16th Dec 2009 07:00
16 December 2009
Statement of Results for the Six Months ended 31 October 2009
Financial Summary
The Group outperformed its major markets in tough trading conditions while improving profitability and further strengthening its balance sheet.
Group revenue increased by 7.6% to £2,347.2 million (2008: £2,180.8 million), an increase of 0.1% in constant currency¹ and a decrease of 2.5% on a like for like basis.
Group retail profit² increased to £24.3 million from £13.0 million last year, an increase of 50.6% in constant currency¹. Adjusted3 Group profit before tax was £14.9 million (2008: £10.9 million). Profit before tax was £6.0 million (2008: loss of £103.8 million).
For continuing operations basic and diluted EPS was 0.6 pence (2008: loss of 19.4 pence) and adjusted3 EPS was 2.0 pence (2008: 2.2 pence).
Cash generated from operations was £113.3 million (2008: £122.3 million).
Net cash on 31 October 2009 was £53.0 million (2008: £5.2 million).
The Board has declared an unchanged interim dividend of 1.75 pence to be paid on 1 April 2010.
Strategic Overview
Focussed on progressing cross channel web sales, store network and service offer.
Expect to stabilise and grow Darty France profit margin, increase Comet's profitability and by 2011/12 eliminate losses at Developing businesses.
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1 |
Constant exchange rate of £1 = Euro 1.1375 (2008: 1.2624) |
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2 |
Retail profit represents total operating profit before the share of joint venture and associates' interest and taxation, valuation gains and losses on options to acquire minority interests, exceptional costs, profit on disposal of business operations and amortisation and impairment of acquisition related intangible assets.
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3 |
Excludes the effects of valuation gains and losses on options to acquire minority interests, profit on disposal of business operations, exceptional costs, amortisation and impairment of acquisition related intangible assets and exceptional finance costs. |
Thierry Falque-Pierrotin, Chief Executive, commented:
"Trading conditions across all our markets continued to be challenging with widely varying geographic market conditions. However, the Group has delivered a solid performance over the first half of the year, ahead of our major markets.
"The outlook for the second half of the year remains uncertain but our businesses are prepared and well positioned for the more significant peak trading period."
David Newlands, Chairman, commented:
"I am pleased that the Group continues to demonstrate a strong resilience in the current economic climate through operational efficiencies and a cash generative business model.
"This has enabled the Board to declare an unchanged interim dividend of 1.75 pence."
ENDS
Enquiries
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Press: |
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Kesa Electricals plc |
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Annabel Donaldson |
+44 (0) 20 7269 1400 |
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Finsbury |
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Charles Watenphul |
+44 (0) 20 7251 3801 |
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Euro RSCG |
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Benjamin Perret |
+33 (0) 1 58 47 95 39 |
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Analysts: |
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Kesa Electricals plc |
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Simon Ward |
+44 (0) 20 7269 1400 |
There will be a presentation today to analysts and institutions at 09.00am at The Conference Centre, Ground floor, UBS, 1 Finsbury Avenue, London EC2M 2PP.
This announcement is available on the Kesa Electricals website: www.kesaelectricals.com. A live webcast of the presentation to analysts and institutions will also be available on the site at 09.00am, and recorded for access later in the day.
Kesa Electricals will issue its next trading update on 20 January 2010 for the period 1 November 2009 - 8 January 2010.
Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward looking statements. Unless otherwise required by applicable laws, regulations or accounting standards, Kesa Electricals plc does not undertake any obligation to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.
KESA Electricals is a specialist electrical retailer. It employs more than 26,000 people and trades in 11 countries and has an annual turnover of approximately £5 billion. KESA Electricals is a member of the FTSE 250. Its ordinary shares are listed with the UK Listing Authority and trade on the market for listed securities on the London Stock Exchange under the symbol KESA.L. It is also listed on the Premier Marche of the Paris Stock Exchange. For further information, please visit the company's website, as above.
