Egg plc
 
               Results for the Nine Months to 30 September 2004
 
 
 
'The Group result for the year to date is a loss before tax of £103 million,
including the previously announced provision of £113 million raised in July for
the costs of exiting the French market and the operating losses of £35 million
incurred in France up to the date of our announcement of Egg's intention to
withdraw from the market.  Our withdrawal from the French market is progressing
and as we announced earlier this month we have received approaches for the
consumer credit, savings and brokerage businesses which, if concluded, would
result in the redeployment of up to 140 people and provide continuity of service
to Egg's customers in France.  Our expectations with regard to the total exit
costs for France remain unchanged.
 
 
 
'Our UK business has delivered a satisfactory set of results in what has proved
to be a challenging year for Egg, with the potential sale process initiated by
Prudential in January creating uncertainty in addition to the increased
competition and rising interest rates that have impacted the credit card and
personal loan markets.   We made a profit before tax of £53 million for the nine
months to 30 September 2004 compared to the £57 million profit for the same
period last year.  Unsecured lending balances are growing strongly, with record
personal loan drawdowns of over £1.6 billion and our new MasterCard offer is
proving successful and helped generate healthy credit card balance growth this
quarter.
 
 
 
'Looking forward, Egg people are firmly focused on the future development of our
core UK business, leveraging our brand and high quality customer base to expand
our franchise.  We have recently launched a discount tracker mortgage product
and we have an increased focus on general insurance cross sales, given research
in our customer base indicates a high propensity to buy these products from Egg.
  In addition we have taken the opportunity to re-price our credit card
portfolio in October following similar action by the majority of our
competitors.
 
 
 
'As part of our renewed focus on our core UK business, we announce today the
disposal of our funds supermarket, Egg Invest, to Fidelity FundsNetwork.  The
transaction will result in one-off costs of £3 million and lead to annual
savings of a similar amount moving forward.
 
 
 
'We will continue to take actions to secure the significant value inherent in
our existing unsecured lending business and given the strong brand consideration
that exists among both our customers and the wider UK population we will look to
offer a broader range of products in 2005 and beyond.'
 
 
 
 
 
Paul Gratton, CEO, Egg plc
 
 
 
Highlights:
 
Analysis of Group Profit and Loss Account:
 
 
                                                      Nine Months to 30 Sep   Nine Months to 30 Sep
                                                                       2004                    2003
                                                                         £m                      £m
Egg UK Operating Profit                                                53.2                    56.7
Egg France Operating Loss (i)                                        (35.0)                  (69.5)
Egg France Closure Provision (ii)                                   (112.8)                       -
Other International                                                       -                   (3.5)
Subsidiaries/Associates/JV's                                          (2.9)                   (3.4)
Transaction Costs                                                     (3.7)                       -
Restructuring Costs                                                   (2.1)                   (5.2)
Group Loss before Tax                                               (103.3)                  (24.9)
 
 
 
 
 
(i)                  The current period amount of £35.0 million reflects the
operating loss before tax for the period from 1 January 2004 to 13 July 2004,
the date on which Egg announced its intention to withdraw from the French
market.
 
(ii)                This is the total provision raised for the estimated costs
of exiting the French market.  In the consolidated profit and loss account for
the nine months ended 30 September 2004 £19.7 million has been released to cover
operating losses post 13 July 2004, fixed asset impairment and other costs
incurred to date as part of the exit process.
 
 
 
 
Group
 
         Group operating income up 17% to £364 million (Q3 2003: £311 million)
 
         Group loss before tax of £103 million, including £113 million
          provision for exit costs in France (Q3 2003: £25 million loss)
 
         Group loss per share was 8.5p (Q3 2003: 3.1p)
 
         Total group assets of £12.1 billion (Q3 2003: £11.5 billion)
 
 
 
UK
 
         Egg UK delivered an operating profit of £53 million (Q3 2003: £57
          million)
 
         Unsecured lending balances grew by £0.9 billion (Q3 2003: £1.1
          billion) leading to period end balances of £5.7 billion 
         (30 September 2003: £4.4 billion)
 
         Strong sales growth in personal loans with drawdowns of £1.6 billion,
          up 33% on Q3 2003 (£1.2 billion)
 
         MasterCard offer proving increasingly popular to our customer base
          with balances now exceeding £100 million since launch in June 2004
 
         Credit quality remains strong and benchmarks continue to show Egg's
          card portfolio significantly outperforming industry norms
 
 
 
France
 
         Provision for costs of exiting the French market estimated at £113
          million (€170 million) pre tax and accounted for in July 2004.
 
 
 
 
Chief Executive Paul Gratton said:
 
 
 
'The Group result for the year to date is a loss before tax of £103 million,
including the previously announced provision of £113 million raised in July for
the costs of exiting the French market and the operating losses of £35 million
incurred in France up to the date of our announcement of Egg's intention to
withdraw from the market.  Our withdrawal from the French market is progressing
and as we announced earlier this month we have received approaches for the
consumer credit, savings and brokerage businesses which if concluded, would
result in the redeployment of up to 140 people and provide continuity of service
to Egg's customers in France.  Our expectations with regard to the total exit
costs for France remain unchanged.
 
