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DATE:	Embargoed until 07.00am, Tuesday 8 July 2008
CONTACTS:	Paul Allen, Chief Executive Ian Johnson, Group Finance Director Jacques Vert Plc Tel: 08700 345636
	Alistair Mackinnon-Musson Nicola Savage Hudson Sandler  Tel: 020 7796 4133 Email: jacquesvert@hspr.com
	Photographs available: Please contact Hudson Sandler, as above

 

JACQUES VERT PLC 

 

PRELIMINARY RESULTS

 

Jacques Vert Plc, the womenswear clothing retailer, is pleased to announce its preliminary results for the 52 weeks ended 26 April 2008, together with an update on trading for the 10 weeks since that date.

 

The Group retails four womenswear brands: Jacques Vert, Windsmoor, Planet and Precis. Sales are made predominantly in the UK, Canada and Eire through circa 940 outlets.

 

The key points are:

• Retail sales 1% higher than last year at  £114.9m (2007: £114.1m) and 0.5% ahead on a like for like basis

• Gross margin % in line with last year at 63.0%

• Operating profit before exceptional items of £4.7m (2007: £5.7m)

• Profit after tax of £1.6m after a net exceptional credit of £0.3m (2007: £19.6m after a net exceptional credit of £14.7m) 

• Year end cash of £2.5m (2007: cash of £3.6m less borrowings of £4.5m)

• Net assets at 26 April 2008 of £22.3m (2007: £19.7m)

• Sale of overseas subsidiary, Bairdwear Interfashion (Pvt) Limited, realising £0.4m net cash to the Group

• Retail sales decreased by 5.9% in the 10 weeks since 26 April 2008 and like for like sales decreased by 5.9%

Commenting, Steve Bodger, Chairman, said:

 

'Our brands have performed well in difficult trading conditions. I am confident that our strong financial position will enable us to benefit from any improvement in the market.'

CHAIRMAN'S STATEMENT

The past year has proved to be a difficult trading environment and has affected most areas of the retail market. Against that background our brands have performed well.

Operating profit before exceptional items for the year at £4.7m is down on the previous year but the Company has improved the strength of the balance sheet considerably during this time. The net cash position at the year end also underlines this point. 

We sold the Group's subsidiary in Sri Lanka in January 2008, which means the business is now wholly focused on retail. This disposal simplifies the business and removes a distracting issue for the management team. 

I would like to express my thanks to my predecessor, Derek Lovelock, who stepped down earlier this year for the valuable contribution he has made to the business and to wish him all the best for the future. I also extend my thanks, on behalf of the Board, to all our staff for their contribution and support through the year.

I expect that the remainder of this financial year will be very challenging; but I am confident that the steps taken to consolidate our strong financial position will enable us to benefit from any improvement in the market.

Steve Bodger  Chairman

7 July 2008

CHIEF EXECUTIVE'S STATEMENT

Our financial results for the year have been impacted by the slowdown in the retail environment in the final quarter of the financial year.

Group operating profit before interest and exceptional items from continuing operations for the year ended 26 April 2008 was £4.7m (2007: £5.7m). Profit after tax was £1.6m after a net exceptional credit of £0.3m (2007: £19.6m after a net exceptional credit of £14.7m).

Continuing operations

Against a backdrop of a very challenging retail climate, the business has performed creditably. Sales for the year at £114.9m (2007: £114.1m) were 1% ahead of last year. Like for like sales are 0.5% ahead of last year. The results have been particularly impacted by the poor trading performance during the final six weeks of the financial year, traditionally a very important trading period for the Group. 

At the end of the year the Company operated from circa 940 outlets, a similar number to the level at the previous year end.

The market continues to be affected by an aggressive level of discounting by our competitors. In spite of this, gross margin for the year of 63% has been maintained at the same level as last year. 

Distribution costs, which comprise of mainly the costs of operating stores, were £57.0m (2007: £ 57.0m) and administrative expenses were £10.7m (2007: £9.3m).

Discontinued operations

On 31 January 2008, Jacques Vert completed the disposal of Bairdwear Interfashion (Pvt) Limited, a manufacturing operation in Sri Lanka. The results of this business have therefore been treated as discontinued operations in this statement.

After costs relating to the transaction, Jacques Vert received net cash of approximately £0.4m, which included the repayment of existing debt of £0.5m. An overall loss of £1.9m has been recognised in the accounts in respect of the disposal of this business.

