(net of tax) 36 0.04p 20 0.02p (91) -
------- ------- ------ ------ ------ ------
Adjusted earnings and
adjusted basic
earnings per share 3,617 4.27p 2,843 3.52p 8,493 10.4p
------- ------ ------ ------ ------ ------
Diluted and adjusted
diluted earnings per
share:-
Profit and diluted
earnings per share 21,412 25.24p 544 0.65p (9,379) (11.5)p
Adjustments:
Goodwill impairment 9,000 10.61p 2,000 2.39p 14,429 17.5p
Amortisation of IFRS 3
intangibles(net of tax) 115 0.14p 102 0.12p 224 0.3p
Share option costs 271 0.32p 177 0.21p 10 -
Profit on disposal of
Mercury Health (27,217) (32.09)p - - - -
Mercury Health disposal costs - - - - 3,300 4.0p
Financial instruments
charge/(credit) (net of tax) 36 0.04p 20 0.02p (91) -
------- ------- ------ ------ ------ ------
Adjusted earnings and
adjusted diluted earnings
per share 3,617 4.26p 2,843 3.39p 8,493 10.3p
------- ------- ------ ------ ------ ------
The adjusted basic and adjusted diluted earnings per share figure shown on the
profit and loss account is included as the directors believe that it provides a
better understanding of the underlying trading performance of the Group.
From continuing 30 September 2007 30 September 2006 31 March 2007
operations Earnings Earnings Earnings Earnings Earnings Earnings
£000 per share £000 per share £000 per share
pence pence pence
Basic and adjusted
basic earnings per
share:-
Loss and basic loss
per share (5,842) (6.90)p (802) (1.00)p (7,958) (9.8)p
Adjustments:
Goodwill impairment 9,000 10.62p 2,000 2.48p 14,429 17.6p
Amortisation of IFRS 3
intangibles (net of tax) 115 0.14p 102 0.13p 224 0.3p
Share option costs 271 0.32p 171 0.22p 4 -
Financialinstruments
charge/(credit)(net of tax) 36 0.04p 42 0.05p (40) -
------ ------ ------ ------ ------ ------
Adjusted earnings and
adjusted basic earnings
per share 3,580 4.22p 1,513 1.88p 6,659 8.1p
------ ------ ------ ------ ------ ------
Diluted and adjusted
diluted earnings per
share:-
Loss and diluted loss
per share (5,842) (6.90)p (802) (1.00)p (7,958) (9.8)p
Adjustments:
IAS 33 adjustment * - 0.01p - 0.04p - -
Goodwill impairment 9,000 10.61p 2,000 2.38p 14,429 17.5p
Amortisation of IFRS 3
intangibles(net of tax) 115 0.14p 102 0.12p 224 0.3p
Share option costs 271 0.32p 171 0.21p 4 -
Financial instruments
charge/(credit)(net of tax) 36 0.04p 42 0.05p (40) -
------ ------ ------ ------ ------ ------
Adjusted earnings and
adjusted diluted
earnings per share 3,580 4.22p 1,513 1.80p 6,659 8.0p
------ ------ ------ ------ ------ ------
* IAS 33 requires presentation of diluted earnings per share when a company
could be called upon to issue shares that would decrease net profit or increase
net loss per share. For a loss making company, net loss per share would only be
increased by the exercise of out-of-money options.
10 Dividends
The Board has proposed an interim dividend of 1.15 pence per share (2006: 1.05
pence per share), which will absorb £975,000 (2006: £880,000).
The proposed interim dividend was approved by the Board on 21 November 2007 and
has not been included as a liability as at 30 September 2007. The dividend is
payable on 16 January 2008 to ordinary shareholders who are on the register on
14 December 2007. The shares will be quoted ex-dividend on 12 December 2007.
11 Property, plant and equipment
£000
Opening net book value at 1 April 2007 45,056
Additions 1,575
Disposals (149)
Disposal of subsidiary (37,567)
Depreciation (1,559)
-------
Closing net book value at 30 September 2007 7,356
-------
During the period, the Group invested mainly in enhancing and replacing its
information technology infrastructure.
12 Trade and other receivables
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Trade receivables 34,747 33,139 48,363
Other receivables 575 933 725
Prepayments and accrued income 23,540 21,065 13,100
Fair value of interest rate swaps 461 219 1,017
--------- --------- --------
59,323 55,356 63,205
--------- --------- --------
13 Trade and other payables
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Trade payables 16,495 17,467 24,046
Other taxation and social security 8,402 8,551 11,734
Other payables 7,653 3,820 4,251
Accruals and deferred income 30,494 32,808 41,468
Deferred cash consideration 546 149 -
--------- --------- --------
63,590 62,795 81,499
--------- --------- --------
14 Provisions
As at 30 September 2007, there were provisions of £706,000 (30 September 2006:
£150,000; 31 March 2007: £450,000). Provisions represent an estimate of the cost
of settling potential litigation claims. These claims are expected to be
resolved within one year and are therefore shown within current liabilities.
Further details are contained in note 20.
15 Defined benefit schemes
One of the Group's subsidiary undertakings, Tribal Technology Limited,
participates in the TfL Pension Fund. Another subsidiary, SDP Regeneration
Services 2 Limited, participates in the LPFA Pension Fund. Both are defined
benefit arrangements.
The net pension liability has not been recalculated at 30 September 2007. There
have not been any significant fluctuations or one-time events since 31 March
2007 that would require adjustment to the actuarial assumptions made at that
date. The Group has however made total additional contributions of £0.2m in the
period to fund the existing pension deficit.
This amount has been recognised in the condensed consolidated balance sheet.
