ROBERT WALTERS PLC — Interim / Quarterly Report 2017

Jun 30, 2017

HALF-YEARLY FINANCIAL RESULTS 2017 ROBERT WALTERS PLC

SPECIALISTS IN RECRUITMENT

Robert Walters is a market-leading specialist professional recruitment group spanning 28 countries.

Our specialist solutions to clients range from permanent, contract and interim recruitment through to recruitment process outsourcing and managed services.

FINANCIAL HIGHLIGHTS

OPERATING PROFIT £16.2m (2016: £10.1m)

PROFIT BEFORE TAXATION

£15.6m (2016: £11.2m)

BASIC EARNINGS PER SHARE

CONTENTS

• 01 Financial Highlights
• 02 Interim Management Report
• 04 Condensed Consolidated Income Statement
• 04 Condensed Consolidated Statement of Comprehensive Income and Expense
• 05 Condensed Consolidated Balance Sheet 06 Condensed Consolidated Cash Flow
• Statement
• 07 Condensed Consolidated Statement of Changes in Equity
• 08 Notes to the Condensed Set of Financial Statements
• 11 Responsibility Statement
• 12 Independent Review Report to Robert Walters plc

INTERIM MANAGEMENT REPORT

Interim Management Report

The Group delivered a record performance in the first half benefiting from both our international footprint which now spans 28 countries, including many of the world's fastest growing and emerging recruitment markets, and the breadth of recruitment solutions we provide to our clients.

Revenue was up 25% (17%*) to £562.7m (£529.4m*) (2016: £451.4m) and gross profit (net fee income) increased by 28% (18%*) to £164.5m (£151.4m*) (2016: £128.1m). Operating profit increased 62% (44%*) to £16.2m (£14.5m*) (2016: £10.1m) and profit before taxation increased by 39% (46%*) to £15.6m (£13.9m*) (2016: £11.2m). The Group has maintained a strong balance sheet with net cash of £18.4m as at 30 June 2017 (31 December 2016: £22.5m).

Permanent recruitment currently represents 69% (2016: 69%) of the Group's recruitment net fee income. Group headcount now stands at 3,495 (30 June 2016: 2,902).

Asia Pacific (41% of net fee income)

Revenue was £185.3m (2016: £154.9m) and net fee income increased by 25% (10%*) to £67.4m (£59.3m*) (2016: £54.0m) delivering a 22% (3%*) increase in operating profit to £7.7m (£6.5m*) (2016: £6.4m).

In Asia, performance was strong across both our established and emerging markets. Japan, the region's largest market had a record first half as did our business in Hong Kong, whilst Malaysia also delivered an excellent performance across both Kuala Lumpur and our newer office in Penang. Our emerging market footprint in Asia covering Indonesia, Korea, Taiwan, Thailand, Vietnam and most recently, the Philippines, is unrivalled and it is very pleasing to report that all markets continued to deliver year-on-year operating profit growth thus providing the Group with a strong platform for the future. Elsewhere in the region, Singapore and mainland China delivered robust performances against a backdrop of more challenging market conditions.

Australia had a good first half with growth strongest in Queensland and South Australia whilst New Zealand delivered strong doubledigit growth in both net fee income and operating profit. The Group's recent sponsorship of the British & Irish Lions tour to New Zealand has further enabled us to cement our market leadership position in this market.

Resource Solutions continued to grow its client portfolio across the region during the period. Significant upfront investment has been required to implement these new wins.

United Kingdom (29% of net fee income)

Revenue in the UK was £278.1m (2016: £220.6m) and net fee income increased by 20% to £48.3m (2016: £40.2m) delivering a more than doubling of operating profit of £4.0m (2016: £1.8m).

Whilst the UK has had a mixed and volatile economic backdrop for the first six months of the year, we were still able to deliver good growth across several recruitment disciplines and locations. In London, we saw strong growth in the financial services space, whilst both our commerce finance and technology teams also performed well. Regional growth was broad-based with Manchester, St. Albans and Milton Keynes the standout performers.

