Half Yearly Report

RNS Number : 2307S

Hydro International PLC

07 September 2010

 

HYDRO INTERNATIONAL plc

Interim results for the six months to 30 June 2010

 

 

Key Performance Indicators

	6 months ended 30 June 2010	6 months ended 30 June 2009
Statutory:
Revenue	£11.1m	£14.2m
Operating profit	£0.8m	£0.8m
Profit before tax	£0.6m	£0.5m
Basic earnings per share	2.68p	2.59p
Non-Statutory:
Adjusted operating profit*	£0.9m	£0.7m
Adjusted basic earnings per share**	3.24p	2.52p
Net cash and cash equivalents***	£0.7m	£0.5m
Closing order book	£13.9m	£9.4m

 

 

* excluding exceptional other operating income and amortisation of acquisition related intangible assets, as disclosed in the income statement.

** excluding exceptional other operating income and amortisation of acquisition related intangible assets, as disclosed in the income statement, and related corporation tax effect at 38.2% (2009: 32.2%).

*** Cash and cash equivalents, less borrowings

 

 

 

For further information, please contact:

 

Stephen Hides (Chief Executive Officer)

Tony Hollox (Chief Financial Officer)

 

Hydro International plc Tel: +44 (0)12 7587 8371

 

Julian Blunt

 

KBC Peel Hunt Limited (Nominated Adviser & Broker) Tel: +44 (0)20 7418 8990

 

 

 

 

Interim Management Report to the members of Hydro International plc

 

Key Points

·; Closing order book up 78% on the 2009 year-end, and 48% on the previous half-year point, at £13.9m.

·; Slow order intake in first quarter associated with;

o Transition from AMP4 to AMP5 delaying projects in the UK Wastewater business and,

o Continuing challenges faced by the Group's Stormwater business units as result of the slow recovery in the housing and construction sectors.

·; Improved order bookings in the second quarter as our UK Wastewater business secured a major £3.95m contract for the supply of our Zickert Scraper system, the Group's largest single order to date.

·; Sustained performance from the Group's US Wastewater and International business driven by demand for the Group's innovative grit removal systems in the US and Middle East.

 

Group results

As expected, the first half of 2010 has continued to provide a challenging trading environment with a slow economic recovery in private sector markets and the prospect of constrained public sector spending. Despite this backdrop, the Group has benefited from a combination of favourable product mix, diligent procurement and careful contract management which have collectively improved average margins and helped to mitigate the reduction in revenues. Further control of overhead costs and favourable foreign exchange movements have delivered a profit before tax for the first half of 2010 slightly ahead of both 2009 levels and our expectations as outlined in the AGM Trading Statement.

 

Group revenues reduced by 22% compared to the six months ended 30 June 2009 during which time, as reported in the 2009 Interim Report, trading levels in the Group's Stormwater businesses were falling sharply from 2008 levels. 2010 has seen a return to stability, albeit at the reduced level, as the UK and US housing and construction sectors emerge slowly from recession.

 

On the Wastewater side of the business revenues have also fallen in comparison to the 2009 period as delays affected the timing of the release of major projects with major orders placed towards the end of the period. The delays were most apparent in the Group's UK Wastewater business while the UK water companies wound down programmes under the fourth asset management programme (AMP4) and slowly established plans and delivery mechanisms for projects under AMP5. There are now more encouraging signs of increased activity associated with AMP5 and the Group was successful in securing its largest ever single contract valued at £3.95m in May to supply Zickert Scraper systems.

 

The Group's innovative and market leading grit removal systems continue to deliver strong performance in the US and International markets. The US Wastewater business converted the majority of the 2009 closing order book to sales in the period and also maintained a good level of new order intake over the first half year, to some extent assisted by the US government stimulus measures which brought forward a number of projects. International Wastewater revenues increased significantly over the same period last year with the continuing supply of equipment to the Villages Project in Egypt.

 

Group operating profit excluding amortisation of acquisition related intangible assets and exceptional other operating income was up 22% on the 2009 level.

