VTC.L Regulatory News (VTC)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

14 August 2014

The Vitec Group plc

Half Year Results to 30 June 2014

Revenue 3.8% higher and operating profit* up 6.3% at constant exchange rates

The Vitec Group plc ("Vitec" or "The Group"), the international provider of products and services for the Broadcast and Video, Photographic, and MAG (Military, Aerospace and Government) markets, announces its results for the half year ended 30 June 2014.

Key Points

* Before restructuring costs and charges associated with acquired businesses. Restructuring costs in H1 2014 were £0.9 million (H1 2013: £6.2 million). Charges associated with acquired businesses were £1.7 million (H1 2013: £1.3 million) consisting of £1.5 million for the amortisation of acquired intangible assets (H1 2013: £1.3 million) and £0.2 million transaction costs (H1 2013: £nil).

** Organic CER: At Constant Exchange Rates on a comparative basis, excluding year on year effect of acquisitions.

Commenting on the results, Stephen Bird, Group Chief Executive, said:

"Our results for the first half of 2014 were in line with our expectations. Our markets remained challenging and, as expected, foreign exchange rates negatively impacted our revenue and profits. At constant exchange rates, revenue and operating profit* were 3.8% and 6.3% respectively ahead of the prior period. Despite the headwinds mentioned above, we maintained margins whilst delivering our strategy of focusing on our core markets supplemented with selective value-adding acquisitions.

Within the Videocom Division, the Broadcast & Video activities performed well in a variable market including a strong performance from Teradek, acquired in the second half of 2013. We have decided to exit our IMT business, which serves the MAG market and is a relatively small part of the Division, and focus Videocom on its core broadcast activities. 

The Imaging Division has seen a continuation of challenging market conditions, particularly in the US, but we have consolidated our market share in key markets. The Services Division had a strong first half including contracts to support the Sochi Winter Olympics and FIFA World Cup.

Although our order book visibility remains limited, the Board's expectations for the full year are unchanged."

Enquiries:

Notes

1. This statement is based on information sourced from management estimates.

2. Current market exchange rates as at 12 August 2014: £1 = $1.68, £1 = €1.26, €1 = $1.34, £1 = Yen172.

3. H1 2014 average exchange rates: £1 = $1.67, £1 = €1.22, €1 = $1.37, £1 = Yen171.

4. H1 2013 average exchange rates: £1 = $1.54, £1 = €1.17, €1 = $1.31, £1 = Yen146.

Vitec is an international Group principally serving customers in the Broadcast & Video, Photographic and Military, Aerospace and Government (MAG) markets. Listed on the London Stock Exchange with 2013 revenue of £315.4 million, Vitec is based on strong, well known, premium brands on which its customers worldwide rely. Vitec is organised in three Divisions: Videocom, Imaging and Services.

Videocom designs, manufactures and distributes systems and products used in broadcasting and live entertainment, film and video production and MAG.

Imaging designs, manufactures and distributes equipment and accessories for photography and video.

Services provides equipment rental, workflow design and technical support to TV production teams and film crews.

More information can be found at: www.vitecgroup.com.

Vitec will be presenting its results to analysts at 9.00 am on Thursday, 14 August. An audio recording of the presentation, along with the presentation slides, will be available on our website after the meeting. Users can pre-register to access the recording and slides by clicking "Open" in the "View Online" section for the 2014 Half Year Results via the following link: www.vitecgroup.com/half_year_results_2014.

Cautionary Statement

Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Vitec's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

H1 2014 Management & Financial Review

Vitec delivered a first half performance in line with our expectations. Activity levels were lower than in H1 2013 but the Group benefited from the Teradek business acquired in the second half of 2013 and contributions from the Sochi Winter Olympics and FIFA World Cup. The results reflect the incremental benefit of successfully streamlining the business in 2013, an ongoing focus on cost management and an adverse impact from foreign exchange.