Resource Solutions continued to perform strongly, winning a number of new client deals and successfully expanding its service range within existing clients.

Europe (23% of net fee income)

Revenue was £88.4m (2016: £69.3m) and net fee income increased by 34% (22%*) to £38.0m (£34.4m*) (2016: £28.2m) delivering a substantial increase in operating profit to £4.4m (£3.7m*) (2016: £2.1m).

Europe delivered an excellent first half performance and, very encouragingly, activity was strong across permanent, contract and interim recruitment.

France, the region's largest business, the Netherlands, Belgium and Spain all delivered record performances with the latter increasing net fee income by more than 70% year-on-year. Germany was also a strong performer, increasing net fee income in excess of 30%, whilst Ireland delivered double-digit growth.

Other International (7% of net fee income)

Other International comprises North America, South Africa, the Middle East and Brazil. Revenue was £11.0m (2016: £6.7m), net fee income was up 93% (67%*) to £10.9m (£9.4m*) (2016: £5.6m) producing an operating profit of £0.1m (£0.3m*) (2016: operating loss of £0.2m).

Market conditions across this diverse set of territories was mixed. In Brazil and South Africa where macro-economic conditions are arguably most challenging, we bucked the market trend delivering net fee income increases of 59% and 16% respectively. Across North America, activity levels in New York were impacted by the tightening of the financial services market, in San Francisco demand in the digital and technology space remained strong whilst our new office in Toronto has shown promising early signs.

Cash flow

The Group maintained a strong net cash position of £18.4m as at 30 June 2017 (31 December 2016: £22.5m). Working capital in the period has increased by £3.7m resulting in £17.5m cash generated from operating activities. Notable cash outflows included a dividend of £4.2m, £3.4m of tax payments and capital expenditure of £4.0m. During the period, 2.1m shares have been purchased and cancelled at an average price of £3.79 for £8.0m. A further 0.4m shares were purchased at an average price of £4.03 for £1.7m through the Group's Employee Benefit Trust.

Dividend

The interim dividend will be increased by 20% to 2.75p per share (2016: 2.30p) and will be paid on 13 October 2017 to those shareholders on the Company's register as at 1 September 2017.

* Constant currency is calculated by applying prior period exchange rates to local currency results for the current and prior periods.

Treasury management, currency risk and other principal risks and uncertainties affecting the business

The Group does not have material transactional exposures although is exposed to translation differences on the profits and cash flows generated in its overseas operations. Overseas currency balances that are surplus to local working capital requirements are converted on a regular basis to Pounds Sterling. The main functional currencies of the Group's operating divisions are Pounds Sterling, the Euro, the Australian Dollar and the Japanese Yen.

The other principal risks and uncertainties affecting the Group's business activities remain those detailed within the Principal Risks and Uncertainties section of the Annual Report and Accounts for the year ended 31 December 2016, namely the economic environment, business model, people management, brand and reputation, laws and regulation and technology. The Board does not foresee a material change in respect of these factors for the remainder of the year.

Outlook

With full-year profit forecasts having been upgraded only a few weeks ago in response to our second quarter trading update, current trading is in line with current market expectations.

We enter the second half of the year with confidence that the Group's platform for growth is strong and that we are well positioned to further capitalise on market opportunities as they arise.

Leslie Van de Walle Robert Walters Chairman Chief Executive 25 July 2017

CONDENSED CONSOLIDATED INCOME STATEMENT

	Note	2017 6 months to 30 June Unaudited £'000	2016 6 months to 30 June Unaudited £'000	2016 12 months to 31 December Audited £'000
Continuing operations
Revenue	4	562,704	451,420	998,535
Cost of sales		(398,175)	(323,323)	(720,205)
Gross profit	4	164,529	128,097	278,330
Administrative expenses		(148,283)	(118,039)	(252,088)
Operating profit	4	16,246	10,058	26,242
Finance income		163	81	460
Finance costs		(395)	(316)	(895)
(Loss) gain on foreign exchange		(446)	1,368	2,334
Profit before taxation	4	15,568	11,191	28,141
Taxation	5	(4,437)	(3,412)	(8,244)
Profit for the period		11,131	7,779	19,897
Earnings per share (pence):	7
Basic		16.3	10.6	27.7
Diluted		14.7	9.7	25.4

