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Warburg (S.G.) Group (WSGC)

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Wednesday 28 September, 2005

Warburg (S.G.) Group

Interim Results

Warburg (S.G.) Group PLC
28 September 2005

                                                             Company No: 1874486


                                   S.G. WARBURG GROUP plc

                                   Half-Year Report
                                   For the six months ended 30 June 2005

Interim Statement


Principal activities

The Group, comprising the Company and its subsidiaries, carries on investment
activities including the provision of finance to a number of companies within
the UBS AG Group.


Significant events during the period

During the period, the Company repurchased an aggregate principal amount of
£104.7m of the outstanding 9% Perpetual Subordinated Loan Notes issued by the
Company for an aggregate cash consideration (including accrued interest) of
£152.3m.  The Notes purchased were subsequently cancelled on 5 May 2005.  An
aggregate principal amount of £8.3m of these Loan Notes remains in issue and
listed on the London Stock Exchange.

On 30 June 2005, S.G. Securities U.K. Limited redeemed at par and subsequently
cancelled its one special redeemable £1 share, which was held by the Company.
At the balance sheet date, the Group held no interest in S.G. Securities U.K.
Limited.


Dividends

Dividends on the 7 5/8 per cent Cumulative Preference shares paid on 31 March
2005 amounted to £0.4m  (period to 30 June 2004: £0.4m; year to 31 December
2004: £0.8m).  The Directors do not at the date hereof intend to declare an
ordinary dividend for the six months ended 30 June 2005 (period to 30 June 2004:
£nil; year to 31 December 2004: £12.2m).


Independent Review Report to S.G. Warburg Group plc


Introduction

We have been instructed by the company to review the financial information for
the six months ended 30 June 2005, which comprises the Consolidated Profit and
Loss Account, Consolidated Balance Sheet, Consolidated Statement of Changes in
Equity, Consolidated Cash Flow Statement and the related Notes.  We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.

This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report or for the conclusions we have formed.


Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors.  The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.

As disclosed in note 2, the next financial statements of the group will be
prepared in accordance with those International Financial Reporting Standards ('
IFRS') adopted for use by the European Union. The accounting policies are
consistent with those that the directors intend to use in the next financial
statements.  There is, however, a possibility that the directors may determine
that some changes to these policies are necessary when preparing the full annual
financial statements for the first time in accordance with those IFRS adopted
for use by the European Union.  This is because, the IFRS standards and IFRIC
interpretations that will be applicable and adopted for use in the European
Union at 31 December 2005 are not known with certainty at the time of preparing
this interim financial information.


Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom.  A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied, unless otherwise disclosed.  A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions.  It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit.  Accordingly we do not express an audit
opinion on the financial information.


Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.


Ernst & Young LLP
London
28 September 2005



S.G. WARBURG GROUP plc

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 2005

                                                                  Six months        Six months              Year
                                                                       ended             ended             ended
                                                                     30 June           30 June       31 December
                                                                        2005              2004              2004
                                                                          £m                £m                £m

Interest income                                                         31.9              28.5              62.2
Interest expense                                                      (15.7)            (14.8)            (31.3)

Net interest income                                                     16.2              13.7              30.9

Other operating income                                                   0.1               0.3               6.8
Gains less losses from investment securities                               -                 -               3.1
Administrative expenses                                                (0.1)                 -             (0.6)

Operating profit                                                        16.2              14.0              40.2

Loss on repurchase of debt                                            (45.6)                 -                 -

(Loss) / profit before income taxation                                (29.4)              14.0              40.2

Income tax credit / (expense)                                            8.6             (4.2)            (11.3)

(Loss) / profit for the period after taxation                         (20.8)               9.8              28.9

Attributable to:
Equity holders of the parent                                          (20.9)               9.5              20.8
Minority Interests                                                       0.1               0.3               8.1
                                                                      (20.8)               9.8              28.9

Earnings per share for (loss)/ profit attributable to the
equity holders of the parent during the year
(expressed in pence per share):
- basic  and diluted                                                  (8.90)              4.05              8.86



S.G. WARBURG GROUP plc

CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2005



                                                                      30 June         30 June     31 December
                                                                         2005            2004            2004
                                                                           £m              £m              £m
ASSETS
Non-current assets
Investment securities available for sale                                    -             0.1             6.4
Property, plant and equipment                                               -             0.1               -

                                                                            -             0.2             6.4

Current assets
Cash                                                                        -             1.0             1.0
Amounts owed by Group undertakings                                    1,294.8         1,641.0         1,685.3
Other assets                                                                -               -             3.2