GROUP OVERVIEW
Results as reported in sterling
|
Revenue for 6 months ended 31/10/09 £m |
Revenue for 6 months ended 31/10/08 £m |
Change % |
Retail profit for 6 months ended 31/10/09 £m |
Retail profit for 6 months ended 31/10/08 £m |
Change % |
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Darty France |
1,133.9 |
1,010.5 |
12.2 |
45.2 |
40.1 |
12.7 |
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Comet |
749.3 |
723.3 |
3.6 |
(1.2) |
(8.1) |
85.2 |
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Other established* |
317.1 |
308.7 |
2.7 |
4.0 |
7.0 |
(42.9) |
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Developing** |
146.9 |
138.3 |
6.2 |
(16.1) |
(19.0) |
15.3 |
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Central |
- |
- |
- |
(7.6) |
(7.0) |
(8.6) |
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Total |
2,347.2 |
2,180.8 |
7.6 |
24.3 |
13.0 |
86.9 |
Results as reported in local currency
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Revenue for 6 months ended 31/10/09 m |
Revenue for 6 months ended 31/10/08 m |
Change % |
Retail profit for 6 months ended 31/10/09 m |
Retail profit for 6 months ended 31/10/08 m |
Change % |
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Darty France |
€1,289.8 |
€1,275.4 |
1.1 |
€51.4 |
€50.6 |
1.6 |
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Comet |
£749.3 |
£723.3 |
3.6 |
£(1.2) |
£(8.1) |
85.2 |
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Other established* |
€361.0 |
€389.8 |
(7.4) |
€4.5 |
€8.7 |
(48.3) |
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Developing** |
€167.1 |
€174.6 |
(4.3) |
€(18.5) |
€(24.0) |
22.9 |
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* |
Includes BCC, Vanden Borre and Datart |
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** |
Includes Darty Switzerland, Darty Italy, Darty Turkey and Menaje del Hogar. Darty Switzerland was sold on 6th July 2009 for which revenue and retail loss of £5.0 million and £1.3 million respectively are included (2008: revenue of £11.8 million and retail loss of £2.3 million). |
Financial results
Group revenue was £2,347.2 million, an increase of 7.6 per cent, 0.1 per cent in constant currency, on the same period last year. On a like for like basis revenue decreased by 2.5 per cent.
Group retail profit was £24.3 million, up from £13.0 million last year as a result of a stable performance at Darty France and improved performance at Comet.
Reported operating profit of £14.7 million was after an exceptional profit on disposal of Darty Switzerland of £4.5 million less exceptional costs across the Group of £9.0 million and valuation losses of £4.6 million which relate to an increase in the fair value of a minority interest option under IAS39.
The net interest cost was £9.4 million (2008: £2.1 million) being net interest on financing of £6.5 million (2008: income of £0.3 million) plus IAS 19 notional pension interest of £2.9 million (2008: £2.4 million). The increased net interest on financing reflected the impact of increased margins in the September 2008 revolving credit facility, reduced deposit market rates on cash balances and foreign exchange translation.
Reported profit before tax and after interest was £6.0 million (2008: loss of £103.8 million).
The effective tax rate on profit before exceptional items and prior year adjustments, including the share of joint venture and associates' tax was 37.0 per cent (2008: 33.0 per cent). This represents the current estimate of the full year effective tax rate.
For continuing operations basic and diluted earnings per share were 0.6 pence (2008: loss of 19.4 pence) and adjusted earnings per share were 2.0 pence (2008: 2.2 pence).
Cash generated from operations was £113.3 million (2008: £122.3 million), net capital expenditure and investments was £24.3 million (2008: £74.9 million) and closing net cash was £53.0 million compared to £5.2 million on 31 October 2008.
The Board has declared an unchanged interim dividend of 1.75 pence. The ex dividend date will be 3 March 2010, the record date 5 March 2010 and the payment date will be 1 April 2010.
Outlook
The outlook for the second half of the year remains uncertain but our businesses are prepared and well positioned for the more significant peak trading period.
Strategic Outlook
Focussed on European electrical retailing, the Group has developed a clear service-led business model supported by a portfolio of 800 - 2,000 square metre stores. The geographic coverage represents a good balance between market leading positions and developing businesses. The Group also benefits from a strong financial structure.
This provides the foundations for future growth based on expanding cross channel web sales, developing our current store network and further differentiating our service offer.
The internet
Web penetration of electrical product sales are forecast to grow significantly over the next few years. The Group is focused on a cross channel approach that will leverage its existing assets; brand awareness, store networks and the service infrastructure and it is working to enhance the web specific elements of this strategy. This will drive incremental profitable web sales with the initial aim of achieving the same level of market share as we have in our retail stores.
Our store network
To maximise the cross channel approach we will continue to expand the geographic store networks with stores consistent in size to the current portfolio. These will continue to offer product ranges that meet customer needs with the web sites increasingly used to offer extended ranges. We intend to open around 25 stores per year, broadly half of which will be in the Developing Businesses. On an ongoing basis, refurbishment concepts and space allocations will be tested to improve sales densities and profitability.
Our services
The Group's differentiating service offer will continue to be developed, particularly around subscription based services for the newer technologies including Darty Box. The Developing businesses will continue to build their service offers taking best practices from within the Group.
Leverage the Group
We have identified a number of additional opportunities to leverage the scale and expertise of the Group sourcing and back office functions to the benefit of all our businesses.
