ECM.L Regulatory News (ECM)

8 Nov 2005 07:00

Electrocomponents PLC08 November 2005 Embargoed to 7:00am Tuesday 8 November 2005 INTERIM STATEMENT Electrocomponents plc, the major international high service distributor ofelectronic, electrical and industrial supplies, today announces its results forthe half year ended 30 September 2005. The summary results, against the first half of last year, were: H1 2005/06 H1 2004/05 Revenue £396.8m £379.5m Profit before tax and reorganisation costs £35.3m £49.6m Profit before tax £33.6m £49.6m Earnings per share 5.2p 7.8p Dividend per share 5.8p 5.8p Bob Lawson, Chairman, commented: In the first half, the strong growth in our International business, which nowrepresents over half the Group's revenue, has been offset by difficult tradingconditions in the UK, and incremental activity and costs associated with ourEnterprise Business System ("EBS") project. The management of the Group is focused on both achieving the successful EBSimplementation in the UK in the final quarter of the financial year and therapid implementation of the new strategy in the markets in which we trade. Bob Lawson 8 November 2005 Enquiries: Bob Lawson, Chairman Electrocomponents plc 0207 567 8000* Ian Mason, Chief Executive Electrocomponents plc 0207 567 8000* Simon Boddie, Finance Director Electrocomponents plc 0207 567 8000* Diana Soltmann Flagship Consulting Ltd 0207 886 8440 * Available to 15:00 on 8 November, thereafter 01865 204000. The results and analyst presentation with accompanying audiocast are publishedon the corporate website at www.electrocomponents.com Notes on the Interim Statement: Definitions of terms: In order to better reflect business performance,comparisons of revenue between periods have been adjusted for exchange rates andthe number of trading days. Changes in profit, cash flow, debt and share relatedmeasures such as earnings per share are at reported exchange rates. Safe Harbour: Our interim statement contains certain statements, statistics andprojections that are or may be forward-looking. The accuracy and completeness ofall such statements, including, without limitation, statements regarding thefuture financial position, strategy, projected costs, plans and objectives forthe management of future operations of Electrocomponents plc and itssubsidiaries is not warranted or guaranteed. These statements typically containwords such as "intends", "expects", "anticipates", "estimates" and words ofsimilar import. By their nature, forward-looking statements involve risk anduncertainty because they relate to events and depend on circumstances that willoccur in the future. Although Electrocomponents plc believes that theexpectations reflected in such statements are reasonable, no assurance can begiven that such expectations will prove to be correct. There are a number offactors, which may be beyond the control of Electrocomponents plc, which couldcause actual results and developments to differ materially from those expressedor implied by such forward-looking statements. Other than as required byapplicable law or the applicable rules of any exchange on which our securitiesmay be listed, Electrocomponents plc has no intention or obligation to updateforward-looking statements contained herein. CHAIRMAN'S STATEMENT The combined results for the Group of sales up by 3% and profits down by 29%mask significantly different levels of performance by region. In line with thelong-term trend of declining manufacturing in the UK, coupled with continuingpressure on the gross margin and the high incremental costs of the EnterpriseBusiness System ("EBS") implementation, RS UK has suffered a substantialreduction in profits. Conversely, the International business, which now represents 56% of Grouprevenue, delivered an overall increase in sales of £21m (9%). Continental Europesales growth rate doubled to 5% with Asia and Rest of World achieving 14% andcontinued high growth in North America of 14%. The implementation of the new strategy continues apace with the launch of theextended Electronic and Electromechanical ("EEM") range (90,000 additionalproducts) in the UK, France, Germany and Italy and the first impact of costreductions being felt in this period. In addition, good progress has been madeon the implementation of EBS into the UK operating company and the Group hub. Weexpect that EBS in the UK will be implemented in the final quarter of the year,thus releasing local management to pursue the new Group strategy. Interim Dividend On 25 May 2005, the Board decided that, assuming there was no substantialdeterioration in economic conditions, it should maintain the current level ofdividend for the following three years and, accordingly, the interim dividendwill be maintained at 5.8p. Board In the half year, Richard Butler resigned from the Board after 18 years with theGroup. Richard made a huge contribution to the development of the Group and wewish him well in the future. Following the retirement of Jeff Hewitt, announced in May, we are delighted thatSimon Boddie has joined the Board as Group Finance Director, effective from 1September 2005. Simon joins us from Diageo and brings relevant, internationalexperience to the Board. Current Trading and Outlook In October, Group revenue growth was around 5% year on year. Growth in ourInternational business was around 12%, following the recent variablemonth-on-month performances. The decline in the UK reduced to around 3% afterthe poor September month performance. Given the uncertain market environment in the UK, declining gross margins andthe impact of the EBS implementation in the second half, we remain cautious onthe outlook for the rest of the financial year. In light of this we are workingto contain costs and to accelerate the implementation of our strategy. Bob Lawson, Chairman 8 November 2005 OPERATING REVIEW Progress on 3 Year Plan In May 2005, the Group announced a 3 year plan with four key elements: - • Implementing a strategy to focus separately on two distinct customer groups: EEM: those working in the research and development and maintenance sectors that require the electronic and electromechanical offer and C&U: those in all sectors who have a wider range of product requirements and who value convenient and urgent service (effectively maintenance, repair and operations ("MRO")). • Implementing the Enterprise Business System ("EBS"). • Creating a lower cost infrastructure. • Substantially improving the medium term financial performance of the business and maintaining the current level of dividend for 3 years. Good progress has been made on developing the 3 year plan in the first half. Atthe end of September, 75,000 additional products from the Allied range and15,000 products from 15 key electronic and electromechanical brands werelaunched in the UK, France, Germany and Italy. The launch represented a new andfaster approach to market for the Group with the extended range being ane-Commerce only, non-stocked and reliable delivery promise offer. In the shorttime since launch, there has been an encouraging start with the number of ordersexceeding our expectations. Work is progressing well on all the other elements of the EEM strategy plan withsubstantial resources being dedicated to the programme and a phased release offuture initiatives being planned. This includes rolling out the range to othergeographies and flexible packaging. The implementation of the broader productstrategy is also underway with a pilot programme in Germany. The next implementation of the EBS project is in the UK, in the final quarter ofthis financial year. This implementation covers the largest group operatingcompany and the central Group hub (all central processes and support to theInternational business). The system build and integrated system testing are nowcomplete and the new hosting centre and outsourced support contract is in place.User acceptance testing and training are progressing well. The first step in the creation of a lower cost infrastructure has been takenwith the announcement of reorganisation costs of £1.7m in this half year withongoing annual savings of £2.0m including the removal of around 40 roles. Thisis the first contribution towards the target of £10m announced in May 2005 andfurther reorganisation costs will be announced in the second half. Financial Performance All figures in this announcement have been prepared using InternationalFinancial Reporting Standards ("IFRS").