Chairman´s statement

2006 is a year of significant investment to enhance the future growth of the group´s UK and international businesses. The group remains strongly cash and capital generative and the interim dividend has been increased by 3%.

The first half of 2006 has been a significant period of investment and development to support the future growth of the group´s UK and international businesses. UK home credit has stepped up its marketing expenditure aimed at developing new sales channels and is now seeing growth in customer numbers after three years of reduction. It is also investing over the next two years in technology which will improve the efficiency and effectiveness of the agency force. Vanquis Bank has successfully developed distribution of its credit cards through the internet and face to face canvassing to augment the customer reach available from its direct mail programme whilst building the foundation for profitable growth through developing its underwriting and credit processes. International has invested heavily in opening up the Mexican and Romanian markets as well as developing future growth opportunities through piloting new products and researching potential new countries. In Poland, the modified home credit product to comply with the Polish interest rate cap legislation has been successfully rolled out and, at the same time, management action has been taken to deal with the adverse trend in impairment following the rapid expansion of credit in late 2004 and early 2005.

Revenue from ongoing operations in the six months to June 2006 increased by 5% to £568.7 million. Group profit before tax from ongoing operations was £66.5 million (June 2005 £89.1 million) after charging start-up losses and development costs totalling £19.1 million (June 2005 £9.2 million). These comprise start-up losses of £5.8 million in Mexico and Romania, £10.7 million in Vanquis Bank, £1.3 million in launching an internet-based distribution channel for our motor insurance division, and £1.3 million on piloting new credit products in Poland.

Earnings per share reduced from 23.07p to 18.26p and an interim dividend of 14.48p per share (June 2005 14.06p) has been declared, an increase of 3.0%.

Operations
UK home credit