H&t Group Plc Regulatory News (HAT)

31 Aug 2006 07:00

H&T Group PLC31 August 2006 H&T Group plc "H&T" or "the Group" H&T Group plc, which trades under the H&T Pawnbrokers and Get>Go brands, is theUK's leading pawnbroking business by size of pledge book. The Group todayannounces its Interim Results, for the period ended 30 June 2006. Financial highlights 6 months 6 months to 30 June to 30 June 2006 2005 Change £m £m %Gross profit 10.8 9.4 +14.1Earnings before Interest, Tax, Depreciation, Amortisation (EBITDA) 3.9 3.4 +12.6before exceptional itemsOperating profit before exceptional items 2.9 2.4 21.0Operating profit 1.0 2.4 -59.3Pledge book 24.3 23.7 +2.3 Operational highlights • Store expansion programme on track with one new store opened in H1 2006 and two further stores opened since the end of June 2006 • In-house cheque cashing & pay day advance underwriting and collecting facilities • Pre-paid debit cards now available in all stores • Admission to AIM on 8 May 2006 with share price of 172 pence per share Peter Middleton, Chairman said: "I am very happy to present H&T's maiden Interim Results as a public company.The period has included the major achievement of an initial public offering onAIM which was well supported primarily by UK institutional investors. Theresults announced today show continued progress and growth and provides a strongfoundation for the Group going forward. Overall, this has been an excellentstart for H&T as a public company." John Nichols, CEO said "Whilst pawnbroking will remain both the core of our business and a major growthdriver, we continue to develop new products within our financial servicesoffering. Pay Day Advance, Kwikloan, our pre-paid debit cards and Get>Go, ouralternative financial services outlet, are progressing well and I believe thatthey offer valuable growth potential. I look forward to the full year with confidence." 31 August 2006 For further information please contact: H&T Group plc John Nichols, Chief Executive 0870 9022 600 Hawkpoint Partners Limited (Nominated adviser)Lawrence Guthrie/Sunil Duggal 020 7665 4500 Numis Securities Limited (Broker)Oliver Hemsley/Charles Farquhar 020 7776 1500 College Hill Associates (PR)Gareth David/Paddy Blewer 020 7457 2020 Notes to Editors H&T is the UK's leading pawnbroking business by size of pledge book. Thebusiness was founded in 1897 and now has 71 outlets across the UK andapproximately 300 employees. H&T's outlets offer a range of services including pawnbroking, cheque cashingand unsecured loans. H&T is also a retailer of jewellery, both second-handitems sourced from its pawnbroking operations and a relatively small number ofnew products brought in for re-sale. H&T provides lending solutions designed to meet the financing needs ofindividuals who may not satisfy the lending criteria of high street banks. Asthese individuals are not adequately serviced by mainstream lenders, theDirectors believe that it is an attractive niche market. The Directors believethat H&T has developed strong client relationships founded on its ability toreach lending decisions quickly and the emphasis on customer service, evidencedby repeat business where a single item may be pawned more than once. Newcustomers are typically sourced through passing trade at the Company's highstreet and shopping mall locations, introductions from existing clients andadvertising. In May 2006 H&T was admitted to AIM, placing shares worth £49 million, at 172pence per share. The Daily Official List closing share price on 29 August 2006was 182.5 pence giving the Group a market capitalisation of £57.5 million. Report of the Chief Executive Officer and Finance Director The first half of 2006 brought an exciting transformation for H&T, with thesuccessful admission to AIM in May which attracted investment from a number ofleading UK institutions. The Board is very pleased to be able to report apositive trading performance which saw an increase in gross profit of 14.1% to£10.8 million from £9.4 million in the equivalent period last year. The pawnbroking segment of the business performed well with gross profitincreasing by 13.1% on the equivalent period last year, driven by strong cashcollections. Although there is evidence that consumer discretionary spend hasbeen under pressure, the Group has responded to the challenge with both revenueand margin for H1 2006 ahead of the same period last year. The financial services operation made further strong progress with an increasein gross profit of 24.4% on the equivalent period last year, driven by growthacross the product range including cheque cashing, pay day advance and Kwikloan. The Group has also brought the authorisations and collections "in