7th Dec 2005 07:02
Northumbrian Water Group PLC07 December 2005 7 December 2005 NORTHUMBRIAN WATER GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2005 HIGHLIGHTS 2005 • Revenue from continuing operations of £295.3 million for the six months to 30 September 2005 (2004: £271.4 million). This increase principally reflects price increases of 9.9% on water and sewerage charges, as a consequence of the recent regulatory price review. • Profit before tax from continuing operations of £64.3 million; (2004: £41.8 million); net interest charges include a credit of £6.0 million amortisation of debt fair value(2004: £3.2 million). • Financial position strengthened by the issue of £150 million index linked Eurobonds and the securing of further European Investment Bank (EIB) facilities of £100 million. • Disposal of Fastflow Pipeline Services Limited (FPS) and Entec UK Limited (Entec) reinforces the focus on the core water and waste water business. • Ordinary interim dividend of 3.52 pence per share for the six month trading period (2004: 2.87 pence per share). • Special dividend of 2.82 pence per share in respect of the profit on disposal of subsidiaries. Managing Director John Cuthbert said, "Northumbrian Water Limited has made agood start to the new five-year regulatory period and has further strengthenedits financial structure. Having successfully delivered our investment programmeover the last five years we are now embarking on a new programme for the periodending 2010. We retain the focus on our core water and waste water competenceand will continue to build on our track record of service delivery. Planned highlevels of investment will allow us to meet the requirements of UK and EUlegislation and the priorities highlighted by customers, the Consumer Councilfor Water and other stakeholders." For further information contact: Northumbrian Water 0191 301 6419John Cuthbert, Managing DirectorChris Green, Finance DirectorAlistair Baker, Communications & PR Manager Finsbury 020 7251 3801Rollo HeadAndrew MitchellSally Hogan International Financial Reporting Standards (IFRS)The Company's results for the six months to 30 September 2005 have been preparedunder IFRS as required by new regulations that came into effect on 1 January2005. NWG confirmed in its presentation to investors and analysts in September 2005that, under IFRS, the three significant areas to impact the Company's resultsare: • non discounting of deferred tax; • changes in infrastructure accounting for fixed assets; and • retirement benefits under IAS 19. There is no impact on the Company's distributable reserves, cash position ordividend policy. The Group has issued explanatory reconciliations detailing how the transitionfrom UK GAAP to IFRS has affected its results. The policies expected to beapplied to the annual report and financial statements for 31 March 2006,together with explanatory reconciliations, were published on 28 November 2005and can be found on the Group's website at www.nwg.co.uk. NWG's financial performanceNWG's revenue from continuing operations was £295.3 million for the six monthsto 30 September 2005. This largely reflects the price increase of 9.9% on waterand sewerage charges, following the recent regulatory price review. Profit on ordinary activities before interest from continuing operations for theperiod was £116.8 million (2004: £97.4 million). Operating costs for NWGincreased by £4.5 million (3%) to £178.5 million. The net interest charge from continuing operations was £52.4 million (2004:£55.6 million). The net interest charge for the period includes a credit of £6.0million (2004: £3.2 million) in respect of the amortisation of the debt fairvalue. Profit on ordinary activities before tax for the period was £64.3 million (2004:£41.8 million). The tax charge of £17.1 million (2004: £12.7 million) reflectsincreased profitability and changes in tax rules relating to capitalisedmaintenance expenditure. Profit from the sale of subsidiaries contributed £14.6 million to the resultsfor the six months and is included in the discontinued operations result of£15.5 million (see note 4 for further analysis). The Group's gearing has remained stable with net debt decreasing by £11.7million to £1,869.3 million over the period. Cash and EBIT interest cover forthe Group are 3.0x and 2.2x respectively. Sale of subsidiariesIn line with its strategy to focus on its core water and waste water business,and following the receipt of several expressions of interest, the Group disposedof FPS on 8 July 2005 and Entec on 5 October 2005. FPS, which provides infrastructure replacement and rehabilitation services, wassold to a management buy-in for a cash consideration of £0.8 million. The total consideration for the sale of Entec to its management was £30.0million, satisfied by £29.0 million in cash and £1.0 million of loan notes. TheGroup agreed at the time of the sale to meet any potential liability underSection 75 of the Pensions Act 1995. A payment of £9.0 million was made into thedefined benefit scheme following the sale. Entec provides environmental andengineering consultancy services. The Group profit recognised in the six months' results to 30 September 2005 onthe disposal of Entec and FPS was £14.0 million and £0.6 million respectively.No tax arises on either disposal due to the availability of the substantialshareholdings exemption. Capital StructureIn September 2005, NWL's finance subsidiary issued £150 million index linked2.033% Eurobonds due in 2036. The proceeds, which extend the profile of the debtmaturity to over eighteen years, will be used to repay short term loans and fundthe continuing capital programme. This was the Group's first index linked debtissue and NWL will benefit from the cash flow advantage from this type of debt. In November 2005, the EIB entered into a new £100 million facility with NWL.This offers NWL attractive funding for periods up to fifteen years and will bedrawn over the next eighteen months. On 20 April 2005, NWL effectively completed the early redemption of sixdebenture stocks amounting to £3.7 million. On 6 September 2005, NWL gave formalnotice to the holders of the 11.2% redeemable debenture stock (£3.5 million) andthe 12% redeemable debenture stock (£2.0 million) that both will be redeemed atpar on 31 December 2005. Northumbrian Water LimitedRevenue was £277.2 million for the six months to 30 September 2005 (2004: £253.7million). The increase is mainly due to a price increase of 9.9% on water andsewerage charges, following the recent regulatory Periodic Review. Operating costs for the period were £161.7 million, an increase of £6.8 million.The increase in costs includes £0.9 million of depreciation, driven by thecapital investment programme, and an increase of £3.3 million for the amount ofinfrastructure investment charged as maintenance. Other areas of increasedoperating costs include manpower, energy, chemicals and abstraction charges,driven by both increased prices and the requirement to meet new obligations.These increases were partially offset by operating efficiencies of about £2.0million. Profit on ordinary activities before interest for the period was £115.5 million(2004: £98.8 million). Capital expenditure for the period was £107.9 million. NWL has established newconsultant and contractor frameworks aimed at improving the delivery of thecapital investment programme. Major environmental capital investment projects were completed at Birtley,Hustledown, Sedgefield and Knitsley, in County Durham, and at Hexham andCramlington, in Northumberland. These will further improve the quality of localwatercourses in the region. Also during the period, 28 unsatisfactory stormwater overflows have been either replaced or improved and 220 kilometres ofwater mains have been renewed or relined. NWL continues to provide its customers with high levels of service. The qualityof drinking water supplied in its northern and southern areas remains among thebest in the country. Furthermore, measures of customer service and market surveyresults of customer satisfaction remain very high. NWL has continued to invest in new and refurbished assets to protect drinkingwater supplies. The water treatment works at Horsley, in Northumberland, isbeing upgraded to safeguard the quality of water supplied to the Tyneside area. Investment in sewage treatment schemes has resulted in much improved bathingwater compliance in recent years. However, as in 2004, heavy rainfall during thesummer months had a detrimental effect on the quality of bathing waters alongthe coast of north east England. The Environment Agency (EA) monitors diffuse pollution from farming and othersources which impact bathing water quality. In its annual review of bathingwater performance, the EA recognises that "changes in quality can occur fromyear to year as a result of differences in the weather". The exceptional rainfall experienced in 2005, has also caused higher levels ofsewer flooding than in any previous year. As a consequence, NWL is unlikely toachieve Ofwat's highest category for sewer flooding performance when theregulator publishes results for 2005/06. However, NWL's sewage treatment workscontinue to deliver high levels of performance. NWL's Overall Performance Assessment (OPA) score for 2004/05 showed anunderlying improvement that was masked by the impact of the exceptional incidentat Hexham