Revenue decreased by 3.0% to £152.9 million (H1 2013: £157.6 million) with organic revenue at constant currency 1.5% lower. Operating profit* decreased by 3.0% to £19.2 million (H1 2013: £19.8 million) with operating margin* maintained at 12.6% on lower revenue.

The adverse year-on-year impact from foreign exchange movements in the first half was £10.3 million on revenue and £1.8 million on operating profit*. Revenue at constant exchange rates was 3.8% higher and operating profit* at constant exchange rates was 6.3% higher.

Our Videocom Division included a strong contribution from Teradek and benefited from the Sochi Winter Olympics. IMT, which represents a relatively small part of the Videocom Division, had a disappointing performance in comparison to a strong first half in 2013 which included a $5.8m contract with the US Department of Justice. The Imaging Division continued to face a challenging market, particularly for camera bags although it delivered tripod and accessory sales ahead of the market. The Services Division's revenue included the benefit from the Sochi Olympics, the FIFA World Cup and an increase in the underlying rentals market.

The gross margin* % was lower than the prior period at 43.0% (H1 2013: 45.1%) mainly reflecting product mix including the non-repeat of the higher margin US Department of Justice contract and revenue growth in the lower margin Services Division. There was a £0.9 million incremental benefit to gross margin from the 2013 restructuring projects which we delivered in line with our plans.

Operating expenses* were £4.6 million lower than in H1 2013 at £46.6 million. This includes focused cost control, £1.6 million of year-on-year benefits from restructuring activities and a £2.7 million benefit from foreign exchange partially offset by the inclusion of the acquisitions' operating expenses.

In the first half of 2014 there was a restructuring charge of £0.9 million (H1 2013: £6.2 million) relating to the completion of the restructuring projects that we commenced in 2013. This included the transfer of manufacturing from the UK to Costa Rica that was delivered on schedule and with costs in line with expectations. The total incremental benefit from restructuring was £2.5 million during the period and strongly positions the Group for the future.

Net finance expenses totalled £1.7 million (H1 2013: £2.2 million). The decrease predominantly reflects lower average borrowing levels and exchange losses in the prior year.

Profit before tax* at £17.5 million was similar to the first half of last year (H1 2013: £17.6 million). Adjusted earnings per share* were in line with H1 2013 at 27.4 pence per share. Group profit before tax of £14.9 million (H1 2013: £10.1 million) was after £0.9 million of restructuring costs (H1 2013: £6.2 million) and £1.7 million of charges associated with acquired businesses (H1 2013: £1.3 million).

Free cash flow+ of £3.8 million (H1 2013: £7.9 million) is reported after £2.1 million of cash outflows on restructuring activities (H1 2013: £3.5 million). There was a total cash outflow of £8.1 million (H1 2013: £0.2 million) after acquisitions, net purchases of shares to meet share plan commitments and dividend payments.

Net debt at 30 June 2014 was £68.0 million (31 December 2013: £61.5 million). The Group's balance sheet remains solid with a net debt to EBITDA ratio of 1.3 times (30 June 2013: 1.2 times; 31 December 2013: 1.1 times).

The Board has declared an interim dividend of 9.3 pence per share, an increase of 4.5%, which equates to dividend cover of 2.9 times on adjusted EPS*. The dividend will be paid on Friday 24 October 2014 to shareholders on the register at the close of business on Friday 26 September 2014.

* Before restructuring costs and charges associated with acquired businesses as defined on page 1 of this announcement.

+ Cash generated from operations in the financial period after net capital expenditure, net interest and tax paid.

Strategy

We believe that Vitec's Broadcast and Photographic businesses continue to present attractive long-term growth prospects for the Group. This is driven by the increase in not only the capture but also the sharing of high quality images and the continued rapid evolution of these technologies. Vitec has leading brands and technologies in these markets and we are developing and launching new premium products and services particularly for the growing number of independent pro-video users.