 
 
'The UK business continues to deliver a sound performance despite increased
competition and rising interest rates.  In the nine months to 30 September 2004
we have achieved an operating profit of £53 million and grown our customer base
by almost 400,000 giving us 3.6 million customers in total.
 
 
 
'We have seen strong net growth in unsecured lending of £0.9 billion in the
first nine months taking total balances to £5.7 billion up 19% on last year end.
Cross selling personal loans into our credit card customer base remains
highly successful, delivering record sales volumes with £1.6 billion disbursed
thus far this year and the recently launched MasterCard proposition is proving
popular with our customers and has now achieved over £100 million in balances.
 
 
 
'Revenues have remained consistent at around the £120 million level each quarter
this year.  Growth in revenues has slowed this year given the pressure on
interest-bearing balance growth and margins created by competition and rising
base rates respectively, however re-pricing the credit card and opportunities to
drive increased fee revenue from cross sales of payment protection and general
insurances should see revenues growing in the fourth quarter.  We are keeping
tight control on costs and credit quality remains good with provision levels
reflecting the continuing growth in the unsecured lending portfolio, the stage
in the life cycle of the card and loan books and the increasing proportion of
personal loans in the book.
 
 
 
 
'This has been a difficult year for Egg with the uncertainty created by the
potential sale of the group as well as the decision to withdraw from the French
market.  In addition the competitive and economic factors, affecting the entire
UK unsecured lending market, have impacted our business.  Against this
background the results are satisfactory and we are confident and positive about
the future of Egg.
 
 
 
Outlook
 
 
 
'Looking forward we are focused on our successful UK business.  We have a highly
attractive unsecured lending portfolio with the opportunity to grow it further
by building on our strong relationship with our customers and the Egg brand.  We
have recently launched a discount tracker mortgage product and we have an
increased focus on general insurance cross sales given research into our
customer base indicates a high propensity to buy these products from Egg.   We
are keeping a tight control on costs and as indicated at our interim results, we
are undertaking a review of our cost base to ensure it is focused on our key
priorities moving forward.
 
 
 
'We will continue to take actions to secure the significant value inherent in
our existing unsecured lending business and given the strong brand consideration
that exists among both our customers and the wider UK population we will look to
offer a broader range of products in 2005 and beyond.'
 
 
Overview of Group Results
 
Summary Profit and Loss account by quarter (Unaudited)
 
 
                                                Q3 2004      Q2 2004      Q1 2004      Q4 2003      Q3 2003
UK                                                   £m           £m           £m           £m           £m
Net Interest Income                                70.4         70.1         73.7         72.5         64.6
Other Operating Income                             48.3         49.9         44.7         39.4         43.6
Egg UK Operating Income                           118.7        120.0        118.4        111.9        108.2
Operational and Administrative Expenses          (34.5)       (38.4)       (41.3)       (39.7)       (36.8)
Brand and Marketing Costs                         (9.0)       (10.6)        (9.6)        (8.5)        (6.5)
Development Costs                                 (5.2)        (4.7)        (5.9)        (4.5)        (5.9)
Depreciation and Amortisation                     (4.3)        (5.6)        (5.2)        (6.5)        (4.4)
Amounts written off Fixed Asset Investment            -            -            -        (4.3)            -
Provisions for Bad and Doubtful Debts            (47.1)       (41.3)       (41.2)       (32.3)       (34.6)
Egg UK Operating Profit                            18.6         19.4         15.2         16.1         20.0
 
France
Net Interest Income                                 1.8          2.1          1.9          1.5          1.8
Other Operating Income                              0.9        (0.1)            -        (0.2)        (0.3)
Egg France Operating Income                         2.7          2.0          1.9          1.3          1.5
Operational and Administrative Expenses           (8.5)        (9.9)        (9.1)       (10.4)       (12.8)
Brand and Marketing Costs                             -        (0.9)        (1.6)        (3.2)        (3.6)
Development Costs                                     -        (0.2)        (0.4)        (0.9)        (0.5)
Depreciation and Amortisation                    (12.7)        (2.0)        (1.7)        (2.1)        (2.1)
Provisions for Bad and Doubtful Debts             (3.9)        (5.5)        (4.9)        (4.3)        (3.3)
Utilisation of Exit Cost Provision                 19.7            -            -            -            -
Egg France Operating Loss                         (2.7)       (16.5)       (15.8)       (19.6)       (20.8)
 
Other International                                   -            -            -        (0.7)        (0.7)
Subsidiaries/Associates/JV's                      (1.2)        (1.0)        (0.7)        (0.2)        (0.6)
Transaction Costs                                 (1.1)        (1.3)        (1.3)            -            -
Provision for France Exit Costs                 (112.8)            -            -            -            -
Restructuring Costs                                   -          0.2        (2.3)        (5.1)            -
Group Profit/(Loss) Before Tax                   (99.2)          0.8        (4.9)        (9.5)        (2.1)
 
 
 
 
Egg UK
 
Revenues
 
 
 
Net interest income in Q3 2004 was £70.4 million, in line with the previous
quarter.  Our rolling annual credit card yield improved from 9.45% at the end of
June to 9.51% at the end of September but this was offset by the higher average
funding costs reflecting the rising base rate environment.  However, we expect
interest income to grow in Q4 on the back of the recent re-pricing of the Egg
card portfolio, with the standard variable rate having increased by 100 basis
points consistent with price increases among our key competitors.
 
