Company Announcements

NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

Basis of preparation

The condensed consolidated financial information for each of the six month periods does not constitute statutory accounts as defined by section 435 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The half-yearly financial report was approved by the Board of Directors on 5 June 2019. The information for the year ended 31 October 2018 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. Full accounts for the year ended 31 October 2018, which include an unqualified audit report, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006, have been delivered to the Registrar of Companies.

Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards ("IFRSs"), this announcement does not itself contain sufficient information to comply with IFRSs. The condensed set of financial statements included in the half-yearly financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

Going concern

The Directors believe the Group is well placed to manage its business risks successfully, despite the current uncertain economic outlook. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities.

As part of their regular assessment of Chemring's working capital and financing position, the Directors have prepared a detailed trading and cash flow forecast for a period which covers at least twelve months after the date of approval of the financial statements. In assessing the forecast, the Directors have considered:

·    trading risks presented by the current economic conditions in the defence market, particularly in relation to government budgets and spending;

·    the impact of macroeconomic factors, particularly interest rates and foreign exchange rates;

·    the status of the Group's financial arrangements and associated covenant requirements;

·    progress made in developing and implementing cost reduction programmes and operational improvements;

·    mitigating actions available should business activities fall behind current expectations, including the deferral of discretionary overheads and restricting cash outflows; and

·    the long-term nature of the Group's business which, taken together with the Group's order book, provides a satisfactory level of confidence to the Board in respect of trading.

The Directors have acknowledged the latest guidance on going concern. Management have considered the latest forecasts available to them and additional sensitivity analysis has been prepared on the covenant forecasts to consider the impact on covenants of any reduction in anticipated levels of EBITDA. This sensitised scenario shows headroom on all covenant test dates. After consideration of the above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statements.

Alternative Performance Measures ("APMs")

In the analysis of the Group's financial performance and position, operating results and cash flows, APMs are presented to provide readers with additional information. The principal APMs presented are underlying measures of earnings including underlying operating profit, underlying profit before tax, underlying profit after tax, underlying EBITDA, underlying earnings per share, and underlying operating cash flow. In addition, EBITDA, net debt, and constant currency revenues are presented which are also considered to be non-IFRS measures. These measures are consistent with information regularly reviewed by management to run the business, including planning, budgeting and reporting purposes and for its internal assessment of the operational performance of individual businesses.

The directors believe that the use of these APMs assist in providing additional information on the underlying trends, performance and position of the Group. APMs are used to improve the comparability of information between reporting periods by adjusting for items that are non-recurring or otherwise non-underlying. Management consider non-underlying items to be:

·    amortisation of acquired intangibles;

·    material exceptional items, for example relating to acquisitions and disposals, business restructuring costs and legal costs;

·    material exceptional items from changes in legislation, for example the GMP equalisation court ruling and the enactment of the US Tax Cuts and Jobs Act;

·    gains or losses on the movement in the fair value of derivative financial instruments; and

·    the tax impact of all of the above.

Our use of APMs is consistent with the prior year and we provide comparatives alongside all current period figures.

Accounting policies

The accounting policies applied by the Group in this half-yearly financial report are the same as those applied by the Group in its consolidated financial statements for the year ended 31 October 2018.

Recent accounting developments

The following standards, amendments and interpretations have been issued by the International Accounting Standards Board (IASB) or by the IFRS IC. The Group's approach to these is as follows:

i) The following International Financial Reporting Committee ("IFRIC") interpretations, amendments to existing standards and new standards were adopted in the period ending 30 April 2019 but have not materially impacted the reported results or the financial position:

·      Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions;

·      IFRS 9 Financial Instruments Recognition and Measurement ;

·      Annual Improvements to IFRSs 2014-2016 Cycle; and

·      IFRIC 22 Foreign Currency Transactions and Advance Consideration

ii) At the date of authorisation of this announcement, the following standards and interpretations that are potentially relevant to the Group and which have not yet been applied in these reported results were in issue but not yet effective (and in some cases had not yet been adopted by the European Union):

Effective for periods beginning on or after 1 January 2019

·      IFRS 16 Leases;

·      Annual Improvements to IFRSs 2015-2017 Cycle; and

·      IFRIC 23 Uncertainty over Income Tax Treatments

Effective for periods beginning on or after 1 January 2021

·      IFRS 17 Insurance Contracts

The Directors do not expect the adoption of these standards and interpretations to have a material impact on the results of the Group in future periods except as follows:

·      IFRS 16 Leases will impact the measurement, recognition, presentation and disclosure of leases, particularly operating leases where the term is longer than 12 months.