 

The appreciation in the value of the US dollar against sterling during the period gave rise to foreign exchange gains on the translation of foreign currency balances. The overall impact of this together with gains and losses associated with other currencies was to credit the income statement with net gains totalling £189,000 (2009: £145,000 charge).

 

Net assets increased over the six month period by 1% to £10.5m (31 December 2009: £10.4m). This increase arises principally as a result of the increase in the foreign currency translation reserve during the period driven by the appreciation of the US dollar against sterling.

 

Net cash generated from operating activities for the six months ended 30 June 2010 was £163,000 which compares to the outflow of £44,000 for the comparative period in 2009. The principal change in cash generation over the last six months has been caused by the timing of payments to suppliers and receipts from customers on the larger contracts typically seen in the Group's Wastewater businesses. During the period the Group made capital repayments totalling £409,000 against borrowing facilities used to finance the acquisition of Eutek Systems, Inc. in 2008. A further £169,000 was paid as deferred consideration to the former shareholders of Eutek Systems, Inc. based on the performance of that business. Along with the payment of a final dividend of £428,000 in respect of the year ended 31 December 2009 and favourable foreign exchange movements totalling £106,000, these were the principal movements in cash balances, which reduced by £871,000 over the period.

 

Review of operations

During the second half of 2009 and the first half of 2010 the Group responded to the difficult trading conditions affecting the Group's Stormwater markets in the UK and the US by closely examining the cost base and effectiveness of these operations. In the US the Stormwater management team has been restructured with the recruitment of two experienced senior managers in the areas of National Sales and Operations management respectively. These appointments have helped ensure a sharper external focus on sales team performance and sales channel improvements and a clearer internal drive towards improving supporting business processes. There are early signs that the enhancements and improvements brought about by the new team are taking effect and improving the underlying trading situation of the business.

 

In the UK the focus of the Stormwater business has been on identifying opportunities to take advantage of new drivers for growth created by emerging regulations. One example would be the Flood and Water Management Act 2010 which has helped to reinforce the emerging market for larger-scale flow controls associated with regional flood relief schemes. Following on from the major White Cart Water flood defence project in Glasgow, which is now nearing completion, the UK Stormwater business secured a further order valued at £610,000 for a similar scheme in Wigan.

 

The ongoing performance of the US Wastewater business continues to demonstrate the strength of our route to market through a premier network of independent sales representatives. The business is implementing a strategy to introduce new products into the US market through this highly effective sales channel. Current initiatives include a third quarter launch of the Hydro SludgeScreen, a product developed by Hydro's UK Wastewater business, into the US market and a business assessment of the opportunities for Hydro's vortex flow control devices for flood control in the urban environment.

 

In the UK, AMP5 commenced on 1 April 2010 and the programme is for the most part a continuation of initiatives and objectives started under AMP4. As has happened in the past during the transition period between AMP cycles there has been a marked slow-down in the release of projects and procurement of equipment by the water companies and their process contractors. This is now starting to pick up and, in addition to the major order secured in May, the business is looking to build further on the success of the Zickert product over the short to medium term.

 

International Wastewater activity continues to focus on opportunities arising in the Middle East. The Group is working to build on the success of the Villages Project in Egypt with growing interest across the region, in particular in Saudi Arabia. Stormwater markets have continued to struggle to shake off the effects of economic recession and revenues have fallen as a result. Recovery in this area is not expected until 2011 at the earliest. The Board is considering a number of options to expand into new International markets and will be looking to strengthen the small International business development team in the near future.

 

The Group's Product Management function, established twelve months ago to act as an interface between the Group's commercial operations and the Product Development team, has made good progress over the period. The team will be enhanced in the third quarter with the appointment, below the main board level, of a Group Commercial Director to direct the Product Management function as well as leading the development of the Group's marketing strategy.

Key performance indicators

In addition to the statutory revenue and profit measures we monitor our performance in implementing our strategy with reference to progress in the key performance indicators listed on page 1.