As a result of these actions, over the next few years the Group expects stabilisation and then growth of the retail profit margin of Darty France, increased profitability at Comet and by 2011/12 the elimination of the losses in the Developing businesses segment.
DARTY FRANCE
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Results for 6 months ended 31/10/09 £m |
Results for 6 months ended 31/10/08 £m |
Change |
Results for 6 months ended 31/10/09 €m |
Results for 6 months ended 31/10/08 €m |
Change |
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Revenue |
1,133.9 |
1,010.5 |
12.2% |
1,289.8 |
1,275.4 |
1.1% |
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Retail profit |
45.2 |
40.1 |
12.7% |
51.4 |
50.6 |
1.6% |
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No of stores |
223 |
220 |
+3 |
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Sales space (000s sq m) |
299.9 |
290.5 |
3.2% |
Darty France improved its overall market share, particularly in the second quarter, in tough trading conditions where the market is estimated to have declined by three per cent. Revenue increased by 1.1 per cent in local currency compared to the same period last year, down 1.9 per cent on a like for like basis (excluding Darty Box).
Retail profit increased 1.6 per cent to €51.4 million, helped by a continued stable gross margin and cost optimisation.
Improvements to the store portfolio continued with two new store openings and two transfers. The roll-out of the successful kitchen range progressed on schedule with a further seven stores being fitted and there are now 19 stores with the new offer. A further two stores will be fitted out with the range during the second half of the year.
The Darty web site continued to be enhanced with improved navigation, customer reviews and product videos helping web generated sales increase by 33 per cent compared to last year. This represents around seven per cent of total product sales.
Darty Box had a successful Back to School campaign and overall over the period Very High Speed subscriptions outweighed those for ADSL with a higher penetration of the triple play offer. We remain in line with our financial plans to achieve a halving of losses this financial year and monthly profitability during 2010.
COMET
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Results for 6 months ended 31/10/09 £m |
Results for 6 months ended 31/10/08 £m |
Change |
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Revenue |
749.3 |
723.3 |
3.6% |
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Retail loss |
(1.2) |
(8.1) |
85.2% |
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No of stores |
251 |
252 |
-1 |
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Sales space (000s sq m) |
274.7 |
273.8 |
0.3% |
In tough trading conditions where the UK market is estimated to have declined by around four per cent, Comet delivered total revenue of £749.3 million, an increase of 3.6 per cent on the same period last year and 2.0 per cent on a like for like basis. This reflects continuing market share gains.
The rate of gross margin decline continued to ease during the period, down around 50 basis points. This, together with the restructuring actions previously announced and ongoing cost control, significantly limited the retail loss to £1.2 million compared to £8.1 million for the same period last year.
During the period the last of the 40 planned mezzanine stores opened and five refurbish-ments were completed while one store was closed. Following successful tests of a light, low cost refurbishment at three smaller core stores, Comet will extend the trial after the peak trading season. In addition, new format laptop and camera tables were introduced to 40 stores.
Web generated sales increased by 16 per cent as a result of the improved on line offer with enhanced navigation, a Q&A facility and a dedicated mobile website. Web generated sales now account for 13 per cent of total product sales.
Improvements to Comet's service proposition continued with installation for built-in cooking and integrated appliances and a new service for speaker wall mounting for TV surround sound systems. In-store staff completed 90,000 on-line training modules and all undertook improved customer service training.
OTHER ESTABLISHED BUSINESSES*
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Results for 6 months ended 31/10/09 £m |
Results for 6 months ended 31/10/08 £m |
Change |
Results for 6 months ended 31/10/09 €m |
Results for 6 months ended 31 /10/08 €m |
Change |
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Revenue |
317.1 |
308.7 |
2.7% |
361.0 |
389.8 |
(7.4)% |
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Retail profit |
4.0 |
7.0 |
(42.9)% |
4.5 |
8.7 |
(48.3)% |
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No of stores |
148 |
141 |
+7 |
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Sales space (000s sq m) |
167.2 |
154.6 |
8.2% |
*BCC, Vanden Borre and Datart
Overall the Other established businesses were impacted by very difficult trading conditions in Holland and the Czech Republic. Total revenue for BCC, Vanden Borre and Datart fell by 7.4 per cent in local currency and 11.5 per cent on a like for like basis. BCC and Datart traded in line with their markets and Vanden Borre continued to strongly outperform its market.
Overall the three businesses delivered a retail profit of €4.5 million, compared to €8.7 million last year.
The store programme continued with the opening of three new stores in Holland. In the Czech Republic Datart relocated its central warehouse during the period.
Web generated sales continued to grow strongly and increased by over 28 per cent during the period.