                                                                      1,294.8          1642.0          1689.5

Total assets                                                          1,294.8         1,642.2         1,695.9

LIABILITIES
Non-current liabilities
Debt securities in issue                                                  8.3           113.0           113.0
Preference shares                                                        10.9            10.9            10.9

                                                                         19.2           123.9           123.9

Current liabilities
Amounts owed to Group undertakings                                      492.6           475.1           517.9
Other liabilities                                                         0.6             2.1             1.5
Current income tax liabilities                                            3.8             7.4            14.6
                                                                                    
                                                                        497.0           484.6           534.0

Total liabilities                                                       516.2           608.5           657.9
                                                                    

EQUITY
Capital and reserves attributable to the equity
holders of the parent
Share capital                                                            58.6            58.6            58.6
Share premium                                                           291.1           291.1           291.1
Capital redemption reserve                                               64.9            64.9            64.9
Other reserves                                                           84.9            84.9            84.9
Retained earnings                                                       279.1           300.9           300.0

                                                                        778.6           800.4           799.5

Minority interest                                                           -           233.3           238.5

Total equity                                                            778.6         1,033.7         1,038.0

Total equity and liabilities                                          1,294.8         1,642.2         1,695.9



Approved by the Board of Directors on 28 September 2005 and signed on their
behalf by:

Richard W J Hardie, Director
       


S.G. WARBURG GROUP plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2005



                                   Share       Share       Capital       Other    Retained  Minority     Total
                                 Capital     Premium    Redemption    Reserves              Interest
                                                           Reserve                Earnings
                                      £m          £m            £m          £m          £m        £m        £m

At 1 January 2004                   58.6       291.1          64.9        84.9       291.4     232.9   1,023.8

Profit for the period                  -           -             -           -         9.5       0.4       9.9
At 30 June 2004                     58.6       291.1          64.9        84.9       300.9     233.3   1,033.7

Profit for the period                  -           -             -           -        11.3       7.5      18.8
Dividend on ordinary shares            -           -             -           -      (12.2)     (2.3)    (14.5)
At 31 December 2004                 58.6       291.1          64.9        84.9       300.0     238.5   1,038.0

(Loss) / Profit for the period         -           -             -           -      (20.9)       0.1    (20.8)
Reduction in minority interest         -           -             -           -           -   (238.6)   (238.6)
on loss of control of
subsidiary
At 30 June 2005                     58.6       291.1          64.9        84.9       279.1         0     778.6




S.G. WARBURG GROUP plc

CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2005



                                                                    Six months      Six months            Year
                                                                         ended           ended           ended
                                                                       30 June         30 June     31 December
                                                                          2005            2004            2004
                                                                            £m              £m              £m
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received                                                         31.9            28.5            62.2
Interest paid                                                           (15.7)          (14.8)          (31.3)

Cash flows from operating profits before changes in
operating assets and liabilities                                          16.2            13.7            30.9

Changes in operating assets and liabilities:
- net increase in loans and advances                                     (3.4)          (28.3)          (42.1)
- net decrease/(increase) in other assets                                    -           (0.1)           (2.8)
- net (decrease)/increase in other liabilities                           (0.5)             0.2           (0.6)

Net cash from operating activities                                        12.3          (14.5)          (14.6)
                                                                     
CASH FLOWS FROM INVESTING ACTIVITIES
Reduction in cash attributable to minority interest (see note            (1.1)               -               -
(a))
Proceeds from sale of property and equipment                                 -               -             0.1

Net cash used in investing activities                                    (1.1)               -             0.1

Cash flows from financing activities
Proceeds from borrowed funds and debt securities                         152.3               -               -
Repayments of borrowed funds and debt securities                       (152.3)               -               -
Equity dividends paid                                                   (12.2)               -               -

Net cash from financing activities                                      (12.2)               -               -

Net decrease in cash                                                     (1.0)          (14.5)          (14.5)

Cash at beginning of period/year                                           1.0            15.5            15.5

Cash at end of period/year                                                   -             1.0             1.0




Note (a)

Reduction in cash attributable to minority interest

On 30 June 2005 S.G. Securities U.K. Limited redeemed at par and cancelled its
one special redeemable share previously held by S.G. Warburg Group plc. The
consideration of £1 represents the net asset value amounts included in those
consolidated accounts in respect of the S.G. Securities U.K. Limited group of
companies.