 

Segmental results for the six months ended 30 June 2010

A summary of the key financial results by segment is disclosed in note 2 to the condensed financial statements.

 

Dividend and dividend policy

In line with current policy no interim dividend has been proposed or approved by the Board in this period or the period ended 30 June 2009.

 

A final dividend of 3.0p per share (£428,000) in respect of the year ended 31 December 2009, as recommended by the directors subsequent to the year-end, was approved at the AGM and paid during the period.

 

Principal risks and uncertainties

The principal risks and uncertainties which could affect the Group for the remainder of the financial year remain those detailed on page 23 of the Annual Report 2009, a copy of which is available at www.hydro-international.biz. In addition, the Outlook section of this Interim Management Report provides a commentary concerning the remainder of the financial year.

 

Going concern

A full commentary on the risks affecting the Group's liquidity and details of the Group's borrowing facilities are outlined on page 24 of the Annual Report 2009. The facilities referred to in that report have not changed in the period to 30 June 2010. The £1.8m overdraft facility, which is subject to annual review by the bank, expired on 30 August 2010. The Board anticipates that the overdraft facility will be extended by a further period of 12 months. Borrowing facilities are subject to financial covenants. During the period the Group's bank agreed to lower the threshold for compliance with the cash flow to debt service covenant for the measurement of compliance at 30 June 2010. A lower ratio of 0.60 will apply for this measurement after which the threshold will return to the previous level of 1.25 for future measurement. As a result of this the Group remained in compliance with banking covenants as at 30 June 2010.

 

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current financial facilities. Accordingly, and after making enquiries, the directors have concluded that the Group has adequate resources to continue in operational existence for the foreseeable future.

 

Outlook

There are signs that the deterioration in activity in the Group's Stormwater businesses has now stabilised although the extent to which the impact of potential cuts in UK and US public spending levels has a knock-on effect on improving private sector activity levels remains to be seen.

 

Order intake in the Group's Wastewater businesses has been robust in the US and international markets in the first half-year and is expected to continue as AMP5 gets fully up and running in the UK. This is expected to compensate for the reduction in Stormwater revenues with full year Group sales expected to be broadly in line with 2009.

 

The Group is well diversified, both in terms of business sector and geography. Looking forward to the second half of 2010 and beyond Hydro remains well positioned on a number of high value strategic Wastewater projects in the UK, US and Internationally. Taken together with an expected slow improvement in housing and construction sectors and a growing awareness of the importance and value of clean water, the Board believe that the prospects and opportunities for Hydro's solutions and equipment going forward remain very positive.

 

 

By order of the Board,

 

 

 

Stephen Hides

Chief Executive Officer

 

6 September 2010

 

 

 

Hydro International plc

Condensed Group Income Statement unaudited

for the six months ended 30 June 2010

 

Continuing operations	Note	6 months ended 30 June 2010 £000	6 months ended 30 June 2009 £000	Year ended 31 December 2009 £000
Revenue		11,059	14,180	27,326
Cost of sales		(5,837)	(8,571)	(15,796)
Gross profit		5,222	5,609	11,530
Administrative expenses		(4,459)	(5,007)	(9,642)
Exceptional other operating income	(3)	-	151	151
Operating profit before exceptional other operating income and amortisation of acquired intangibles		893	733	2,140
Exceptional other operating income	(3)	-	151	151
Amortisation of acquired intangibles		(130)	(131)	(252)
Operating profit		763	753	2,039
Net finance cost	(4)	(145)	(207)	(213)
Profit before tax		618	546	1,826
Tax	(5)	(236)	(176)	(689)
Profit for the period from continuing operations		382	370	1,137
Basic earnings per ordinary share Diluted earnings per ordinary share	(6) (6)	2.68p 2.67p	2.59p 2.58p	7.97p 7.95p

 

 

Condensed Group Statement of Comprehensive Income unaudited

for the six months ended 30 June 2010

 

	6 months ended 30 June 2010 £000	6 months ended 30 June 2009 £000	Year ended 31 December 2009 £000
Profit for the period   Exchange differences on translation of foreign operations	382   173	370   (236)	1,137   (191)
Total comprehensive income for the period	555	134	946