The impact of IFRS 16 Leases is currently being assessed. Under IFRS 16 Leases, lessees will be required to apply a single model to recognise a lease liability and asset for all leases, including those classified as operating leases under current accounting standards, unless the underlying asset has a low value or the lease term is 12 months or less. The adoption of IFRS 16 will have a significant impact on the results as each lease will give rise to a right of use asset which will be depreciated on a straight line basis, and a lease liability with a related interest charge. The depreciation and interest will replace the operating lease payments currently recognised as an expense. The impact will depend on the transition approach and the contracts in effect at the time of the adoption. We have assessed the impact of the new standard as at 31 October 2018 assuming a modified retrospective approach and calculated that the finance lease asset and liability coming on balance sheet would be £4.6m.

Critical accounting judgements and sources of estimation uncertainty

When applying the Group's accounting policies, management must make judgements, assumptions and estimates concerning the future that affect the carrying amounts of assets and liabilities at the balance sheet date and the amounts of revenue and expenses recognised during the period. Such judgements, assumptions and estimates are based upon factors including historical experience, the observance of trends in the industries in which the Group operates, and information available from the Group's customers and other external sources.

Critical accounting judgements

Revenue recognition

IFRS 15 Revenue from Contracts with Customers recognises revenue on the basis of the satisfaction of performance obligations. The identification of these obligations requires management judgement, particularly with respect to milestone contracts that contain multiple obligations. Additionally, management has to consider whether performance obligations should be recognised at a single point in time, which is generally the case for the sale of products by the Group, or over a period of time, which is more common for certain service contracts.

Key sources of estimation uncertainty

Goodwill impairment

Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which goodwill has been allocated. The value-in-use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit, and to determine a suitable discount rate in order to calculate present value. In reviewing the carrying value of goodwill of the Group's businesses, the Board considers the separate plans and cash flows of these businesses consistent with the requirements of IAS 36 Impairment of Assets. The plans and cash flows of these businesses reflect current and anticipated conditions in the defence industry.

Capitalised development costs

IAS 38 Intangible Assets requires that development costs, arising from the application of research findings or other technical knowledge to a plan or design of a new substantially improved product, are capitalised, subject to certain criteria being met. Determining the future cash flows generated by the products in development requires estimates which may differ from the actual outcome. In particular, this can depend on the estimation applied to future milestone events to secure long-term positions on production contracts.

Deferred tax assets on tax losses and US interest deductions

Applicable accounting standards permit the recognition of deferred tax assets only to the extent that it is probable that future taxable profits will be available to utilise the tax losses carried forward. The assessment of future taxable profits involves significant estimation uncertainty, principally relating to an assessment of management's projections of future taxable income based on business plans and ongoing tax planning strategies. These projections include assumptions about the future strategy of the Group, the economic and regulatory environment in which the Group operates, future tax legislation, and customer behaviour, amongst other variables.

2. SEGMENTAL ANALYSIS

3. ALTERNATIVE PERFORMANCE MEASURES AND DISCONTINUED OPERATIONS

The principal Alternative Performance Measures ("APMs") presented are the underlying measures of earnings which exclude discontinued operations, exceptional items, gain or loss on the movement on the fair value of derivative financial instruments, and the amortisation of acquired intangibles. The Directors believe that these APMs improve the comparability of information between reporting periods. The term underlying is not defined under IFRS and may not be comparable with similarly titled measures used by other companies.

Acquisition and disposal-related costs

In the year to 31 October 2018, acquisition and disposal-related costs of £4.1m (H1 2018: £0.5m) related to transaction costs and an earnout payment on the acquisition of Wallop Defence Systems' assets for which no provision was made at the time of acquisition.

Business restructuring costs

In the year to 31 October 2018, business restructuring costs of £8.1m (H1 2018: £1.6m) related to the non-capital costs/asset write offs and demolition element of the Tennessee capacity expansion project.

Legal costs

In the year to 31 October 2018, legal costs of £12.8m (H1 2018: £1.5m) were in relation to ongoing investigations.

Change of Chief Executive

In the year to 31 October 2018, the costs associated with the change of Chief Executive were £1.7m (H1 2018: £nil). As disclosed in the directors' report contained in the Annual Report and Accounts 2018, Michael Flowers stepped down as Group Chief Executive on 30 June 2018 and Michael Ord was appointed as Group Chief Executive on 1 July 2018.