 
 
Egg had grown non-interest income significantly over the first half of the year
with Q2 2004 reaching a total at £49.9 million.  Q3 saw a slight decrease to
£48.3 million which reflects the lower sales volumes achieved on personal loans
with the resulting impact on commissions earned on cross-selling payment
protection insurance.  This was expected as, on a seasonal basis, disbursements
of loans in Q3 2004 were consistent with the same period last year.  Looking
ahead we expect Q4 to be the highest quarter for other income this year
reflecting the sales plan for personal loans and the fact that we will also be
putting more focus on general insurance products.
 
 
 
Costs
 
 
 
Operational and administrative costs at £34.5 million for the quarter remain
tightly managed and also reflect a cumulative adjustment of £4.4 million release
in the provision for the cost of the various share schemes in operation to
incentivise Egg staff.  This reduction reflects our revised view of the cost of
share awards post Prudential's announcement that it was no longer seeking offers
for its stake in the company.
 
 
 
Brand and marketing costs were £9.0 million in Q3 2004.  This reflected a
tactical reduction in credit card marketing activity for seasonal reasons.  Q3
is traditionally the slowest quarter for card sales.  Sales performance was
pleasing with 105,000 net new customers acquired in the third quarter, despite
some attrition in the savings base which was expected given our relative price
point in the market.  Looking into Q4 we expect to spread the marketing budget
over mortgages and general insurance, as well as credit cards and personal
loans, including some brand awareness campaigns.  Overall we are on track to
spend the £40 million for the full year that was highlighted in the interim
results in July.
 
 
 
Development costs were £5.2 million for the quarter, a slight increase on Q2
(£4.7 million).  We expect a further increase in Q4 reflecting the investment in
systems and processes in preparation for IFRS, Basel 2 and other regulatory
changes.
 
 
 
Depreciation and amortisation at £4.3 million in Q3 2004 showed some savings
compared to the first half run rate which had included some accelerated charges.
 
 
 
Bad Debt Provisions
 
 
 
Credit quality remains good and provision levels reflect the continuing growth
in the unsecured lending portfolio, the stage in the life cycle of the card and
loan books and the increasing proportion of personal loans in the book.  As
noted in the interim results we have made improvements in our analytics
capabilities and consequent enhancements to our provisioning methodologies which
enable us to predict our provision requirements more accurately.  Application of
this revised methodology led to overall provisions held against our unsecured
lending portfolio being slightly reduced in Q2 as a proportion of impaired
balances and also effected a shift in mix between general and specific
provisions.  Allowing for the benefit seen in the Q2 charge for these changes,
the Q3 bad debt charge of £47.1 million is consistent with previous trends.
The improvement in performance of delinquent accounts is most noticeable in
those accounts 6 months and further past due, where the previous assumptions
about ultimate default have been favourably revised in the light of actual
recoveries.  This results from improvements in both collection techniques and
the quality of the customer base.
 
 
 
 
 
Egg France and Provision for Exit Costs
 
 
 
The provision estimate of £112.8 million includes the operating losses that will
be incurred in running the business throughout the closure process, asset
impairment write downs, redundancy and other social plan costs, contract break
costs and the write off of the remaining goodwill.  In the period from 13 July
to 30 September 2004 £19.7 million of the provision was utilised leaving £93.1
million in reserve.  Our expectations with regard to the total exit costs for
France remain unchanged.
 
 
 
 
 
Subsidiaries/Associates/JV's
 
 
 
The £1.2 million net loss in Q3 2004 was primarily in respect of Egg's 85% owned
subsidiary Investment Funds Direct Holdings Limited ('Funds Direct').
 
 
 
Transaction Costs
 
 
 
The costs of £1.1 million in Q3 2004 relate to incremental expenses incurred in
relation to the process whereby Prudential were considering proposals for its
shareholding in Egg.  The most significant cost is the loyalty bonus scheme that
was put in place for all staff at Egg as a retention tool and which will pay out
in October.
 
 
 
 
 
Restructuring Costs
 
 
 
There were no further costs in Q3.  The charge related to exit costs on one of
our leased properties within Egg France.
 
 
Business Performance
 
 
 
Egg UK
 
Summary New Business Figures by Quarter
 
 
                                                       Q3         Q2           Q1                 Q4                 Q3
                                                     2004       2004         2004               2003               2003
Net New Egg UK Customers ('000)                       105        144          148                150                145
 
Net New Customers by product ('000)
 - Savings                                           (12)          7           17                  4                (1)
 - Credit Card                                        105        171          157                160                167
 - Personal loans                                      15         23           23                 23                 23
 - Mortgages                                          (1)        (1)          (1)                (1)                  -
 - Egg Invest                                           -          1            1                  1                  -
 - Egg Insure                                          25          1          (1)                  2                (8)
 
 
Products                                               £m         £m           £m                 £m                 £m
 - Egg Card Balance Growth                            215         81          (5)                122                250
 - Egg Personal Loan Drawdowns                        496        574          563                526                490
 - Egg Mortgage Drawdowns                              54         57           60                 58                 64
 - Egg Savings Flows (net)                          (339)        244         (47)              (229)              (637)
 
 
 