 

 

Hydro International plc

Condensed Group Balance Sheet unaudited

30 June 2010

 

	30 June 2010 £000	30 June 2009 £000	31 December 2009 £000
ASSETS Non-current assets Intangible assets - Goodwill Intangible assets - Other Property, plant and equipment	5,344 2,379 1,813	5,271 2,422 1,913	5,064 2,346 1,805
Deferred tax assets	48	70	67
Trade receivables	746	338	774
	10,330	10,014	10,056
Current assets Inventories Trade and other receivables Cash and cash equivalents Derivative financial assets	658 8,004 4,169 -	649 8,951 4,394 -	553 8,437 5,040 5
	12,831	13,994	14,035
TOTAL ASSETS	23,161	24,008	24,091
LIABILITIES
Current liabilities
Trade and other payables	(6,479)	(8,177)	(7,518)
Current tax payable	(440)	(631)	(499)
Deferred tax liability	(536)	(97)	(495)
Borrowings	(800)	(727)	(3,559)
Derivative financial liabilities	(31)	(85)	-
	(8,286)	(9,717)	(12,071)
Non-current liabilities
Trade and other payables	(705)	(605)	(773)
Deferred tax liability	(1,001)	(996)	(864)
Borrowings	(2,648)	(3,135)	-
	(4,354)	(4,736)	1,637
TOTAL LIABILITIES	(12,640)	(14,453)	13,708
NET ASSETS	10,521	9,555	10,383
EQUITY
Share capital	714	714	714
Share premium account	975	974	975
Foreign currency translation reserve	474	256	301
Retained earnings	8,358	7,611	8,393
TOTAL EQUITY	10,521	9,555	10,383

 

 

 

 

 

 

Hydro International plc

Condensed Group Statement of Changes in Equity unaudited

for the six months ended 30 June 2010

			Foreign
	Issued capital	Share premium	currency reserve	Retained earnings	Total
	£000	£000	£000	£000	£000
1 January 2009	713	967	492	7,660	9,832
Currency translation difference	-	-	(236)	-	(236)
Profit for the period	-	-	-	370	370
Comprehensive income/(loss)	-	-	(236)	370	134
Equity shares issued	1	7	-	-	8
Share based payments	-	-	-	9	9
Dividends paid	-	-	-	(428)	(428)
30 June 2009 (unaudited)	714	974	256	7,611	9,555
Currency translation difference	-	-	45	-	45
Profit for the period	-	-	-	767	767
Comprehensive income/(loss)	-	-	45	767	812
Equity shares issued	-	1	-	-	1
Share based payments	-	-	-	15	15
Dividends paid	-	-	-	-	-
31 December 2009	714	975	301	8,393	10,383
Currency translation difference	-	-	173	-	173
Profit for the period	-	-	-	382	382
Comprehensive income/(loss)	-	-	173	382	555
Equity shares issued	-	-	-	-	-
Share based payments	-	-	-	11	11
Dividends paid	-	-	-	(428)	(428)
30 June 2010 (unaudited)	714	975	474	8,358	10,521

 

 

 

Hydro International plc

Condensed Group Cash Flow Statement unaudited

for the six months ended 30 June 2010

 

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended  31 December 2009
	£000	£000	£000
Cash generated from operations	387	296	2,068
Interest paid	(34)	(110)	(211)
Corporation tax paid	(190)	(230)	(488)
Net cash from operating activities	163	(44)	1,369
Cash flows from investing activities
Purchases of property, plant and equipment	(103)	(29)	(146)
Purchases of patents and trademarks	(30)	(69)	(114)
Purchase of software assets	-	(8)	(12)
Expenditure on product development	(7)	-	-
Interest received	6	13	17
Acquisition of subsidiary*	(169)	(275)	(540)
Net cash used in investing activities	(303)	(368)	(795)
Cash flows from financing activities
Proceeds from the issue of shares to shareholders	-	9	9
Repayment of borrowings	(409)	(377)	(742)
Dividends paid to shareholders	(428)	(428)	(428)
Net cash expended from financing activities	(837)	(796)	(1,161)
Net decrease in cash and cash equivalents	(977)	(1,208)	(587)
Cash and cash equivalents at the beginning of the period	5,040	5,808	5,808
Exchange gains/(losses) on cash and cash equivalents	106	(206)	(181)
Cash and cash equivalents at the end of the period	4,169	4,394	5,040

 

*Represents deferred payments to the vendor of Eutek Systems, Inc, acquired in May 2008.