__________________________________________________________________________Group H1 2005/06 H1 2004/05__________________________________________________________________________Revenue £396.8m £379.5mGross margin % 52.0% 53.5%Market contribution* £85.1m £88.2mGroup process costs* £(48.5)m £(38.5)mNet interest payable £(1.3)m £(0.1)mProfit before tax* £35.3m £49.6mProfit before tax £33.6m £49.6mEarnings per share 5.2p 7.8pDividend per share 5.8p 5.8pFree cash flow £18.1m £28.3mNet debt £96.3m £61.1m__________________________________________________________________________* before reorganisation costs Group revenue increased 2.9% with the UK business declining by 3.6% and theInternational business growing by 8.7%. North America (14.0%) and Asia and Restof World (13.9%) showed particularly strong growth. e-Commerce revenue continuesto grow quickly (28.6%), across all markets and e-Commerce channels and is now23.3% of sales, up from 18.6% last year. In addition, the Group's singlee-Commerce capability has been used to enable a quick roll-out of the extendedEEM ranges. The gross margin was down 1.5% points from the first half of last year and down1.0% points from the second half of last year. The reductions in the first halfwere across most regions and for similar reasons. To improve competitiveness, wehave adjusted selling prices by technology and customer discounts for selectedcustomers. In addition there were changes in product mix with higher growth inlower margin technologies, cost price increases, particularly in Allied, andchanges in geographic mix. Market contribution decline of £3.1m has been impacted by the decline in the UKof £7.2m, partially offset by the growth in the International business of £4.1m. Process costs have increased by £10.0m, principally as a result of the increasein EBS project costs (£6.1m) and other IS costs including the data centrerequired for the EBS go-live. Excluding these impacts, process costs haveincreased by £1.3m largely driven by the Supply Chain logistics costs requiredto support the International business growth. The Supply Chain process hasdelivered increased levels of customer service ("orderfill") in many areas ofthe Group including France where the service level is now higher than before EBSwas implemented. The interest charge was £1.2m higher than last year due to the greater level ofdebt. Profit before tax and reorganisation costs fell by 28.8%, while profit beforetax and after reorganisation costs fell by 32.3% as a result of reorganisationcosts of £1.7m being incurred in the period. Free cash flow was down 36.0% from last year, due to lower profits and highercapital expenditure caused by the planned increased spend on EBS, offset byhigher creditors due to the EBS related spend. Closing net debt was £96.3m, £40.9m higher than last year end. As in previousyears, financial ratios remained strong with high interest cover and lowgearing. United Kingdom__________________________________________________________________________ H1 2005/06 H1 2004/05__________________________________________________________________________Revenue £176.3m £180.0mRevenue growth % (3.6)% 2.3%e-Commerce revenue % 26.4% 20.8%Contribution before reorganisation costs £46.5m £53.7mContribution % 26.4% 29.8%__________________________________________________________________________ Revenue in the UK was 3.6% lower than last year. Revenue was affected by thelong term decline in manufacturing and slower economic growth in the widereconomy, a continuation of the trend present in the second half of the lastfinancial year. Throughout most of this period, the year on year revenue performance was around3% below last year. However, in September, there was a further step down to a 6%decline, driven by a lower average order value and average order frequency,which was experienced in most sectors of the economy and regions of the country,but particularly in electronic and electrical manufacturing in the South ofEngland. Sales via the network of 15 trade counters continue to grow, althoughat a lower rate than last year. During the period, the UK business opened twonew 'Call & Collect' centres in Leicester and Coventry enabling same daydeliveries of 135,000 products to customers in those areas. In addition, severallarge account contracts have been won. e-Commerce continued to grow with the improvements made to our catalogue datalast year having now been exploited in the Internet trading channel allowingimproved search for and comparison of products. The UK business is focused on delivery of a successful EBS go-live in the finalquarter of the financial year. The local costs of implementing EBS of £1.1m areincluded in market contribution. Without these costs, the UK contribution wouldhave been £47.6m, giving an underlying contribution rate of 27.0%. International__________________________________________________________________________ H1 2005/06 H1 2004/05__________________________________________________________________________Revenue £220.5m £199.5mRevenue growth % 8.7% 9.2%e-Commerce revenue % 21.0% 16.8%Contribution £38.6m £34.5mContribution % 17.5% 17.3%__________________________________________________________________________ The International business accounts for 56% of Group sales and 45% of Groupcontribution. It is comprised of Continental Europe (56% of revenue in theregion), North America (29%), Asia and Rest of World (11%) and Japan (4%).Contribution in these businesses grew by 11.9% in the period. The Group is focused on accelerating growth in the International businesses byimplementing the global EEM offer and via strategic market investments in China,Japan and North America. Continental Europe__________________________________________________________________________ H1 2005/06 H1 2004/05__________________________________________________________________________Revenue £122.8m £114.3mRevenue growth % 5.1% 2.6%e-Commerce revenue % 26.2% 20.1%Contribution £26.7m £24.6mContribution % 21.7% 21.5%__________________________________________________________________________ All businesses in Continental Europe are growing with improving performances inFrance, Germany and Italy and the smaller European markets continuing doubledigit growth. This improved performance has been driven primarily by an increasein customer numbers. Both contribution and contribution percentage grew in theperiod. The September exit growth rate was 4%. In addition to the extended EEM range launched in September, we have broadenedthe range of products in several European markets through the availability ofthe UK product range on differential service. This has contributed incrementalrevenue in the markets in which the range has been launched and in Italy thiswas nearly 3% of the total revenue at the end of the period. In France we have seen a 6% point swing in revenue growth. There is confidencein the EBS system and it is beginning to deliver benefits. Service levels haveimproved through better stock visibility and customer satisfaction is at recordlevels. We have increased customer marketing pressure with more material beingissued, more quickly and at lower cost. In Germany, we have achieved particular success in large accounts, helped by ourstrength in e-Procurement. Further services have also been added including anextended 10pm order cut-off for next day delivery. In Spain we have moved to newoffices