Our strategy is to grow our core business by leveraging our strong brands, premium positioning, global reach and product development. This includes using our expertise to help end users capture and share images. We believe that the Asia-Pacific region, which accounts for around 18% of our revenue, is an important growth market and there are good opportunities in this region. We will continue to acquire and integrate appropriate adjacent activities into our core Broadcast and Photographic businesses.

Products and services supporting major sporting events also present good growth opportunities for the Group as demonstrated in the recent Winter Olympics and FIFA World Cup. In the first half of the year we acquired assets of £1.8 million from the Speciality Cameras division of SIS Outside Broadcasts Limited, which captures unique images at live events. We are also managing our Services Division more closely with our other broadcast activities to seek to grow this part of our business.

Decision to exit from IMT

Our Videocom Division serves the Broadcast & Video market and also includes IMT, a relatively small part of our business, which provides wireless microwave products for the Military, Aerospace and Government (MAG) markets. We have attempted to grow IMT in an increasingly challenging market that has become overly price driven. This was recently demonstrated by the award of certain large Government contracts to competitors at prices where we would not generate positive returns. There are limited synergies between IMT's MAG business and other activities within the Group. IMT incurred a loss of £1.1 million in the first half of 2014 (H1 2013: profit of £1.4 million) on revenue of £5.8 million (H1 2013: £9.0 million). This compares to a breakeven position in 2013 for the full year on revenue of £14.0 million which included the large profitable Department of Justice contract.

As a result, we have decided to exit the IMT business and we are assessing our options of a sale or closure. Our preliminary assessment of the net exit costs based on closing the business is an exceptional one-off pre-tax charge in the region of c.£5.5 million, after foreign exchange recycling, of which c.£5.0 million is anticipated to be a cash outflow. We will provide an update on the exit from IMT in due course.

Videocom Division

The Videocom Division specialises in the supply of high-quality broadcast equipment principally for professionals engaged in producing video content for the media industries globally: broadcast, film and live events. This equipment is also supplied to meet the growing demand from pro-video users including corporate, educational and religious entities.

* Before restructuring costs and charges associated with acquired businesses as defined on page 1 of this announcement.

** Organic CER: at Constant Exchange Rates excluding year on year effect of acquisitions

The Videocom Division's results summarised in this table include IMT. We have announced today that we have decided to exit from that business. Excluding IMT's performance, revenue for the Division in H1 2014 would have increased by 4.1% to £63.7 million (H1 2013: £61.2 million) and operating profit* would have increased by 31.5% to £9.6 million (H1 2013: £7.3 million).

Markets

We estimate that the Broadcast & Video addressable market for products and services supplied by Vitec is worth around £600 million annually. This includes the traditional broadcast and film markets as well as the video production market. Videocom is well positioned due to its broad geographical reach and premium products. We have a global sales team that provides strong international coverage and is able to offer a full range of products and services to our customers all over the world. This market has seen some variability in demand in the first half of the year particularly in the US although it has seen good opportunities from major sporting events.

Operations

Videocom's revenue for H1 2014 was £69.5 million, a decrease of 1.0% on H1 2013. On a constant exchange rate basis, revenue was up 6.0% but was 5.7% lower organically. Operating margin* was broadly consistent with the prior year at 12.2% including the benefit of streamlining the business and cost control measures. The Division benefited from the inclusion of a strong performance at Teradek and a contribution from supporting the Sochi Winter Olympics. As a result operating profit* on a constant exchange rate basis was up by 1.2%. Restructuring activities are largely complete, with the relocation of certain UK manufactured products to Costa Rica completed to schedule in the first half of 2014.

Our camera supports brands experienced a lower level of project activity. However we have continued to grow sales of our premium robotics products across all regions. Prompters performed in line with last year, but the Litepanels LED lighting products and Anton/Bauer mobile power products performance has been lower than expected. We are in the process of broadening our LED lighting product range to maintain our leading position in the market, and are launching some new, innovative mobile power products.

The Teradek business that we acquired in H2 2013 is performing well with strong growth post-acquisition. The business continues to develop innovative products, including the new Bolt wireless transmitter that was released in July 2014 and further product launches are planned for later in the year.

