Interim Results

RNS Number : 4387I

API Group PLC

19 November 2008

 



19 November 2008

API GROUP PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2008

• Further improvement in Group results, representing a significant advance on last year and the prior six month period.

• Sales of £50.5m, 7% ahead of last year and 4% up at constant exchange rates.

• Operating profit before exceptional items £2.0m, compared to £0.2m loss for the same period last year.

• Profit before tax on continuing operations £4.8m (after exceptional gains of £4.1m) compared to a £1.4m loss last year and earnings per share 3.2p (2007: 5.3p loss)

• Net cash flow from operating activities £4.6m (2007: £0.6m) supplemented by an additional £3.0m from sale of surplus land in China.

• Net debt reduced to £15.1m, representing gearing of 47%. This compares to £17.1m and 62% at 31 March 2008 and £23.0m and 116% at 30 September 2007.

Commenting, API's Chief Executive Andrew Turner said:

'This is the second consecutive six month period showing an improvement in the Group's trading performance, reflecting the cost reduction measures implemented in prior periods and a recovery in both volumes and margins in our European businesses.  

'So far the overall level of demand for the Group's products has remained steady in the face of the generally worsening economic climate. However, conditions appear likely to deteriorate further in the near term which could adversely impact volumes. Whilst we expect our second half year to be much more challenging, the Group is now stronger, both financially and operationally, and is better placed to exploit market opportunities as and when they arise.'

Enquiries:

Andrew Turner, Group Chief Executive Officer, API Group plc	01625 650334
Chris Smith, Finance Director	01625 650334
Tim Spratt, Nicola Biles, Financial Dynamics	020 7831 3113
Nick Westlake, Numis Securities Limited	020 7260 1000

  REPORT ON INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2008

Trading Performance

The Board is pleased to report an improvement in the Group's trading performance for the second successive six month period reflecting the cost reduction measures implemented in prior periods and a recovery in both volumes and margins in our European businesses.  

Group sales for the six months ending 30 September 2008 were £50.5m, 7% higher than the same period last year (£47.2m) and 4% ahead at constant exchange rates. Growth in Europe more than compensated for lower sales in Asia Pacific and a decline in US sales on a local currency basis.

Reported operating profit, before exceptional items, was £2.0m compared with a prior year loss of £0.2m and a profit of £0.6m for the previous six month period ended 31 March 2008. Improved results against last year were due to significant advances in Europe, partly offset by weakness in the US and continuing difficulties with the Group's joint venture operation in China.  

Net exceptional gains of £4.1m (2007: £0.2m loss) were predominantly related to the sale of surplus land assets in Shanghai after the relocation of the manufacturing operations in China to a new, purpose-built site on the outskirts of Shanghai.  Sale proceeds have been recognised on the basis of amounts received as of the date of this report with further amounts due in line with the Company's announcement of 11 July 2008. Further information is provided in note 3 to the accounts.

Profit before tax after exceptional items was £4.8m (2007: £1.4m loss) and net profit from continuing operations for the period was £3.1m (2007: £1.7m loss). Basic earnings per share increased to 3.2p (2007: 5.3p loss). 

Net financing costs of £1.3m (2007: £1.0m) include UK pension plan interest of £0.4m (2007: £0.3m credit). Reported net interest includes a £0.3m revaluation gain on an interest rate derivative (2007: nil), reversing a charge taken in the prior period. Interest expense was reduced by £0.1m to £1.2m as a result of lower average borrowings.

The pension deficit, calculated in accordance with IAS19, was £3.2m, £0.3m lower than the reported figure at March 2008 of £3.5m (2007: £6.1m). A fall in the value of scheme assets since March 2008 has been compensated by a larger reduction in calculated scheme liabilities, primarily due to higher market value discount rate assumptions. During November, the company commenced formal consultation with active members of its UK defined benefit pension plan, with a view to closing the scheme to future service accrual.

Cash Flow and Borrowings

Net cash flow from operating activities was £4.6m (2007: £0.6m) reflecting the stronger operating profit performance and improved working capital control.