and expanded the warehouse to drive additional growth. North America__________________________________________________________________________ H1 2005/06 H1 2004/05__________________________________________________________________________Revenue £64.1m £56.2mRevenue growth % 14.0% 23.5%e-Commerce revenue % 7.9% 6.8%Contribution £8.6m £7.5mContribution % 13.4% 13.3%__________________________________________________________________________ Allied's revenue in US$ was higher than in 2001, the previous record. Thebook-to-bill ratio remains positive and the revenue growth in September was 19%.There are several factors contributing to the higher revenue. The productportfolio from key brands is continuing to be expanded with 25,000 new productshaving been introduced since October 2004. Service levels have also beenimproved through adding more stock and the introduction of the Group's stockmanagement system. Within sales, the management has been strengthened, we haveincreased the number of account managers and we have improved training. Accountmanagers are closely aligned to a local branch and, through regular customervisits, ensure that specific customer needs are addressed. e-Commerce grew by 31% in Allied but remains only about 8% of revenue. This isto be accelerated via better product images, product sourcing and improvedsearch engine links. While gross profit is significantly higher than last year, gross marginpercentage reduced during the period, particularly in the second quarter. Theaverage gross margin percentage was around 37% but the exit rate was lower. Theprincipal reasons for this were vendor cost pressures, product mix and customerdiscounts. The business needs a new warehouse to continue to grow. Consequently, the Grouphas approved the investment in a new warehouse and office in Fort Worth toreplace the existing one. The total cost is estimated to be around £22m and thewarehouse is expected to be opened in mid 2007. The purchase of the land, due totake place late in this financial year, will cost around £4m. Japan__________________________________________________________________________ H1 2005/06 H1 2004/05__________________________________________________________________________Revenue £8.4m £7.8mRevenue growth % 9.0% 29.7%e-Commerce revenue % 51.7% 46.4%Contribution £0.2m £0.6mContribution % 2.4% 7.7%__________________________________________________________________________ The slow down in growth has been caused by a significant decline in the generalelectronics and related manufacturing sectors in Japan, which has adverselyimpacted our core customers. Product sales have continued to grow in all areaswith the exception of semi-conductors. The September exit growth rate was 2.3%.The business has been refocused on growing new customers in the more buoyantsectors of universities and automotive research, supported by an increased salesand marketing investment. Asia and Rest of World__________________________________________________________________________ H1 2005/06 H1 2004/05__________________________________________________________________________Revenue £25.2m £21.2mRevenue growth % 13.9% 7.0%e-Commerce revenue % 18.5% 14.1%Contribution £3.1m £1.8mContribution % 12.3% 8.5%__________________________________________________________________________ All of the Asian sub regions had double digit growth. Revenue in North Asia grewby 20%. This includes China, which grew at 32% with the same day offerdelivering in both Shanghai and Beijing. Australasia and South Asia grew at 11%and 17% respectively, being the strongest rates for several years. In Asia as awhole, customer numbers were up around 10% on September last year helped by thebroadening of the electronics range in April. The growth in Hong Kong took placewhile EBS went live, successfully, in May 2005. The growth for Asia and Rest ofWorld in September was 15%. The region is showing strong growth in revenue, contribution and contributionpercentage. Solid foundations have been built for future growth in Asia withincreased sales effectiveness, EBS established and the Same Day Offer in China. Restriction of Hazardous Substances Another important project for the Group is the preparation for the Restrictionof Hazardous Substances Directive (RoHS) to take effect in July 2006. ThisEuropean Directive requires changes to be made to products that are to be usedin production, although not in maintenance. This is expected to affect around95,000 products in the European range and will almost certainly become thestandard for the world. The Group has worked closely with suppliers tounderstand how they plan to effect this change. The non-compliant products willbe replaced by the compliant products when the manufacturer has changed theirmanufacturing processes. The emphasis has been on informing customers of therelevant RoHS requirements and minimising the financial exposure to the Group.However, it is possible that demand for non-compliant products, while notceasing, will decline hence an additional stock provision will be needed. Earlyindications suggest that an additional provision of up to £4m could be necessaryfor this one off event but this will be calculated at the year end when theresponse of both suppliers and customers will be clearer. If demand fornon-compliant product did decline significantly, potentially up to £8m of extracompliant stock would be required. EBS Financials The income statement charge is £10.3m for the half year, of which £8.8m is inprocess costs and £1.5m in market contribution. The total cost has increased by£6.9m from last year. The Group has announced expected full year implementationcosts of £25m to be charged to the income statement, up from the £18m announcedin May 2005. The additional costs have been in external consultancy associatedwith the increased system testing, and assumed increased early life supportfollowing go-live. Additional stock of £5m has been bought in, as a contingency, to protect serviceduring the implementation period. This will increase to around £8m at the yearend. In 2006/07, the operating profit impact will be reduced slightly from 2005/06.The implementation costs will fall significantly, but EBS support costs willrise and the depreciation charge will increase following the UK go-live by anannualised equivalent of about £5m. The EBS projects will replace existing standalone systems that are nearing theend of their lives with integrated regional systems that will be able to supportthe Group for many years. There are also incremental benefits that are enabledby the EBS implementations. For example, the stock turn is expected to improvesignificantly as stock can be managed by reference to regional demand ratherthan for each individual operating company. The Group has regularly compared theincremental benefits with the costs of the project and this is to be updated inthe second half of the financial year after UK go-live. Pensions The Group has defined benefit schemes in the UK (closed to new entrants in April2003 and replaced by a defined contribution scheme), Ireland (closed to newentrants) and Germany (closed to new entrants). Elsewhere the main schemes aredefined contribution. Under IAS 19, the defined benefit schemes showed a combined deficit of £32.4m,net of deferred tax, at 31 March 2005. Of this, the deficit in the UK scheme was£28.9m, net of deferred tax. The estimated net deficit, net of deferred tax, forthe UK scheme at 30 September 2005 is £32m, compared with £28m (under FRS 17) inSeptember 2004. This increase in deficit is due mainly to revised mortalityassumptions. International Financial Reporting Standards The Group has implemented IFRS during this financial year. On 12 July 2005, theGroup announced the IFRS restatement of the results for the year ended 31 March2005 and these have been used throughout this announcement. An explanation ofthe changes and the accounting policies are included