Interim Results

RNS Number : 4847Q

Statpro Group PLC

04 August 2010

 

 

For release at 07.00 a.m.

Wednesday, 4 August 2010

STATPRO GROUP PLC

("StatPro", the "Group", or the "Company")

 

Interim results for the six months ended 30 June 2010

 

StatPro Group plc (AIM: SOG), the AIM listed provider of portfolio analytics and data solutions for the global asset management industry, announces its interim results for the six months ended 30 June 2010.

 

 

 

Financial Highlights:

·; Recognised recurring revenue up 9% to £15.53 million amounting to 93% of total revenue (2009: 92%)

·; Adjusted EBITDA** increased by 4% to £4.21 million (2009: £4.04 million)

·; Adjusted profit before tax** increased by 6% to £3.36 million (2009: £3.19 million)

·; Adjusted earnings per share** increased to 4.4p (2009: 4.3p)

·; Increased cash generated from operations*** of £4.80 million (2009: £4.31 million)

·; Net debt reduced to £6.31 million from £8.89 million at end December 2009

·; Interim dividend increased by 17% to 0.7p (2009: 0.6p)

 

Operating Highlights:

·; Integration test for StatPro Revolution with major global custodian bank progressing well

·; Increasing investment in StatPro Revolution

·; Percentage of analytics clients on SaaS increased to 24% (2009: 15%)

 

* Profit before tax and basic earnings per share include the impact of exceptional items amounting to £0.50 million (2009: £1.16 million) (notes 2 and 4)

** Adjusted profit before tax, adjusted earnings per share, adjusted operating profit and adjusted EBITDA are profit before tax, earnings per share, operating profit and EBITDA after adjustment for amortisation of acquired intangibles, share based payments and exceptional items (notes 2, 4 and 5)

*** Cash generated from operations is after investment in internally generated intangible assets (note 6)

 

Commenting on the results, Justin Wheatley, Chief Executive of StatPro said: "We remain confident that our strategy and our products are well adapted to the current market environment. By focusing on providing outstanding customer quality of service and value for money we believe that we can grow our revenues and profitability over the coming months and years. Early market reaction to StatPro Revolution has been very positive and sales of Seven continue to be solid, we are confident therefore of a successful outcome to the year."

 

- Ends -

For further information, please contact:

StatPro Group plc	www.statpro.com
Justin Wheatley, Chief Executive		020 8410 9876
Andrew Fabian, Finance Director
Cenkos Securities
Ken Fleming		0131 220 6939
Jon Fitzpatrick		0207 397 8900
Julian Morse		020 7397 1931
Threadneedle Communications
Tom Moriarty / Caroline Evans-Jones/Hilary Millar		020 7653 9850

 

A briefing for analysts will be held at 11.30am today at the offices of

Threadneedle Communications, 3rd Floor, Aldermary House, 10-15 Queen Street, London, EC4N 1TX

 

About StatPro

StatPro is a leading provider of portfolio analytics and data solutions for the global asset management industry. The Company sells a SaaS-based Analytics and Data platform on a rental basis to investment management companies allowing them to analyse portfolio performance, attribution, risk and GIPS® compliance. StatPro also provides market data and valuation feeds including a Complex Asset Pricing service.

 

StatPro has grown its recurring revenue from less than £1 million in 1999 to £28 million at end June 2010 and currently enjoys a renewal rate of approximately 90%. StatPro floated on the London Stock Exchange in May 2000 and transferred its listing in June 2003 to AIM. The Company has operations in Europe, North America, South Africa and Australia, with approximately 79% of recurring revenues being generated outside the UK.

 

 

 

CHIEF EXECUTIVE'S REVIEW

 

Introduction

 

StatPro has delivered a solid performance in the first half of this year.

 

Our underlying contracted recurring revenue figure has increased, demonstrating the strength of the business model; sales to new customers of StatPro Seven have continued strongly; we have increased the percentage of customers receiving our products via SaaS and perhaps most significantly, we have completed the successful launch of the beta version of StatPro Revolution. The launch has been well received within the industry and we expect it to significantly expand our addressable market.