Exceptional items

The result for the year includes a net exceptional credit of £0.3m (2007: £14.7m). This net credit comprises a reduction in the fair value of the phantom option over shares in the Company granted to the Baird Group Pension Scheme offset, in the main, by an increase in provisions for onerous properties.

Balance sheet 

Focus has continued on improving the strength of the balance sheet and at the year end net assets were £22.3m (2007: £19.7m). Cash generation in the year has been strong and at the year end cash balances were £2.5m (2007: Cash of £3.6m less borrowings of £4.5m).

The level of inventories has reduced by 11% to £24.9m (2007: £28.0m). Given the current trading environment, emphasis will continue on controlling and reducing working capital.

IFRS

For the financial year ending 26 April 2008 the Group is required to prepare financial statements in accordance with International Financial Reporting Standards (IFRS). The parent company has opted to continue to prepare its accounts under UK GAAP.

Details of the differences may be found in note 2 of this announcement. At 26 April 2008, net assets are unchanged compared to UK GAAP however the total values of the Group's assets and liabilities are £0.5m higher under IFRS.

Current trading and prospects

Sales in the 10 weeks since the year end are 5.9% lower than last year and 5.9% lower on a like for like basis. Despite the pressure on sales, gross margin % is slightly ahead of the previous year. 

We expect the remainder of this financial year will continue to be characterised by the difficult trading conditions. Company plans and expectations have been formulated on this assumption and our emphasis will be focused on managing cash, which will include ensuring that stocks and costs remain under tight control.

Paul Allen  Chief Executive

7 July 2008

Group income statement             

For the 52 weeks ended 26 April 2008

Note			52 weeks ended 26 April 2008		52 weeks Ended 28 April 2007
			£000		£000
Continuing operations
Revenue			114,935		114,140
Cost of sales			(42,535)		(42,197)
Gross profit			72,400		71,943
Operating expenses
Distribution costs			(56,984)		(56,983)
Administrative expenses			(10,395)		5,380
Operating profit			5,021		20,340
Analysed between:
Operating profit before exceptional items			4,687		5,685
Net exceptional items	3		334		14,655
Finance income	4a		17		193
Finance expenses	4b		(718)		(648)
Profit before income tax			4,320		19,885
Income tax (expense) / credit	5		(774)		100
Profit for the period from continuing operations			3,546		19,985
Loss for the period from discontinued operations	6		(1,906)		(411)
Profit for the period attributable to equity shareholders			1,640		19,574
Basic earnings per share
- continuing operations			1.87p		10.57p
- discontinued operations			(1.00)p		(0.22)p
- total			0.87p		10.35p
Diluted earnings per share
- continuing operations			1.77p		9.88p
- discontinued operations			(0.95)p		(0.20)p
- total			0.82p		9.68p

Statement of recognised income and expense

52 weeks ended 26 April 2008

		52 weeks ended 26 April 2008		52 weeks Ended 28 April 2007
		£000		£000
Actuarial loss arising in defined benefit scheme		(220)		(5,900)
Gain on cash flow hedges		559		888
Currency translation differences		295		(295)
Net income / (expense) recognised directly in equity		634		(5,307)
Profit for the period		1,640		19,574
Total recognised income for the year		2,274		14,267

Group balance sheet                    

At 26 April 2008

	Note		26 April 2008 £000		28 April 2007 £000
Non current assets
Intangible assets			2,431		2,431
Property, plant and equipment			4,444		4,979
Deferred tax asset			2,638		3,360
			9,513		10,770
Current assets
Inventories			24,942		27,992
Trade and other receivables			11,802		11,624
Derivative financial assets			202		-
Cash and cash equivalents			2,511		3,644
			39,457		43,260
Current liabilities
Trade and other payables			(20,353)		(20,430)
Borrowings			-		(4,500)
Derivative financial liabilities			(10)		(798)
			(20,363)		(25,728)
Non current liabilities
Deferred income			(722)		(741)
Long term provisions	8		(5,130)		(7,420)
Pension schemes	8		(450)		(442)
Total liabilities			(26,665)		(34,331)
Net assets			22,305		19,699
Equity
Called up equity share capital			19,244		19,244
Share premium account			4,599		4,599
Other reserve			969		969
Hedge reserve			200		(359)
Translation reserve			-		(295)
Retained earnings			(2,707)		(4,459)
Total shareholders' equity			22,305		19,699