in the notes to thisstatement. Summary These results demonstrate the difference in performance between the UK businessand the International business. The UK business continues to suffer from theongoing decline in the UK manufacturing industry while the Internationalbusiness, comprising Continental Europe, North America, Japan and Asia and Restof World, is growing strongly. The EBS implementation in the UK is progressing well and we are confident thatit will be implemented successfully, as planned, in the final quarter of thisfinancial year. The Group has taken the first steps to deliver the 3 year plan announced in Mayand more will be done in the coming months to accelerate the implementation ofthe plan. Ian Mason, Group Chief Executive Simon Boddie, Group Finance Director 8 November 2005 CONSOLIDATED INCOME STATEMENT ______________________________________________________________________________________________________________________ Note 6 months to 6 Months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited) £m £m £m______________________________________________________________________________________________________________________Revenue 1 396.8 379.5 773.9______________________________________________________________________________________________________________________Operating profit- before reorganisation costs 36.6 49.7 100.8- reorganisation costs (1.7) - -______________________________________________________________________________________________________________________Operating profit after reorganisation costs 34.9 49.7 100.8Financing income 2.3 1.7 3.6Financing costs (3.6) (1.8) (4.5)______________________________________________________________________________________________________________________Profit before tax 1 33.6 49.6 99.9______________________________________________________________________________________________________________________Profit before tax and reorganisation costs 35.3 49.6 99.9______________________________________________________________________________________________________________________Income tax expense 2 (11.1) (15.5) (32.3)______________________________________________________________________________________________________________________Profit for the period attributable to equity 22.5 34.1 67.6shareholders______________________________________________________________________________________________________________________Earnings per share (pence)- basic 3 5.2p 7.8p 15.5p- diluted 3 5.2p 7.8p 15.5p______________________________________________________________________________________________________________________ A dividend of 5.8p per share (2004: 5.8p) relating to the period has been recognised since the period end. STATEMENT OF RECOGNISED INCOME AND EXPENSE ________________________________________________________________________________________________________________________ Note 6 months to 6 months to Year to 30.9.2005 30.9.2006 31.3.2005 (unaudited) (unaudited) (unaudited) £m £m £m________________________________________________________________________________________________________________________Opening balance sheet adjustment: IAS 39 7 0.9 - -Foreign exchange 5 8.3 5.8 1.5Actuarial gain 5 - - 0.5Changes in fair value of cash flow hedges 5 0.3 - -Tax on items taken directly to equity 5 - - (0.2)________________________________________________________________________________________________________________________Net income recognised directly in equity 9.5 5.8 1.8Profit for the period 22.5 34.1 67.6Total recognised income and expense 32.0 39.9 69.4________________________________________________________________________________________________________________________ GROUP BALANCE SHEET _______________________________________________________________________________________________________________________ Note 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited) £m £m £m_______________________________________________________________________________________________________________________Non-current assetsIntangible assets 203.8 189.1 191.9Property, plant and equipment 112.4 119.5 110.9Investments 0.2 0.1 0.2Trade and other receivables 2.5 2.7 2.8Deferred tax asset 18.2 17.7 17.6_______________________________________________________________________________________________________________________ 337.1 329.1 323.4_______________________________________________________________________________________________________________________Current assetsInventories 157.3 139.6 142.3Trade and other receivables 148.0 140.0 145.1Income tax receivables 0.3 0.5 2.2Cash and cash equivalents 58.2 49.9 64.8_______________________________________________________________________________________________________________________ 363.8 330.0 354.4_______________________________________________________________________________________________________________________Current liabilitiesTrade and other payables (120.5) (104.3) (109.5)Loans and borrowings (22.8) (28.1) (27.7)Tax liabilities (12.8) (17.8) (18.7)_______________________________________________________________________________________________________________________ (156.1) (150.2) (155.9)_______________________________________________________________________________________________________________________Net current assets 207.7 179.8 198.5_______________________________________________________________________________________________________________________Total assets less current liabilities 544.8 508.9 521.9_______________________________________________________________________________________________________________________Non-current liabilitiesTrade and other payables (11.1) (11.8) (7.6)Retirement benefit obligations (45.9) (47.5) (47.0)Loans and borrowings (131.7) (82.9) (92.5)Deferred tax liability (21.6) (16.7) (19.1)_______________________________________________________________________________________________________________________Net assets 334.5 350.0 355.7_______________________________________________________________________________________________________________________EquityCalled-up share capital 43.5 43.5 43.5Share premium account 38.4 38.4 38.4Retained earnings 252.6 268.1 273.8_______________________________________________________________________________________________________________________Total equity available to the shareholders of the parent 5 334.5 350.0 355.7_______________________________________________________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT _______________________________________________________________________________________________________________________ Note 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited) £m £m £m_______________________________________________________________________________________________________________________Cash flows from operating activitiesProfit before tax 33.6 49.6 99.9Depreciation and amortisation 11.1 10.9 22.2Employee share options 1.6 1.0 2.4Finance income and expense 1.3 0.1 0.9_______________________________________________________________________________________________________________________Operating profit before changes in working capital 47.6 61.6 125.4Increase in inventories (12.7) (9.8) (13.6)(Increase) decrease in trade and other receivables (0.1) 5.9 9.3Increase (decrease) in trade and other payables 12.6 (1.3) (3.7)_______________________________________________________________________________________________________________________Cash generated from operations 47.4 56.4 117.4Interest paid (1.3) (0.1) (1.3)Income tax (13.8) (15.8) (31.2)_______________________________________________________________________________________________________________________Operating cash flow 32.3 40.5 84.9Cash flows from investing activitiesNet additions to fixed assets (14.2) (12.2) (23.8)_______________________________________________________________________________________________________________________Free