 

Highlights

In the first half of 2010 we have had solid revenue growth of 7% to £16.63 million (2009: £15.55 million) and strong cash generation from operations of £4.80 million (2009: £4.31 million). Adjusted profits before tax are also up 6% to £3.36 million (2009: £3.19 million) although operating margins are down slightly to 22.2% from 23.5% due to increased investment in products and sales infrastructure. Net debt is down to £6.31 million from £8.89 million at 31 December 2009 and £10.81 million at 30 June 2009. This figure would have been lower but during the course of the first half we purchased 475,000 shares in the market at a cost of £0.52 million and net settled a further 729,044 options for a sum of £0.44 million.

 

During the first half of 2010 we continued to build our pipeline of prospects and had some notable successes in Asia and South Africa as well as our main markets of North America and Europe. We made steady progress converting existing clients to our Software as a Service ("SaaS") platform with roughly 24% of clients now hosted (2009: 15%). We also have a backlog of planned work to convert many more clients to the new hosted environment in the second half of 2010 and early 2011. We remain highly focused on converting as many of our clients as possible to our SaaS platform.

 

Market Environment

The state of the market has been mixed in the first half of 2010 as asset managers reacted to events in the bond and equity markets. Nevertheless, now that significant new regulations (e.g. UCITS IV) are coming into force in Europe and North American, our clients and prospects are keenly focused on meeting these new standards of regulation in a cost efficient manner. We consider such regulation to be an opportunity for StatPro to make further sales, especially of our acclaimed Risk and Compliance capacity. In addition, we have seen renewed interest in our Complex Asset Pricing capability especially in respect of illiquid bonds, of which there are an increasing number.

 

Products and Services

We continue to invest significantly in our product range of StatPro Seven, StatPro Unlimited and StatPro Revolution. StatPro Seven offers world class analytics for performance and risk practitioners in the Middle Offices of asset managers. The new platform offers a wide range of functionality which allows the expert to produce exactly the reports required. StatPro Seven is one of the most widely used performance and attribution systems in the world because of its ease of use and capability.

 

StatPro Unlimited is our combined pricing and data service which offers clients equity prices and evaluated bond prices as well as model prices from our Complex Asset Pricing service. We have expanded the range and number of assets we can price and invested in more efficient production and delivery systems resulting in us beating our 99.75% on time delivery targets.

 

The Public Beta of StatPro Revolution

StatPro Revolution was made available for the public to request a free trial on 21 July 2010 (visit www.statpro.com/revolution for more information). StatPro Revolution is a new-style service designed to offer the very best portfolio analytics at an affordable price. By offering subscriptions from just one portfolio we aim to make it possible for any portfolio manager, large or small, to have at his or her finger tips analysis that used to require large teams of people to deliver and be able to produce beautiful reports instantly. The service has already made significant functional progress since the private beta launch in March 2010 and it will continue to add new features progressively over the next half of the year prior to StatPro Revolution going live in January 2011.

 

As a result of the innovative and proprietary technology at the heart of StatPro Revolution we are able to develop new features at a far faster rate than was previously possible. What is more, all clients of the service will be updated with these new features automatically and frequently, something that is impossible using traditional technology. A significant aspect of this will be our ability to provide solutions to new regulatory requirements faster.

 

Our confidence in StatPro Revolution has been endorsed by a paid test to integrate the client data of a significant global custodian bank into the system. We have therefore decided, as previously stated, to increase our investment in Revolution by a further £0.7 million in 2010 in order to capitalise on this opportunity. Our current beta trials are progressing well and we have had overwhelmingly positive feedback about the service.

 

Strategy

We believe that, in the long term, a web-based multi-tenant service is the best way to provide our services to our potential clients. Furthermore, the technology we have opens up our services to a wider market place. We have three distinct target markets. The first is to provide our technology to custodian banks, prime brokers and other significant gatekeepers to portfolios under management so that they can provide better services to their clients.

 

The second is to link StatPro Revolution to StatPro Seven so that our core market of asset managers can more readily provide reconciled performance and risk analysis between the Front and Back Offices. The third is to target smaller asset managers around the world and offer them the same outstanding service that previously only the largest asset managers could afford. During the beta phase of Revolution we have been collating views and opportunities from all these target markets and this reinforces our view that they represent very significant opportunities for us.

 

People

StatPro is lucky to have a very dedicated and talented team. I would like to thank them all for all their hard work.

 

Interim dividend increases by 17%

The Board is pleased to announce an interim dividend of 0.7p per share which is an increase of 17% on last year's interim dividend of 0.6p. We intend to maintain a progressive dividend policy reflecting the balance between the investment needs of the business and growth in the underlying cash and earnings per share, as well as our confidence in the future.

 

Outlook

We remain confident that our strategy and our products are well adapted to the current market environment. By focusing on providing outstanding customer quality of service and value for money we believe that we can grow our revenues and profitability over the coming months and years. Early market reaction to StatPro Revolution has been very positive and sales of Seven continue to be solid, we are confident therefore of a successful outcome to the year.

 

 

Justin Wheatley

Chief Executive

FINANCIAL REVIEW

 

Overview

During the first six months of 2010 we increased our underlying annualised contracted recurring revenue, our key performance indicator. We have also increased total revenue by 7% and the proportion of the Group's total revenue that is recurring remains high at 93% (2009: 92%). We benefitted from the termination of a non-core contract with the Johannesburg Stock Exchange ("JSE"), including the disposal of the related customised software. This resulted in an exceptional gain of £0.50 million in H1 2010, and we will continue to generate revenue from the handover project, which is due to conclude on 31 October 2010. We also marginally improved our adjusted EBITDA while increasing our investment in research and development and marketing costs for StatPro Revolution, our new web-based solution aimed at a much broader market reach.

 

The adjusted operating profit margin fell slightly to 22.2% (2009: 23.5%), although the adjusted EBITDA in H1 2010 grew from £4.04 million to £4.21 million and the business continues to generate a solid positive operating cash flow.

 

Profit before tax (including exceptional item of £0.50 million) amounting to £3.59 million (2009: £4.01 million) was 10% lower than in H1 2009 which benefitted from an exceptional gain on refinancing amounting to £1.16 million. Adjusting for exceptional items, amortisation of acquired intangibles and share based payments, the adjusted profit before tax increased by 6% to £3.36 million (2009: £3.19 million) as shown in note 5.

 

Revenue

Revenue increased by 7% to £16.63 million (2009: £15.55 million), of which approximately 3.6% was due to currency impact.

 

New recurring business signed in H1 2010 was satisfactory and the level of cancellations was in line with our internal budgets with a renewal rate of approximately 90%.

 

The split of revenue by type was as follows:

 

 

Recurring revenue

Overall recurring revenue grew by 9% with software analytics revenue increasing by 13%. Data revenue fell by 13% mainly as a result of the impact of legacy contracts which expired in 2009, as previously reported, although this was partly mitigated by a small increase in data overage. The proportion by value of recurring software licences on multi-year contracts (licence agreements with more than one year remaining contractually committed) was 80% at the end of June 2010 (2009: 80%). New business from existing clients was 65% (2009: 56%) and the proportion of software clients on our SaaS solution increased to 24% (2009: 15%).

 

The annualised value of contracted recurring revenue increased marginally to £27.85 million from £27.44 million at 31 December 2009 (at constant currencies and adjusted for disposal of JSE contract) as shown below.

 

 

Professional services revenue was lower by 13%, due to the combination of clients keeping tighter control over discretionary consultancy budgets coupled with a lower level of consulting associated with implementing our SaaS offering.

 

Operating expenses

Operating expenses (before amortisation of intangibles and exceptional items) increased by 7% to £11.80 million in the first half of 2010 (2009: £11.00 million), of which 4.4% was due to currency impact. The main areas of increased expenditure relate to a larger sales team and increased expenditure on StatPro Revolution, including infrastructure costs.

 

Employees

The average number of employees during the first six months of 2010 increased by 4% to 249 compared with 240 in the first half of 2009. The number of employees currently in the Group is 254 employees, situated in ten offices in Europe, North America, South Africa and Australia.

 

Development costs

We increased our investment in research and development, in particular on StatPro Seven and StatPro Revolution and this resulted in an increased level of capitalised development costs amounting to £1.44 million (2009: £1.02 million). The amortisation of internal development costs also increased year on year to £1.17 million (2009: £0.95 million).

 

Exceptional items

As announced in January 2010, the Company signed an agreement with the JSE for a total consideration of US$4.08 million (£2.5 million) following the JSE's decision to in-source its back office systems development project, a non-core project inherited by StatPro through an earlier acquisition. £1.10 million of the total contract value was attributable to the proceeds of the disposal of the software. After writing off thecarrying value of the associated development costs amounting to £0.49 million (previously shown under current assets as an asset held for sale at 31 December 2009) and related costs, there was an exceptional gain arising amounting to £0.50 million.

 

The redemption in February 2009 of our previous financing facility resulted in an exceptional pre-tax gain of £1.16 million in H1 2009.

 

Earnings before interest, tax, depreciation and amortisation

Overall the adjusted EBITDA in H1 grew from £4.04 million to £4.21 million and the business continues to generate a solid positive operating cash flow. The adjusted operating margin reduced marginally from 23.5% to 22.2%, mainly as a result of lower data revenue and increased investment in StatPro Revolution.

 

Finance income and expense

The underlying (pre-exceptional) financing costs reduced from £0.47 million to £0.33 million as the level of net debt reduced and interest rates remain low. In H1 2009, the £1.16 million exceptional pre-tax gain on refinancing was included within financing income for the period. 

 

Profit before tax

Including the impact of the exceptional items, profit before tax reduced by 10% to £3.59 million from £4.01 million. The adjusted profit before tax increased by 6% to £3.36 million from £3.19 million.

 

Taxation

The total tax charge amounted to £0.83 million (2009: £0.91 million), giving an underlying rate of tax of approximately 23% (2009: 23%). The level of deferred tax asset reduced to £0.72 million (Dec 2009: £0.90 million) as a result of an increase in deferred tax charge; nevertheless, the current tax charge remains low although it is expected to increase going forward as the Group's historic tax losses are utilised.

 

Earnings per share

Basic earnings per share reduced to 4.5p (2009: 5.2p). Adjusted earnings per share increased to 4.4p (2009: 4.3p). The average number of shares in issue in the period increased by approximately 2% to 60.65 million (2009: 59.55 million). The diluted earnings per share were 4.4p (2009: 5.2p) based on potentially dilutive shares outstanding amounting to 1.73 million (2009: 0.10 million).

Cash flow

Cash inflow from operations before investment in development activities during the first six months of 2010 amounted to £6.24 million (2009: £5.33 million). The investment in development activities was £1.44 million (2009: £1.02 million). As a result, the cash inflow from operations after investment in development activities amounted to £4.80 million (2009: £4.31 million) in the first six months of 2010 (see note 6). Working capital benefitted from the advance payment under the JSE contract and the overall working capital movement inflow was £0.86 million (2009: £0.34 million).

 

In the period we paid a second interim dividend and a final dividend amounting to a total of 1.5 pence per share (£0.92 million).

 

Balance sheet

The Group's net assets increased to £40.29 million at June 2010 (Dec 2009: £37.59 million). The level of trade and other receivables, of which the major component is trade debtors, reduced to £5.47 million (Dec 2009: £7.27 million). There was a reduction in net debt to £6.31 million at 30 June 2010 from £8.89 million at December 2009.

 

The major component of creditors is deferred income, a non-cash liability, which amounted to £12.66 million (Dec 2009: £12.60 million). The level of deferred contingent consideration is estimated at £1.47 million at the end of June 2010 (Dec 2009: £0.26 million), including the provision for the acquisition of the minority interest in SiSoft Sarl described below.

 

Share capital and treasury stock

During the period, 222,416 shares were issued. In order to reduce dilution, options over a total number of 729,044 shares were net settled resulting in a payment including tax liability of £0.44 million. The Company also purchased into treasury 475,000 shares in the period resulting in a notional reduction in capital amounting to £0.52 million. As at 30 June 2010, there were 60,901,357 shares in issue (Dec 2009: 60,678,941 shares) including 475,000 shares held in treasury.

 

Minority interests

As announced in March 2010, the Company gave notice to the minority shareholders in SiSoft Sarl ('SiSoft') of its intention to exercise its call option to acquire the 49% minority interest SiSoft with effect from 30 June 2010. The calculation of the contingent consideration is derived by applying a formula based on a percentage of the revenue within SiSoft (equating to approximately one times the annual recurring revenue generated by the new Composites product globally), adjusted for the net assets of SiSoft on the exercise date, and the directors' current estimate is approximately £1.3 million.

 

Interim dividend

The directors have declared an increased interim dividend by 17% to 0.7 pence per ordinary share (2009: 0.6 pence), which will be paid on 3 November 2010 to shareholders on the register at the close of business on 8 October 2010, reflecting the Board's confidence in the business prospects. The Board intends to maintain a progressive dividend policy reflecting the balance between the investment needs of the business and maintaining an appropriate dividend cover.

 

Principal risks and uncertainties

The directors continue to evaluate the principal business risks and uncertainties affecting the Group and provided below is a summary of these risks, although it is not intended to be an exhaustive list. Further discussion of the principal risks and uncertainties can be found in the 2009 Annual Report.

 

·; Significant losses of customer contracts

·; Insufficient level of new business contracted or delays in contract completion

·; Liquidity risk (i.e. insufficient working capital or other financing)

·; Competitor products

·; Inability to recruit or retain high calibre management and employees

·; Loss of good reputation

·; Development delays or undetected errors in software

·; Data or software hosting delivery failure or unplanned downtime

·; Technological change

 

For each category of risk, the directors have identified means by which the risk can be managed or reduced in a cost effective way, whilst accepting that some risks cannot be completely eliminated.

 

 

Andrew Fabian

Finance Director

 

  Group Income Statement  

 

 

 

 

 

 

Group Statement of Comprehensive Income

 

 

 

 

 

Group Balance Sheet

  Consolidated Statement of Changes in Shareholders' Equity

 

 

   

Other reserves includes merger reserve amounting to £2,369,000 (2009: £2,369,000), and translation reserve amounting to a surplus of £8,019,000 (2009: £1,807,000). The merger reserve arose on acquisitions and represents the difference between the fair value of shares issued and the nominal value of the shares. The translation reserve incorporates the gains and losses on revaluation of the net assets and liabilities of subsidiary undertakings and other currency gains and losses that are treated as part of equity.

Group Cash Flow Statement

 

 

Notes to the interim financial information

 

 

1. This announcement was approved by the Board of directors on 3 August 2010. The financial information set out in this interim statement has been prepared under IFRSs as adopted by the European Union and on the basis of the accounting policies set out in the statutory accounts of StatPro Group plc for the year ended 31 December 2009, amended as follows. The following new standards, amendments to standards and interpretations are mandatory for the first time in the current period and have been adopted by the Group with no significant impact on its consolidated results or financial position.

 

International Accounting Standards ("IAS/IFRS")
IAS 27 (revised)	Consolidated and Separate Financial Statements
IAS 39	Amendments to IAS 39 - Eligible Hedged Items
IFRS 2	Amendments to IFRS 2 - Group Cash-settled Share-based Payment Transactions
IFRS3 (revised)	Business Combinations
IFRIC 17	Distributions of Non-cash assets to Owners

 

 

This report is not prepared in accordance with IAS 34 which is currently not mandatory. This interim statement has not been audited but has been reviewed by the Company's current auditors Ernst & Young LLP (appointed in June 2010). The financial information does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. Statutory accounts for StatPro Group plc for the year ended 31 December 2009 reported under IFRS have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. Copies of this statement will be posted or provided electronically to shareholders. Further copies are available free of charge on request from the Company Secretary at the Company's registered office, StatPro House, 81-87 Hartfield Road, London SW19 3TJ.

 

2. Earnings per share.

Basic earnings per share has been calculated based on the profit after taxation and minority interests of £2.73 million (2009: £3.11 million) and the weighted average number of shares of 60.65 million (2009: 59.55 million). The diluted earnings per share were 4.4p (2009: 5.2p) based on potentially dilutive shares outstanding amounting to 1.73 million (2009: 0.10 million).

 

 

Adjusted earnings per share are shown in the table below.

 

3. Revenue analysis

Revenue for the period is analysed as follows:

 

 

 

4. Exceptional items

As announced in January 2010, the Company signed an agreement with the Johannesburg Stock Exchange ("JSE") for a total consideration of US$4.08 million (£2.5 million). This followed the JSE's decision to in-source its back office systems development project, a non-core project inherited by StatPro through an earlier acquisition. £1.10 million of the total contract value was attributable to the proceeds of the disposal of the software. After writing off the carrying value of the development costs associated with the project amounting to £0.49 million (previously shown under current assets as an asset held for sale at 31 December 2009) and related costs, there was an exceptional gain arising amounting to £0.50 million. The tax charge on the exceptional item is estimated as £0.14 million. The remaining £1.40 million value of the contract relates to maintenance, support, handover assistance and other management services.