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE

	2017	2016	2016
	6 months to	6 months to	12 months to
	30 June	30 June	31 December
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Profit for the period	11,131	7,779	19,897
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of overseas operations	20	10,810	12,953
Total comprehensive income and expense for the period	11,151	18,589	32,850

CONDENSED CONSOLIDATED BALANCE SHEET

	Note	2017 30 June Unaudited £'000	2016 30 June Unaudited £'000	2016 31 December Audited £'000
Non-current assets
Intangible assets		11,809	11,508	11,402
Property, plant and equipment		9,356	8,055	8,183
Deferred tax assets		9,127	9,443	8,253
		30,292	29,006	27,838
Current assets
Trade and other receivables		251,589	226,265	236,507
Corporation tax receivables		836	561	1,531
Cash and cash equivalents		49,281	37,154	62,601
		301,706	263,980	300,639
Total assets		331,998	292,986	328,477
Current liabilities
Trade and other payables		(189,379)	(163,612)	(178,008)
Corporation tax liabilities		(5,139)	(4,708)	(5,069)
Loans	9	(30,923)	(26,947)	(40,070)
Provisions		(641)	(587)	(1,244)
		(226,082)	(195,854)	(224,391)
Net current assets		75,624	68,126	76,248
Non-current liabilities
Deferred tax liabilities		–	(33)	–
Provisions		(2,692)	(1,940)	(2,143)
		(2,692)	(1,973)	(2,143)
Total liabilities		(228,774)	(197,827)	(226,534)
Net assets		103,224	95,159	101,943
Equity
Share capital		15,711	17,268	16,101
Share premium		21,935	21,848	21,854
Other reserves		(71,818)	(73,410)	(72,241)
Own shares held		(18,384)	(16,684)	(19,906)
Treasury shares held		(9,095)	(19,860)	(9,095)
Foreign exchange reserves		14,058	11,895	14,038
Retained earnings		150,817	154,102	151,192
Total equity		103,224	95,159	101,943

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

	Note	2017 6 months to 30 June Unaudited £'000	2016 6 months to 30 June Unaudited £'000	2016 12 months to 31 December Audited £'000
Cash generated from operating activities Income taxes paid	8	17,468 (3,418)	9,041 (2,012)	37,178 (7,693)
Net cash generated from operating activities		14,050	7,029	29,485
Investing activities
Interest received Purchases of computer software Purchases of property, plant and equipment		163 (1,069) (2,968)	81 (1,232) (1,214)	460 (2,172) (2,841)
Net cash used in investing activities		(3,874)	(2,365)	(4,553)
Financing activities
Equity dividends paid		(4,195)	(3,966)	(5,410)
Proceeds from issue of equity		114	31	39
Interest paid		(395)	(316)	(895)
Proceeds from bank loans		–	1,276	14,350
Repayment of bank loans		(9,114)	–	–
Share buy-back and cancellation		(8,033)	–	(3,446)
Purchase of own shares		(1,746)	(13,510)	(19,168)
Proceeds from exercise of share options		670	4	26
Net cash used in financing activities		(22,699)	(16,481)	(14,504)
Net (decrease) increase in cash and cash equivalents		(12,523)	(11,817)	10,428
Cash and cash equivalents at beginning of the period Effect of foreign exchange rate changes		62,601 (797)	43,378 5,593	43,378 8,795
Cash and cash equivalents at end of the period		49,281	37,154	62,601