Pension scheme charge in respect of GMP equalisation court ruling

On 26 October 2018, the High Court handed down a judgement involving the Lloyds Banking Group's defined benefit pension schemes. The judgement concluded that pension schemes should be amended to equalise pension benefits for men and women in relation to guaranteed minimum pension benefits. We are working with our actuarial advisers to understand the extent to which the judgement crystallises any additional liabilities for the Group UK defined benefit pension scheme. We are early in the evaluation process, but we estimate that the additional liability could be in the region of £0.4m and £1.2m, therefore we recognised £0.8m (H1 2018: £nil) in our 2018 results.

Derivative financial instruments

Included in non-underlying items is a £nil (H1 2018: £0.1m loss, 2018: £0.4m loss) on the movement in fair value of derivative financial instruments. This is excluded from underlying earnings to ensure the recognition of the gain or loss on the derivative matches the timing of the underlying transaction.

Impairment of capitalised development costs

In the year to 31 October 2018, an impairment of capitalised product development costs of £7.4m (H1 2018: £nil) was recognised following the appointment of a new Chief Executive who conducted a strategic review of the Group's product portfolio to rationalise future resources on areas where the Group had a niche position and competitive advantage. The carrying value of the products for which an impairment charge was recognised exceeded the expected future value, hence an impairment charge was recognised in the year.

Amortisation of acquired intangibles

Also included is the amortisation charge arising from business combinations of £5.6m (H1 2018: £5.7m, 2018: £11.6m). Amortisation of acquired intangibles arising from business combinations is associated with acquisition costs under IFRS 3 Business Combinations. As such, these costs are not reflective of the underlying activities of the Group and therefore have been excluded from the underlying measures.

Tax

In the period to 30 April 2019, the tax impact of continuing non-underlying items comprises a £1.2m tax credit (H1 2018: £1.3m credit, 2018: £4.3m credit) on the above non-underlying items. In the year to 31 October 2018, the tax impact of non-underlying items also comprised a £17.4m charge (H1 2018: £17.4m charge) in respect of the enactment of the US Tax Cuts and Jobs Act on 22 December 2017. These significant one-off tax charges/credits have arisen from a change in legislation, and as such have been removed from underlying results to aid comparability and understanding of the Group's performance.

Discontinued operations

Further details on the results of discontinued operations is presented in note 9.

4. SEASONALITY OF REVENUE

Revenue for both of the two business segments is more weighted towards the second half of the financial year. This second half weighting arises due to customer behaviours in the defence marketplace, the timing of expected contract activity and planned facility maintenance work programmes, and the acceptance testing of product by customers.

5. TAX

The continuing statutory tax charge totalled £0.8m (H1 2018: £17.9m, 2018: £18.8m) on a continuing statutory profit before tax of £4.3m (H1 2018: £1.1m loss, 2018: £22.0m loss).

The effective tax rate on underlying profit before tax for the period is a charge of 20.2% (H1 2018: 21.7%, 2018: 22.9%). This is lower than the estimated effective tax rate on underlying profit before tax expected for the full year of 21.5% due to prior year tax adjustments.

The US Tax Cuts and Jobs Act ("TCJA") was substantively enacted on 22 December 2017. The TCJA provides for a reduction in the main rate of US federal corporate income tax from 35% to 21% for accounting periods beginning on or after 1 January 2018, thus first impacting Chemring for its 2019 financial year, however the impact on the deferred tax asset was recognised in 2018 hence the significant charge to non-underlying in prior periods.

6. EARNINGS PER SHARE

Earnings per share are based on the average number of shares in issue, excluding own shares held, of 279,999,500 (H1 2018: 279,642,267, 2018: 279,768,360). Diluted earnings per share has been calculated using a diluted average number of shares in issue, excluding own shares held, of 284,800,433 (H1 2018: 285,755,048, 2018: 285,993,316).

No dilution has been recognised for the purposes of basic earnings per share from continuing operations in April 2018 and 31 October 2018 due to there being a loss per share for the period to 30 April 2018 and 31 October 2018.

The earnings used in the calculations of the various measures of earnings per share are as follows:

7. DIVIDENDS

On 20 April 2018 a dividend of 2.0p per ordinary share was paid to shareholders on the register on 6 April 2018 and an interim dividend of 1.1p per ordinary share was paid on 14 September 2018 to shareholders on the register on 31 August 2018.