Cumulative Figures
 
 
                                                                 30 Sep            30 Sep            31 Dec
                                                                   2004              2003              2003
Total Egg UK Customers (1) (2)                                3,594,109         3,046,942         3,196,435
 
Total 'Marketable' Egg UK Customers (1) (2)                   3,056,429               n/a               n/a
 
'Marketable' Customers by product (1)
 - Credit Card (3)                                            2,249,066               n/a               n/a
 - Savings (4)                                                  695,560               n/a               n/a
 - Personal loans (5)                                           272,860               n/a               n/a
 - Mortgages (5)                                                 26,123               n/a               n/a
 - Egg Invest (5)                                                60,124               n/a               n/a
 - Egg Insure (6)                                               125,843               n/a               n/a
 
 
Product balances  (1)                                                £m                £m                £m
 - Egg Card                                                       3,306             2,892             3,015
 - Egg Savings                                                    6,022             6,393             6,164
 - Egg Personal Loans                                             2,403             1,536             1,773
 - Egg Mortgages                                                  1,117             1,231             1,197
 - Prudential Savings                                               125               201               185
 - Prudential Mortgages                                             632               883               798
 - Prudential Personal Loans                                          1                 2                 2
 
 
 
 
Notes:
 
(1)           Cumulative as at the date indicated.
 
(2)           If a customer holds more than one Egg product they are treated as
              a single customer for the purposes of this line item.
 
(3)           Includes accounts where there has been activity in the past 2
              years.  Second card holders are treated as separate customers.
 
(4)           Includes accounts with activity within the past three years. Joint
              accounts are treated as 2 or more customers.
 
(5)           Includes accounts with a balance greater than zero.
 
(6)           Includes all customers holding an active insurance policy.
 
 
 
Egg UK
 
Customers
 
Egg now has 3.6 million customers including the 105,000 net new customers who
joined during the third quarter.  This is a good performance in an increasingly
competitive market, especially with the summer months traditionally being the
quietest for card acquisition and the fact that we saw some attrition in savings
customers in the period.
 
 
 
Given the UK business is now a lot more mature we have decided to switch the
basis on which we report customer numbers to align with the way we manage the
business.  This involves excluding those customers that we consider dormant and
where we do not expect to be able to re-activate them and therefore exclude them
from our marketing campaigns into the customer base.  We believe that this new
metric gives a better indicator of the value potential in the customer base.  We
will continue to enhance our analysis and disclosures going forward and in
particular are making improvements to our customer databases in preparation for
Basel 2.  At 30 September 2004 we had 3.1 million 'marketable' customers.
 
 
 
Unsecured Lending
 
Net lending balance growth was a healthy £362 million in Q3 bringing the total
net increase to £921 million for the nine months to date.  This is an excellent
performance given the increased competition in the market and compares to £1.13
billion in the same period last year.  Credit card balance growth returned to
previously strong levels with £241 million net increase in the third quarter
following the slight slowdown experienced in H1 2004.  This performance is
encouraging and our MasterCard offer is now making a good contribution with over
£100 million in total balances since its launch in June 2004.  While Q3 saw an
expected slowdown in personal loan sales compared to the records established in
the first half we remain on track to easily surpass £2 billion in disbursements
this year which is an excellent result from a product that is predominantly
cross sold to card customers.
 
Savings
 
Q3 2004 saw a net outflow on Egg deposits of £339 million.  This is in line with
our forecasts and gives an overall result of a £142 million net outflow year to
date compared to £1,315 million outflow in the same period last year.  The
reduction in outflows reflects the success of our bonus account offering which
ran in April and May to raise additional monies from the retail savings market
as part of Egg's funding strategy.
 
 
 
Investments
 
We announce today an agreement with Fidelity whereby from Q1 2005, Egg will host
Fidelity's FundsNetwork on its website as its exclusive investment platform.
This partnership will significantly increase the level of funds Egg can offer
its customers to over 900 funds from 56 managers, from its current level of 220
funds from 25 managers.  The new platform will also offer enhanced tools,
information and services to all Egg investors.
 
 
 
As part of this agreement we will sell our existing funds supermarket business,
which has assets under management of around £170 million, to Fidelity
FundsNetwork.  The transaction will result in one-off costs of £3 million and
lead to annual savings of a similar amount moving forward.
 
 
 
All Egg employees who work within the investment business will be offered
alternative roles within Egg.  No job losses are expected as a result of the
transfer.
 
 
 
This transaction is consistent with Egg's focus on its core UK business and is
expected to be completed in Q1 2005, subject to regulatory approval.
 
 
 
Insure
 
Egg Insure had an excellent quarter with 25,000 new policies sold.  These were
predominantly motor insurance policies.  This is consistent with our intention
to extend our product range given research in our customer base shows a high
propensity to buy general insurance policies from Egg.   Work to raise awareness
of our general insurance product range will continue to build momentum in Q4 and
into 2005.
 
 
 
Mortgages
 
The third quarter continued the trend seen over the past year of £50-60 million
of disbursements each quarter.  However moving forward we intend to increase our
focus on the mortgage business.  As a first step we have launched a new mortgage
proposition, the Egg Discount Tracker product, which is one of the best value
mortgage offers in the market over both the short and the long term and is
consistent with Egg's brand positioning.
 
