Half Year Results to 30 June

RNS Number : 6532R
Guinness Peat Group PLC
25 August 2010
 



RESULTS OF GUINNESS PEAT GROUP PLC ("GPG")

FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

CHAIRMAN'S STATEMENT

 

 

After two disappointing years in 2008/09, GPG returned to a modest level of profit in the first half of 2010. That was mainly due to a vastly improved result from Coats, as investment returns still showed a deficit after Note interest and overheads.

 

A small profit at Capral (a long time problem for GPG) is an encouraging sign after the previous 7 years of losses.

 

Both Coats and Capral still have a long way to go but, hopefully, the actual and intangible resource which GPG has invested over the years is now finally starting to pay off.

 

Three other events which have had little profile but have impact for the future:

 

·    eServGlobal Ltd, in which we have a 19% interest, sold its USP business to Oracle for A$107 million and is now examining capital management options;

 

·    our former subsidiary, MMC Contrarian made a major acquisition of life insurance and wealth management businesses from BUPA and changed its name to ClearView Wealth Ltd. We now hold 48% of the enlarged company, operating in an industry where GPG has had considerable success in the past;

 

·    the acquisition of 20% of Ridley Ltd, Australia's leading producer of salt and animal stockfeeds (GPG's predecessor, Industrial Equity Ltd previously owned most of the salt business). After an unsuccessful North American expansion, Ridley is restoring the value of its Australian operations and we believe it has a promising future ahead.

 

Several years ago we announced we were working towards a release of value to shareholders.

 

Subsequently, those plans have followed a rather erratic course.

 

First, the global credit crisis intervened and then the Australian demerger proposal did not find favour with various institutional shareholders.

 

However, it is inescapable that the present corporate model no longer works for GPG and we are now revisiting alternative capital restructuring proposals and will shortly be appointing 3 new Directors to assist in this task.

 

As most shareholders will be aware, Tony Gibbs recently left the Board after 16years of service.

 

Consequently, we have closed the Auckland office and are selling off the New Zealand share portfolio other than the two major investments, Turners & Growers (66%) and Tower (35%) which have been transferred to Australian portfolio management. When we established in New Zealand, in the early 1990's, there were no undue expectations but, largely due to Tony's efforts, it proved more active and rewarding than anticipated.

 

More recently, however, there have been little or no opportunities and the New Zealand operation has necessarily become expendable for GPG.

 

During the forthcoming months, the corporate restructure will continue to be the main priority but not neglecting traditional "value enhancement" measures, expected to emerge before the end of the financial year.

 

 

 

Ron Brierley

Chairman

26 August 2010

 

 

 

 


 

Condensed Consolidated Income Statement







Unaudited


Unaudited


Audited


6 months to


6 months to


Year to


30 June


30 June


31 December


2010


2009


2009




Restated *


Restated **


£m


£m


£m

Continuing Operations






Revenue

643 


577 


1,172 







Cost of sales

(417)


(395)


(799)







Gross profit

226 


182 


373 







Profit on disposal of investments and other investment income


18 


26 







Distribution costs

(90)


(85)


(164)

Administrative expenses

(110)


(87)


(200)







Operating profit

31 


28 


35 







Share of profit/(loss) of joint ventures


(9)


(6)







Share of profit of associated undertakings









Finance costs

(17)


(16)


(31)







Profit before taxation from continuing operations

26 









Tax on profit from continuing operations

(15)


(18)


(28)







Profit/(loss) for the period from continuing operations

11 


(12)


(21)







Discontinued Operations






Profit/(loss) on discontinued operations


(12)


(17)







Profit/(loss) for the period

12 


(24)


(38)







Attributable to:






EQUITY SHAREHOLDERS OF THE COMPANY

10 


(22)


(36)

Non-controlling interests


(2)


(2)


12 


(24)


(38)







Earnings/(loss) per Ordinary Share from continuing and discontinued operations:



Basic (pence)

0.54p


(1.23p) ***


(2.04p) ***

Diluted (pence)