 

The redemption in February 2009 of our previous financing facility resulted in an exceptional pre-tax gain of £1.16 million in H1 2009.

 

5. Adjusted profit before taxation, adjusted operating profit margin and adjusted EBITDA

 

a) Adjusted profit before taxation

 

 

b) Adjusted operating profit

 

 

 

c) Adjusted EBITDA

 

 

 

6. Cash flow - reconciliation from statutory heading to business performance measures

 

 

a) Cash generated from operations 

 

 

b) Free cash flow

 

 

 

 

7. Reconciliation of profit before tax to net cash inflow from operating activities

 

	Unaudited		Unaudited		Audited
	Six months to 30 June		Six months to 30 June		Year to 31 December
	2010		2009		2009
	£'000		£'000		£'000
Profit before taxation	3,590		4,005		7,371
Net finance expense/(income)	333		(686)		(268)
Operating profit	3,923		3,319		7,103
Exceptional item - gain on disposal of software	(502)		-		-
Operating profit (before exceptional item)	3,421		3,319		7,103
Depreciation of tangible fixed assets	514		376		839
Amortisation of intangibles	1,412		1,235		2,542
Decrease in debtors	1,757		2,550		1,252
(Decrease) in creditors (excluding deferred income)	(800)		(1,110)		(1,465)
(Decrease) in deferred income	(97)		(1,099)		(231)
Share based payments	32		58		107
Net cash inflow from operating activities	6,239		5,329		10,147

 

 

 8. Reconciliation of net cash flow to movement in net debt

 

 

 

Net debt is the total of cash and cash equivalents, overdrafts and borrowings.

 

9. Dividend

An interim dividend for 2010 amounting to 0.7 pence per ordinary share (2009: 0.6 pence) will be paid on 3 November 2010 to shareholders on the register on 8 October 2010. A second interim dividend for 2009 amounting to 1.3 pence per ordinary share was paid on 24 March 2010 and a final dividend for 2009 amounting to 0.2 pence per ordinary share was paid on 26 May 2010.

 

10. Goodwill and other intangible assets

The main components of the increase in goodwill since 31 December 2009 amounting to £3.49 million were the contingent consideration arising on SiSoft (see notes 11 and 13) and an exchange gain in reserves on revaluation of goodwill denominated in foreign currencies amounting to £2.04 million. Other intangibles comprise internally generated development costs capitalised and acquired intangibles (technology assets and client contracts).

 

11. Provisions - contingent consideration

The increase in contingent consideration in the period of £1.21 million relates predominantly to the provision for consideration for the SiSoft minority holding (see note 13) and other adjustments on the Kizen acquisition less the amounts paid on Kizen in the period.

 

12. Share capital and treasury shares

During the period, 222,416 shares were issued, including 172,000 shares issued in exchange for FRI Exchangeable shares. In order to reduce dilution, options over a total number of 729,044 shares were net settled resulting in a payment including tax liability of £0.44 million. The Company acquired into treasury 475,000 shares in the period (2009: nil) for a consideration of £0.52 million resulting in a corresponding notional reduction in capital. As at 30 June 2010, there were 60,901,357 shares in issue (Dec 2009: 60,678,941 shares) including 475,000 held in treasury. The treasury shares will not accrue dividends and are excluded from the earnings per share calculation.

 

13. Minority interests

As announced in March 2010, the Company gave notice to the minority shareholders in SiSoft Sarl ("SiSoft") of its intention to exercise its call option to acquire the 49% minority interest in SiSoft with effect from 30 June 2010. The calculation of the deferred consideration is derived by applying a formula based on a percentage of the revenue within SiSoft (equating to approximately one times the annual recurring revenue generated by the new Composites product globally), adjusted for the net assets of SiSoft on the exercise date, and the directors' current estimate is £1.3 million. As a result, the minority balance at 30 June 2010 is nil (Dec 2009: £29,000).

 

Independent review report to StatPro Group plc

 

 

Introduction

 

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 Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Consolidated Statement of Changes in Equity and Group Cash Flow Statement and the related notes 1 to 13. 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 guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" 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 half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

 

 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 has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

 

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 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 half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 1, which comply with IFRS's as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.

 

 

Ernst & Young LLP

Chartered Accountants

London

3 August 2010