cash flow 18.1 28.3 61.1Cash flows from financing activitiesLoans 28.9 2.7 14.2Dividends paid (54.8) (54.8) (80.0)_______________________________________________________________________________________________________________________Net movement in cash and cash equivalents 6 (7.8) (23.8) (4.7)Cash and cash equivalents at the beginning of the year 62.6 72.6 72.6Effects of exchange rates 1.8 0.4 (5.3)_______________________________________________________________________________________________________________________Cash and cash equivalents at the end of the year 56.6 49.2 62.6_______________________________________________________________________________________________________________________ BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the Group, for the year ending 31 March 2006, beprepared in accordance with International Financial Reporting Standards("IFRSs") adopted for use in the EU ("adopted IFRSs"). This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that either areendorsed by the EU and effective (or available for early adoption) at 31 March2006 or are expected to be endorsed and effective (or available for earlyadoption) at 31 March 2006, the Group's first annual reporting date at which itis required to use adopted IFRSs. Based on these IFRSs, the directors have madeassumptions about the accounting policies expected to be applied, which are asset out below, when the first annual IFRS financial statements are prepared forthe year ending 31 March 2006. In particular, the directors have assumed that the following IFRSs issued by theInternational Accounting Standards Board will be adopted by the EU in sufficienttime that they will be available for use in the annual IFRS financial statementsfor the year ending 31 March 2006: Amendments to IAS 19 'Employee benefits' Amendment to IAS 39 'Financial instruments: recognition and measurement - thefair value option' In addition, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31 March 2006are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the year ending 31 March 2006. The comparative figures for the financial year ended 31 March 2005 are not thecompany's statutory accounts for that financial year. Those accounts, whichwere prepared under UK Generally Accepted Accounting Practices ("UK GAAP"), havebeen reported on by the company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was unqualified and did not containstatements under section 237 of the Companies Act 1985. Principal Accounting Policies Basis of preparation The financial statements are presented in £ Sterling and rounded to £0.1m. Theyare prepared on the historical cost basis except certain financial instrumentsdetailed below. The preparation of financial statements in conformity with IFRSs requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates are believed to be reasonable. Actual results maydiffer from these estimates. First time adoption of IFRS (IFRS 1) This Standard has been issued to assist the first time adoption of IFRS. TheStandard allows alternative treatments for certain areas of the financialstatements during the initial transition period. The treatments have beendetailed in the relevant sections. Goodwill and other intangibles Goodwill arising on all acquisitions prior to 31 March 1998 has been written offagainst reserves. Goodwill arising on acquisitions after 1 April 1998 has beencapitalised and, under UK GAAP was amortised on a straight-line basis over itsestimated useful life, with a maximum of 20 years. IFRS 3 requires that, when a subsidiary entity is acquired and consolidated intothe Group financial statements, intangible assets (such as customer lists ortrademarks) are valued and then recognised separately on the balance sheet.These are then amortised over their useful economic lives. Goodwill remains thedifference between the purchase price and the value of the tangible andintangible assets but is likely to be smaller under IFRS. Goodwill will not beamortised under IFRS. Instead the carrying value will be reviewed annually forimpairment and only written down if impaired. The Group has made the elective exemption that allows goodwill in respect ofacquisitions made prior to 1 April 2004 to remain as stated under UK GAAP. Other intangible assets are stated at cost less accumulated amortisation. Thecost of acquired intangible assets are their purchase cost together with anyincidental costs of acquisition. Amortisation is calculated to write off thecost of the asset on a straight-line basis at the following annual rates: Trademarks 5% Computer software costs 12.5-50% Amortisation is disclosed in distribution and marketing expenses in the incomestatement. The residual value, if not insignificant, is reassessed annually.Expenditure on internally generated goodwill and brands is recognised in theincome statement as an expense as incurred. Investments in subsidiary undertakings Investments in subsidiary undertakings including long term loans are included inthe balance sheet of the Company at the lower of cost and the expectedrecoverable amount. Any impairment is recognised in the income statement. Investments in jointly controlled entities The consolidated financial statements include the Group's share of the totalrecognised gains and losses in one jointly controlled entity on an equityaccounted basis. Property, plant and equipment Tangible assets are stated at cost less accumulated depreciation. The cost ofself constructed assets includes the cost of materials, direct labour andcertain direct overheads. Leases in which the Group assumes substantially all of the risks and rewards ofownership are classified as finance leases. Each lease is stated at an amountequal to the lower of its fair value and the present value of the minimum leasepayments at the inception of the lease less accumulated depreciation. No depreciation has been charged on freehold land. Other assets have beendepreciated to residual value, on a straight-line basis at the following annualrates: Freehold buildings 2% Leasehold premises term of lease, not exceeding 50 years Warehouse systems 10-20% Motor vehicles 25% Mainframe computer equipment 20% Network computer equipment 33% Portable computers 50% Other office equipment 20% Depreciation is disclosed in distribution and marketing expenses in the incomestatement. The residual value, if not insignificant, is reassessed annually. Impairment The carrying amounts of the Group's goodwill are reviewed annually to determinewhether there is any indication of impairment. If such an indication exists, theasset's recoverable amount is estimated. The goodwill was tested for impairmentat 1 April 2004, the date of transition to IFRS, in accordance with IFRS 1. An impairment loss is recognised whenever the carrying amount of an asset or itscash generating unit exceeds its recoverable amount. Impairment losses arerecognised in the income statement. The recoverable amount is calculated as thepresent value of estimated future cash flows using a pre tax discount rate thatreflects current market assessments of the time value of money and the risksspecific to the asset. For an asset that does not generate largely independentcash flows, the recoverable amount is determined for the cash generating unit towhich the asset belongs. Inventories Inventories are valued at the lower of cost and net realisable value. This valueis calculated on a weighted average basis. Work in progress and goods for resaleinclude attributable overheads. Trade and other receivables Trade and other receivables are stated at their cost less impairment losses. Government grants Government grants related to expenditure on property, plant and equipment arecredited to the income statement at the same rate as the depreciation on theasset to which the grants relate. The unamortised balance of capital grants isincluded within trade and other payables. Net