                                                                             £m
Decrease in loans and advances                                            230.2
Decrease in other assets                                                    3.2
Decrease in other liabilities                                             (0.2)
Decrease in fixed asset investments                                         6.4
Decrease in corporation tax liability                                     (2.1)
Decrease in cash at bank and in hand                                        1.1

Net Assets                                                                238.6
Reduction in Minority Interests                                         (238.6)

Consideration received                                                    -



S.G. WARBURG GROUP plc

NOTES TO THE HALF YEAR REPORT


1.  General Information

The financial information included in this Half-Year Report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.

The financial statements for the year ended 31 December 2004 prepared under UK
GAAP, upon which the auditors issued an unqualified opinion, have been delivered
to the Registrar of Companies.


2. Summary of Significant Accounting Policies
     
•    Basis of Preparation

These interim financial statements have been prepared, for the first time, on a
basis consistent with the Company's anticipated 2005 IFRS accounting policies.
The most significant of the IFRS accounting policies are set out below.

The reconciling adjustments from UK GAAP to IFRS are set out in Note 4.  The
Group has elected to take the following exemptions as permitted by IFRS 1 '
First-time Adoption of International Financial Reporting Standards':
        
   i)  IFRS 3 'Business combinations' - not to apply IFRS 3 to business 
       combinations prior to the date of transition to IFRS;
       
  ii)  IFRS 1 'First-time Adoption of International Financial Reporting 
       Standards' - Designation of previously recognised financial instruments, 
       which permits a financial instrument to be designated on the date of 
       transition to IFRS as a financial asset or financial liability at fair 
       value through profit or loss or as available for sale.

The Company has elected to provide comparative information to comply with IAS 32
and IAS 39, with the main adjustment being the reclassification of £10.9m
preference shares from Equity to Non-Current liabilities.

     
•    Consolidation

The Interim Financial Statements comprise those of the parent company S.G.
Warburg Group plc and its subsidiaries. The effects of intra-group transactions
are eliminated in preparing the Interim Financial Statements. Subsidiaries
directly or indirectly controlled by the Group are consolidated. Subsidiaries
divested are consolidated up to the date of disposal.  Equity and net income
attributable to minority interests are shown separately in the balance sheet and
income statement.


•    Cash

Cash in the balance sheet comprises cash at bank.


•    Financial Instruments


i) Investments

All investments are initially recognised at cost, being the fair value of the
consideration given.  After initial recognition, investments, which are
classified as held for trading and available-for-sale, are measured at fair
value. If any investments are in unquoted equity instruments they will be
measured at cost if their fair value cannot be measured reliably. Gains and
losses on investments held for trading are recognised in income. Gains or losses
on available-for-sale investments are recognised as a separate component of
equity until the investment is sold, collected or is otherwise disposed of, or
until the investment is determined to be impaired, at which time the cumulative
gain or loss previously reported in equity is included in the income statement.


ii) Financial Liabilities

All loans and borrowings including debt securities are recognised at cost, being
the fair value of the consideration received.

Preference shares, which carry a mandatory coupon, are classified as financial
liabilities and are presented within non-current liabilities. The dividends on
these preference shares are charged in the income statement as an interest
expense.


iii) Financial Assets

Non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market are classified as loans and receivables. They arise
when the Group finances borrowings within the UBS AG Group.


•    Plant, property and equipment

Assets are stated at cost less depreciation calculated on the straight-line
basis to write off the assets over their estimated useful lives as follows:

Motor vehicles                5 years

Plant and equipment           3 to 10 years


3.   Explanatory Notes


•    Segmental Analysis

The Group's activities constitute investment in subsidiaries and provision of
finance for subsidiaries within the UBS AG Group.  All material activities of
the Group are within the UK and subject to the same risks and returns.
Accordingly, the Group has not produced any segmental analysis.

     
•    Repurchase of debt

During the period, the Company recorded a loss of £45.6m upon the repurchase of
an aggregate principal amount of £104.7m of the outstanding 9% Perpetual
Subordinated Loan Notes issued by the Company and governed by a Trust Deed dated
4 February 1994 by Private Treaty from SBCI IB Limited, a fellow subsidiary of
UBS AG, for aggregate cash consideration of £152.3m.  The Notes purchased were
subsequently cancelled on 5 May 2005.


•    Dividends

The Company paid a dividend of £0.4m on cumulative preference shares (30 June
2004: £0.4m; 31 December 2004: £0.8m).  In accordance with IFRS, these dividends
have been reclassified as interest.  The Group has not paid an equity dividend
during the six months to 30 June 2005 (period to 30 June 2004: nil; year to 31
December 2004: £12.2m).


•    Changes in composition of the entity

On 30 June 2005, S.G. Securities U.K. Limited redeemed at par and cancelled its
one special redeemable £1 share from SG Warburg Group plc. The one special
redeemable £1 share had been previously issued by S.G. Securities U.K. Limited
and allotted for cash to S.G. Warburg Group plc.  As holder of this redeemable
share, the Group had 50.1% of the voting rights at general meetings, but no
right to dividends or participation in a distribution of assets on liquidation.
At the balance sheet date, the Group held no interest in S.G. Securities U.K.
Limited.

At the date of redemption, S.G. Securities U.K. Limited Group had assets of
£251.5m and liabilities of £12.9m.  Its profit before and after taxation for the
six months ending 30 June 2005 was £0.1m.


•    Contingent Assets or contingent liabilities

There were no contingent assets or liabilities at the balance sheet date.


4.   Transition from UK GAAP to IFRS


•         Profit and loss

Under IFRS, preference share dividends are included as an interest cost.  Under
UK GAAP, preference share dividends were treated as a distribution.  This has
resulted in a change to the previously reported profit after taxation figures
under UK GAAP.

The preference share dividend of £0.4m has therefore been included as an
interest cost in the profit and loss account for the six month period to 30 June
2005 (six month period to 30 June 2004: £0.4m; year to 31 December 2004: £0.8m.

Under UK GAAP, for the 6 month period to 30 June 2005, the loss after taxation
would have been £20.4m (6 month period to 30 June 2004 profit of £10.2m; year to
31 December 2004 profit of £29.7m) compared to the loss after taxation under
IFRS for the 6 month period to 30 June 2005 of £20.8m (six month period to 30
June 2004 profit of £9.8m; year to 31 December 2004 profit of £28.9m).

There has been no net effect on the Group's retained earnings reserve.


•    Equity

Under UK GAAP, share capital comprised ordinary share capital of £58,645,694 and
preference share capital of £10,934,796.  The preference shares have been
separately disclosed as a financial liability on the face of the balance sheet
in accordance with IFRS.


Reconciliation of equity disclosed at 31 December 2003

                               Equity Share       Share         Capital        Other    Retained Total
                                    Capital     Premium      Redemption     Reserves
                                                                Reserve                 Earnings
                                         £m          £m              £m           £m          £m        £m

Equity under UK GAAP                   69.5       291.1            64.9         84.9       291.4     801.8
Reclassification of preference       (10.9)           -               -            -           -    (10.9)
shares to non-current
liability
Equity under IFRS                      58.6       291.1            64.9         84.9       291.4     790.9


Reconciliation of equity disclosed at 30 June 2004

                               Equity Share       Share         Capital        Other    Retained Total
                                    Capital     Premium      Redemption     Reserves
                                                                Reserve                 Earnings
                                         £m          £m              £m           £m          £m        £m

Equity under UK GAAP                   69.5       291.1            64.9         84.9       300.9     811.3
Reclassification of preference       (10.9)           -               -            -           -    (10.9)
shares to non-current
liability
Equity under IFRS                      58.6       291.1            64.9         84.9       300.9     800.4


Reconciliation of equity disclosed at 31 December 2004

                               Equity Share       Share         Capital        Other    Retained Total
                                    Capital     Premium      Redemption     Reserves
                                                                Reserve                 Earnings
                                         £m          £m              £m           £m          £m        £m

Equity under UK GAAP                   69.5       291.1            64.9         84.9       300.0     810.4
Reclassification of preference       (10.9)           -               -            -           -    (10.9)
shares to non-current
liability
Equity under IFRS                      58.6       291.1            64.9         84.9       300.0     799.5


     
•    Cash flow statement

Under UK GAAP, the Group elected to utilise the exemption in paragraph 5(a) of
Financial Reporting Standard No 1 (Revised 1996) 'Cash flow Statement' from
preparing a cash flow statement, since the Group is a wholly owned subsidiary.
The Group, therefore, presents its cash flow statement for each of the periods
for the first time in this financial information, which has been prepared under
IFRS accounting policies.  The preference share dividend of £0.4m has been
included within interest payable in the consolidated cash flow statement for the
period to 30 June 2005 (period to 30 June 2004: £0.4m; year to 31 December 2004:
£0.8m).  This reclassification has had no effect on the net cash flow of the
group.




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IR EVLFLEKBEBBX                                                                                                                                                                                                                                               

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