At the Annual General Meeting on 21 March 2019 the shareholders approved a final dividend in respect of the year ended 31 October 2018 of 2.2p per ordinary share. This was paid on 18 April 2019 to shareholders on the register on 5 April 2019.

The Board also declared an interim dividend in respect of 2019 of 1.2p per ordinary share which will be paid on 13 September 2019 to shareholders on the register on 30 August 2019. In accordance with accounting standards this dividend has not been recorded as a liability as at 30 April 2019.

8. FINANCIAL INSTRUMENTS

As at 30 April 2019, there were no significant differences between the book value and fair value (as determined by market value) of the Group's derivative financial instruments.

The fair value of derivative financial instruments is estimated by discounting the future contracted cash flow using readily available market data and represents a Level 2 measurement in the fair value hierarchy under IFRS 7 Financial Instruments: Disclosures. As at 30 April 2019, the total fair value of forward foreign exchange contracts recognised in the condensed consolidated balance sheet were an asset of £0.1m (H1 2018: £0.4m, 2018: £0.1m), a current liability of £0.4m (H1 2018: £0.3m, 2018: £0.3m), and a non-current liability of £0.2m (H1 2018: £nil, 2018: £0.2m).

9. DISCONTINUED OPERATIONS

A strategic review of the Group's Energetics portfolio was conducted during the year ended 31 October 2018. The Board concluded that the future focus within the Energetics segment should be on the Energetics Devices businesses. It therefore made the decision to exit the commodity Energetics businesses. 

In the period to 30 April 2019 the exceptional items include an impairment loss of £3.1m in respect of the carrying value of Chemring Defence UK Limited.

In the year to 31 October 2018 the exceptional items include the amortisation of acquired intangibles of £2.7m (H1 2018: £1.1m) and an impairment loss of £69.3m (H1 2018: £nil) in respect of the carrying values of Chemring Defence UK Limited, Chemring Ordnance Inc., B.D.L. Systems Limited and Richmond Electronics and Engineering Limited was recorded.

Amortisation of acquired intangibles arising from business combinations is associated with acquisition costs under IFRS 3 Business Combinations. As such, these costs are not reflective of the underlying activities of the discontinued operations and therefore have been treated as exceptional items. Impairment losses have been removed from underlying measures for improved comparability between reporting periods. This is in line with the Group's accounting policy.

The Group completed the sale of the entire issued share capital of Chemring Military Products, Inc., to Global Ordnance LLC on 5 April 2019. Under the terms of the agreement, the Group received £1.7m upon completion of the transaction on 5 April 2019. Deferred consideration of £0.7m is payable on the first anniversary of the transaction. A further deferred consideration amount of £0.4m is payable on the second anniversary of the transaction.

The Group is entitled to further contingent consideration following the sale of up to £0.8m if certain performance related and event driven milestones are achieved by Chemring Military Products, Inc. No value has been assigned to this consideration based on the probability assessment of the associated milestones being reached.

The carrying amounts of assets and liabilities as at the date of sale were:

10. RETIREMENT BENEFIT SURPLUS

The defined benefit surplus are calculated using an actuarial valuation as at 30 April 2019. In the period to 30 April 2019, retirement benefit surplus improved to a £7.8m surplus (H1 2018: £3.5m, 2018: £7.5m), principally as a result of employer contributions paid in accordance with the funding plan agreed with the trustees of the Chemring Group Staff Pension Scheme in 2015.

11. RELATED PARTY TRANSACTIONS

The Group had no related party transactions during the period requiring disclosure.

12. CASH FLOWS FROM UNDERLYING OPERATIONS

13. ANALYSIS OF NET DEBT

The Group increased its existing revolving credit facility to £136.7m during the period. The revolving credit facility was first established in October 2018 and has a four-year initial term with options to extend by a further two years.

The Group had £117.3m (H1 2018: £67.6m, 2018: £68.1m) of undrawn borrowing facilities at the half year.

The Group is subject to two key financial covenants, which are tested quarterly. These covenants relate to the leverage ratio between "underlying EBITDA" and debt; and the interest cover ratio between underlying EBITDA and finance costs. The calculation of these ratios involves the translation of non-Sterling denominated debt using average, rather than closing, rates of exchange. The revolving credit facility and the loan notes have differing covenant compliance calculations. The Group was in compliance with the covenants throughout the period.