debt Net debt comprises cash and cash equivalents less borrowings. Cash and cashequivalents comprises cash in hand and held with qualifying financialinstitutions in current accounts or overnight deposits net of overdrafts withqualifying financial institutions. Liquid resources include governmentsecurities, investment in money market funds and term deposits with qualifyingfinancial institutions and are classed as investments under current assets.Borrowings represent term loans from qualifying financial institutions togetherwith capital instruments classified as liabilities. Revenue Revenue from the sale of goods is recognised in the income statement when thesignificant risks and rewards of ownership have been transferred. Revenuerepresents the sale of goods and services and is stated net of sales taxes.Freight recharged to customers is included within revenue. Operating expense classification Cost of sales comprises the cost of goods delivered to customers. Distribution and marketing expenses include all operating company expenses,including freight expenses, together with the Supply Chain, Product Management,Media Publishing, Facilities, Information Systems and e-Commerce processexpenses. Administration expenses comprise Finance, Legal and Human Resources processexpenses, together with the expenses of the Group Board. Net financing costs comprise interest payable on borrowings calculated using theeffective interest rate method, interest receivable on funds invested, foreignexchange gains and losses and gains and losses on hedging instruments that arerecognised in the income statement. Interest income is recognised in the income statement as it accrues, using theeffective interest method. The interest expense component of finance leasepayments is recognised in the income statement using the effective interest ratemethod. Catalogue costs Prior to the issue of a catalogue, all related costs incurred are accrued andcarried as a prepayment. On the issue of a catalogue, these costs are writtenoff over the life of the catalogue, which mainly varies between six and twelvemonths. Major investments in new catalogue production systems are written offover the period during which the benefits of those investments are anticipated,such period not to exceed three years. Operating leases Operating lease rentals are charged to the income statement on a straight-linebasis over the course of the lease period. The benefits of rent free periods andsimilar incentives are credited to the income statement on a straight-line basisover the full lease term. Pension costs In the United Kingdom the Group operates a pension scheme providing benefitsbased on final pensionable pay for eligible employees who joined on or before 1April 2003. The scheme is administered by a corporate trustee and the funds areindependent of the Group's finances. In addition there are defined benefitpension schemes in Germany and Ireland (both closed to new entrants). Contributions to the defined benefit schemes are charged to the income statementso as to spread the cost of pensions over the working lives with the Group ofthose employees who are in the scheme. The Group has elected to adopt theamendment to IAS 19 (revised), which allows the impact of changes in the valueof the deficits to be recorded in the Statement of Recognised Income and Expenserather than the income statement. The Group will also adopt the exemption inIFRS 1 allowing all actuarial gains and losses arising before 1 April 2004 to beshown in the opening balance sheet at 1 April 2004. Annual charges to the incomestatement comprise a service cost and a finance cost both included withinDistribution and Marketing expenses. For UK employees who joined after 1 April 2003 the Group provides a definedcontribution pension scheme. There are also defined contribution schemes inAustralia and North America and government schemes in France, Italy, Denmark andNorth Asia. Obligations for contributions to defined contribution schemes arerecognised as an expense in the income statement as incurred. Share based payment transactions The Group operates several share based payment schemes, the largest of which arethe Savings Related Share Option Scheme (SAYE) and the Long Term IncentiveOption Plan (LTIOP). The fair value of options granted is recognised as an employee expense with acorresponding increase in equity and spread over the period during whichemployees become unconditionally entitled to the options. The fair values arecalculated using an appropriate option pricing model. The income statementcharge is then adjusted to reflect expected and actual levels of vesting basedon non market performance related criteria. The Group's SAYE scheme has beenvalued using a Black-Scholes model and the income statement charge has beenadjusted for forfeitures caused by employees failing to maintain either theiremployment or the required savings. The Group's LTIOP scheme includesperformance criteria based on the Group's total shareholder return performancerelative to a group of 13 comparable companies. The fair value of the LTIOPschemes has been calculated using a Monte Carlo model and the income statementcharge has been adjusted for options forfeited by employees leaving the Group. The consolidated income statement includes the administration expenses of theshare based payment schemes and the consolidated and Company balance sheetsinclude the assets and liabilities of the schemes. Shares in the Company, heldby the trust established to administer the schemes, are shown within reserves. The Group has chosen to adopt the exemption whereby IFRS 2, Share-Based Payment,is applied only to awards made after 7 November 2002. Tax Income tax on the profit or loss for the year comprises current and deferredtax. Current tax is the expected tax payable on the taxable income for the year,using tax rates enacted at the balance sheet date, and any adjustment to taxpayable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. Theamount of deferred tax provided is calculated using tax rates enacted at thebalance sheet date. Financial statements of foreign operations Overseas companies' profits, losses and cash flows are translated at averageexchange rates for the year, and assets and liabilities at rates ruling at thebalance sheet date. This leads to exchange gains and losses being generated onconsolidation. IFRS requires translation differences on the revaluation of theassets and liabilities of overseas subsidiaries to be taken directly to equity.On the disposal of any overseas entity any exchange differences previously takento equity will have to be transferred to the income statement and taken to theGroup profit/loss on disposal of that entity. The elective exemption in IFRS 1 means that any translation differences prior tothe date of transition (1 April 2004) do not need to be analysed retrospectivelyand so the deemed cumulative translation differences at this date can be set tonil. Thus, any cumulative translation differences arising prior to the date oftransition are excluded from any future profit/loss on disposal of any entities.The Group will adopt this exemption. Net investment in foreign operations Exchange differences arising on foreign currency net investments are taken tothe foreign exchange reserve. Foreign currency transactions Transactions in foreign currencies are recorded using the rate of exchangeruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated using the rate of exchangeruling at the balance sheet date and the gains and losses on translation areincluded in the income statement. Financial instruments The Group currently has cash, money market deposits, investments in money marketfunds, overdrafts, money market loans and forward and spot foreign currencycontracts used for cash flow hedging. It also has an external interest rate swapand an internal, inter-company currency swap, both of which are used to hedgespecific loans. These financial instruments are recognised initially at cost. Subsequent toinitial recognition, they are stated at fair value. The gain or loss onremeasurement to fair value is recognised immediately in the income statementunless the instrument qualifies for hedge accounting as detailed below. The Group adopted the exemption delaying the implementation of IAS 32, FinancialInstruments: Disclosure and Presentation, and IAS 39, Financial Instruments:Recognition and Measurement, to the year ending 31 March 2006. The comparativeinformation has not been adjusted. Cash flow hedging Where a financial instrument is designated as a hedge of the variability in cashflows of a highly probable forecast transaction, the effective part of any gainor loss on the financial instrument is taken to equity. The hedge is"effectiveness" tested monthly against the designated exposure. All hedges areincluded on the balance sheet at the fair market value. A hedge is deemed"ineffective" if the forecast transaction is less than 80% or more than 125% ofthe hedged amount. Hedges are revalued monthly with changes in the fair value of"ineffective" hedges taken to the income statement and changes in the fair valueof effective hedges taken to equity. Fair Value Hedging The Group uses derivatives to hedge financial liabilities. The Group designatesthe hedging, documents it and tests its effectiveness monthly at both Group andcompany level. Derivatives and liabilities are disclosed at fair value on thebalance sheet and revalued monthly with movements to the income statement. Net Investment in Foreign Entity Hedging The Group currently uses long term US$ debt to hedge its net equity investmentin the US Group. The Group designates the hedging, documents it and tests theeffectiveness regularly at both Group and Company level. Changes in fair valueare taken to equity. Embedded Derivatives A review is undertaken half yearly of all external, commercial contracts toidentify any material embedded derivatives. Any embedded derivatives aredisclosed on the balance sheet at fair value and revalued monthly with movementsposted to the income statement. NOTES TO THE INTERIM STATEMENT ______________________________________________________________________________________________________ 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited)1 Segmental Reporting £m £m £m______________________________________________________________________________________________________By geographical destination______________________________________________________________________________________________________Revenue: United Kingdom 169.4 173.3 345.2 Continental Europe 124.9 116.2 247.6 North America 63.2 55.6 111.8 Japan 8.4 7.8 17.0 Asia & Rest of World 30.9 26.6 52.3______________________________________________________________________________________________________ 396.8 379.5 773.9____________________________________________________________________________________________________________________________________________________________________________________________________________By geographical origin______________________________________________________________________________________________________Revenue: United Kingdom 176.3 180.0 358.8 Continental Europe 122.8 114.3 243.5 North America 64.1 56.2 112.8 Japan 8.4 7.8 17.0 Asia & Rest of World 25.2 21.2 41.8______________________________________________________________________________________________________ 396.8 379.5 773.9____________________________________________________________________________________________________________________________________________________________________________________________________________Profit before tax: United Kingdom 46.5 53.7 105.7 Continental Europe 26.7 24.6 55.5 North America 8.6 7.5 15.7 Japan 0.2 0.6 1.5 Asia & Rest of World 3.1 1.8 4.0 ______________________________________________________________________________________________________ Contribution - before reorganisation costs 85.1 88.2 182.4 Group process costs (48.5) (38.5) (81.6) Reorganisation costs (1.7) - - Net interest payable (1.3) (0.1) (0.9)______________________________________________________________________________________________________Profit before tax 33.6 49.6 99.9______________________________________________________________________________________________________ ______________________________________________________________________________________________________ 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited)2 Taxation on the profit of the Group £m £m £m______________________________________________________________________________________________________United Kingdom taxation 4.3 8.9 18.9Overseas taxation 6.8 6.6 13.4______________________________________________________________________________________________________ 11.1 15.5 32.3______________________________________________________________________________________________________ _____________________________________________________________________________________________________ 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited)3 Earnings per share £m £m £m_____________________________________________________________________________________________________Profit after taxation but before reorganisation costs 23.6 34.1 67.6Reorganisation costs (1.7) - -Taxation on reorganisation costs 0.6 - -_____________________________________________________________________________________________________Profit after taxation 22.5 34.1 67.6_____________________________________________________________________________________________________Weighted average number of shares 434.9m 434.9m 434.9mDiluted weighted average number of shares 435.2m 436.7m 435.0m_____________________________________________________________________________________________________Basic earnings per share before reorganisation costs 5.4p 7.8p 15.5pBasic earnings per share after reorganisation costs 5.2p 7.8p 15.5p_____________________________________________________________________________________________________Diluted earnings per share before reorganisation costs 5.4p 7.8p 15.5pDiluted earnings per share after reorganisation costs 5.2p 7.8p 15.5p_____________________________________________________________________________________________________ _____________________________________________________________________________________________________ 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited)4 Interim dividend £m £m £m_____________________________________________________________________________________________________Amounts recognised in the period:Final dividend for the year ended 31 March 2005 - 12.6p (2004: 54.8 54.8 54.812.6p)Interim dividend for the year ended 31 March 2005 - 5.8p 25.2_____________________________________________________________________________________________________ 54.8 54.8 80.0_____________________________________________________________________________________________________Amounts determined after the balance sheet date:Interim dividend for the year ended 31 March 2006 - 5.8p 25.2_____________________________________________________________________________________________________The timetable for the payment of the interim dividend is: Ex-dividend date 14 December 2005Dividend record date 16 December 2005Dividend payment date 19 January 2006 _____________________________________________________________________________________________________ 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited)5 Reconciliation of movements in equity £m £m £m_____________________________________________________________________________________________________Profit for the period 22.5 34.1 67.6Dividends (54.8) (54.8) (80.0)_____________________________________________________________________________________________________Loss for the period (32.3) (20.7) (12.4)Translation differences 8.3 5.8 1.5Actuarial gain on defined benefit pension scheme - - 0.5Changes in the fair value of cash flow hedges 0.3 - -Tax impact of adjustments taken directly to equity - - (0.2)Equity settled transactions 1.6 1.0 2.4_____________________________________________________________________________________________________Net reduction in equity (22.1) (13.9) (8.2)_____________________________________________________________________________________________________Equity shareholders' funds at the beginning of the period 355.7 363.9 363.9Opening balance sheet adjustment: IAS 39 0.9Equity shareholders' funds at the beginning of the period as 356.6restated_____________________________________________________________________________________________________Equity shareholders' funds at the end of the period 334.5 350.0 355.7_____________________________________________________________________________________________________ _________________________________________________________________________________________________________ 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited)6 Reconciliation of movements in cash and cash equivalents £m £m £m_________________________________________________________________________________________________________Reduction in cash and cash equivalents (7.8) (23.8) (4.7)Translation differences on cash and cash equivalents 1.8 0.4 (5.3)_________________________________________________________________________________________________________Movement in cash and cash equivalents (6.0) (23.4) (10.0)Movement in loan balances (28.9) (2.7) (14.2)Translation differences on loan balances (6.0) (0.5) 3.3Net debt at the beginning of the period (55.4) (34.5) (34.5)_________________________________________________________________________________________________________Net debt at the end of the period (96.3) (61.1) (55.4)_________________________________________________________________________________________________________Net debt at the end of the period comprises:Cash at bank and in hand 58.2 49.9 64.8Overdrafts (1.6) (0.7) (2.2)Current instalments of loans (21.2) (27.4) (25.5)Loans repayable after more than one year (131.7) (82.9) (92.5)_________________________________________________________________________________________________________ (96.3) (61.1) (55.4)_________________________________________________________________________________________________________ 7 Opening balance sheet adjustment - adoption of IAS32 and IAS39 The Group adopted IAS 32 Financial Instruments: Disclosure and Presentation andIAS 39 Financial Instruments: Recognition and Measurement from 1 April 2005 aspermitted by IFRS 1 First-time Adoption of International Financial ReportingStandards. An adjustment has therefore been made to include these balances inthe opening equity balances for the half year to 30 September 2005. Inaccordance with IFRS 1, comparative information has not been restated. The opening adjustment for the Group represents the difference between the bookvalue and the market value of its forward foreign exchange contracts as at 1April 2005. This has the effect of increasing opening equity by £0.9m and increasing tradeand other receivables by £0.9m. ____________________________________________________________________________________________ 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 (unaudited) (unaudited) (unaudited)8 Principal exchange rates____________________________________________________________________________________________Average for the periodEuro 1.47 1.49 1.47Japanese Yen 199 198 198United States Dollar 1.82 1.82 1.85____________________________________________________________________________________________ 30.9.2005 30.9.2004 31.3.2005____________________________________________________________________________________________ Period endEuro 1.47 1.46 1.46Japanese Yen 200 199 202United States Dollar 1.76 1.81 1.89____________________________________________________________________________________________ 9 First time adoption of International Financial Reporting Standards IFRS 1: First time adoption of International Financial Reporting Standardsrequires reconciliations of total equity and income from UK GAAP to IFRS. Thisis summarised further below. Further details of all the adjustments wereannounced on 12 July 2005. ____________________________________________________________________________________________ 31.3.2005 30.9.2004 1.4.2004 (unaudited) (unaudited) (unaudited)Reconciliation of equity from UK GAAP to IFRS £m £m £m____________________________________________________________________________________________Total equity under UK GAAP 330.7 356.7 344.4IFRS adjustments Share based payments 1.3 1.3 0.5Employee benefits (37.0) (36.2) (35.7)Goodwill 6.0 3.1 -Dividends 54.8 25.2 54.8Other (0.1) (0.1) (0.1)____________________________________________________________________________________________Total equity under IFRS 355.7 350.0 363.9____________________________________________________________________________________________ ____________________________________________________________________________________________ Year to 6 months to 31.3.2005 30.9.2004 (unaudited) (unaudited)Reconciliation of profit from UK GAAP to IFRS £m £m____________________________________________________________________________________________Profit attributable to shareholders for the period under UK GAAP 64.7 31.8IFRS adjustmentsShare based payments (2.4) (1.0)Employee benefits (2.1) (0.9)Goodwill 9.4 4.8Taxation on above adjustments (2.0) (0.6)____________________________________________________________________________________________Profit attributable to shareholders for the period under IFRS 67.6 34.1____________________________________________________________________________________________ None of the IFRS adjustments affect the free cash flow of the Group. Independent review report to Electrocomponents plc Introduction We have been engaged by the company to review the financial information set outon pages 9 to 21 and we have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility to anyone other than the Companyfor our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of and has been approved by the Directors. The Directors areresponsible for preparing the interim report in accordance with the ListingRules which require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing thepreceding annual financial statements except where any changes, and the reasonsfor them, are disclosed. As disclosed in the basis of preparation and principal accounting policies, thenext annual financial statements of the Group will be prepared in accordancewith the IFRSs adopted for use in the European Union. The accounting policies that have been adopted in preparing the financialinformation are consistent with those that the Directors currently intend to usein the next annual financial statements. There is, however, a possibility thatthe Directors may determine that some changes to these policies are necessarywhen preparing the full annual financial statements for the first time inaccordance with those International Financial Reporting Standards adopted foruse by the European Union. This is because, as disclosed in the basis ofpreparation and principal accounting policies, the directors have anticipatedthat certain standards, which have yet to be formally adopted for use in the EU,will be so adopted in time to be applicable to the next annual financialstatements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4Review of interim financial information issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review is substantially lessin scope than an audit performed in accordance with Auditing Standards 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. KPMG Audit Plc Chartered Accountants London 8 November 2005 This information is provided by RNS The company news service from the London Stock Exchange