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital £'000	Share premium £'000	Other reserves £'000	Own shares held £'000	Treasury shares held £'000	Foreign exchange reserves £'000	Retained earnings £'000	Total equity £'000
Balance at 1 January 2016	17,249	21,836	(73,410)	(7,136)	(19,860)	1,085	151,893	91,657
Profit for the period Foreign currency translation differences	– –	– –	– –	– –	– –	– 10,810	7,779 –	7,779 10,810
Total comprehensive income and expense for
the period	–	–	–	–	–	10,810	7,779	18,589
Dividends paid	–	–	–	–	–	–	(3,966)	(3,966)
Credit to equity for equity-settled share
based payments	–	–	–	–	–	–	2,354	2,354
Deferred tax on share-based payment
transactions Transfer to own shares held on exercise of	–	–	–	–	–	–	–	–
equity incentives	–	–	–	3,958	–	–	(3,958)	–
New shares issued and own shares
purchased	19	12	–	(13,506)	–	–	–	(13,475)
Unaudited balance at 30 June 2016	17,268	21,848	(73,410)	(16,684)	(19,860)	11,895	154,102	95,159
Profit for the period	–	–	–	–	–	–	12,118	12,118
Adjustment1	–	–	–	–	–	–	1,254	1,254
Foreign currency translation differences	–	–	–	–	–	2,143	–	2,143
Total comprehensive income and expense for
the period	–	–	–	–	–	2,143	13,372	15,515
Dividends paid	–	–	–	–	–	–	(1,444)	(1,444)
Shares repurchased for cancellation	(1,169)	–	1,169	–	10,765	–	(14,211)	(3,446)
Credit to equity for equity-settled share
based payments Deferred tax on share-based payment	–	–	–	–	–	–	2,236	2,236
transactions	–	–	–	–	–	–	(449)	(449)
Transfer to own shares held on exercise of
equity incentives	–	–	–	2,414	–	–	(2,414)	–
New shares issued and own shares
purchased	2	6	–	(5,636)	–	–	–	(5,628)
Balance at 31 December 2016	16,101	21,854	(72,241)	(19,906)	(9,095)	14,038	151,192	101,943
Profit for the period	–	–	–	–	–	–	11,131	11,131
Foreign currency translation differences	–	–	–	–	–	20	–	20
Total comprehensive income and expense for
the period	–	–	–	–	–	20	11,131	11,151
Dividends paid	–	–	–	–	–	–	(4,195)	(4,195)
Shares repurchased for cancellation	(423)	–	423	–	–	–	(8,033)	(8,033)
Credit to equity for equity-settled share
based payments Deferred tax on share-based payment	–	–	–	–	–	–	2,607	2,607
transactions	–	–	–	–	–	–	713	713
Transfer of own shares held on exercise of
equity incentives	–	–	–	2,598	–	–	(2,598)	–
New shares issued and own shares
purchased	33	81	–	(1,076)	–	–	–	(962)
Unaudited Balance at 30 June 2017	15,711	21,935	(71,818)	(18,384)	(9,095)	14,058	150,817	103,224

1 An immaterial adjustment of £1.25 million has been made to increase brought forward retained earnings. £0.195 million of this adjustment is related to the income statement for the 2015 financial year. The adjustment was made in order to recognise two changes in the current year in the application of the revenue recognition policy in part of the business (the impact on the equivalent balance sheet and income statement captions is similarly immaterial).

The first change relates to permanent placements. These were previously recognised by this part of the business when a candidate started a position. However, given the maturity of the market for this part of the business, the Group considers that it is more appropriate to recognise this revenue when the candidate accepts a position and the start date is determined, in line with the rest of the Group, as this reflects the underlying agreements. Provision is made for candidates who fail to start employment after accepting the offer and is based on the historic rate of "back-outs". The adjustment has not been treated as a change in accounting policy, under IAS 8, as it is not material.

The second change relates to temporary placements. The adjustment made is to recognise the impact of timesheets received after the year end date, where work was completed during the 2016 financial year. The adjustment has also not been treated as a change in accounting policy, under IAS 8, as it is not material.

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS

1 Statement of accounting policies

Basis of preparation

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements has been prepared in accordance with the International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.

The accounting policies applied by the Group are as set out in detail in the Annual Report and Accounts for the year ended 31 December 2016.