 
 
 
Financial Review
 
 
 
This section analyses Group results for the nine months ended 30 September 2004
compared to the same period last year, as set out in the consolidated profit and
loss account and balance sheet.
 
 
 
Net interest income increased by 13% to £219.9 million for the period (30
September: £194.6 million) resulting from the growth in retail asset balances
(30 September 2004: £7.4 billion, 30 September 2003: £6.5 billion).  Margins
have remained relatively stable.
 
 
 
Other operating income increased by £28.0 million (24%) to £144.0 million. This
has largely resulted from the continued success of our cross sale strategy in
unsecured personal loans, with commissions and profit share from selling
creditor insurance on loans in the UK up by £17.4 million (33%) to £69.6 million
on the back of increased loan sales and increased penetration on the product.
In addition commission earned on the sale of credit card protection insurance
increased by £8.7 million to £37.6 million (30 September 2003: £28.9 million)
reflecting the larger book.
 
 
 
Operational and administrative expenses increased by £3.2 million (2%) to £149.8
million. This has resulted from a combination of factors; there has been an
increase in the core UK operational costs of £16.6 million (16%) in line with
growth in customers (18%), offset by the credit of £4.4 million re the revised
share scheme costs and savings of £7.1 million in France reflecting the
increased cost control.
 
 
 
Brand and marketing costs have decreased by £16.4 million (34%) to £31.8
million. This reflects a deliberate slowdown in Egg France (£20.2 million lower
in 2004).
 
 
 
Development costs have decreased by £3.7 million (18%) to £16.4 million.  There
was a decrease in costs relating to France of £2.0 million as the infrastructure
is now in place. In addition during 2003 there was R&D expenditure in the USA of
£2.3 million which has not been repeated this year.
 
 
 
 
Depreciation and amortisation increased by £13.0 million (69%). Within the UK,
depreciation has increased by £3 million in line with expectations following the
occupation of an additional building in Derby and the investment in our Customer
Data Warehouse.  The France depreciation figure has increased by £10 million
largely due to the impairment provision booked in July 2004 once the decision
was taken to exit the French market.  This asset write-down is included in the
£113 million exit cost provision some of which has been released to the profit
and loss account to offset this cost.
 
 
 
The charge for bad and doubtful debts was £143.9 million (30 September 2003:
£100.4 million). The increase in this figure over the previous year has
predominantly resulted from strong growth in the UK personal loan book due to
the success of the cross-sales strategy and the increasing mix of unsecured
lending in the overall retail asset portfolio, which has resulted in a £37.5
million increase in the personal loan provision.  Our delinquency levels on
cards remain well below the industry average.  The France bad debts charge has
increased by £9.2 million to £14.1 million largely due to an increase in the
credit card provision by £8.3 million to £13.5 million, reflecting the growth in
France Credit card balances to £137.5 million (30 September 2003: £88.2
million).
 
 
 
Provision for France exit costs is £93.1 million net.  This represents the
£112.8 million booked in July on announcement of the intention to exit the
French market less the release of £19.7 million to cover operating losses in the
period from 13 July to 30 September 2004 plus the write off of the goodwill
remaining from the original acquisition of Zebank plus recognising the assets
that are now deemed impaired.
 
 
 
The tax credit was £33.3 million (30 September 2003: £0.7 million tax charge).
The credit reflects the fact that the Group is now loss-making following the
France exit provision.  In the prior year we did not recognise a tax credit for
the losses in France prior to the conversion of the business to a branch of Egg
Banking in the UK, hence the small tax charge in that period.
 
 
 
Loss attributable to ordinary shareholders after tax was £69.6 million compared
to a loss of £25.3 million for the nine month period to 30 September 2003.
 
 
 
Loss per share was 8.5p compared to 3.1p for the nine month period to 30
September 2003.
 
 
 
Total assets increased to £12.1 billion as at 30 September 2004 (30 September
2003: £11.5 billion) mainly due to the ongoing growth in UK unsecured lending
balances.
 
 
 
Total liabilities increased to £11.7 billion as at 30 September 2004 (30
September 2003: £11.1 billion), largely due to a further securitisation of
credit cards of £500 million in September 2004 with increases in wholesale
funding to offset the reduction in retail savings.
 
 
 
Capital ratios at 30 September 2004 were 7.6% (tier 1) and 14.4% (total) (30
September 2003: 9.6% (tier1) and 17.5% (total)).  The reduction in capital
ratios predominantly reflects the provision for exit costs in France.
 
 
Independent review report by KPMG Audit Plc to Egg plc
 
 
 
Introduction
 
 
 
We have been instructed by the Company to review the financial information set
out on pages 19 to 27 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
 
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 Listing
Rules of the Financial Services Authority.  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 interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.
 
 
 
Review work performed
 
 
 
We conducted our review in accordance with guidance contained in the Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom.  A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review is substantially less in scope than an
audit performed in accordance with auditing standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
 
 
 
Review conclusion
 
 
 
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the nine months
ended 30 September 2004.
 