Capital expenditure at £2.3m was similar to the level last year (£2.7m) with the majority relating to the relocation project in China. The balance of expenditure on the Shanghai project is forecast at £0.5m and the final cost is expected to total £10.1m, £1.0m below the original budget on a constant currency basis. At the balance sheet date, cash proceeds from the land sale in China amounted to £3.0m.

The Group's net borrowings fell to £15.1m at 30 September 2008 compared with £17.1m at 31 March 2008 despite an upward revaluation of non sterling-denominated debt by £1.1m. Net borrowings were £23.0m at the end of September 2007. Gearing was down to 47% compared to 62% at 31 March 2008 and 116% twelve months earlier.

Throughout the period, the Group has continued to operate comfortably within its banking covenants.  

Review of Operations

Europe

External sales from European operations were 13% above the prior year at £34.7m and 11% ahead on a constant currency basis, whilst operating profits, before exceptional items, improved to £3.4m from last year's break even result.

In Laminates, sales recovered by 27% from the prior year low as a result of a particularly buoyant period for new product developments.   Projects utilising holographic finishes were particularly significant as well as API's recyclable laminate, Portabio. Margins improved due to favourable sales mix and the benefit of productivity gains and rigorous measures to reduce and control costs.  

Turnover in Foils was unchanged overall with the contribution from the new distribution operation in Italy and growth in Germany being offset by a decline in the UK and lower external sales in security holographics. Nevertheless, profitability improved significantly due to cost savings and the margin impact of exchange rates.

North America

US sales, at £11.0m, were marginally behind the same period last year (£11.1m) and 4% down at constant exchange rates with tough economic conditions impacting most market segments. In addition, the US business faced rapidly increasing raw material and utility costs and suffered a time lag in passing these through to customers. Operating profit for the half year declined by £0.2m to £0.4m (2007: £0.6m).

Asia Pacific

Asia Pacific sales for the six months to September 2008 were down 12% at £4.7m (2007: £5.3m). At constant exchange rates, the Asia business saw sales fall 21%, predominantly due to the business in China. Quality, service and start up issues experienced during the relocation project continued to impact the business during the period and manufacturing volumes were depressed for both domestic and export markets. Lower sales, higher depreciation and other costs as well as the impact of a stronger currency on export margins all contributed to a poor result although losses before exceptional items, at £0.9m, narrowed slightly from the previous six month period (2007: £0.2m profit).  Since the completion of the relocation project, a new management team is now refocusing the business on growth and the restoration of satisfactory levels of profitability.   

Discontinued Operations

The Group reported a loss from discontinued operations of £0.3m in the six months to 30 September 2008 (2007: £0.9m). The loss principally represents legal fees incurred by the Group in defence of a claim of alleged warranty breaches in connection with a business disposed in 2005. Further information is provided in the notes to the accounts.

Dividend

The Board is not recommending the payment of an interim dividend (2007: none)

Management

The Board was pleased to announce the appointment of Chris Smith as Group Finance Director with effect from 23 September 2008. The Group will continue to strengthen its management team as it works to build on the recent improvement in trading performance and financial condition achieved in the last twelve months.

Outlook

So far, with the exception of the US and one or two other markets, the general level of demand for the Group's products has remained steady in the face of the generally worsening economic climate. However, conditions appear likely to deteriorate further in the near term which could adversely impact volumes.  Prospects depend to some extent on the level of promotional activity maintained by customers and the Group's ability to offset the higher utility and raw material prices in the second half of the year.   

In the current environment, the Group's management will continue to focus on realising further cost reduction opportunities, restoring profitability to the business in China and on generating cash to reduce the overall burden of debt.

Whilst we face challenging market conditions, the operational and financial strength of the Group has been much improved in the last 12 months and the Board believes the Group is better placed to exploit market opportunities as they arise.