14. EXCHANGE RATES

The following exchange rates applied during the year:

The translation of foreign currency items in the financial statements are dependent on the prevailing foreign exchange rates. For the period ended 30 April 2019, a 10 cent increase in the US dollar exchange rate would have decreased reported underlying operating profit for the first half of 2019 by approximately £0.6m and decreased reported net debt at 30 April 2019 by approximately £4.2m.

15. CONTINGENT LIABILITIES

The Group is, from time to time, party to legal proceedings and claims, and is involved in correspondence relating to potential claims, which arise in the ordinary course of business.

A dispute between Alloy Surfaces Company, Inc. and the US Army, in relation to disputed pricing of a certain historic contract fulfilled by Alloy Surfaces Company, Inc., proceeded to a hearing in front of the US Armed Services Board of Contract Appeals ("ASBCA") in April 2017. ASBCA is expected to take at least two years to issue its decision in relation to this matter, and therefore it is too early to predict the outcome of the hearing. The range of possible outcomes is between £nil to £12.0m. A provision of £1.1m (H1 2018: £1.0m, 2018: £1.0m) exists to cover estimated legal costs for the Group with regards to this issue.

Since 2013, the Group has benefited from the UK's Controlled Foreign Company ("CFC") Finance Company exemption. The European Commission has launched an investigation into whether the UK's CFC Finance Company exemption breaches state aid rules. No timescale has been set for the review and this could take several years to conclude. On 2 April 2019 the European Commission delivered a judgement which concluded in some circumstances the UK's CFC exemption may breach state aid rules. The UK Government is working to understand the circumstances where it is required to seek repayment of the lost tax from the relevant taxpayers. Given the early stage of this process, it is too early to determine whether a tax liability is probable. The range of possible outcomes is between £nil and £15m, plus interest.

The Serious Fraud Office ("SFO") is currently undertaking a formal investigation into concerns about bribery, corruption and money laundering involving intermediaries who previously represented one of the Group's UK-based subsidiaries, Chemring Technology Solutions Limited ("CTSL"), and its predecessor companies. The investigation commenced following a voluntary report made by CTSL relating to two specific historic contracts, the first of which was awarded prior to the Group's ownership of the business concerned and the second in 2011, neither of which are considered to be material in the context of the Group. It is too early to predict the outcome of the SFO's investigation, in which the Group continues to co-operate fully.

On 10 August 2018 an incident occurred at the Group's Countermeasures facility in Salisbury.  The Group responded immediately to support those who were injured, and maintains appropriate employee liability insurance that we expect will provide full compensation in due course. We continue to fully support the Health and Safety Executive ("HSE") as it undertakes its investigation. Whilst provisions have been recorded for costs that have been identified, it is possible that additional uninsured costs and, depending on the outcome of the HSE investigation, financial penalties may be incurred. At this stage, these costs are not anticipated to be material in the context of the Group's financial statements.

16. EVENTS AFTER THE BALANCE SHEET DATE

There are no material post balance sheet events.

17. PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which could have a material impact on the Group's performance and could cause actual results to differ materially from expected and historical results have not changed significantly from those set out in the Group's 2018 Annual Report and Accounts. A detailed description of the Group's principal risks and uncertainties and the ways they are mitigated can be found on pages 34 to 41 of the 2018 Annual Report and Accounts. These risks can be summarised as:

·      health and safety risks;

·      environmental laws and regulations;

·      possible defence budget cuts;

·      timing and value of orders;

·      contract-related risks;

·      political risks;

·      manufacturing risks;

·      technology risks;

·      Brexit;

·      people risks;

·      product liability and other customer claims;

·      compliance and corruption risks;

·      product-related risks;

·      cyber-related risks; and

·      financial risks.

Management have detailed mitigation plans and assurance processes to manage and monitor these risks.

18. CORPORATE WEBSITE

Further information on the Group and its activities can be found on the corporate website at www.chemring.co.uk.

INDEPENDENT REVIEW REPORT TO CHEMRING GROUP PLC

Conclusion

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 April 2019 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement and the related explanatory notes.

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 April 2019 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

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.  We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) 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.

The impact of uncertainties due to the UK exiting the European Union on our review

Uncertainties related to the effects of Brexit are relevant to understanding our review of the condensed consolidated financial statements. Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. An interim review cannot be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.

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 DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 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-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

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 DTR of 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.

Andrew Campbell-Orde

for and on behalf of KPMG LLP 

Chartered Accountants 

Gateway House

Tollgate

Chandlers Ford

Southampton

SO53 3TG

5 June 2019