 
 
 
 
KPMG Audit Plc
 
Chartered Accountants
 
London
 
18 October 2004
 
 
Consolidated profit and loss account (Unaudited)
                                                                Nine             Nine        (Audited)
                                                           months to        months to
                                                             30 Sept          30 Sept        Full Year
                                                                2004             2003             2003
                                                                  £m               £m               £m
Interest receivable                                            671.6            615.7            830.8
Interest payable                                             (451.7)          (421.1)          (562.0)
Net interest income                                            219.9            194.6            268.8
Other operating income                                         144.0            116.0            155.2
Operating income                                               363.9            310.6            424.0
Administrative expenses
  - operational and administrative expenses                  (149.8)          (146.6)          (202.6)
  - brand and marketing costs                                 (31.8)           (48.2)           (60.0)
  - development costs                                         (16.4)           (20.1)           (25.7)
Depreciation and amortisation                                 (31.7)           (18.7)           (26.9)
Amounts written off fixed asset investment                         -                -            (4.3)
Provisions for bad and doubtful debts                        (143.9)          (100.4)          (137.0)
Utilisation of Provision for France exit costs                  19.7                -                -
Operating profit/(loss)                                         10.0           (23.4)           (32.5)
Provision for France exit costs                              (112.8)                -                -
Share of operating profit of joint ventures                      0.4                -              0.1
Share of associates losses                                     (0.9)            (1.5)            (2.0)
Loss on ordinary activities before tax                       (103.3)           (24.9)           (34.4)
Tax credit/(charge) on loss on ordinary activities              33.3            (0.7)              1.4
Minority interests                                               0.4              0.3              0.2
Retained loss for the financial period                        (69.6)           (25.3)           (32.8)
Loss per share (pence per share)                              (8.5p)           (3.1p)           (4.0p)
 
 
 
All of the Group's losses arose from continuing operations.
 
 
Consolidated statement of total recognised gains and losses
 
 
                                                              Nine months to   Nine months to        (Audited)
                                                                     30 Sept          30 Sept        Full Year
                                                                        2004             2003             2003
 
                                                                          £m               £m               £m
Retained loss for the financial period                                (69.6)           (25.3)           (32.8)
Currency translation differences on foreign currency net               (4.0)              4.5              4.4
investments
Adjustment to reserves in respect of UITF 38                             8.1                -                -
Total recognised losses related to the period                         (65.5)           (20.8)           (28.4)
 
 
 
 
Consolidated balance sheet (Unaudited)
 
 
                                                                                                     (Audited)
                                                                30 Sept           30 Sept          31 December
                                                                   2004              2003                 2003
                                                                                 Restated             Restated
                                                                     £m                £m                   £m
Assets
Cash and balances at central banks                                 14.2              13.1                 13.3
Loans and advances to banks                                       416.4             742.5                329.6
Securities purchased under agreements to resell                     1.4                 -                    -
Loans and advances to customers                                 7,353.5           6,456.1              6,718.0
Debt securities                                                 3,909.1           3,851.1              4,156.5
Shares in joint ventures                                            1.3               0.8                  1.0
Investment in associated undertakings                               4.5               5.9                  5.4
Intangible fixed assets                                             1.9               6.1                  6.0
Tangible fixed assets                                             107.9              87.8                 95.3
Other assets                                                      137.7             244.5                268.5
Deferred tax                                                       23.3              27.2                 23.3
Prepayments and accrued income                                     80.7              77.8                 75.5
Total assets                                                   12,051.9          11,512.9             11,692.4
 
 
Liabilities
Deposits by banks                                               2,481.2           1,464.7              1,610.4
Securities sold under agreements to repurchase                    531.1             612.3                829.2
Customer accounts                                               6,570.3           6,668.2              6,451.7
Debt securities issued                                          1,127.5           1,422.6              1,422.9
Other liabilities                                                 232.2             304.3                340.1
Accruals and deferred income                                      197.7             149.9                153.7
Provisions for liabilities and charges                             96.5                 -                    -
Subordinated liabilities
- Dated loan capital                                              450.8             450.8                450.8
Total liabilities                                              11,687.3          11,072.8             11,258.8
 
 
 
                                                                                                     (Audited)
                                                             30 Sept              30 Sept          31 December
                                                                2004                 2003                 2003
                                                                                 Restated             Restated
                                                                  £m                   £m                   £m
Shareholders' funds
Called up share capital                                        412.2                410.3                410.3
Share premium account                                          111.0                107.5                107.5
Capital reserve                                                359.7                359.7                359.7
Profit and loss account                                      (519.2)              (438.6)              (445.1)
Shareholders' funds (all attributable to equity                363.7                438.9                432.4
interests)
Minority interests (equity)                                      0.9                  1.2                  1.2
Total liabilities and shareholders' funds                   12,051.9             11,512.9             11,692.4
 
 
 
 
Consolidated Cash Flow (Unaudited)
 
                                                              Nine               Nine           (Audited)
                                                         months to          months to
                                                           30 Sept            30 Sept           Full Year
                                                              2004               2003                2003
                                                                £m                 £m                  £m
Net cash inflow/(outflow) from operating                       9.7            (343.0)             (259.9)
activities
Return on investments and servicing of finance              (24.4)             (17.7)              (25.9)
Taxation:
Tax paid                                                     (8.5)              (4.3)               (3.8)
Capital expenditure and financial investment:
Purchase of tangible fixed assets                           (25.7)             (32.8)              (46.7)
Sale of tangible fixed assets                                  1.9                0.1                   -
Restricted share plan purchase of shares                         -              (3.0)               (3.0)
Purchase of investments                                  (4,253.2)          (4,614.9)           (5,960.7)
Sale of investments                                        4,472.8            5,022.6             5,996.9
Net cash inflow/(outflow) from capital                       195.8              372.0              (13.5)
expenditure and investment
Financing:
Issue of dated loan capital                                      -              249.1               249.1
Issue of share capital                                         5.4                0.4                 0.4
Net cash inflow from financing                                 5.4              249.5               249.5
Increase/(decrease) in net cash                              178.0              256.5              (53.6)
 
 
 
 
Reconciliation of loss before tax to net operating cash flows (Unaudited)
 
 
                                                                   Nine              Nine        (Audited)
                                                              months to         months to
                                                                30 Sept           30 Sept        Full Year
                                                                   2004              2003             2003
                                                                     £m                £m               £m
Operating profit/(loss)                                            10.0            (23.4)           (32.5)
(Increase)/decrease in prepayments and accrued                    (5.1)             (1.7)              0.6
income
Increase in accruals and deferred income                           43.0               4.3              8.1
Provision for bad and doubtful debts                               52.3              48.3             64.2
Profit on sale of financial investments                           (1.6)             (5.0)            (5.3)
Utilisation of France exit cost provision                        (19.7)
Depreciation and amortisation                                      42.1              30.1             47.6
Interest on subordinated liabilities                               24.4              17.7             25.9
Net increase in loans and advances to banks and                 (610.9)         (1,205.8)        (1,379.0)
customers
Net (increase)/decrease in securities purchased                   (1.4)             150.0            150.0
under agreements to resell
Net increase/(decrease) in deposits by banks and                  989.4           (384.4)          (455.2)
customer accounts
Net (decrease)/increase in securities sold under                (298.1)             612.3            829.2
agreements to repurchase
Net (decrease)/increase in debt securities in issue             (295.5)             407.7            408.0
Net decrease/(increase) in other assets                            54.6            (82.9)           (47.1)
Net (decrease)/increase in other liabilities                     (46.6)              73.6            165.8
Net increase/(decrease) in settlement balances                     74.9              11.7           (44.9)
Other non-cash movements                                          (2.1)               4.5              4.7
Net cash inflow/(outflow) from operating activities                 9.7           (343.0)          (259.9)
 
 
 
 
 
 
Reconciliation of movement in shareholders' funds (Unaudited)
 
 
                                                                 Nine               Nine          (Audited)
                                                            months to          months to
                                                              30 Sept            30 Sept          Full Year
                                                                 2004               2003               2003
                                                                                Restated           Restated
                                                                   £m                 £m                 £m
Retained loss for the financial period                         (69.6)             (25.3)             (32.8)
Exchange and other adjustments                                  (4.0)                4.5                4.4
Increase in share capital                                         1.9                0.2                0.2
Share premium                                                     3.5                0.2                0.2
Awards under incentives schemes                                 (0.5)                1.3                2.5
Net decrease in shareholders' funds                            (68.7)             (19.1)             (25.5)
Opening shareholders' funds                                     432.4              457.9              457.9
Closing shareholders' funds                                     363.7              438.8              432.4
 
 
 
Notes on financial information
 
 
 
 
 
a)      The financial information has been prepared on the basis of the
accounting policies set out in the Notes to the Financial Statements within the
Egg plc Annual Report and Accounts for the year ended 31 December 2003 and are
unchanged for the period to 30 September 2004, with the exception of the
adoption of the requirements of Abstract 38 issued by the Urgent Issues Task
Force on Accounting for ESOP Trusts, the effect of which has been to reclassify
shares held by the Egg Employee Trust as a deduction from shareholders' funds.
The comparatives have been amended as appropriate.
 
 
 
b)      The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2003 but is derived from
those accounts. The auditors have reported on this set of accounts: their
reports were unqualified and did not contain statements under section 237(2) or
(3) of the Companies Act 1985.
 
 
 
c)      Group operating loss is stated after charging provisions for bad and
doubtful debts of £143.9 million (30 September 2003: £100.4 million). The
balance sheet provisions for bad and doubtful debts and movements thereon were:
 
 
 
 
 
 
 
 
                                                                   General          Specific             Total
                                                                        £m                £m                £m
Balance at 1 January 2004                                             51.2             142.2             193.4
Exchange adjustments                                                     -             (0.1)             (0.1)
Amounts written off                                                      -            (87.8)            (87.8)
New and additional provisions                                          2.8             141.1             143.9
Net charge against profit and loss                                     2.8             141.1             143.9
Balance at 30 Sept 2004                                               54.0             195.4             249.4
Balance at 30 Sept 2003                                               47.6             129.7             177.3
 
 
 
Provisions at 30 September 2004 were 3.3% of advances to customers (30 September
2003: 2.7%).
 