 

 

 

 

Hydro International plc

Reconciliation of Profit to Net Cash Flow from Operating Activities unaudited

for the six months ended 30 June 2010

 

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended  31 December 2009
	£000	£000	£000
Profit for the period	382	370	1,137
Finance costs	145	207	213
Corporation tax expense	236	176	689
Share based payment expense	11	8	24
Depreciation	112	107	338
Amortisation of intangibles	178	196	374
(Increase)/decrease in inventories and work in progress	(105)	38	134
Decrease in trade and other receivables	526	278	534
Decrease in trade and other payables	(1,098)	(1,084)	(1,375)
Cash generated from operations	387	296	2,068

 

 

 

 

Hydro International plc

Notes to the condensed financial statements unaudited

for the six months ended 30 June 2010

 

1. Basis of preparation

 

The Condensed Interim Financial Statements were approved by the directors on 6 September 2010.

 

The information for the year ended 31 December 2009 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

The condensed set of financial statements has been prepared on a going concern basis using accounting policies consistent with International Financial Reporting Standards (IFRS's) and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting. The same accounting policies, presentation methods of computation are followed in the condensed set of financials as applied in the Group's latest annual audited financial statements, which are prepared in accordance with IFRSs as adopted by the European Union.

 

 

 

2. Segmental analysis of results

 

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board of Directors to allocate resources to the segments and to assess their performance. Information reported to the Group's Board of Directors for the purpose of resource allocations and assessment of segment performance is more specifically focused on the destination of products sold by the operating divisions and the combination of business activity as detailed above and the destination of the product. The Group's reportable segments under IFRS 8 are therefore as follows:

 

Stormwater

- UK and Ireland

- US

- Rest of World

 

Wastewater

- UK and Ireland

- US

- Rest of World

Information regarding the Group's operating segments is reported below. Amounts reported for the prior year have been restated to conform to the requirements of IFRS8.

 

 

 

Hydro International plc

Notes to the condensed financial statements unaudited

for the six months ended 30 June 2010

 

2 Segmental analysis of results (continued)

 

	6 months ended 30 June 2010	6 months ended  30 June 2009	Year ended 31 December 2009
Revenue by destination	£000	£000	£000
Stormwater
UK and Ireland	2,461	3,597	6,844
US	1,256	1,236	2,319
Rest of World	177	523	656
	3,894	5,356	9,819
Wastewater
UK and Ireland	2,116	5,211	8,022
US	3,729	2,944	8,237
Rest of World	1,320	669	1,248
	7,165	8,824	17,507
Consolidated	11,059	14,180	27,326

 

There are no intersegment sales.

 

 

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
Operating profit by destination	£000	£000	£000
Stormwater
UK and Ireland	252	539	971
US	28	(218)	(284)
Rest of World	87	338	386
	367	659	1,073
Wastewater
UK and Ireland	7	644	932
US	1,031	440	2,027
Rest of World	678	270	490
	1,716	1,354	3,449
Group	(1,190)	(1,280)	(2,382)
Consolidated	893	733	2,140
Exceptional other operating income US Wastewater	-	151	151
Amortisation of intangibles US Wastewater	(130)	(131)	(252)
Operating profit	763	753	2,039
Net finance cost	(145)	(207)	(213)
Profit before tax	618	546	1,826
Taxation	(236)	(176)	(689)
Profit after tax	382	370	1,137

 

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit represents the profit earned by each segment without allocation of amortisation of intangibles, central administration costs including director's salaries, investment revenue and finance costs, and income tax expense. This is the measure reported to the Group's Board of Directors for the purpose of resource allocation and assessment of segment performance.