in January 2005, where the town's strategic water mains were washedaway by floodwater. The company was commended by a range of authoritiesincluding the Consumer Council for Water (previously WaterVoice) and theDrinking Water Inspectorate for its handling of this emergency. However, Ofwat'sOPA reflected the fact that the interruption to supply for many customers inHexham was greater than 12 hours. Water and waste water contractsRevenue for the Group's water and waste water contracts was £13.0 million forthe period (2004: £10.7 million) and profit on ordinary activities beforeinterest was £1.0 million (2004: £0.5 million). In the Republic of Ireland, Northumbrian Water Projects Limited (NWP), is partof a consortium that designed and built a €70 million waste water treatmentplant for Cork City Council. NWP commenced the 20 year operation and maintenancecontract in September 2004, following commissioning, and the plant was formallyopened in June 2005. The Group's two waste water PFI projects, operated forScottish Water, in Levenmouth and Ayrshire continue to perform satisfactorily. Related servicesThe Group's non-water companies' revenue was £39.3 million (2004: £42.7 million)of which £26.3 million (2004: £27.2 million) was in respect of discontinuedoperations. Profit on ordinary activities before interest was £1.7 million(2004: £1.4 million), of which £1.4 million (2004: £0.5 million) was in respectof discontinued operations (i.e. FPS and Entec). DividendThe Board has declared an ordinary interim dividend for the period of 3.52 penceper share (2004: 2.87 pence) and a special dividend of 2.82 pence per share. Thetotal dividend will be paid on 3 February 2006 to shareholders on the registerat the close of business on 23 December 2005. The dividend cover for the periodis 1.9x. The ordinary interim dividend is consistent with the progressive dividend policyannounced by the Board in June 2005. The special dividend was agreed by theBoard following the profit on the disposal of Entec and FPS. Financial calendar200521 December Ex-dividend date23 December Record date 20063 February Interim dividend payment7 June Preliminary results announcement27 July AGM Board appointmentsRon Lepin was appointed to the NWG board as a non-executive director on 24October 2005. Ron worked at PricewaterhouseCoopers in Canada, where he advised anumber of foreign and domestic governments and companies on privatisations andproject finance transactions. He joined Ontario Teachers' Pension Plan Board in2002 and since March 2003 has been Vice-President of their Infrastructuredivision. Ontario Teachers Pension Plan Board holds 25% of the issued sharecapital of NWG and Ron is, therefore, not regarded as an independent director. On 25 November, the Board announced that its Chairman, Sir Frederick Holliday,has indicated that having reached the age of 70, he intends to retire from theBoard at the Annual General Meeting on 27 July 2006. The Board has decided,following consultation with major shareholders, that Sir Derek Wanless willsucceed Sir Frederick as Chairman of NWG. The NWL Board has agreed to appoint the non-executive directors of NWG, SirPatrick Brown, Ron Lepin, Martin Negre, Sir Derek Wanless and Jenny Williams, tothe Board of NWL on 1 January 2006. Sir Derek will also chair the Board of NWLfollowing Sir Frederick's retirement. Following the retirement of Richard Allan in July 2005, Alex Scott-Barrett wasappointed an independent non-executive director to the board of NWL on 1November 2005. OutlookThe Company's operating performance continues to be strong and the financialstructure has been further strengthened. As we shape our investment programme and plans for the new regulatory period, weretain the focus on our core water and waste water competence. We will continueto build on our track record of service delivery, environmental performance andstakeholder value. John CuthbertManaging Director7 December 2005 CONSOLIDATED INCOME STATEMENT 6 months ended 30 September 2005 1.4.05 to 1.4.04 to 1.4.04 to 30.9.05 30.9.04 31.3.05 £m £m £m Notes (restated) (restated)--------------------------------------------------------------------------------Continuing operations Revenue 2 295.3 271.4 545.0 Operating costs (178.5) (174.0) (348.7) ----------------------------------Profit on ordinary activitiesbefore interest 2 116.8 97.4 196.3Finance costs payable (54.3) (56.6) (108.0)Finance income receivable 1.9 1.0 8.2Share of profit from associatesand jointly controlled entities (0.1) - 0.1 ----------------------------------Profit on ordinary activitiesbefore taxation 64.3 41.8 96.6 - current taxation (10.1) (2.3) 0.9- deferred taxation (7.0) (10.3) (21.0)- overseas tax - (0.1) (0.1) ----------------------------------Profit for the year fromcontinuing operations 47.2 29.1 76.4 Discontinued operationsProfit for the year fromdiscontinued operations 4 15.5 0.2 1.0 ----------------------------------Profit for the year 62.7 29.3 77.4 ---------------------------------- Attributable to:Equity shareholders of the company 62.9 29.5 77.9Minority interests (0.2) (0.2) (0.5) ---------------------------------- 62.7 29.3 77.4 ---------------------------------- Basic and diluted earnings pershare for profit attributable toordinary equity holders of the parent 12.1p 5.6p 14.9p ----------------------------------Basic and diluted earnings pershare for profit from continuingoperations attributable toordinary equity holders of theparent 3 9.1p 5.6p 14.7p ----------------------------------Adjusted earnings per share forprofit from continuing operationsattributable to ordinary equityholders of the parent (excludingdeferred tax, amortisation of debtfair value and IAS 39 adjustments) 3 9.3p 7.5p 16.5p ----------------------------------Ordinary dividend proposed per share 3.52p 2.87p 7.13p -------- -------- --------Special dividend proposed per share 2.82p - - -------- -------- --------Dividend paid per share 7.13p 4.63p 7.50p -------- -------- -------- CONSOLIDATED BALANCE SHEET As at 30 September 2005 30.9.05 30.9.04 31.3.05 £m £m £m (restated) (restated)--------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 0.1 0.2 0.1Other intangible assets 64.2 64.2 64.2Property, plant and equipment 2,850.0 2,732.5 2,800.3Investments in jointly controlled entities 3.7 3.5 3.6Investments in associates 0.8 1.5 1.4Other investments 0.4 0.4 0.4 ----------------------------------- 2,919.2 2,802.3 2,870.0 -----------------------------------Current assetsInventories 4.0 6.8 4.5Trade and other receivables 107.0 117.5 121.9Cash and cash equivalents 216.4 95.6 118.0 ----------------------------------- 327.4 219.9 244.4 -----------------------------------TOTAL ASSETS 3,246.6 3,022.2 3,114.4 ----------------------------------- EQUITY AND LIABILITIESEquity attributable to equity holders of the parentIssued capital 51.9 51.9 51.9Share premium 446.5 446.3 446.3Cash flow reserve 0.5 4.3 4.3Treasury shares (0.9) (0.5) (0.9)Retained earnings (249.3) (306.4) (272.4) ---------------------------------- 248.7 195.6 229.2Minority interest 0.8 1.6 1.1 ----------------------------------TOTAL EQUITY 249.5 197.2 230.3 ---------------------------------- Non-current liabilitiesInterest bearing loans and borrowings 1,858.1 1,875.1 1,929.7Provisions 3.6 6.6 5.2Deferred income tax liabilities 456.7 440.4 450.4Pension liability 81.6 74.3 76.4Other payables 15.7 12.8 16.6Grants 171.2 149.0 161.3 ----------------------------------- 2,586.9 2,558.2 2,639.6 -----------------------------------Current liabilitiesInterest bearing loans and borrowings 232.9 90.4 73.9Trade and other payables 166.3 170.8 169.4Income tax payable 11.0 5.6 1.2 ---------------------------------- 410.2 266.8 244.5 -----------------------------------TOTAL LIABILITIES 2,997.1 2,825.0 2,884.1 ----------------------------------- TOTAL EQUITY AND LIABILITIES 3,246.6 3,022.2 3,114.4 ----------------------------------- CONSOLIDATED CASH FLOW STATEMENT 6 months ended 30 September 2005 1.4.05 to 1.4.04 to 1.4.04 to 30.9.05 30.9.04 31.3.05 £m £m £m (restated) (restated)-------------------------------------------------------------------------------- Net cash flows from operating activities 107.5 90.3 161.1Net cash flows from investing activities (60.0) (67.9) (147.3)Net cash flows from financing activities 83.2 (17.1) 43.7 ---------------------------------- Increase in cash and cash equivalents 130.7 5.3 57.5Cash and cash equivalents at start ofperiod 85.2 27.7 27.7 ---------------------------------- Cash and cash equivalents at end of period 215.9 33.0 85.2 ---------------------------------- Net cash flow in respect of discontinued operationsCash consideration 29.8 - -Cash and cash equivalents disposed (11.0) - -Expenses paid in connection with disposals (0.1) - - ---------------------------------- 18.7 - - ---------------------------------- Reconciliation of profit before tax to netcash flows from operating activitiesProfit on ordinary activities beforeinterest 116.8 97.4 196.3Profit before interest on discontinuedoperations 1.4 0.5 1.6Depreciation and other similar non-cashcharges 40.6 39.9 78.9Net interest paid (55.6) (47.3) (113.6)Net charge for provisions, less payments (0.3) 0.3 (1.1)Movements in working capital 4.7 (0.5) (7.7)Income taxes (paid)/received (0.1) - 6.7 ----------------------------------Net cash flows from operating activities 107.5 90.3 161.1 ---------------------------------- Consolidated