  GROUP INCOME STATEMENT

         for the six months ended 30 September 2008

		Unaudited	Unaudited	Audited
		6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
	Note	£'000	£'000	£'000
Continuing operations
Revenue	1	50,454	47,159	143,783
Cost of sales		(39,219)	(38,251)	(115,120)
Gross profit		11,235	8,908	28,663
Other operating costs		(9,201)	(9,114)	(28,255)
Operating profit / (loss) before exceptional items	1	2,034	(206)	408
Exceptional items	3	4,052	(184)	(3,417)
Operating profit / (loss) from continuing operations		6,086	(390)	(3,009)
Finance revenue	4	276	331	292
Finance costs	4	(1,610)	(1,303)	(4,418)
		(1,334)	(972)	(4,126)
Profit / (loss) on continuing activities before taxation		4,752	(1,362)	(7,135)
Tax expense	5	(1,628)	(345)	407
Profit/ (loss) from continuing operations		3,124	(1,707)	(6,728)
Discontinued operations
Loss from discontinued operations	6	(293)	(929)	(1,130)
Profit / (loss) for the period		2,831	(2,636)	(7,858)
Profit attributable to minority equity interest		911	126	137
Profit / (loss) attributable to equity holders of the parent		1,920	(2,762)	(7,995)
Profit / (loss) for the period		2,831	(2,636)	(7,858)
Earnings per share (pence)
Basic earnings / (loss) per share from continuing operations	7	3.2	(5.3)	(16.7)
Diluted earnings / (loss) per share from continuing operations	7	3.1	(5.3)	(16.7)
Basic earnings / (loss) per share on profit / (loss) for the period	7	2.8	(8.0)	(19.5)
Diluted earnings / (loss) per share on profit / (loss) for the period	7	2.7	(8.0)	(19.5)

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENDITURE

for the six months ended 30 September 2008

		Unaudited	Unaudited	Audited
		6 months to 30 September 2008	6 months to 30 September 2007	18 months to       31 March 2008
		£'000	£'000	£'000
Exchange differences on retranslation of foreign operations		1,916	(341)	489
Change in fair value of effective cash flow hedge (interest rate swap)		(130)	-	-
Actuarial gains on defined benefit pension plans		122	4,454	5,936
Tax on items taken directly to or transferred from reserves		(34)	(1,420)	(1,852)
Net income recognised directly in equity		1,874	2,693	4,573
Profit / (loss) for the period		2,831	(2,636)	(7,858)
Total recognised income and expense for the period		4,705	57	(3,285)
Attributable to:
Equity holders of the parent		2,915	(22)	(3,734)
Minority equity interest		1,790	79	449
		4,705	57	(3,285)

  GROUP BALANCE SHEET

at 30 September 2008

		Unaudited	Unaudited	Audited
		30 September 2008	30 September 2007	31 March 2008
	Note	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		32,990	31,895	30,901
Intangible assets - goodwill		6,480	6,480	6,480
Deferred tax assets		1,807	1,721	2,062
		41,277	40,096	39,443
Current assets
Trade and other receivables		19,466	17,761	17,440
Inventories		11,687	11,798	11,760
Other financial assets - forward currency hedging contracts		57	-	108
Cash and short-term deposits		2,753	2,103	2,131
		33,963	31,662	31,439
Total assets		75,240	71,758	70,882
Liabilities
Current liabilities
Trade and other payables		19,397	19,483	18,762
Financial liabilities	9	5,026	7,662	6,794
Income tax payable		1,877	411	588
Provisions		27	5	83
		26,327	27,561	26,227
Non-current liabilities
Financial liabilities	9	13,031	17,485	13,041
Deferred tax liabilities		256	639	363
Provisions		65	77	70
Deficit on defined benefit pension plans		3,184	6,147	3,482
		16,536	24,348	16,956
Total liabilities		42,863	51,909	43,183
Net assets		32,377	19,849	27,699
Equity
Called up share capital		8,998	8,642	8,998
Share premium		7,136	294	7,136
Other reserves		298	298	298
Foreign exchange reserve		849	(1,523)	(188)
Retained earnings		7,419	6,560	5,568
API Group shareholders' equity	10	24,700	14,271	21,812
Minority interest	10	7,677	5,578	5,887
Total equity		32,377	19,849	27,699

  GROUP CASH FLOW STATEMENT

for the six months ended 30 September 2008

		Unaudited	Unaudited	Audited
		6 months to 30 September 2008	6 months to 30 September  2007	18 months to 31 March 2008
	Note	£'000	£'000	£'000
Operating activities
Group operating profit / (loss)		6,086	(390)	(3,009)
Adjustments to reconcile group operating profit / (loss) to net cash flow from operating activities:
Depreciation of property, plant and equipment		1,850	1,831	5,498
Impairment of property, plant and equipment		-	-	1,881
Profit on disposal of property, plant and equipment		(4,083)	(258)	(263)
Share-based payments		(26)	161	300
Difference between pension contributions paid and amounts recognised in the income statement		(458)	(484)	(1,489)
Decrease in inventories		713	12	1,611
Decrease in trade and other receivables		268	892	1,211
Increase / (decrease) in trade and other payables		657	(685)	(4,118)
Movement in provisions		(61)	(300)	(232)
Cash generated from operations		4,946	779	1,390
Income taxes paid		(377)	(160)	(359)
Net cash flow from operating activities		4,569	619	1,031
Investing activities
Interest received		-	12	184
Purchase of property, plant and equipment		(2,311)	(2,682)	(8,180)
Sale of property, plant and equipment		3,320	698	730
Cash flow relating to discontinued operations		(232)	54	984
Net cash flow from investing activities		777	(1,918)	(6,282)
Financing activities
Interest paid		(1,772)	(1,229)	(3,280)
Proceeds from share issues		-	80	7,278
New borrowings		-	756	2,330
Repayment of borrowings		(2,297)	-	(3,459)
Net cash flow from financing activities		(4,069)	(393)	2,869
Increase / (decrease) in cash and cash equivalents		1,277	(1,692)	(2,382)
Effect of exchange rates on cash and cash equivalents		112	160	51
Cash and cash equivalents at the beginning of the period		1,015	(1,763)	3,346
Cash and cash equivalents at the end of the period	8	2,404	(3,295)	1,015

NOTES

1. SEGMENTAL ANALYSIS

Primary reporting format - geographic segments:  At 30 September 2008, the Group is organised into three distinct independently managed geographic segments, Europe, North America and Asia Pacific. The following table presents revenue and profit information for these segments.

		Unaudited	Unaudited	Audited
		6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
		£'000	£'000	£'000
		Continuing	Continuing	Continuing
Total revenue by region
Europe		36,092	32,235	100,113
North America		11,502	11,222	33,796
Asia Pacific		5,372	5,792	15,863
		52,966	49,249	149,772
Inter-segmental sales
Europe		1,349	1,493	4,353
North America		495	130	513
Asia Pacific		668	467	1,123
		2,512	2,090	5,989
External sales by region
Europe		34,743	30,742	95,760
North America		11,007	11,092	33,283
Asia Pacific		4,704	5,325	14,740
		50,454	47,159	143,783
Profit / (loss) from operations
Europe
before exceptional items		3,402	15	2,481
exceptional items		(81)	(61)	(790)
		3,321	(46)	1,691
North America
before exceptional items		352	610	1,560
exceptional items		-	258	297
		352	868	1,857
Asia Pacific
before exceptional items		(859)	229	(289)
exceptional items		4,133	-	238
		3,274	229	(51)
Central costs
before exceptional items		(861)	(1,060)	(3,344)
exceptional items		-	(381)	(3,162)
		(861)	(1,441)	(6,506)
Total profit / (loss) from operations before exceptional items		2,034	(206)	408
Exceptional items		4,052	(184)	(3,417)
Operating profit / (loss) from continuing operations		6,086	(390)	(3,009)

     NOTES CONTINUED

2. PRESENTATION OF INTERIM FINANCIAL STATEMENTS

Authorisation of interim financial statements

The consolidated interim financial statements of API Group plc for the six months ended 30 September 2008 were authorised for issue in accordance with a resolution of the directors on 18 November 2008. API Group plc is a public limited company incorporated in the United Kingdom whose shares are publicly traded.

Basis of preparation

These consolidated interim financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

The financial information contained in this interim statement is unaudited and does not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and therefore does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's latest annual financial statements as at 31 March 2008 which were prepared in accordance with International Financial Reporting Standards as adopted by the EU. The audited annual financial statements for the eighteen months ended 31 March 2008, which represent the statutory accounts for that period, and on which the auditors gave an unqualified opinion, have been filed with the Registrar of Companies.  

Accounting policies

The accounting policies adopted are consistent with the annual financial statements for the eighteen months ended 31 March 2008, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU.

3. EXCEPTIONAL ITEMS

		Unaudited	Unaudited	Audited
		6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
		£'000	£'000	£'000
Exceptional items charged against operating profit / (loss) comprise
Restructuring of UK operating businesses		(81)	(61)	(790)
Charlotte factory closure		-	258	297
Rationalisation of Group costs		-	(381)	(1,281)
Impairment of property, plant and equipment		-	-	(1,881)
Factory relocation - China		4,133	-	238
		4,052	(184)	(3,417)

Exceptional items are material items which derive from events or transactions that fall within the ordinary activities of the Group and which need to be disclosed by virtue of their size or incidence.

Restructuring of UK operating businesses

These relate to employee redundancy, relocation and other one-off costs, in connection with business improvement initiated in late 2007.

NOTES CONTINUED

Charlotte factory closure

The credits in the comparative figures relate to the sale of the Charlotte factory which was closed in a previous period.

Rationalisation of Group costs

These costs relate to the severance and other costs in respect of a number of senior executives who were made redundant in the period to 31 March 2008 as a consequence of the Group restructuring program initiated in late 2007.

Impairment of property, plant and equipment

In the period to 31 March 2008, as part of the review of Group costs, a provision was made in respect of the costs of a suspended IT project.

Factory relocation - China

During the period, the Group’s 51% subsidiary in China, Shanghai Shen Yong, received RMB 40 million (£3.0 million), representing the first instalment of compensation receivable in respect of the former factory site in Shanghai. A second instalment of RMB 20 million (£1.5 million) was received after the balance sheet date and has been accrued in the results. The full net book value of the old site (£0.4 million) has been deducted from this amount. Further proceeds are due, but have not been accrued because of the uncertainty regarding the amount of the final net proceeds. The amount in the period to 31 March 2008 related to a parcel of adjoining land previously sold for £0.5 million, net of initial relocation costs and dual running costs of £0.3 million.

     NOTES CONTINUED

4. FINANCE REVENUE AND FINANCE COSTS
	Unaudited	Unaudited	Audited
	6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
	£'000	£'000	£'000
Finance revenue
Interest receivable on bank and other short term deposits	-	6	33
Gains arising on forward foreign currency contracts	31	-	259
Gain on interest rate swap	245	-	-
Finance credit in respect of defined benefit pension plans	-	325	-
	276	331	292
Finance costs
Interest payable on bank loans and overdrafts	(1,208)	(1,303)	(3,556)
Other interest payable	-	-	(92)
Losses arising on forward foreign currency contracts	-	-	(433)
Unrealised loss on interest rate swap	-	-	(260)
Finance cost in respect of defined benefit pension plans	(402)	-	(77)
	(1,610)	(1,303)	(4,418)

5. TAXATION
	Unaudited	Unaudited	Audited
	6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
	£'000	£'000	£'000
Current income tax
Overseas tax	(1,508)	(196)	(525)
Total current income tax	(1,508)	(196)	(525)
Deferred tax
Origination and reversal of temporary differences	(120)	(149)	932
Total deferred tax	(120)	(149)	932
Total expense in the income statement	(1,628)	(345)	407

NOTES CONTINUED

6. DISCONTINUED OPERATIONS
	Unaudited	Unaudited	Audited
	6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
	£'000	£'000	£'000
Loss on disposal of discontinued operations	(293)	(929)	(1,130)
Total charge in the income statement	(293)	(929)	(1,130)

The loss on disposal of discontinued operations relates to a business divested by the Group in January 2005. The current period charge relates to legal fees incurred in defending a claim in respect of alleged breach of warranties from the purchaser (see Note 11). The comparative amounts include the write-off of deferred consideration of £750,000, previously held in other debtors, other settlement costs payable to the purchaser and related legal fees.