 

 

 

Hydro International plc

Notes to the condensed financial statements unaudited

for the six months ended 30 June 2010

 

2 Segmental analysis of results (continued)

 

	6 months ended  30 June 2010	6 months ended 30 June 2009	Year ended 31 December 2009
Gross assets by origin	£000	£000	£000
Stormwater
UK and Ireland	4,189	4,493	4,256
US	1,322	1,944	1,138
	5,511	6,437	5,394
Wastewater
UK and Ireland	4,531	5,460	5,688
US	11,950	10,407	11,690
	16,481	15,867	17,378
Group	1,169	1,704	1,319
Consolidated	23,161	24,008	24,091
Capital expenditure by origin
Stormwater
UK and Ireland	-	39	6
US	20	-	22
	20	39	28
Wastewater
UK and Ireland	8	9	18
US	14	152	126
	22	161	144
Group	61	56	100
Consolidated	103	256	272
Depreciation and amortisation by origin
Stormwater
UK and Ireland	4	19	13
US	35	-	98
	39	19	111
Wastewater
UK and Ireland	8	13	35
US	155	137	121
	163	150	156
Group	88	134	445
Consolidated	290	303	712

 

For the purposes of monitoring segment performance and allocating resources between segments, the Board of Directors monitor the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of other financial assets (except for trade and other receivables) and tax assets.

 

 

 

Hydro International plc

Notes to the condensed financial statements unaudited

for the six months ended 30 June 2010

 

3. Exceptional other operating income

 

The exceptional other operating income received during the six months ended 30 June 2009 related to the reversal of a fair value adjustment made to the assets recognised on the acquisition of Eutek Systems, Inc. The circumstances giving rise to the reversal occurred more than 12 months after the date of the acquisition and as such could not be treated as an adjustment to restate the fair value of assets acquired.

 

4. Net finance cost

	6 months ended	6 months ended	Year ended
	30 June 2010	30 June 2009	31 December 2009
	£000	£000	£000
Bank deposit interest receivable	3	7	10
Other interest receivable	3	5	7
Finance revenue	6	12	17
On bank loans and overdrafts	(35)	(44)	(79)
Derivative financial instruments	(36)	(109)	(19)
Unwinding of discount	(80)	(66)	(132)
Finance cost	(151)	(219)	(230)
Net finance cost	(145)	(207)	(213)

 

 

5. Income tax charge

 

Interim period income tax is accrued based on the estimated average annual effective income tax rate of 38.2% (6 months ended 30 June 2009: 32.2%).

 

6. Earnings per share

 

Earnings per ordinary share are based on profit on ordinary activities after taxation, divided by a weighted average of 14,279,460 (2009: 14,260,960) shares in issue during the period. The diluted earnings per share are calculated after the inclusion of share options and the weighted average of ordinary shares used in the calculation is 14,318,005 (2009: 14,343,299).

 

7. Interim results

 

Copies of the interim results will be distributed to shareholders and made available to the general public at the Company's registered office. In accordance with AIM Rules 20 and 26 the interim results will also be available on the Company's website at www.hydro-international.biz.

 

INDEPENDENT REVIEW REPORT TO HYDRO INTERNATIONAL 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 June 2010 which comprises the condensed group income statement, the condensed group statement of comprehensive income, the condensed group balance sheet, the condensed group statement of changes in equity, the condensed group cash flow statement, the reconciliation of profit to net cash flow from operating activities and related notes 1 to 7. 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 company 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. Our work has been undertaken so that we might state to the company 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 company, 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 AIM Rules of the London Stock Exchange.

 

As disclosed in note 1, 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 have 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 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

 

 

 

Deloitte LLP

Chartered Accountants and Statutory Auditors

Bristol, United Kingdom

6 September 2010

 

 

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The company news service from the London Stock Exchange