The Group was profitable for the period and has considerable financial resources, including £18.4m of net cash at 30 June 2017, together with a diverse range of clients and suppliers across different geographic locations and sectors. As a consequence, the Directors believe the Group is well placed to manage its business risks successfully.

After making enquiries, the Directors have formed a judgement, at the time of approving the half-yearly financial results, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. For this reason the Directors continue to adopt the going concern basis in preparing the condensed set of financial statements.

2 Financial information

The financial information on pages 4 to 12 was formally approved by the Board of Directors on 25 July 2017. The financial information set out in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

Statutory accounts prepared under IFRSs for the year ended 31 December 2016 for Robert Walters plc have been delivered to the Registrar of Companies. The auditor's report on these accounts was not qualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The financial information in respect of the period ended 30 June 2017 is unaudited but has been reviewed by the Company's auditor. Their report is included on page 13. The financial information in respect of the period ended 30 June 2016 is also unaudited.

3 Currency conversion

The presentational currency of the Group is Pounds Sterling and the condensed set of financial statements has been prepared on this basis. The main functional currencies of the Group's operating divisions are Pounds Sterling, the Euro, the Australian Dollar and the Japanese Yen.

The condensed consolidated income statement for the period ended 30 June 2017 has been prepared using, among other currencies, the average exchange rate of €1.1625 to the Pound (period ended 30 June 2016: €1.2841; year ended 31 December 2016: €1.2181); ¥141.3893 to the Pound (30 June 2016: ¥160.0445; 31 December 2016: ¥146.7317) and AU\$1.6681 to the Pound (30 June 2016: AU\$1.9547; 31 December 2016: AU\$1.8144).

The condensed consolidated balance sheet as at 30 June 2017 has been prepared using the exchange rates on that day of €1.1381 to the Pound (30 June 2016: €1.2058; 31 December 2016: €1.1722); ¥145.7482 to the Pound (30 June 2016: ¥137.7140; 31 December 2016: ¥144.2890) and AU\$1.6914 to the Pound (30 June 2016: AU\$1.7991; 31 December 2016: AU\$1.7118).

4 Segmental Information	2017 6 months to 30 June Unaudited £'000	2016 6 months to 30 June Unaudited £'000	2016 12 months to 31 December Audited £'000
i) Revenue: Asia Pacific UK Europe Other International	185,265 278,117 88,368 10,954	154,862 220,621 69,286 6,651	348,636 480,587 146,985 22,327
	562,704	451,420	998,535
ii) Gross profit: Asia Pacific UK Europe Other International	67,384 48,277 37,981 10,887	54,025 40,196 28,242 5,634	117,591 86,675 60,062 14,002
	164,529	128,097	278,330
iii) Profit before taxation: Asia Pacific UK Europe Other International	7,749 4,010 4,397 90	6,350 1,846 2,108 (246)	14,655 6,396 4,243 948
Operating profit Net finance costs	16,246 (678)	10,058 1,133	26,242 1,899
Profit before taxation	15,568	11,191	28,141
iv) Total assets: Asia Pacific UK Europe Other International Unallocated corporate assets*	60,524 156,291 44,740 11,199 59,244	63,841 136,342 33,429 12,216 47,158	63,621 146,599 37,168 8,704 72,385
	331,998	292,986	328,477
v) Total liabilities: Asia Pacific UK Europe Other International Unallocated corporate liabilities*	(33,963) (127,251) (25,076) (6,422) (36,062) (228,774)	(28,627) (105,245) (22,670) (9,597) (31,688) (197,827)	(31,000) (117,732) (27,576) (5,086) (45,140) (226,534)
vi) Revenue by business grouping: Robert Walters Resource Solutions	318,954 243,750	276,123 175,297	599,356 399,179
	562,704	451,420	998,535

* For the purpose of segmental analysis, unallocated corporate assets and liabilities include cash, bank loans, corporation and deferred tax balances.