Statement of Recognised Income and Expense 6 months ended 30 September 2005 1.4.05 to 1.4.04 to 1.4.04 to 30.9.05 30.9.04 31.3.05 £m £m £m (restated) (restated)-------------------------------------------------------------------------------- Profit for the period 62.7 29.3 77.4Translation differences - - 0.4Actuarial (losses)/gains (4.3) 21.2 21.2Deferred tax on actuarial (losses)/gains 1.3 (6.4) (6.4)Cash flow hedges (3.8) 7.2 7.2Tax on cash flow hedges - (0.9) (0.9) -----------------------------------Total recognised income and expense 55.9 50.4 98.9 ----------------------------------- Attributable to:Equity shareholders of the company 56.1 50.6 99.4Minority interests (0.2) (0.2) (0.5) ----------------------------------- 55.9 50.4 98.9 ----------------------------------- 1. Basis of preparation The results for the six months to 30 September 2005 have been prepared using theaccounting policies expected to be applied to the annual report and financialstatements for 31 March 2006. These accounting policies were published by thecompany on 28 November 2005 and are available on the Group's website atwww.nwg.co.uk. The Group has also released explanatory reconciliations detailing how thetransition from UK GAAP to IFRS has affected its results. These explanatoryreconciliations were also released on 28 November 2005 and can be found on theGroup's website at www.nwg.co.uk. The financial information has been prepared on the basis of IFRS expected to bein effect for the year ended 31 March 2006. The IFRS in effect at that date maydiffer owing to decisions taken by the EC on endorsement, interpretativeguidance issued by the IASB or the International Financial ReportingInterpretations Committee (IFRIC) and the requirements of company legislation.The Group has decided to adopt the amendments to IAS 19 "Employee Benefits"allowing actuarial gains and losses to be recognised in full through reserves.The Group has also adopted IAS 32 and 39 from 1 April 2004. The results of Northumbrian Water Group plc may change as a result of futurechanges to IFRS. The results for the year ended 31 March 2005 have been extracted from thefinancial statements, which have been delivered to the Registrar of Companies.The independent auditors' report on those financial statements was unqualifiedand did not contain a statement under section 237 (2) or (3) of the CompaniesAct 1985. The financial information contained in the interim financialstatements does not constitute statutory accounts as defined in Section 240 ofthe Companies Act 1985. The figures for the above periods are unaudited and do not constitute statutoryaccounts. However, the auditors have carried out a review of the figures to 30September 2005 and their report is set out in the independent review report. The interim report was approved by the Board of Directors on 6 December 2005. 2. Segmental analysis of revenue and profit on ordinary activities before interest Revenue Northumbrian Water Related Total Discontinued Total revenue Water & waste water services operations from Limited contracts continuing operations £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------Period ended 30 September 2005Segment revenue 277.2 13.0 39.3 329.5 (26.3) 303.2Inter segment revenue - (0.6) (16.6) (17.2) 9.3 (7.9) ------------------------------------------------------------------------------------Revenue to externalcustomers 277.2 12.4 22.7 312.3 (17.0) 295.3 ------------------------------------------------------------------------------------ Period ended 30 September 2004Segment revenue 253.7 10.7 42.7 307.1 (27.2) 279.9Inter segment revenue - (0.3) (20.3) (20.6) 12.1 (8.5) ------------------------------------------------------------------------------------Revenue to externalcustomers 253.7 10.4 22.4 286.5 (15.1) 271.4 ------------------------------------------------------------------------------------ Year ended 31 March 2005Segment revenue 508.2 23.1 87.7 619.0 (57.1) 561.9Inter segment revenue - (0.7) (39.7) (40.4) 23.5 (16.9) ------------------------------------------------------------------------------------Revenue to externalcustomers 508.2 22.4 48.0 578.6 (33.6) 545.0 ------------------------------------------------------------------------------------ Profit on ordinary activities before interest Northumbrian Water & waste Related Total Discontinued Total revenue Water water services operations from continuing Limited contracts operations £m £m £m £m £m £m-----------------------------------------------------------------------------------------------------------Period ended 30 September 2005Segment profit beforeinterest 115.5 1.0 1.7 118.2 (1.4) 116.8Central unallocated costs and provisions - ----------Profit on ordinary activitiesbefore interest 116.8Net finance costs (52.4)Share of loss fromassociates andjointly controlledentities (0.1) -----------Profit on ordinaryactivities before taxation 64.3 ----------- The trading profit disclosed as discontinued operations is part of related services. Period ended 30 September 2004 Segment profitbefore interest 98.8 0.5 1.4 100.7 (0.5) 100.2Central unallocatedcosts and provisions (2.8) -----------Profit on ordinary activities before interest 97.4Net finance costs (55.6) -----------Profit on ordinary activitiesbefore taxation 41.8 ----------- Profit on ordinary activities before interest Northumbrian Water & waste Related Total Discontinued Total revenue Water water services operations from continuing Limited contracts operations £m £m £m £m £m £m ------------------------------------------------------------------------------------------------------------ Year ended 31 March 2005Segment profit beforeinterest 197.7 2.1 4.3 204.1 (1.6) 202.5Central unallocatedcosts and provisions (6.2) ----------Profit on ordinary activitiesbefore interest 196.3Net finance costs (99.8)Share of profit fromassociates and jointlycontrolled entities 0.1 ----------Profit on ordinary activitiesbefore taxation 96.6 ---------- 3. Earnings per share Basic and diluted earnings per share are calculated using a weighted averagenumber of shares of 518.6 million. Adjusted earnings per share is considered by the directors to give a betterindication of the Group's underlying performance. Adjusted earnings per sharehave been calculated as follows: 1.4.05 to 1.4.04 to 1.4.04 to 30.9.05 30.9.04 31.3.05 £m £m £m (restated) (restated)--------------------------------------------------------------------------------Adjusted earnings from continuing operations Profit for the year from continuingoperations 47.2 29.1 76.4Deferred tax 7.0 10.3 21.0Amortisation of debt fair value (6.0) (3.2) (14.1)IAS 39 adjustments - 2.7 2.1 -----------------------------------Adjusted earnings from continuingoperations 48.2 38.9 85.4 ----------------------------------- Basic and diluted EPS from continuingoperations 9.1p 5.6p 14.7p ----------------------------------- Adjusted EPS 9.3p 7.5p 16.5p ----------------------------------- Profit for the year from discontinuedoperations 15.5 0.2 1.0 ----------------------------------- EPS from discontinued operations 3.0p 0p 0.2p ----------------------------------- 4. Discontinued operations The Group disposed of FPS and Entec on 8 July 2005 and 5 October 2005,respectively. The results of FPS and Entec for the period are presented below: 1.4.05 to 1.4.04 to 1.4.04 to 30.9.05 30.9.04 31.3.05 £m £m £m (restated) (restated)-------------------------------------------------------------------------------- Revenue 26.3 27.2 57.1Inter segment revenue (9.3) (12.1) (23.5) --------------------------------------External revenue 17.0 15.1 33.6Operating costs (15.6) (14.6) (32.0) --------------------------------------Profit on ordinary activities beforeinterest 1.4 0.5 1.6Profit on disposal of discontinuedoperations 14.6 - -Net finance costs 0.2 0.1 0.2 --------------------------------------Profit on ordinary activities beforetaxation 16.2 0.6 1.8Taxation (0.7) (0.4) (0.8) --------------------------------------Profit for the year from discontinuedoperations 15.5 0.2 1.0 -------------------------------------- INDEPENDENT REVIEW REPORT TO NORTHUMBRIAN WATER GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 September 2005 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Recognised Income and Expense, and the related notes 1to 4. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept 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, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 1, the next annual report and financial statements of thegroup will be prepared in accordance with those IFRS adopted for use by theEuropean Union. The accounting policies are consistent with those that the directors intend touse in the next financial statements. There is, however, a possibility that thedirectors may determine that some changes to these policies are necessary whenpreparing the full annual report and financial statements for the first time inaccordance with those IFRS adopted for use by the European Union. 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 Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies have been applied. A review excludes audit proceduressuch as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. Ernst & Young LLPNewcastle upon Tyne7 December 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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