We have further strengthened our premium product and service offerings through the acquisition of the speciality camera assets of SIS Outside Broadcasts Limited. These are renowned for the innovative solutions that deliver viewers to the heart of live events, including the Stump Cam used in international cricket matches and the Plunge Cam that tracks high divers from the diving board to underwater.

In April 2014, the Group reached an agreement to acquire Autocue, a leading provider of teleprompters, for a net consideration of £6.0 million. The transaction is subject to UK competition clearance and we await the decision of the Competition and Markets Authority.

Imaging Division

The Imaging Division provides premium photographic and video equipment to both professional and non-professional users. The photographic and video equipment consists primarily of camera supports, tripods, heads, camera bags, lighting supports, LED lights and lighting accessories. We also supply a range of tripods, bags, lighting and other photographic products to the consumer segment.

* Before restructuring costs and charges associated with acquired businesses as defined on page 1 of this announcement.

** Organic CER: at Constant Exchange Rates

Markets

We estimate that the addressable Photographic market for product categories supplied or distributed by Vitec is worth around £800 million. Approximately half of this market is professional photographers and the remainder is consumers who have a keen interest in photography or who simply want to record and share images. Photography continues to attract new consumers as the number and type of image-taking devices increases and the distribution of images via social media continues to grow in popularity.

The sale of new cameras is a key driver in the Photographic market. According to the Camera & Imaging Products Association (CIPA), global shipments of interchangeable lens cameras continued to decrease in H1 2014 and were 16% lower than prior year including a very challenging US market.

End markets, particularly the US, have seen a continued slowdown in interchangeable lens camera sales. The effect of this market softness has been exacerbated by retailers continuing to destock following high levels of inventory in 2012 plus an overall reduction in the amount of inventory in the retail chain as the mix continues to swing away from specialist camera retailers towards e-tailers. We believe that both of these effects should start to unwind in due course.

Operations

Imaging's revenue for H1 2014 was 12.9% lower than H1 2013 at £64.1 million or 7.2% lower at constant exchange rates. Operating profit* fell by £2.3 million to £8.6 million. Despite the decline in revenue, operating margin* was consistent with H1 2013 after adjusting for adverse currency movements. This reflects a continuing focus on cost control and the year-on-year benefits from the restructuring completed in 2013. Against the challenging market background, our core camera supports sales are performing relatively well and we are pleased with sales of new products including further versions of the BeFree and new 190 tripod ranges. Our share of the US market remained broadly steady whilst elsewhere we continued to grow our market share and increased sales particularly through our owned distribution channels.

The camera bags market which is largely driven by new camera sales continued to decrease significantly in the first half of the year. We are addressing this with the launch of our Manfrotto branded range of bags to grow our relatively small share of this large market.

Services Division

Our Services Division provides broadcast equipment rental and technical support to television production teams and film crews. It provides a complete one-stop solution for producers globally, enabling customers to deliver the most demanding projects. It also enables Vitec to closely monitor changes in technology and to showcase our products. The Division has a strategy to focus on events where higher levels of service are most needed.

* Before restructuring costs and charges associated with acquired businesses as defined on page 1 of this announcement.

** Organic CER: at Constant Exchange Rates

Markets

We estimate that the addressable market for these services is worth around £250 million. We have seen good demand for our services during the first half of the year driven by the demand for high quality live broadcasting of major sporting events that achieve large audiences.

Operations

Revenue for H1 2014 increased by 39.9% to £19.3 million, with operating profit* £1.9 million higher at £2.1 million. This included the benefit from contracts to supply the Sochi Winter Olympics, the FIFA World Cup and an increase in our underlying rentals business. We are pleased with progress in this business where we are concentrating on driving sales, including sales of rental assets, while securing attractive pricing for our premium services. The profitability of the business is also continuing to benefit from improving asset utilisation by acquiring appropriate assets and disposing of under-utilised assets, as well as from managing the cost base effectively.