house",resulting in an improvement in margin. In line with the Group's growth strategy, we have continued to grow our estatewith one new store opening in the first half of the year and two further newstore openings since 30 June. On the product side, we are continuing to investin our recently launched alternative financial products, such as Kwikloan andour pre- paid debit card, as well as trialling new product initiatives. OPERATIONAL REVIEW Pawnbroking: - Pawnbroking activities contributed £9.7 million (H1 2005: £8.6 million) or 91% of Group gross profit in H1 2006 (H1 2005: 91%). - The pledge book totalled £24.3 million at 30 June 2006 compared with £23.7 million at the same time in 2005. The current pledge book represents a small decrease on the 31 December 2005 position (£24.4 million) due to seasonal factors. - Pawn Service Charge (PSC) rose by 8.3% to £7.6 million (2005: £7.0 million). - Disposition combines contribution from retail and scrap. Difficult high street trading conditions experienced in the sector in the second half of 2005 continued in the first half of 2006 and consequently retail gross revenues were 2.3% down on prior year. However, the revision of the retail pricing policy proved successful with the gross profit margin rising from 38.4% to 43.7%. As a result, the retail gross profit increased by 11.1% to £1.6 million (2005: £1.4 million). Scrap sales benefited from the rise in the gold price showing an increase of £0.4 million in gross margin. Financial services: - Financial services activities contributed £1.1 million (H1 2005: £0.9 million) or 9% of Group gross profit in H1 2006 (H1 2005: 9%). - In January 2006, the arrangements for the underwriting of cheque cashing and pay day advances with the The Money Shop were terminated. The transition to in-house facilities has proved successful generating a positive contribution from the outset. - Kwikloan, the Group's unsecured loan product, was fully rolled out at the end of 2005 and exhibited good growth in H1 2006. However, the Kwikloan book remains small and the product's contribution to Group results remains limited at present. - The pre-paid debit card product has attracted new customers to the stores although, as anticipated, it has made an immaterial direct financial contribution to the H1 results. However, the Board believes there is considerable potential for this product going forward. STRATEGY REVIEW H&T's admission document produced in connection with its admission to AIM,presented the growth strategy on four main streams: - Expand geographical footprint: The Group opened one new store in H1 2006 in Hastings. Two further new stores in Irvine and Basildon have been opened since 30 June 2006, taking the current number of stores to 71. Leases have been signed in respect of three further sites and subject to planning consents these stores will be opened during the second half of 2006. The Board also continues to review acquisition opportunities to expand the Group's estate on an ongoing basis. - Establish recently introduced products and services: The pre-paid debit cards are attracting new customers to stores and the Group continues to invest in the Kwikloan product. - New store format Get>Go: The Group is planning to add a further store in the Get>Go format, which focuses on cheque cashing and other financial services. A pawnbroking offering presented as "cash lent on gold" is currently being launched within this store format. - New products: A trial of a new referral loans service is currently planned for the second half of 2006. Staff incentives The Group has put in place both an approved and an unapproved share optionscheme. The approved scheme will enable share options to be granted to storemanagement as well as operational staff and should provide a strong incentivefor staff to contribute to the success of the Group. Trading outlook The Board is pleased with the overall trading performance of the Group whichremains in line with its expectations. Seasonality within the business means that the second half of the year tends tomake a larger contribution to the full year result than the first half. Theextent of this is affected by retail sentiment, particularly during theChristmas period. The business has good prospects for organic growth which willbe driven by further branch openings in the second half of the year. FINANCIAL REVIEW Turnover and gross profit Turnover for the first six months of 2006 amounted to £14.5 million comparedwith £13.6 million for the corresponding period in 2005. This 6.2% increase wasdriven by strong PSC and scrap sales. The improvement in retail gross margin andscrap gross profit resulted in an increase in total gross profit of 