0.54p


(1.23p) ***


(2.04p) ***







Earnings/(loss) per Ordinary Share from continuing operations:






Basic (pence)

0.47p


(0.57p) ***


(1.32p) ***

Diluted (pence)

0.47p


(0.57p) ***


(1.32p) ***







    *  Restated to reflect the results of Capral Ltd and Staveley Inc. as discontinued operations

  **  Restated to reflect the results of ClearView Wealth Ltd and Staveley Inc. as discontinued operations

***  Adjusted for the 2010 Capitalisation Issue



 

Condensed Consolidated Statement of Comprehensive Income












Unaudited


Unaudited


Audited


6 months to


6 months to


Year to


30 June


30 June


31 December


2010


2009


2009


£m



£m







Profit/(loss) for the period

12 



(38)







(Losses)/gains on revaluation of fixed asset investments

(1)



41 

Gains/(losses) on cash flow hedges


(1)


(4)

Exchange gains/(losses) on translation of foreign operations

21 


(33)


15 

Actuarial losses on retirement benefit schemes

(23)



(13)

Net (loss)/income recognised directly in equity

(1)



39 







Transfers






Transferred to profit or loss on sale of fixed asset investments

(3)


(7)


(13)

Transferred to profit or loss on sale of businesses

(3)


(2)


(6)

Transferred to profit or loss on cash flow hedges




(3)



(15)







Net comprehensive income/(expense) for the period


(74)


(14)







Attributable to:






EQUITY SHAREHOLDERS OF THE COMPANY


(72)


(12)

Non-controlling interests



(2)









(74)


(14)







 



 

Condensed Consolidated Statement of Financial Position



Unaudited


Unaudited


Audited



30 June


30 June


31 December



2010


2009


2009



£m


£m


£m

NON-CURRENT ASSETS







Intangible assets


199


190


192

Property, plant and equipment


416


463


424

Investments in associated undertakings


230


123


157

Investments in joint ventures


47


43


47

Fixed asset investments


259


169


220

Deferred tax assets


15


13


20

Pension surpluses


28


25


27

Trade and other receivables


23


24


24



1,217


1,050


1,111

CURRENT ASSETS







Inventories


257


236


179

Trade and other receivables


308


302


239

Current asset investments


13


8


15

Derivative financial instruments


2


4


3

Cash and cash equivalents


255


317


402



835


867


838








Non-current assets classified as held for sale


4



3








TOTAL ASSETS


2,056


1,917


1,952








CURRENT LIABILITIES







Trade and other payables


278


262


256

Current tax liabilities


9


5


8

Other borrowings


130


126


80

Derivative financial instruments


17


20


16

Provisions


61


67


65



495


480


425








NET CURRENT ASSETS


340


387


413








NON-CURRENT LIABILITIES







Trade and other payables


11


15


13

Deferred tax liabilities


28


20


22

Capital Notes


195


167


191

Other borrowings


257


248


235

Derivative financial instruments


4


3


3

Retirement benefit obligations:







  Funded schemes


59


44


39

  Unfunded schemes


53


58


56

Provisions


25


18


24



632


573


583

TOTAL LIABILITIES


1,127


1,053


1,008

NET ASSETS


929


864


944



 

Condensed Consolidated Statement of Financial Position (continued)














Unaudited


Unaudited


Audited



30 June


30 June


31 December



2010


2009


2009



£m


£m


£m

EQUITY







Share capital


91


80


81

Share premium account


62


61


63

Translation reserve


140


83


123

Unrealised gains reserve


65


37


68

Other reserves


270


275


274

Retained earnings


239


267


258








EQUITY SHAREHOLDERS' FUNDS


867


803


867

Non-controlling interests


62


61


77








TOTAL EQUITY


929


864


944















Net asset backing per share*







  Pence


47.69


45.42


48.64

  Australian cents


84.48


92.53


87.34

  New Zealand cents


103.76


115.47


107.95



*

The net asset backing per share for June 2009 and December 2009 has been adjusted for the 2010 Capitalisation Issue.



Blake Nixon, Director

Approved by the Board on 26 August 2010

 

 


Condensed Reconciliation of Consolidated Changes in Equity

6 months ended 30 June 2010












Share


Unrealised




Non-


Share

premium

Translation

gains

Other

Retained


controlling


capital

account

reserve

reserve

reserves

earnings

Total

interests


£m

£m

£m

£m

£m

£m

£m

£m











Balance as at 1 January 2009

71 

61 

118 

36 

281 

311 

878 

71 










Total comprehensive income and expense









  for the period

(35)

(38)

(72)

(2)

Other currency translation differences

(3)

Dividends (note 11)

(14)

(14)

(3)

Scrip dividend alternative

(2)

Capitalisation issue of shares

(7)

Other share issues

Share based payments

Acquisition of subsidiaries

(2)











Balance as at 30 June 2009

80 

61 

83 

37 

275 

267 

803 


61 










Balance as at 1 January 2009

71 

61 

118 

36 

281 

311 

878 

71 










Total comprehensive income and expense









  for the period

32 

(1)

(48)

(12)

(2)

Other currency translation differences

Dividends (note 11)

(14)

(14)

(6)

Scrip dividend alternative

(2)

Capitalisation issue of shares

(7)

Other share issues

Share based payments

Acquisition of subsidiaries

18 

Disposal of subsidiaries

(7)

Acquisition of non-controlling interests

(2)











Balance as at 31 December 2009

81 

63 

123 

68 

274 

258 

867 


77 










Total comprehensive income and expense









  for the period

17 

(3)

(13)

3

Other currency translation differences

3

Dividends (note 11)

(16)

(16)

(3)

Scrip dividend alternative

(1)

10 

10 

Capitalisation issue of shares

(8)

Other share issues

Additional investment in subsidiaries

16 

Disposal of subsidiaries

(34)











Balance as at 30 June 2010

91 

62 

140 

65 

270 

239 

867 


62 











 

 

Condensed Statement of Consolidated Cash Flows













Unaudited


Unaudited


Audited


6 months to


6 months to


Year to


30 June


30 June


31 December


2010


2009


2009


£m


£m


£m

Cash (outflow)/inflow from operating activities






Net cash (outflow)/inflow from operating activities

(72)



121 

Interest paid

(20)


(23)


(46)

Taxation paid

(15)


(11)


(20)

Net cash (absorbed in)/generated by operating activities

(107)


(34)


55 







Cash (outflow)/inflow from investing activities






Dividends received from associated undertakings and joint ventures



10 

Capital expenditure and financial investment

(10)


(9)


(16)

Acquisitions and disposals

(90)



27 

Net cash (absorbed in)/generated by investing activities

(92)


(3)


21 







Cash inflow/(outflow) from financing activities






Issue of ordinary shares



Equity dividends paid to Company's shareholders

(6)


(6)


(6)

Dividends paid to non-controlling interests

(4)


(5)


(6)

Increase/(decrease) in debt

42 



(30)

Net cash generated by/(absorbed in) financing activities

33 


(2)


(37)







Net (decrease)/increase in cash and cash equivalents

(166)


(39)


39 

Cash and cash equivalents at beginning of the period

388 


347 


347 

Exchange gains/(losses) on cash and cash equivalents


(1)


Cash and cash equivalents at end of the period

230 


307 


388 







Cash and cash equivalents per the balance sheet

255 


317 


402 

Bank overdrafts

(25)


(10)


(14)

Cash and cash equivalents at end of the period

230 


307 


388 













 



 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 


 

1.

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed consolidated financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting, as adopted by the European Union, and comply with the disclosure requirements of the Listing Rules of the UK Financial Services Authority and the Listing Rules of the Australian Securities Exchange.

 


After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these condensed consolidated financial statements.

 


Other than the adoption of IFRS 3 (2008) ("Business Combinations") and IAS 27 (2008) ("Consolidated and Separate Financial Statements"), the same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

 



 

2.