Geographic Spread

Vitec has a broad geographic spread. In H1 2014, 43% of our revenues by destination came from North America, with the remainder split between Europe 33%, Asia-Pacific 18% and Rest of World 6%. Only 9% of our revenue is derived from the UK. We have seen a decrease in revenues from the North American region in the first half of the year, which represented 45% of revenue in 2013, reflecting the more challenging market in this region. We currently have a direct presence in 12 countries around the world: the UK, USA, Brazil, Costa Rica, France, Germany, Italy, Netherlands, Israel, Japan, China and Singapore.

Outlook

Although our order book visibility remains limited, the Board's expectations for the full year are unchanged.

Going Concern

The Directors have made appropriate enquiries and consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

Principal risks and uncertainties

Vitec is exposed to a number of risk factors which may affect its performance. The Group has a well-established framework for reviewing and assessing these risks on a regular basis, and has put in place appropriate processes and procedures to mitigate against them. However, no system of control or mitigation can completely eliminate all risks. The Board has determined that the following are the principal risks facing the Group:

Demand for our products may be adversely affected by many factors. These include changes in customer and consumer preferences and our ability to deliver appropriate products or to support changes in technology. We have continued to invest in new product development and launched a number of new products. Demand may be impacted by competitor activity and the level of customer demand in our target markets particularly in the current challenging market environment.

We value our relationships with our customers and closely monitor our target markets and user requirements. We maintain good relationships with all our key customers and make appropriate investments in product development and marketing activities to ensure that we remain competitive in each market. In support of our new product launches, we have completed consumer research before developing new products to ensure that they are appropriately designed for our target markets.

Our operating performance and cash flow may be dependent on the timing of major contract awards. The timing of the award of these contracts can be difficult to predict. In addition, the loss, suspension or cancellation of contracts may impact trading performance. In particular, our MAG business has been adversely impacted by a lower level of investment in the US defence budget.

We attempt to gain a good understanding of likely demand through developing close relationships with our customers. We also have a broad range of contracts that reduce our dependence on any particular contract or customer. We actively review our orders and trading outlook and manage our resources in line with anticipated activity.

As we enter new markets and channels of distribution we may achieve lower than anticipated trading volumes and pricing levels or higher costs and resource requirements. This may impact the levels of profitability and cash flows delivered. During the year we have seen a continuation of the trend of sales increasingly being made online rather than through stores.

We have a thorough process for assessing and planning the entry into new markets and related opportunities. This includes marketing and advertising strategies for our products and services. We continuously assess our performance in these markets and the related opportunities and risks. We adapt our approach taking into account our actual and anticipated performance.

In pursuing our business strategy we continuously explore opportunities to enhance our business through development activities such as strategic acquisitions and disposals. This involves a number of calculated risks including: acquiring desired businesses on economically acceptable terms; integrating new businesses, employees, business systems and technology; and realising satisfactory post-acquisition performance. During the year we acquired the speciality camera assets of SIS Outside Broadcasts Limited which is being integrated into the Group. We have also reached agreement to acquire Autocue which is subject to competition clearance.

We mitigate these risks by having a clear acquisition strategy with a robust valuation model. Thorough due diligence processes are completed including the use of external advisers where appropriate. There is a clear focus on integrating acquired businesses and monitoring post-acquisition performance. Over the past four years the Group has made five acquisitions and completed the disposal of a non-core business.

We might experience pricing pressure including challenges in raising prices, especially in the current economic climate, or not recovering increases in commodity and other costs. If the price of products does not at least recover movements in commodity costs and other expenses and we are unable to reduce our expenses, our results could be adversely affected.

We ensure that our product and service offering remains competitive by investing in new product development, in appropriate marketing and product support, and improving the management of supply chain costs. This allows us to support price increases when required by working closely with our suppliers and managing our expenses and cost base appropriately.