14.1% to£10.8 million (2005: £9.4 million). Administrative expenses The Group's administrative expenses before exceptional items in the first sixmonths of 2006 were £7.9 million compared with £7.1 million for the same periodin 2005. This 11.9% increase was due to nine additional stores and theintroduction of the new cheque cashing authorisation and debt collectionfacility. Exceptional expenses of £1.9 million were incurred as part of theInitial Public Offer (IPO). Operating profit The Group recorded an operating profit before exceptional items of £2.9 millionfor the period compared with £2.4 million in the previous period. Earningsbefore interest, taxation, depreciation, amortisation and exceptional items(EBITDA before exceptional items) increased by 12.6% to £3.9 million (2005: £3.4 million). After taking account of the exceptional items, operating profit was£1.0 million in the six months ended 30 June 2006 compared with £2.4 million inthe same 2005 period. Interest payable and similar charges Interest payable before exceptional items decreased by £0.3 million from £2.6million in the first six months of 2005 to £2.3 million in 2006. This reductionhas arisen as a result of the repayment of the Rutland loan notes and therestructuring of bank facilities at the time of H&T's admission to AIM in May2006. This restructuring incurred an exceptional charge of £0.8 million in theperiod. Had this restructuring and IPO been effective as from the beginning ofthe year, the Board estimates that the interest payable before exceptional itemswould have been £1.6 million for H1 2006. Profit/(loss) before taxation The Group has recorded a loss before taxation of £2.3 million in H1 2006compared with a profit before taxation of £0.4 million in H1 2005. The result inH1 2006 was impacted by exceptional costs consisting of £1.9 million ofexceptional administrative expenses relating to H&T's admission to AIM and £0.8million of debt restructuring costs. Profit before taxation and exceptionalitems in H1 2006 was £0.4 million compared to a loss of £0.5 million in H1 2005. (Loss)/Earnings per share Basic loss per share for H1 2006 was 9.88 pence compared with basic earnings pershare of 0.83 pence in H1 2005. After adjusting for exceptional items, adjustedbasic loss per share for H1 2006 was 0.08 pence compared with adjusted basicloss per share of 2.42 pence in H1 2005. IPO/New debt structure Following the IPO of H&T, a new debt structure was put in place. The mezzaninedebt (£5.2 million) and the Rutland loan notes (£18.3 million) were repaid withthe placing proceeds and an increase in other banking facilities provided byBarclays Bank PLC. Net debt (before unamortised debt issue costs) was £35.8million at 30 June 2006 compared with £52.7 million at 30 June 2005. Hedging policy The Group entered into a hedging agreement fixing the interest rate on £35.0million of banking debt for a period of 3 years. This instrument was effectivefrom 30 June 2006. Dividends The Directors intend to pay a dividend of approximately 3 pence per ordinaryshare in respect of the financial year ending 31 December 2006. The Directorsintend this to be declared as a final dividend and paid in April 2007. J. G. Nichols L P GenthialonChief Executive Officer Finance Director 31 August 2006 H&T Group plc Unaudited consolidated Profit and Loss Account Six months Ended 30 June 2006 Before Exceptional Six months Before Exceptional Six months Exceptional Items ended Exceptional Items ended Items 30 June Items 30 June 2006 2005 Total Total Note £'000 £'000 £'000 £'000 £'000 £'000 Turnover 14,478 - 14,478 13,636 - 13,636Cost of sales (3,717) - (3,717) (4,208) - (4,208)Gross profit 2 10,761 - 10,761 9,428 - 9,428 Administrative expenses 3 (7,904) (1,896) (9,800) (7,066) - (7,066)Operating profit/(loss) 2,857 (1,896) 961 2,362 - 2,362 Profit on disposal of 4 - - - - 898 898fixed assetsInterest receivable and 11 - 11 12 - 12similar incomeInterest payable and 5 (2,479) (800) (3,279) (2,909) - (2,909)similar chargesProfit/(loss) on ordinary 389 (2,696) (2,307) (535) 898 363activities before taxation Tax on (loss)/profit on 6 (408) 400 (8) 52 (250) (198)ordinary activities(Loss)/profit for the 11 (19) (2,296) (2,315) (483) 648 165period (Loss)/earnings per share 7 (9.88) p 0.83 p- basic(Loss)/ earnings per 7 (9.88) p 0.79 pshare - diluted Adjusted loss per share - 7 (0.08) p (2.42) pbasicAdjusted loss per share - 7 (0.08) p (2.32) pdiluted The consolidated Profit and Loss account for the 12 months ended 31 December 2005 is provided in note 1. H&T Group plc Unaudited consolidated Balance Sheet As at 30 June 2006 30 June 2006 30 June 2005 31 December 2005 Note £'000 £'000 £'000Fixed AssetsIntangible assets - goodwill 13,962 14,197 14,346Tangible 5,437 4,920 5,144 19,399 19,117 19,490 Current AssetsStock 4,277 4,534 3,373Debtors 31,185 30,658 31,526Cash at bank and in hand 1,220 2,101 1,434 36,682 37,293 36,333 Creditors: amounts falling due within 8 (4,589) (2,855) (3,569)one year Net Current Assets 32,093 34,438 32,764 Total Assets Less Current Liabilities 51,492 53,555 52,254 Creditors: amounts falling due after 9 (34,846) (52,409) (50,990)more than one year Provisions for liabilities & charges (143) (171) (133) Net Assets 16,503 975 1,131 Capital and ReservesCalled up share capital 10,11 1,574 1,000 1,000Share premium account 11 17,113 - -Profit and loss account 11 (2,184) (25) 131 Shareholders' Funds 11 16,503 975 1,131 H&T Group plc Unaudited consolidated Cash Flow Statement Six months ended 30 June 2006 Six months Six months ended ended Year ended 30 June 30 June 31 December 2006 2005 2005 Note £'000 £'000 £'000 Net cash inflow from operating activities 12 3,020 686 5,421 Returns on investment and servicing of financeInterest received 11 12 16Debt restructuring cost (800) - -Interest paid (1,299) (1,423) (2,850)Net cash outflow from returns on investments andservicing of finance (2,088) (1,411) (2,834) Taxation - corporation tax paid (150) (437) (806) Capital expenditure and financial investmentPayments to acquire tangible fixed assets (1,462) (268) (910)Sales of tangible fixed assets 42 999 1,074Net cash (outflow)/inflow from capitalexpenditure and financial investment (1,420) 731 164 Acquisitions and disposalsPurchase of businesses - (390) (636)Cash acquired with unincorporated businesses - - 3Net cash outflow from acquisitions and disposals - (390) (633) FinancingIssue of shares 18,364 - -Expenses of share issue (677) - -New borrowings 6,400 2,800 500Repayment of borrowings (23,663) (500) (1,000)Net cash inflow/(outflow) from financing 424 2,300 (500) (Decrease)/increase in cash in the period (214) 1,479 812 H&T Group plc Unaudited Notes to the Interim Statement Six months ended 30 June 2006 Note 1 Consolidated profit and loss account for the 12 months ended 31 December2005 Note Before Total Exceptional Exceptional Items Items £'000 £'000 £'000 Turnover 29,638 - 29,638Cost of sales (9,576) - (9,576)Gross profit 2 20,062 - 20,062 Administrative expenses 3 (14,354) - (14,354)Operating profit 5,708 - 5,708 Profit on disposal of fixed assets 4 - 898 898Interest receivable and similar income 16 - 16Interest payable and similar charges 5 (5,860) - (5,860)(Loss)/profit on ordinary activities before (136) 898 762taxation Tax on (loss)/profit on ordinary activities 6 (191) (250) (441)(Loss)/profit for the financial year 11 (327) 648 321 Earnings per share - basic 7 1.61 pEarnings per share - diluted 7 1.54 p Adjusted loss per share - basic 7 (1.64) pAdjusted loss per share - diluted 7 (1.57) p Note 2 Gross profit analysis Six months Six months ended ended Year ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Pawn service charge (PSC) 7,615 7,029 14,258 Retail 1,552 1,397 3,561Scrap 537 152 484Disposition 2,089 1,549 4,045 Other financial services 1,057 850 1,759Total gross profit 10,761 9,428 20,062 Pawn service charge principally comprises interest on loans, plus auction profit and loss, less any auctioncommissions payable and less surplus payable to the customer. Retail is the gross margin made on retail sales less direct costs. Scrap is the proceeds from scrap less the pledge value of the item and associated disposition cost. Other financial services includes cheque cashing commission, pay day advances commission, Kwikloan interest,prepaid debit card commission, netted off with any bad debt write off or provision associated with any ofthese products. H&T Group plc Unaudited Notes to the Interim Statement (continued) Six months ended 30 June 2006 Note 3 Administrative expenses Six months ended Six months ended Year ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Other administrative expenses 6,900 6,000 12,217Depreciation charge on owned tangible fixed 620 699 1,361assetsAmortisation charge on intangible fixed 384 367 776assetsTotal administrative expenses before 7,904 7,066 14,354exceptional itemsExceptional items (IPO expenses - note 13) 1,896 - -Total administrative expenses 9,800 7,066 14,354 Note 4 Exceptional items for the six months ended 30 June 2005 and the yearended 31 December 2005 During the first six months of 2005, the Group disposed of three freeholdproperties, two of which were leased back under operating leases. The profitarising on disposal amounted to £898,000. Note 5 Interest payable and similar charges Six months ended Six months ended Year ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Interest