 
 
d)      The movement on the provision for exit costs in France is as follows:
 
 
                                                                                       Nine           Nine
                                                                                  months to      months to
                                                                                    30 Sept        30 Sept
                                                                                       2004           2003
                                                                                         £m             £m
Opening balance                                                                           -              -
Provision raised                                                                      112.8              -
Amounts utilised                                                                     (19.7)              -
Exchange adjustments                                                                    3.7              -
Closing balance                                                                        96.8              -
 
 
 
 
 
e)      The taxation charge assumes a UK corporation tax rate of 30% (2003: 30%)
and comprises:
 
 
                                                                                       Nine           Nine
                                                                                  months to      months to
                                                                                    30 Sept        30 Sept
                                                                                       2004           2003
                                                                                         £m             £m
Tax credit/(Corporation tax payable)                                                   33.3          (0.7)
 
 
 
 
 
f)        Loss per share of 8.5p (30 September 2003: 3.1p) is calculated by
dividing the loss after tax for the financial period of £69.6 million (30
September 2003: £25.3 million) by the weighted average of 819.1 million (30
September 2003: 814.8 million) ordinary shares in issue during the period.
 
 
 
g)      Egg's share of the gross assets and liabilities in respect of joint
venture undertakings is as follows:
 
 
                                                                              30 Sept       30 Sept
                                                                                 2004          2003
                                                                                   £m            £m
Gross assets                                                                      3.0           3.2
Gross liabilities                                                               (1.7)         (2.4)
Shares in joint ventures                                                          1.3           0.8
 
 
 
 
 
h)      The table below analyses the Group results for the 9 months to 30
September 2004 by the geographical area in which business is generated. Certain
costs incurred in the UK on behalf of France are included in the results of
France.
 
 
 
 
                                                                                UK       France        Group
                                                                                £m           £m           £m
Interest receivable                                                          662.0          9.6        671.6
Fees and commissions receivable                                              156.8          4.2        161.0
Profit on disposal of investments                                              1.6            -          1.6
Other operating income                                                         3.4            -          3.4
Gross income                                                                 823.8         13.8        837.6
 
Operating profit/(loss)                                                       45.0       (35.0)         10.0
Provision for exit costs                                                                (112.8)      (112.8)
Share of operating profit of joint venture                                     0.4            -          0.4
Share of operating loss of associates and amortisation of goodwill           (0.9)            -        (0.9)
Profit/(loss) before taxation                                                 44.5      (147.8)      (103.3)
 
 
 
 
 
 
Average Balance Sheet (UK Business Only)
                                               (£m, except percentages)
 
 
                                         30 Sept                      30 Sept                 31 December
                                         2004                           2003                      2003
                                       Avg.          Avg.         Avg.          Avg.         Avg.         Avg.
                                    Balance       Rate %       Balance       Rate %       Balance      Rate %
Assets
Wholesale assets                      4,257         4.44         4,389         4.04         4,345       4.11
Mortgages                             1,920         4.91         2,260         4.75         2,210       4.74
Personal loans                        2,009         7.39         1,214         8.20         1,326       8.03
Credit cards                          3,046         9.51         2,550         9.67         2,650       9.59
Total average                                                                              10,531       6.12
interest-earning assets              11,232         6.42        10,413         6.06
Fixed and other assets                  109                        166                        157
Total assets                         11,341                     10,579                     10,688
Liabilities
Customer accounts                     6,357         3.61         7,383         3.36         7,149       3.32
Wholesale liabilities                 4,282         4.52         2,523         5.10         2,875       4.04
and subordinated debt                
Total average interest-              10,639         3.98         9,906         3.81        10,024       3.52
bearing liabilities                  
Other liabilities                       229                        236                        234
Total liabilities                    10,868                     10,142                     10,258
Shareholders' funds                     473                        437                        430
Total liabilities and                11,341                     10,579                     10,688
shareholders funds
 
 
 
 
 
Note: The above analysis represents interest earned or borne on on-balance sheet
assets and liabilities only.  In each case the average balances and yields have
been calculated on a 12-month rolling basis.  Comparatives have been restated.
 
 
 
 
Average Yields (UK Business Only)
 
 
                                                             30 Sept           30 Sept        31 December
                                                                2004              2003               2003
                                                        Average rate    Average rate %     Average rate %
 
                                                                  %
Interest income as a percentage of average                      6.42               6.06              6.12
interest-earning assets
Interest expense as a percentage of average                     3.98               3.81              3.52
interest-bearing liabilities
Interest spread                                                 2.44               2.25              2.60
Net interest margin (includes interest on off-balance           2.54               2.44              2.50
sheet items)
 
 
 
 
 
Note:
 
This press release contains certain forward-looking statements with respect to
the financial condition, results of operations, and businesses of the Egg Group.
These statements and forecasts involve risk and uncertainty because they
relate to events that depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or developments to
differ materially from those expressed or implied by these forward-looking
statements and forecasts.  The statements have been made with reference to
forecast price changes, economic conditions and the current regulatory
environment.  Nothing in this press release should be construed as a profit
forecast.
 
 
 
                                      Ends
 
 
 
For further information:
 
Media:
 
Egg Press Office (main number):  020 7526 2600
 
Emma Byrne:  020 7526 2565 / mobile: 07775 657 241
 
Analysts / Investors:
 
Kieran Coleman: 020 7526 2648 / mobile: 07711 717 358
 
 
Notes to Editors:
 
1.                  Egg plc is the world's largest pure online bank, providing
financial services products through its Internet site and other distribution
channels.
 
2.                  Egg plc floated on 12 June 2000 and is listed on the London

Stock Exchange.  Prudential plc holds 78% of the share capital.