Group cash flow statement                    

For the 52 weeks ended 26 April 2008

					52 weeks ended 26 April 2008 £000		52 weeks ended 28 April 2007 £000
Cashflows from continuing operating activities
Operating profit before exceptional items					4,687		5,685
Depreciation charge					1,614		1,803
Decrease / (increase) in working capital					685		(2,429)
Decrease in provisions					(2,032)		(6,933)
Charges relating to options and employee share awards					382		364
Cash generated from / (used in) operations					5,336		(1,510)
Interest paid					(448)		(396)
Corporation tax (paid) / received					(41)		100
Cash flow from continuing operating activities					4,847		(1,806)
Cash flow from discontinued operations					(575)		642
Net cash flow from operating activities					4,272		(1,164)
Cashflows from investing activities
Disposal of subsidiary					530		2,229
Purchase of property, plant and equipment					(1,458)		(1,624)
Interest received					17		44
Discontinued operations					(6)		(95)
Net cash flow from investing activities					(917)		554
Cash flows from financing activities
Loan repayment					(4,500)		-
New loans					-		1,056
Sale of shares by ESOP Trust					28		38
Net cash flow from financing activities					(4,472)		1,094
Net (decrease) / increase in cash and cash equivalents					(1,117)		484
Cash and cash equivalents at beginning of period					3,644		3,046
Exchange rate movement					(16)		114
Cash and cash equivalents at period end					2,511		3,644

Notes to the Preliminary Results    

For the 52 weeks ended 26 April 2008

1.    Accounting Policies

For the period to 26 April 2008, the Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards as adopted for use in the EU ('IFRS') and those parts of the Companies Act 1985 applicable to companies reporting under IFRS. Accordingly, the directors have applied the accounting policies set out in Note 9. Due to the transition from UK Generally Accepted Accounting Principles ('UK GAAP') to IFRS, the comparative figures for the 52-week period ended 28 April 2007 are not as shown in the statutory accounts for that period. The financial statements for that period, prepared under UK GAAP, have been delivered to the Registrar of Companies. The auditors report on these financial statements was unqualified and did not include a statement under Section 237 (2) or (3) of the Companies Act 1985.

The financial information set out in this announcement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and is an abridged version of the Group's financial statements for the 52 weeks ended 26 April 2008 which were approved by the Directors on 7 July 2008. 

2.    Adoption of IFRS

a) Revised accounting policies

The Group adopted IFRS with effect from 29 April 2006 and has taken certain exemptions under IFRS 1, 'First time adoption of international financial reporting standards' as follows:

IFRS 3, 'Business combinations'

The Group has elected not to apply IFRS 3, 'Business combinations' retrospectively to acquisitions that took place before the date of transition.

IAS 21, 'The effects of changes in foreign exchange rates'

The Group has elected to set all brought forward translation gains and losses in equity to zero at the date of transition.

IAS 16, 'Property, plant and equipment'

The Group has elected to continue to recognise property, plant and equipment at historic cost less accumulated depreciation on transition to IFRS.

The Group's accounting policies are set out in full in Note 9. Excerpts from those accounting policies adopted as a result of the application of IFRS and which affect the results or net assets of the Group are shown below:

IFRS 3, 'Business combinations'

Goodwill on acquisition of subsidiaries is included within 'intangible assets'. Goodwill is not amortised but is tested annually for impairment. Impairment losses are not reversed. Gains and losses on the disposal of an entity include the carrying value of goodwill relating to the entity sold.

IAS 17, 'Leasing'

Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Inducements to enter into a lease are recognised over the full lease term. 

IAS 32 and IAS 39, 'Financial Instruments'

Financial instruments that are documented as part of an effective cash flow hedge are recognised directly in equity and recycled to the income statement when the underlying cash flows occur, or are no longer expected to occur.

IAS 1, 'Presentation of financial statements'

The directors consider transactions that are material in size and/or nature warrant specific disclosure in the primary financial statements. These are highlighted as exceptional items in the income statement. Further details are included in Note 3. Such transactions are treated consistently in each period that they arise.

b) Reconciliation of profit - UK GAAP to IFRS			52 weeks ended 28 April 2007
			£000
Profit after tax as previously reported under UK GAAP			19,350
IFRS adjustments: -    IAS 17 - leasing -    IAS21 - foreign exchange -    IFRS 3 - business combinations			208 (128) 144
Profit after tax for the period in accordance with IFRS			19,574

Reconciliation of Group equity - UK GAAP to IFRS	28 April 2007		29 April 2006
	£000		£000
Total Group equity as previously reported under UK GAAP	20,452		7,023
IFRS adjustments: -    IAS 17 - leasing -    IAS 32 - financial instruments -    IFRS 3 - business combinations	(538) (359) 144		(746) (1,247) -
Total Group equity in accordance with IFRS	19,699		5,030

There are no differences between cash as previously shown under UK GAAP and cash and cash equivalents under IFRS.