payable on bank loans and overdraft 1,360 1,521 3,023On Rutland loan notes * 896 1,088 2,273Other interest 15 3 29Amortisation of debt issue costs 208 297 535 2,479 2,909 5,860Exceptional items ** 800 - -Total interest payable and similar charges 3,279 2,909 5,860 * The Rutland loan notes interest for the 2006 period ceased to accrue on 12 May2006 when the loan notes were fully repaid. ** The £800k charge in the six month period ended 30 June 2006 relates to costsexpensed associated with the arrangement fees of the bank loan restructuringdisclosed in note 9. H&T Group plc Unaudited Notes to the Interim Statement (continued) Six months ended 30 June 2006 Note 6 Tax on (loss)/profit on ordinary activities The taxation on profit/(loss) on ordinary activities before exceptional itemsassessed for the 6 months ended 30 June 2006 is higher than that resulting fromapplying the standard rate of corporation tax in the UK of 30% (2005 - 30%). Thedifferences are explained below: Six months ended Six months ended Year ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Profit/(Loss) on ordinary activities before 389 (535) 762taxationTaxation on profit/(loss) on ordinary activities 117 (161) 229before taxationEffects of:Disallowed expenses and non taxable income 99 140 348Capital allowances and other timing differences 43 (48) (82)Short term timing differences 139 4 9Disposal of properties - - (23)Adjustments to tax charge in respect of previous - - (104)periodsTotal actual amount of current tax 398 (65) 377Deferred tax 10 13 64Tax on profit/(loss) on ordinary activities 408 (52) 441 Tax on exceptional items The £400k tax credit on exceptional items for the 6 month period ended 30 June2006 is based on £160k available relief for IPO expenses and £240k availablerelief for the debt restructuring costs. The £250k tax on exceptional items forthe 6 months ended 30 June 2005 and for the year ended 31 December 2005 is dueto the gain on the disposal of tangible fixed assets. H&T Group plc Unaudited Notes to the Interim Statement (continued) Six months ended 30 June 2006 Note 7 (Loss)/Earnings per share Basic (loss)/earnings per share is calculated by dividing the profit on ordinaryactivities after taxation by the weighted average number of ordinary shares inissue during the period. For diluted (loss)/earnings per share, the weightedaverage number of ordinary shares in issue is adjusted to assume the exercise ofwarrants over shares. Reconciliations of the (loss)/earnings per ordinary shares and weighted averagenumber of shares used in the calculations are set out below: Six months ended Six months ended Year ended 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000(Loss)/profit after taxation used for Basic andDiluted (L)/EPS (2,315) 165 321IPO costs 1,896 - -Profit on fixed assets disposal - (898) (898)Debt restructuring costs 800 - -Tax relating to IPO costs, profit on fixed assetsdisposal and debt restructuring costs (400) 250 250Loss after taxation used for Adjusted Basic and (19) (483) (327)Diluted (L)/EPS Weighted average number of shares used for Basicand Adjusted Basic (L)/EPS 23,426,675 20,000,000* 20,000,000*Assumed conversion of warrants - 833,340* 833,340*Diluted weighted average number of shares 23,426,675 20,833,340 20,833,340 * Reflects the subdivision of the ordinary shares from 100p to 5p The Adjusted loss per share is presented as the directors consider that itreflects the group results on a comparable basis once non recurring items aretaken into consideration. All the adjustments made to the non-adjusted (loss)/earnings per share in arriving at adjusted (loss)/earnings per share are forexceptional items disclosed separately on the face of the profit and lossaccount. Note 8 Creditors: Amounts falling due within one year At 30 June At 30 June At 31 December 2006 2005 2005 £'000 £'000 £'000 Short term 1,250 1,250 1,500portion ofbank loan Unamortised (207) (577) (518)debt issuecosts Net 1,043 673 982short-termportion ofbank loans Trade 1,034 579 859creditors Corporation - 377 73tax Other 967 133 239taxationand socialsecuritycosts Accruals 1,545 1,093 1,416anddeferredincome 4,589 2,855 3,569 H&T Group plc Unaudited Notes to the Interim Statement (continued) Six months ended 30 June 2006 Note 9 Creditors: Amounts falling due after more than one year At 30 June 2006 At 30 June 2005 At 31 December 2005 £'000 £'000 £'000 Facility A 13,750 11,250 10,500Facility B 22,000 20,900 18,600Mezzanine debt - 5,164 5,265Bank loans 35,750 37,314 34,365Unamortised issue costs (904) (1,145) (801)Rutland loan notes - 16,240 17,426 34,846 52,409 50,990 The Group restructured its banking arrangements at the time of the IPO. As aresult, the mezzanine debt