7. EARNINGS PER SHARE
	Unaudited	Unaudited	Audited
	6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
	£'000	£'000	£'000
Net profit / (loss) attributable to equity holders of the parent company - continuing operations	2,213	(1,833)	(6,865)
Loss attributable to equity holders of the parent company - discontinued operations	(293)	(929)	(1,130)
Net profit / (loss) attributable to equity holders of the parent company	1,920	(2,762)	(7,995)

	Unaudited	Unaudited	Audited
	6 months to 30 September  2008	6 months to 30 September  2007	18 months to 31 March 2008
	No	No	No
Basic weighted average number of ordinary shares	70,068,505	34,412,276	41,018,077
Dilutive effect of employee share options	1,705,750	-	-
Diluted weighted average number of ordinary shares	71,774,255	34,412,276	41,018,077

NOTES CONTINUED	Unaudited	Unaudited	Audited
	6 months to 30 September 2008	6 months to 30 September 2007	18 months to 31 March 2008
Earnings per share	pence	pence	pence
Continuing operations
Basic earnings / (loss) per share	3.2	(5.3)	(16.7)
Diluted earnings / (loss) per share	3.1	(5.3)	(16.7)
Discontinued operations
Basic earnings / (loss) per share	(0.4)	(2.7)	(2.8)
Diluted earnings / (loss) per share	(0.4)	(2.7)	(2.8)
Total
Basic earnings / (loss) per share	2.8	(8.0)	(19.5)
Diluted earnings / (loss) per share	2.7	(8.0)	(19.5)

The weighted average number of shares excludes the shares owned by the API Group plc No.2 Employee Benefit Trust. 

 

In the comparative periods, as any dilution would have the effect of reducing the loss per share, the diluted weighted average number of shares is equivalent to the basic weighted average number of shares.

     NOTES CONTINUED

8. CASH AND CASH EQUIVALENTS
	Unaudited	Unaudited	Audited
	30 September 2008	30 September 2007	31 March 2008
	£'000	£'000	£'000
Cash and short-term deposits	2,753	2,103	2,131
Bank overdrafts	(349)	(5,398)	(1,116)
	2,404	(3,295)	1,015

9.  FINANCIAL LIABILITIES
	Unaudited	Unaudited	Audited
	30 September 2008	30 September 2007	31 March  2008
	£'000	£'000	£'000
Current
Bank overdrafts	349	5,398	1,116
Current instalments on bank loans	4,562	2,264	5,267
Forward currency hedging contracts	44	-	295
Interest rate swap	71	-	116
	5,026	7,662	6,794
Non-current
Non-current instalments due on bank loans	12,972	17,485	12,897
Interest rate swap	59	-	144
	13,031	17,485	13,041

  NOTES CONTINUED

1 10. CHANGES IN EQUITY
		Shareholders' equity	Minority interest	Total  equity
		£'000	£'000	£'000
Balance at 1 October 2006		17,967	5,438	23,405
Total recognised income and expense for the period		(4,001)	61	(3,940)
Share based payments		86	-	86
Balance at 31 March 2007		14,052	5,499	19,551
Total recognised income and expense for the period		(22)	79	57
Exercise of employee share options		80	-	80
Share based payments		161	-	161
Balance at 30 September 2007		14,271	5,578	19,849
Total recognised income and expense for the period		289	309	598
Issue of shares under open offer		8,000	-	8,000
Costs relating to shares issued under open offer		(802)	-	(802)
Share based payments		54	-	54
Balance at 31 March 2008		21,812	5,887	27,699
Total recognised income and expense for the period		2,915	1,790	4,705
Share based payments		(26)	-	(26)
Balance at 30 September 2008		24,701	7,677	32,378
The net assets per share attributable to API shareholders is as follows:
		Unaudited	Unaudited			Audited
		30 September 2008	30 September 2007			31 March 2008
Net assets attributable to API shareholders	(£'000)	24,701	14,271			21,812
Number of shares in issue at period end	(no.)	70,068,505	34,511,292			70,068,505
Net assets per share	(pence)	35.3	41.4			31.1

11. CONTINGENT LIABILITIES

As disclosed in the Annual Report and Accounts 2008, the Group has received a claim in respect of alleged breach of warranties from the purchaser of a business disposed by the Group in 2005. The claimant has acknowledged that the maximum amount which it may recover in connection with the material element of the claim is capped at £3.1 million plus interest and costs. Since March 2008, the Company has continued to vigorously defend the claim. The Directors continue to consider that the Group has a strong basis upon which the claim can be defended. Accordingly, no provision has been made in the accounts in respect of this claim.

 

END

 

 

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