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS CONTINUED

5 Taxation

	2017	2016	2016
	6 months to	6 months to	12 months to
	30 June	30 June	31 December
	Unaudited	Unaudited	Audited
	£'000	£'000	£'000
Current tax	4,623	3,411	7,931
Deferred tax	(186)	1	313
Total tax charge for the period	4,437	3,412	8,244

The tax charge is based on the expected annual tax rate of 28.5% (2016: 29.3%) on profit before taxation.

6 Dividends

	2017 6 months to 30 June Unaudited £'000	2016 6 months to 30 June Unaudited £'000	2016 12 months to 31 December Audited £'000
Amounts recognised as distributions to equity holders in the period: Final dividend for 2016 of 6.2p (2015: 5.13p) Interim dividend for 2016 of 2.3p (2015: 1.95p)	4,195 –	3,966 –	4,316 1,620
	4,195	3,966	5,936
Proposed interim dividend for 2017 of 2.75p (2016: 2.30p)	1,877	1,620	n/a

The proposed interim dividend was approved by the Board on 25 July 2017 and has not been included as a liability at 30 June 2017.

7 Earnings per share

The calculation of earnings per ordinary share is based on the profit for the period attributable to equity holders of the Parent and the weighted average number of shares of the Company.

	2017 6 months to 30 June Unaudited £'000	2016 6 months to 30 June Unaudited £'000	2016 12 months to 31 December Audited £'000
Profit for the period attributable to equity holders of the Parent	11,131	7,779	19,897
	Number of shares	Number of shares	Number of shares
Weighted average number of shares:
Shares in issue throughout the period	80,507,284	86,175,371	86,251,859
Shares issued in the period	92,076	95,145	74,666
Shares cancelled in the period	(1,668,798)	–	(1,652,089)
Treasury and own shares held	(10,822,054) (13,046,447)		(12,799,910)
For basic earnings per share	68,108,508	73,224,069	71,874,526
Outstanding share options	7,821,209	6,766,373	6,470,656
For diluted earnings per share	75,929,717	79,990,442	78,345,182

8 Notes to the cash flow statement

	2017		2016
	6 months to 30 June	2016 6 months to 30 June	12 months to 31 December
	Unaudited £'000	Unaudited £'000	Audited £'000
Operating profit for the period	16,246	10,058	26,242
Adjustments for:
Depreciation and amortisation charges	2,238	2,037	4,179
Loss on disposal of property, plant and equipment and computer software	178	44	666
Charge in respect of share-based payment transactions	2,607	2,354	4,590
Operating cash flows before movements in working capital	21,269	14,493	35,677
Increase in receivables	(14,819)	(22,946)	(29,634)
Increase in payables	11,018	17,494	31,135
Cash generated from operating activities	17,468	9,041	37,178

9 Bank loans

In January 2017, the Group renewed and extended to four years its committed financing facility of £45.0m, which expires in December 2020. At 30 June 2017, £30.3m (2016: £25.2m) was drawn down under this facility.

The Group has a short-term facility of Renminbi 25m (£2.8m) of which Renminbi 5m (£0.6m) was drawn down as at 30 June 2017. The loan is secured against cash deposits in Hong Kong.

10 Related party transactions

During the first six months of the year, there were related party transactions totalling £77,000 (2016: £26,000) with Tay Associates Limited, a related party through a Director of Robert Walters plc. There were no outstanding balances as at 30 June 2017.

All transactions were undertaken on an arms-length basis.

11 Registered office

The Company's registered office is located at 11 Slingsby Place, St Martin's Courtyard, London, WC2E 9AB.

RESPONSIBILITY STATEMENT

We confirm to the best of our knowledge:

a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

• b) the Interim Management Report includes a fair review of the information required by DTR 4.2.7R (indication of the important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
• c) the Interim Management Report and note 10 includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board,

Alan Bannatyne Chief Financial Officer 25 July 2017

INDEPENDENT REVIEW REPORT TO ROBERT WALTERS PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income and Expense, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement, the Condensed Consolidated Statement of Changes In Equity, and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with 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. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an Independent Review 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 formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority.

Deloitte LLP Statutory Auditor London, United Kingdom 25 July 2017

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