16 Movements in equity
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Recognised income and expense for the 21,374 875 (8,238)
period
Dividends payable (2,031) (1,812) (2,692)
------- ------- -------
19,343 (937) (10,930)
Shares issued 122 2,468 7,717
Share option exercises - (949) (949)
Own shares disposed/(acquired) 122 (122) (105)
Credit in relation to share based payment 271 177 10
Opening equity 156,631 160,888 160,888
------- ------- -------
176,489 161,525 156,631
------- ------- -------
During the six months ended 30 September 2007, 87,992 ordinary 5p shares with an
aggregate nominal value of £5,000 were issued under share option schemes for a
total consideration of £122,000.
17 Note to the cash flow statement
Reconciliation of operating profit to operating cash flows
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Operating (loss)/profit from continuing
operations (3,398) 2,043 (287)
Profit from discontinued operations 186 1,789 479
Depreciation of property, plant and 1,493 2,600 5,356
equipment
Amortisation of development expenditure 674 261 869
Amortisation of intangible assets 160 160 320
Impairment of goodwill 9,000 2,000 14,429
Net pension (credit)/charge (27) 7 (105)
Gain on disposal of property, plant and (87) (24) (133)
equipment
Gain on sale of investments (68) - -
Share based payments 271 177 10
(Increase)/decrease in amounts recoverable
on contracts (21) 560 (4,041)
(Increase)/decrease in inventories (475) 532 (168)
(Increase)/decrease in receivables (2,442) 2,723 (4,724)
(Decrease)/increase in payables (4,339) (7,735) 16,118
Increase in provisions 256 - 300
------- ------- -------
Net cash from operating activities before 1,183 5,093 28,423
tax
Tax repaid/(paid) 671 (2,579) (4,143)
------- ------- -------
Net cash from operating activities 1,854 2,514 24,280
------- ------- -------
Net cash from operating activities before tax can be
analysed as follows: £000 £000 £000
Continuing operations 3,315 (732) 18,149
Discontinued operations (2,132) 5,825 10,274
------- ------- ------
1,183 5,093 28,423
------- ------- ------
18 Analysis of net debt
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
2007 2006 2007
£000 £000 £000
Cash at bank and in hand 15,293 16,264 33,483
Cash collateralised 199 1,131 949
-------- -------- --------
Gross cash 15,492 17,395 34,432
-------- -------- --------
Short term loans (337) (1,690) (1,455)
Syndicated bank facility (net of bank
arrangement fees) (22,076) (72,491) (72,676)
Non-recourse bank facility (net of bank
arrangement fees) - (25,284) (31,481)
Mercury Health asset finance facility - - (500)
Share option facility - (1,725) (1,725)
Finance leases (7) (469) (425)
-------- -------- --------
Gross debt (22,420) (101,659) (108,262)
-------- -------- --------
Net debt (6,928) (84,264) (73,830)
-------- -------- --------
The proceeds from the disposal of Mercury Health were used to pay down the
Group's net debt and the non-recourse bank facility was transferred with the
Mercury Health business.
Following the disposal, the Group no longer required its existing level of
banking facility and the high costs associated with the non-utilised portion. On
14 June 2007, the Group agreed a new £40m senior debt banking facility until
2012. Under the terms of the facility, £40m is available under a fully
fluctuating revolving credit facility, which can in part be transferred into a
performance bond facility as required. The previous £180m facility, together
with the share option facility of £5m, has been cancelled.
19 Post balance sheet event
On 16 October 2007, the Group acquired the remaining 49% minority shareholding
in Sportsvine Holdings Limited for a maximum total consideration of £6.0m. £1.5m
consideration was paid in cash on that date with the balance of the
consideration, subject to the future performance of that business, deferred
until May 2008.
20 Contingent liabilities
As reported at March 2007, the Group has received notification of potential
claims, as set out below. In all cases the claims are being investigated by our
lawyers and are being robustly contested as to both liability and quantum. The
principal claims are:
• breach of contract arising out of the provision of services to a further
education college;
• the return of funding received for the provision of learning assessment
and delivery for job seekers;
• claim for negligence in the treatment of a development contract as part
of a transfer of council housing stock.
A provision of £706,000 (30 September 2006: £150,000, 31 March 2007: £450,000)
has been made for defending the potential claims, where appropriate.
These claims are expected to be resolved within one year and are therefore shown
within current liabilities. The provision made is management's best estimate of
the Group's liability based on past experience, commercial judgement and legal
advice. There is no expected reimbursement for any economic outflow that may be
required.
There are two parent company guarantees (PCGs) given by the Company relating to
leases of Mercury Health properties that were not released at the time of the
sale of Mercury Health to Care UK. These have an aggregate annual commitment of
approximately £0.4m over the outstanding term of approximately 17 years. Care UK
and Tribal Group have a formal agreement whereby Care UK shall use its best
endeavours to obtain full release of the PCGs on a timely basis. It is expected
that releases will be obtained during the course of the current accounting
period.
Tribal Group plc
Responsibility statement
We confirm that to the best of our knowledge:
(a)the condensed set of financial statements has been prepared in
accordance with IAS 34;
(b)the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
three months of the accounting period); and
(c)the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board
Peter J Martin Simon M Lawton
Chief Executive Group Finance Director
21 November 2007
Independent review report to Tribal Group plc
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007 which comprises the consolidated income statement, the
consolidated balance sheet, the consolidated statement of recognised income and
expense, the consolidated cash flow statement and related notes 1 to 20. We have
read the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the group in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the Group those matters we
are required to state to them in an independent review 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 Group, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdoms' Financial Services Authority.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
Bristol, United Kingdom
21 November 2007
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