DEVELOPING BUSINESSES**
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Results for 6 months ended 31/10/09 £m |
Results for 6 months ended 31/10/08 £m |
Change |
Results for 6 months ended 31 /10/09 €m |
Results for 6 months ended 31 /10/08 €m |
Change |
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Revenue |
146.9 |
138.3 |
6.2% |
167.1 |
174.6 |
(4.3)% |
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Retail loss |
(16.1) |
(19.0) |
15.3% |
(18.5) |
(24.0) |
22.9% |
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No of stores |
82 |
98 |
-16 |
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Sales space (000s sq m) |
97.8 |
127.4 |
(23.2)% |
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** |
Includes Darty Switzerland, Darty Italy, Darty Turkey and Menaje del Hogar. Darty Switzerland was sold on 6th July 2009 for which revenue and retail loss of £5.0 million and £1.3 million respectively are included (2008: revenue of £11.8 million and retail loss of £2.3 million). |
Total revenue for the Developing businesses, Darty Switzerland, Darty Italy, Darty Turkey and Menaje del Hogar fell by 4.3 per cent, due to the impact of the Darty Switzerland sales and store closures at Menaje del Hogar. On a like for like basis sales fell by 4.9 per cent predominantly due to the poor trading at the stores in Spain identified for closure.
Overall losses reduced to €18.5 million from €24.0 million in 2008 helped by loss reduction at Darty Italy and Darty Turkey as scale is built, actions at Menaje del Hogar and the sale of Darty Switzerland in July.
Both Darty Italy and Darty Turkey improved gross margin and we will continue to build scale in both these markets to bring them to profitability. In Italy we now have 16 stores in operation, with two new store openings planned for the second half of the year. In Turkey we have 13 stores in operation with a further four stores planned for the second half of the year.
The restructuring programme at Menaje del Hogar to stabilise the business and reduce losses is now well underway. Of the stores identified for closure this financial year, 14 have been closed with a further four planned for January 2010. At the end of the programme there will be a total of 49 stores. 29 stores have been relayed with improved product ranges and better in-store merchandising and these stores are showing encouraging early results. In addition, the management team is aligned to develop a service led concept. We will rebrand the business to Darty starting in January 2010 and this will be rolled out across the chain in line with our store refurbishment programme.
Key Events
On 16th June 2009 the Group announced that it had entered into exclusive negotiations with Swiss electrical retailing chain FUST, regarding the sale of its Swiss operations. The sale was completed on 6th July 2009.
On 28th September 2009 the Group announced the appointment of Dominic Platt as Finance Director who will join as an Executive Director of the Board in early January 2010.
Principal Risks
The risks to achieving the objectives for the remainder of the financial year remain those more fully set out in the Directors' report on pages 20 and 21 of the 2008/09 Annual report.
The business, financial condition or results of operations of the Group could be adversely affected by any of the risks set out in the 2008/09 Annual Report. The Group's systems of control and protection are designed to help manage and control risks to an appropriate level rather than to eliminate them.
A summary of these risks is as follows;-
Economic and market conditions
Product life cycles
Entry into new markets
Systems failure
Financial risk management
Legislative and regulatory risks
Reputational risks
Pension risks
Employees
Leased properties
The economic environment influences the level of consumer expenditure on electrical goods in a number of ways. The state of the housing market affects spending on white goods in particular, and the 'feel good' factor has a significant influence on discretionary spending on higher value electrical products. Many other economic factors influence customers' spending decisions, including macro economic uncertainty, unemployment, personal taxation, interest rates and levels of personal debt.
The Group's business is seasonal, with a high percentage of its annual sales and operating profit generated during the Christmas gift and New Year periods.
These risk factors influence the liquidity of the business. The Board has reviewed the Group's latest financial forecasts and is satisfied that the Group will continue to operate as a going concern.
Forward looking statements
Certain statements in this half-yearly report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Company and Group undertakes no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events or otherwise.
Directors' Responsibility Statement
The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a true and fair review of the information required by DTR 4.2.7 and DTR 4.2.8.
The narrative of this half year report includes a fair review of the business and of any required related party disclosures.
The Directors of Kesa Electricals Group are listed in the Kesa Electricals Group Annual Report for 2008/09. A list of current directors is maintained on the Kesa Electricals Group website: www.kesaelectricals.com.
By order of the Board
Independent review report to Kesa Electricals plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the interim report for the six months ended 31 October 2009, which comprises the Group Income Statement, the Group Statement of Comprehensive Income, the Group Statement of Changes in Equity, the Group Balance Sheet, the Group Statement of Cash Flows and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
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 interim 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 interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
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 enquiries, 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 interim financial report for the six months ended 31 October 2009 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.
PricewaterhouseCoopers LLP Chartered Accountants London
16 December 2009
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