The information for the year ended 31 December 2009 does not constitute statutory accounts (as defined in section 435 of the Companies Act 2006) but has been extracted from the statutory accounts for that year, which have been filed with the Registrar of Companies. The audit report on those accounts did not contain statements under Sections 498(2) or 498(3) of the Companies Act 2006. The audit opinion contained in that report was unqualified but contained an emphasis of matter paragraph drawing attention to the significant uncertainty surrounding the ultimate outcome of the appeal by Coats plc against the European Commission fine of €110.3 million (equivalent to £90.3 million at 30 June 2010 exchange rates). That uncertainty remains as at 30 June 2010 and the independent review report on these condensed consolidated financial statements contains a similar emphasis of matter paragraph. The directors remain of the view that any anticipated eventual payment of the fine is adequately covered by existing provisions.

 


The condensed consolidated financial statements for the six months ended 30 June 2010 have been reviewed - see attached independent review report - but have not been audited. The condensed consolidated financial statements for the equivalent period in 2009 were also reviewed but not audited.

 



 

3.

Group foreign exchange movements - during the six months to 30 June 2010, GPG recognised in operating profit £2 million of net foreign exchange losses compared to £7 million of net foreign exchange gains in the six months to 30 June 2009 (£8 million net losses in the year to 31 December 2009).

 



 

4.

Tax on profit from continuing operations

 



30 June

30 June

31 December

 



2010

2009

2009

 



£m

£m

£m

 






 


UK Corporation tax at 28.0% (2009: 28.0%)

 


Overseas tax

(11)

(10)

(21)

 



(11)

(10)

(21)

 


Deferred tax

(4)

(8)

(7)

 



(15)

(18)

(28)

 



 

5.

The Parent Group's significant joint ventures and associated undertakings are as follows:

 



 



30 June

30 June

31 December

 



2010

2009

2009

 






 


Autologic Holdings plc

26.2%

26.2%

26.2%

 


Australian Country Spinners Ltd

50.0%

50.0%

50.0%

 


Capral Ltd

44.4%

na

44.4%

 


ClearView Wealth Ltd (formerly MMC Contrarian Ltd)

47.9%

28.6%

na

 


Green's General Foods Pty Ltd

72.5%

72.5%

72.5%

 


The Maryborough Sugar Factory Ltd

24.3%

24.0%

22.9%

 


Peanut Company of Australia Ltd

24.8%

24.8%

24.8%

 


Rattoon Holdings Ltd

44.4%

44.4%

44.4%

 


Tower Ltd

35.0%

35.0%

35.0%

 



5.

ClearView Wealth Ltd ("ClearView"), a former subsidiary undertaking which was part of the Group's investment segment, became an associated undertaking on 5 May 2010, as a result of a share placement by that company (see note 7).  ClearView, as an associated undertaking, contributed £3 million to the Group result for the period.  The carrying value of ClearView at 30 June 2010 amounted to £64 million.


Other significant contributions to the profit/(loss) for the period from Parent Group joint ventures and associated undertakings were:








30 June

30 June

31 December



2010

2009

2009



£m

£m

£m







Autologic Holdings plc


Green's General Foods Pty Ltd

(1)


Peanut Company of Australia Ltd

(2)


Tower Ltd







Other contributions to the profit/(loss) for the period from joint ventures and associated undertakings, held by operating subsidiaries, include a CIC joint venture £5 million profit (6 months to 30 June 2009: £9 million loss;  year to 31 December 2009: £7 million loss).  The CIC joint venture profit for the period includes an impairment charge of £Nil (6 months to 30 June 2009: £12 million; year to 31 December 2009: £12 million).

        

6.

Segmental Analysis - Analysis by activity

 







Non-


 







operating


 



Thread

Fruit/produce

Aluminium

Other

items


 


Investment

manufacture

distribution

extrusion

activities

(see note)

Total

 


£m

£m

£m

£m

£m

£m

£m

 









 

6 months ended 30 June 2010:








 

Revenue:








 

External sales

497 

134 

12 

643 

 









 

Profit/(loss) after tax:








 

Continuing operations

(19)

25 

11 

 

Discontinued operations

(1)

 









 

Total assets 30 June 2010

470 

890 

199 

97 

400 

2,056 

 









 

6 months ended 30 June 2009:








 

Revenue:








 

External sales

443 

120 

13 

577 

 









 

(Loss)/profit after tax:








 

Continuing operations

(1)

(4)

-

(9)

(12)

 

Discontinued operations

(12)

(12)

 









 

Total assets 30 June 2009

503 

792 

176 

126 

68 

252 

1,917 

 









 

Year ended 31 December 2009:








 

Revenue:








 

External sales

903 

237 

30 

1,172 

 









 

(Loss)/profit after tax:








 

Continuing operations

(23)

(5)

(21)

 

Discontinued operations

(2)

(19)

(17)

 









 

Total assets 31 December 2009

524 

815 

148 

83 

382 

1,952 

 

 

Note:

 

Non-operating items comprise cash and cash equivalents, derivatives and investments held by operating subsidiaries (which are not considered to be financial operations).



 

7.

Discontinued operations

 


As stated in note 5, in May 2010 ClearView became an associated undertaking.  ClearView has been treated as a discontinued operation in the 2010 and the 2009 comparative Condensed Consolidated Income Statements.

 


The impact of the deemed disposal of ClearView was as follows:

 



£m

 


Intangible assets

 


Deferred tax assets

 


Trade and other receivables

 


Cash and cash equivalents

94 

 


Trade and other payables

(3)

 


Net assets at disposal

105 

 


Non-controlling interests

(34)

 


Group share of net assets at disposal

71 

 


Cumulative translation differences recycled from reserves

(3)

 



68 

 


Residual carrying value as an associated undertaking

67 

 


Loss on disposal

 




 


Also during the 6 months to 30 June 2010, Staveley Inc. sold its two remaining trading businesses, resulting in a gain of £3 million.  That gain, together with the results of those businesses for the period and for the 2009 comparatives, is included within the profit/(loss) on discontinued operations.

 



 

8.

Earnings/(loss) per share - The calculation of earnings/(loss) per Ordinary Share is based on profit/(loss) after taxation attributable to shareholders and the weighted average number of 1,794,939,109 Ordinary Shares in issue during the six months ended 30 June 2010.

 


For the calculation of diluted earnings/(loss) per Ordinary Share, the weighted average number of Ordinary Shares in issue is adjusted, where appropriate, to assume conversion of all dilutive potential Ordinary Shares, being share options granted to employees and Capital Notes.  All dilutive potential ordinary Shares were not dilutive during the period.

 


The comparatives for the six months to 30 June 2009 and the year to 31 December 2009 have been adjusted for the Capitalisation Issue which took place in June 2010 - see Note 10.

 


Calculations of earnings/(loss) per share are based on results to the nearest £000s.

 



 

9.

The net tangible assets per share figure at 30 June 2010 was 40.14p (30 June 2009: 38.14p, 31 December 2009: 42.16p).  The comparatives for 30 June 2009 and 31 December 2009 have been adjusted for the 2010 Capitalisation Issue.

 




 

10.

Changes in the issued share capital during the six months to 30 June 2010 comprise the following:

 



£000

 


At 1 January 2010

81,046

 


Employee options exercised

162

 


Scrip dividend alternative shares issued (17 May 2010)

1,456

 


Capitalisation Issue (4 June 2010)

8,266

 


At 30 June 2010

90,930

 




 

11.

Dividends - The directors have not recommended the payment of an interim dividend (6 months to 30 June 2009: Nil).  An interim dividend of 0.91p per share, adjusted for the 2010 Capitalisation Issue, was paid during the period in respect of the year ended 31 December 2009.  An interim dividend of 0.91p per share, adjusted for the 2009 Capitalisation Issue, was paid during the six months ended 30 June 2009 in respect of the year ended 31 December 2008.

 



 

12.

Contingent liabilities - During the period a subsidiary was released from its previously reported A$12 million exposure to provide funding to, or acquire assets from, an entity in which it has an existing investment.

 


 



 

13.

There have been no changes to the principal risks and uncertainties compared to those outlined in note 40 to the Financial Statements in the 2009 Annual Report, comprising risks associated with currency, interest rate, market price, liquidity, credit and capital.

 



 

14.

Related party transactions - There have been no related party transactions or changes in related party transactions described in the latest annual report that could have a material effect on the financial position or performance of the Group in the first six months of the financial year.

 



 

15.

Directors - The following persons were, except where noted, directors of GPG during the whole of the period and up to the date of this report:

 



 


Sir Ron Brierley

 


A I Gibbs (to 28 June 2010)

 


R Langley

 


B A Nixon

 


Dr G H Weiss

 



 

16.

Interim Management Report - The Chairman's Statement appearing in the half-yearly financial report and signed by Sir Ron Brierley provides a review of the operations of the Group for the six months ended 30 June 2010.

 



 

17.

Publication - This statement will be available at the registered office of the Company, First Floor, Times Place, 45 Pall Mall, London SW1Y 5GP. A copy will also be displayed on the Company's website on www.gpgplc.com.

 



 



 



DIRECTORS' RESPONSIBILITY STATEMENT


In accordance with a resolution of the directors of Guinness Peat Group plc I state that:

in the opinion of the Directors and to the best of their knowledge:


a.

the condensed set of unaudited financial statements:





(i)

give a true and fair view of the financial position as at 30 June 2010 and the performance of the consolidated Group for the half-year ended on that date;





(ii)

have been prepared in accordance with IAS 34 "Interim Financial Reporting";





(iii)

comply with the recognition and measurement principles of applicable International Financial Reporting Standards as adopted by the Group; and




b.

the half-yearly financial report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8;



c.

there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.







Signed on behalf of the Board

B A Nixon, Director

26 August 2010




UNITED KINGDOM

First Floor, Times Place, 45 Pall Mall, London SW1Y 5GP

Tel:  020 7484 3370

Fax:  020 7925 0700


AUSTRALIA

c/o Computershare Investor Services Limited

GPO Box 242, Melbourne VIC 3001

Tel:  03 9415 4083

Fax:  03 9473 2506


NEW ZEALAND

c/o Computershare Investor Services Limited

Private Bag 92119, Auckland 1142, New Zealand

Tel:  09 488 8777

Fax:  09 488 8787



Registered in England No. 103548

 



 

INDEPENDENT REVIEW REPORT TO GUINNESS PEAT GROUP PLC


Introduction


We have been engaged by Guinness Peat Group plc (the "Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 which comprises the condensed consolidated income statement, the condensed consolidated statement of financial position, the condensed statement of comprehensive income, the condensed reconciliation of consolidated changes in equity, the condensed statement of consolidated cash flows and related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.


This report is made solely to the Company 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.  Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review 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 formed.


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 Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.


As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.


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.


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 United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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.


Conclusion


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 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.


Emphasis of matter - uncertainty relating to the amount of a potential liability arising from a European Commission investigation


Without qualifying our conclusion, we draw attention to the disclosures made in note 2 to the condensed consolidated financial statements concerning the European Commission competition investigation into alleged market sharing agreements relating to the European haberdashery market. In September 2007, the European Commission imposed a fine of €110.3 million (equivalent to £90.3 million at 30 June 2010 exchange rates) in relation to these allegations, against which one of the Company's subsidiaries, Coats plc, has lodged an appeal. Significant uncertainty surrounds the ultimate outcome of this matter. The directors are of the view that any anticipated eventual payment of the remaining fines is adequately covered by existing provisions.



Deloitte LLP

Chartered Accountants and Statutory Auditors

London, United Kingdom

26 August 2010

 

 


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Companies

Coats Group (COA)
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