We source materials and components from many suppliers in various locations and in some instances are more dependent on a limited number of suppliers for particular items. If any of these suppliers or subcontractors fails to meet the Group's requirements, we may not have readily available alternatives, thereby impacting our ability to provide an appropriate level of customer service.

We aim to secure multiple sources of supply for all materials and components and develop strong relationships with our major suppliers. We review the performance of strategically important suppliers globally on an on-going basis.

Whilst the Group has a wide customer base, the loss of a key customer, or a significant worsening in their success or financial performance, could result in a material impact on the Group's results. As in previous years, Vitec has no customer that accounts for more than 10% of sales.

We monitor closely our performance with all customers through developing strong relationships, analysis of sales trends and financial performance of our key customers. We continue to expand our customer base including entering into new channels of distribution to expand our portfolio of customers.

Disruption to our business can arise from a range of events such as: natural/man-made disasters, conflicts, pandemic flu or infrastructure issues affecting our production and distribution sites. In addition, we are dependent on our IT platforms continuing to work effectively in supporting our business.

We have appropriate business continuity plans within our businesses that we periodically review to mitigate these risks.

We employ around 1,800 people and are exposed to a risk of being unable to retain or recruit suitable talent to support the business. We manufacture and supply products from a number of locations and it is important that our employees operate in a professional and safe environment.

We recognise that it is important to motivate and retain capable people across our businesses to ensure that we are not exposed to risk of unplanned staff turnover. We fairly reward our employees and have appropriate staff recruitment, appraisal, talent management and succession planning strategies to ensure we recruit and retain good quality people across the business. We take our employees' health and safety very seriously and have appropriate processes in place to allow us to monitor and address any issues appropriately.

We are subject to a comprehensive range of legal obligations in all countries in which we operate. As a result, we are exposed to many forms of legal risk. These include, without limitation, regulations relating to government contracting rules, anti-bribery provisions, competition, and health and safety laws in numerous jurisdictions around the world. Failure to comply with such laws could significantly impact the Group's reputation and could expose the Group to fines and penalties.

We have resources dedicated to legal and regulatory compliance supported by external advice where necessary. We enhance our controls, processes and employee knowledge to maintain good governance and to comply with new laws and regulations such as the provisions of the UK Bribery Act 2010. The Group has processes in place to ensure that its worldwide business units understand and apply the Group's culture and processes to their own operations.

Damage to our reputation and our brand names can arise from a range of events such as poor product performance, unsatisfactory customer service, and other events either within or outside our control. We have many premium brands within our niche markets as well as the reputation of the Group.

We recognise the importance of our reputation and attempt to identify any potential issues quickly and address them appropriately. We recognise the importance of providing high quality products, good customer service and managing our business in a safe and professional manner. This requires all employees to commit to and comply with the Vitec Code of Business Conduct which was recommunicated to all employees in 2013.

The global nature of the Group's business means it is exposed to volatility in currency exchange rates in respect of foreign currency denominated transactions, and the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group is exposed to a number of foreign currencies, the most significant being the US Dollar and Euro. We have seen a weakening of these currencies relative to sterling, which has been detrimental to our reported performance.

We regularly review and assess our exposure to changes in exchange rates. We reduce the impact of sudden movements in exchange rates with the use of appropriate hedging activities on forecast foreign exchange net exposures. We do not hedge the translation effect of exchange rate movements on the Income Statement or Balance Sheet of overseas subsidiaries.

Responsibility statement of the Directors in respect of the Half Year Results to 30 June 2014

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

The Half Year Results announcement report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

For and on behalf of the Board

Paul Hayes

Group Finance Director

13 August 2014

Independent review report to The Vitec Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the Half Year results announcement for the six months ended 30 June 2014 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Balance Sheet, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the Half Year results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The Half Year results announcement is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half Year results announcement in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this Half Year results announcement has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the Half Year results announcement based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Year results announcement for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Robert Brentfor and on behalf of KPMG LLPChartered Accountants

15 Canada Square

London

E14 5G

13 August 2014