was fully repaid, the Facility A loan was increasedto £15.0m, the Facility B was increased (enabling the Group to draw down to amaximum amount of £29.0m based on the value of the Group's pledge book and a£3.0m working capital facility was made available. The Group does not considerthese facilities as new debt but as a restructuring of its existing facilitiesand accordingly the arrangement and associated fees incurred have been expensedin the period. The proceeds to the Group from the IPO were used to repay in fullthe £18.3m balance of Rutland loan notes. Note 10 Called up share capital At 30 June 2006 At 30 June 2005 At 31 December 2005 £ £ £Authorised:830,000 Ordinary A-class shares of £1 each - 830,000 830,000110,000 Ordinary B-class shares of £1 each - 110,000 110,00060,000 Ordinary C-class shares of £1 each - 60,000 60,00041,667 Ordinary D-class shares of £1 each - 41,667 41,66741,970,000 Ordinary shares of £0.05 each 2,098,500 - - 2,098,500 1,041,667 1,041,667 Allotted, called up and fully paid830,000 Ordinary A-class shares of £1 each - 830,000 830,000110,000 Ordinary B-class shares of £1 each - 110,000 110,00060,000 Ordinary C-class shares of £1 each - 60,000 60,00031,485,706 Ordinary shares of £0.05 each 1,574,285 - - 1,574,285 1,000,000 1,000,000 The cumulative authorised share capital as at 31 December 2005 of £1,041,667 hasbeen sub-divided during the six months ended 30 June 2006 into one class ofordinary 5p share comprising 20,833,340 shares. 21,136,660 new ordinary sharesof 5p each have been authorised in the six months ended 30 June 2006 taking theauthorised ordinary share capital to 41,970,000 shares. Of these 21,136,660 newordinary shares, 10,652,366 were issued, called up and fully paid at the placingprice of £1.72 per share upon the admission of the Group to AIM on 8 May 2006. H&T Group plc Unaudited Notes to the Interim Statement (continued) Six months ended 30 June 2006 Note 11 Combined reconciliation of movement in shareholders' funds & statementof movements on reserves Share Share premium Profit and loss Total capital account account £'000 £'000 £'000 £'000 At 1 January 2005 1,000 - (190) 810Retained profit for the period - - 165 165At 30 June 2005 1,000 - (25) 975Retained profit for the period - - 156 156At 31 December 2005 1,000 - 131 1,131Retained loss for the period - - (2,315) (2,315)Issue of share capital 574 17,790 - 18,364Issue expenses - (677) - (677)At 30 June 2006 1,574 17,113 (2,184) 16,503 Note 12 Cash flow from operating activities Six months Six months ended ended Year ended 30 June 30 June 31 December 2006 2005 2005Continuing operations £'000 £'000 £'000 Operating profit 961 2,362 5,708 Amortisation of intangible assets 384 367 776Profit on disposal of fixed assets (7) - (20)Depreciation of tangible fixed assets 620 699 1,361(Increase)/decrease in stock (904) (712) 456Decrease/(increase) in debtors 431 (2,170) (3,429)Increase in creditors 1,535 140 569Net cash inflow from operating activities 3,020 686 5,421 Note 13 Initial Public Offer (IPO) costs In the six months ended 30 June 2006, the Group incurred £3.4m of expensesrelating to the IPO and its debt restructuring. £0.8m was incurred for therestructuring of its debt and accordingly was expensed to the profit and lossaccount (note 5). £0.7m was directly allocated to the issue of new shares andwritten off to the share premium account (note 11). The balance of £1.9m wasexpensed to the profit and loss account (note 3). H&T Group plc Unaudited Notes to the Interim Statement (continued) Six months ended 30 June 2006 Note 14 Reconciliation of the Earnings before Interest, Tax, Depreciation andAmortisation (EBITDA) before exceptional items to Operating Profit beforeexceptional items Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000 Operating profit before exceptional items 2,857 2,362 5,708 Add depreciation 620 699 1,361Add amortisation 384 367 776EBITDA before exceptional items 3,861 3,428 7,845 Note 15 Statutory information These results have been prepared on the basis of the UK generally acceptedaccounting principles (GAAP) and accounting policies set out in the Group's 2005audited statutory accounts. These results do not constitute the Group statutoryaccounts for the periods ended 30 June 2006 or 30 June 2005 within the meaningof section 240 of the Companies Act 1985. Financial information for the periodended 31 December 2005 is extracted from the Group financial statements for theyear ended 31 December 2005, which was reported on by the Group's auditors,Deloitte & Touche LLP, and have been filed with the Registrar of Companies. Thereport of the auditors thereon was unqualified and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange