Notes to the Interim Accounts

For the six months ended 30 June 2010 (unaudited)

1 General information

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is 120 Bothwell Street, Glasgow G2 7JS, UK.

This condensed interim financial information was approved for issue on 25 August 2010.

This condensed consolidated interim financial information does not comprise Statutory Accounts within the meaning of Section 434 of the Companies Act 2006. Statutory Accounts for the year ended 31 December 2009 were approved by the Board on 4 March 2010 and delivered to the Registrar of Companies. The report of the auditors on those Accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The condensed consolidated interim financial information is unaudited but has been reviewed by the Group’s auditors, whose report is
on page 26.

2 Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2010 has been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services Authority and IAS 34 ‘Interim financial reporting’ as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.

3 Accounting policies

Except as described below, the accounting policies are consistent with those of the annual financial statements for the year ended 31 December 2009, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

(a) New and amended standards adopted by the Group.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2010:

• IFRS 3 (revised), ‘Business combinations’, and consequential amendment to IAS 27, ‘Consolidated and separate financial statements’, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. There has been no impact of IFRS 3 (revised) and IAS 27 (revised) on the current period.

(b) Standards, amendments and interpretations to existing standards effective in 2010 but not relevant to the Group:

• IFRIC 17, ‘Distributions of non-cash assets to owners’, effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the Group, as it has not made any non-cash distributions.
• IFRIC 18, ‘Transfers of assets from customers’, effective for transfer of assets received on or after 1 July 2009. This is not relevant to the Group, as it has not received any assets from customers.
• Additional exemptions for first-time adopters’ (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer.
• Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010.

(c) The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:

• IFRS 9, ‘Financial instruments’, issued in December 2009. This addresses the classification and measurement of financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption only when endorsed by the EU. The Group is yet to assess IFRS 9’s full impact however initial indications are that it will not have a material impact on the Group.
• Revised IAS 24, ‘Related party disclosures’, issued in November 2009. It supersedes IAS 24, ‘Related party disclosures’, issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted.
• ‘Classification of rights issues’ (Amendment to IAS 32), issued in October 2009. For rights issues offered for a fixed amount of foreign currency, current practice appears to require such issues to be accounted for as derivative liabilities. The amendment states that if such rights are issued pro rata to all the entity’s existing shareholders in the same class for a fixed amount of currency, they should be classified as equity regardless of the currency in which the exercise price is denominated. The amendment should be applied for annual periods beginning on or after 1 February 2010. Earlier application is permitted.
• ‘Prepayments of a minimum funding requirement’ (Amendments to IFRIC 14), issued in November 2009. The amendments correct an unintended consequence of IFRIC 14, ‘IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct the problem. The amendments are effective for annual periods beginning 1 January 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented.
• IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’. This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods beginning on or after 1 July 2010. Earlier application is permitted.
• Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard but most are effective 1 January 2010.

The Directors do not anticipate that the adoption of any of the other above standards or interpretations will have a material impact on the Group’s financial statements in the period of initial application.

4 Cashflow from operating activities

	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million
Profit for the period	87.4	71.9	168.4
Adjustments for:
Tax	38.3	33.8	75.6
Depreciation	77.4	74.9	148.2
Amortisation of intangibles	1.4	1.4	2.7
Finance income	(0.1)	(0.1)	(0.4)
Finance cost	5.1	8.0	18.5
Profit on sale of PPE	(0.9)	(7.8)	(9.6)
Share based payments	10.3	4.5	9.2
Changes in working capital   (excluding the effects of exchange differences on consolidation):
(Increase)/decrease in inventories	(16.6)	8.6	7.5
(Increase)/decrease in trade and other receivables	(64.0)	32.4	35.2
Increase/(decrease) in trade and other payables	70.0	(28.3)	(24.5)
Cash generated from operations	208.3	199.3	430.8

5 Cash and cash equivalents

	30 June 2010 £ million	30 June 2009 £ million	31 Dec 2009 £ million
Cash at bank and in hand	31.2	15.7	21.7
Short-term bank deposits	0.3	0.6	0.5
	31.5	16.3	22.2

Cash and bank overdrafts include the following for the purposes of the cashflow statement:

	30 June 2010 £ million	30 June 2009 £ million	31 Dec 2009 £ million
Cash and cash equivalents	31.5	16.3	22.2
Bank overdrafts (Note 11)	(15.5)	(9.9)	(8.7)
	16.0	6.4	13.5

6 Segmental reporting

(a) Revenue by segment

	Total revenue			Inter-segment revenue			External revenue
	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million
Middle East & South East Europe	48.7	42.6	90.8	–	–	0.1	48.7	42.6	90.7
Europe	76.4	79.5	158.9	–	–	–	76.4	79.5	158.9
North America	115.3	94.1	197.7	0.3	–	0.1	115.0	94.1	197.6
International Local	85.8	48.5	97.0	0.8	–	0.2	85.0	48.5	96.8
Local business	326.2	264.7	544.4	1.1	–	0.4	325.1	264.7	544.0
International Power Projects	259.2	235.7	481.0	0.7	0.6	1.1	258.5	235.1	479.9
Eliminations	(1.8)	(0.6)	(1.5)	(1.8)	(0.6)	(1.5)	–	–	–
Group	583.6	499.8	1,023.9	–	–	–	583.6	499.8	1,023.9

Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.

(b) Profit by segment

	Trading profit pre intangible asset amortisation			Amortisation of intangible assets arising from business combinations			Trading profit
	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million
Middle East & South East Europe	11.5	9.9	22.5	–	–	(0.1)	11.5	9.9	22.4
Europe	2.5	4.5	13.0	(0.1)	(0.1)	(0.1)	2.4	4.4	12.9
North America	15.6	11.6	35.7	(0.9)	(0.8)	(1.6)	14.7	10.8	34.1
International Local	23.9	10.6	24.1	(0.4)	(0.3)	(0.6)	23.5	10.3	23.5
Local business	53.5	36.6	95.3	(1.4)	(1.2)	(2.4)	52.1	35.4	92.9
International Power Projects	77.7	70.4	159.7	–	–	(0.1)	77.7	70.4	159.6
Group	131.2	107.0	255.0	(1.4)	(1.2)	(2.5)	129.8	105.8	252.5

	Gain/(loss) on sale of PPE			Operating profit
	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million
Middle East & South East Europe	0.2	(0.1)	(0.1)	11.7	9.8	22.3
Europe	0.9	6.3	7.0	3.3	10.7	19.9
North America	1.4	1.6	2.7	16.1	12.4	36.8
International Local	(0.1)	–	0.1	23.4	10.3	23.6
Local business	2.4	7.8	9.7	54.5	43.2	102.6
International Power Projects	(1.5)	–	(0.1)	76.2	70.4	159.5
Group	0.9	7.8	9.6	130.7	113.6	262.1
Finance costs – net				(5.0)	(7.9)	(18.1)
Profit before taxation				125.7	105.7	244.0
Taxation				(38.3)	(33.8)	(75.6)
Profit for the period				87.4	71.9	168.4

(c) Depreciation and amortisation by segment

	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million
Middle East & South East Europe	8.9	8.1	16.3
Europe	10.3	12.7	24.9
North America	14.0	15.2	28.4
International Local	9.2	7.9	16.1
Local business	42.4	43.9	85.7
International Power Projects	36.4	32.4	65.2
Group	78.8	76.3	150.9

(d) Capital expenditure on property, plant and equipment and intangible assets by segment

	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million
Middle East & South East Europe	12.6	8.5	11.9
Europe	9.7	5.7	7.9
North America	12.5	8.4	24.4
International Local	21.2	12.7	21.0
Local business	56.0	35.3	65.2
International Power Projects	47.6	65.6	99.2
Group	103.6	100.9	164.4

 

(e) Total assets by segment

	6 months ended 30 June 2010 £ million	6 months ended 30 June 2009 £ million	Year ended 31 Dec 2009 £ million
Middle East & South East Europe	124.3	105.1	106.1
Europe	155.0	161.0	148.1
North America	241.8	208.4	222.2
International Local	166.1	122.5	114.1
Local business	687.2	597.0	590.5
International Power Projects	588.2	490.5	521.1
	1,275.4	1,087.5	1,111.6
Deferred and current tax asset	10.8	4.8	10.5
Total assets per balance sheet	1,286.2	1,092.3	1,122.1

7 Dividends

The dividends paid in the period were:

	6 months ended 30 June 2010	6 months ended 30 June 2009	Year ended 31 Dec 2009
Total dividend (£ million)	22.1	16.9	28.6
Dividend per share (pence)	8.23	6.28	10.65

An interim dividend in respect of 2010 of 6.55 pence (2009: 4.37 pence), amounting to a total dividend of £17.5 million (2009: £11.8 million) was proposed during the period.

8 Earnings per share

Basic earnings per share have been calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the period, excluding shares held by the Employee Share Ownership Trusts which are treated as cancelled.

	30 June 2010	30 June 2009	31 Dec 2009
Profit for the period (£ million)	87.4	71.9	168.4
Weighted average number of ordinary shares in issue (million)	269.0	268.6	268.7
Basic earnings per share (pence)	32.49	26.76	62.67

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary shares during the period. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

	30 June 2010	30 June 2009	31 Dec 2009
Profit for the period (£ million)	87.4	71.9	168.4
Weighted average number of ordinary shares in issue (million)	269.0	268.6	268.7
Adjustment for share options (million)	1.3	0.7	1.0
Diluted weighted average number of ordinary shares in issue (million)	270.3	269.3	269.7
Diluted earnings per share (pence)	32.33	26.69	62.42

9 Taxation

The taxation charge for the period is based on an estimate of the Group’s expected annual effective rate of tax for 2010 based on prevailing tax legislation at 30 June 2010. This is currently estimated to be 30.5% (2009: 32.0%).

10 Property, plant and equipment

Six months ended 30 June 2010

	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2010	40.2	13.8	1,379.0	65.7	1,498.7
Exchange adjustments	0.7	0.4	64.8	0.8	66.7
Additions	1.7	0.5	99.1	2.3	103.6
Disposals	–	–	(22.3)	(0.7)	(23.0)
At 30 June 2010	42.6	14.7	1,520.6	68.1	1,646.0
Accumulated depreciation
At 1 January 2010	12.7	6.7	718.7	47.6	785.7
Exchange adjustments	0.5	0.1	29.7	0.6	30.9
Charge for the period	0.9	0.6	72.3	3.6	77.4
Disposals	–	–	(19.8)	(0.6)	(20.4)
At 30 June 2010	14.1	7.4	800.9	51.2	873.6
Net book values
At 30 June 2010	28.5	7.3	719.7	16.9	772.4
At 31 December 2009	27.5	7.1	660.3	18.1	713.0

Six months ended 30 June 2009

	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2009	37.9	11.9	1,382.8	64.4	1,497.0
Exchange adjustments	(3.0)	(1.0)	(131.0)	(2.4)	(137.4)
Additions	1.7	1.3	91.7	2.7	97.4
Acquisitions	–	–	1.6	–	1.6
Disposals	–	–	(40.8)	(0.6)	(41.4)
At 30 June 2009	36.6	12.2	1,304.3	64.1	1,417.2
Accumulated depreciation
At 1 January 2009	11.7	5.6	684.3	43.4	745.0
Exchange adjustments	(1.1)	(0.3)	(65.6)	(2.1)	(69.1)
Charge for the period	0.7	0.8	70.0	3.4	74.9
Disposals	–	–	(36.7)	(0.6)	(37.3)
At 30 June 2009	11.3	6.1	652.0	44.1	713.5
Net book values
At 30 June 2009	25.3	6.1	652.3	20.0	703.7
At 31 December 2008	26.2	6.3	698.5	21.0	752.0

11 Borrowings

	30 June 2010 £ million	30 June 2009 £ million	31 Dec 2009 £ million
Non-current
Bank borrowings	137.5	276.7	180.0
Current
Bank overdrafts	15.5	9.9	8.7
Bank borrowings	38.0	16.9	9.0
	53.5	26.8	17.7
Total borrowings	191.0	303.5	197.7
Short-term deposits	(0.3)	(0.6)	(0.5)
Cash at bank and in hand	(31.2)	(15.7)	(21.7)
Net borrowings	159.5	287.2	175.5

The bank overdrafts and borrowings are all unsecured.

The maturity of financial liabilities

The maturity profile of the borrowings was as follows:

	30 June 2010 £ million	30 June 2009 £ million	31 Dec 2009 £ million
Within 1 year, or on demand	53.5	26.8	17.7
Between 1 and 2 years	109.0	2.6	151.1
Between 2 and 3 years	28.5	246.8	–
Between 3 and 4 years	–	–	28.9
Between 4 and 5 years	–	27.3	–
	191.0	303.5	197.7

12 Capital commitments

	30 June 2010 £ million	30 June 2009 £ million	31 Dec 2009 £ million
Contracted but not provided for (property, plant and equipment)	19.2	22.5	8.3

13 Pension commitments

Analysis of movement in retirement benefit obligation in the period:

	30 June 2010 £ million	30 June 2009 £ million	31 Dec 2009 £ million
At start of period	(5.8)	(8.0)	(8.0)
Income statement expense	(1.2)	(0.8)	(1.5)
Contributions	4.3	1.3	5.8
Net actuarial (loss)/gain	(1.7)	6.3	(2.1)
At end of period	(4.4)	(1.2)	(5.8)

The net actuarial loss of £1.7 million in the period is mainly driven by a decrease in the discount rate assumption used to value the retirement benefit obligation which decreased from 5.7% at 31 December 2009 to 5.4% at 30 June 2010.

14 Related party transactions

Transactions between the Group and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There were no other related party transactions in the period.

15 Seasonality

The Group is subject to seasonality with the third quarter of the year being our peak demand period, accordingly revenue and profits have historically been higher in the second half of the year.

16 Events occurring after the balance sheet date

A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010, which was substantively enacted on 20 July 2010, includes legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. The changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements. The changes are not expected to have a material impact on the Group.