3.    Exceptional items

The Group's operating profit for the period includes the following exceptional items:

	52 weeks ended 26 April 2008 £000		52 weeks ended 28 April 2007 £000
Restructuring costs	(406)		(574)
Legacy business:
Increase in other legacy provisions	(615)		(1,227)
Phantom option granted to the Jacques Vert (2006) pension scheme Trustee over 10 million shares in Jacques Vert Plc	1,355		(1,385)
Net curtailment gain on Baird Group Pension Scheme	-		17,841
	334		14,655

4.    Finance income and expenses

		52 weeks ended  26 April 2008 £000		52 weeks ended  28 April 2007 £000
a) Finance income
Interest receivable		17		134
Finance credit on pension scheme		-		59
		17		193
b) Finance charges
Interest payable		(448)		(251)
Unwinding of discount on other provisions		(270)		(397)
		(718)		(648)

5.    Taxation

The tax charge comprises:		52 weeks ended  26 April 2008 £000		52 weeks ended  28 April 2007 £000
Current tax
Overseas tax charge		(52)		(112)
Overseas tax credit adjustment in respect of prior period		-		221
		(52)		100
Deferred tax
Origination and reversal of timing differences		(722)		-
Total tax (charge) / credit		(774)		100

6.    Analysis of the results of discontinued operations    

	52 weeks ended 26 April 2008		52 weeks ended 28 April 2007
	£000		£000
Revenue	759		13,274
Expenses	(1,213)		(14,452)
Operating exceptional items	-		(588)
Operating loss	(454)		(1,766)
Net finance charge	(16)		(366)
(Loss) / profit on sale of subsidiary	(1,436)		1,673
Loss before tax	(1,906)		(459)
Tax	-		48
Loss after tax	(1,906)		(411)

On 31 January 2008, Bairdwear Interfashion (Pvt) Ltd, a wholly-owned subsidiary, was disposed of by the Group. During the period prior to disposal, Bairdwear Interfashion (Pvt) Ltd reduced Group cashflows from operating activities by £613,000 (2007: £185,000 increase) and paid £16,000 of net interest (2007: £26,000).

On 29 December 2006, M/T Owner AB, a wholly-owned subsidiary, was disposed of by the Group. During the period prior to disposal, M/T Owner AB contributed £349,000 to the Group operating cash flows, paid £53,000 interest in respect of the net returns on investment and servicing of finance and received £97,000 of taxation refunds.

7.    Earnings per share 

Basic /diluted earnings per share 

The basic earnings per share have been calculated by dividing the profit after taxation for the year by 189,131,344 (2007: 189,073,400) being the weighted average number of shares in issue during the year excluding those held by the Employee Share Ownership Trust ('the Trust'). At 26 April 2008 734,209 shares were held in the Trust (28 April 2007: 3,370,678).

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: those share options granted to employees where the exercise price is lower than the average market price of the Company's ordinary shares during the year and the awards under the Jacques Vert Plc Long Term Incentive Plan ('the Plan') to the extent that performance criteria attached to those awards are expected to be met.

Adjusted earnings per share

The Directors consider that an appropriate measure of the Group's performance is the adjusted earnings per share in respect of its continuing operations ('adjusted EPS'). The adjusted EPS has been calculated by dividing an adjusted profit for the period by the weighted average number of shares in issue during the period as shown below:

	52 weeks ended 26 April 2008		52 weeks ended 28 April 2007
Adjusted earnings per share - Basic - continuing operations	2.42p		3.30p
Adjusted earnings per share - Diluted - continuing operations	2.29p		3.08p

The calculation of adjusted profit for the period is shown below:

	52 weeks ended 26 April 2008 £000		52 weeks ended 28 April 2007 £000
Profit for the period from continuing operations	3,546		19,985
Net exceptional items	(334)		(14,655)
Charges relating to options and awards under the Plan	382		364
Cost of vacating onerous property lease	-		200
Finance credit on pension schemes	-		(59)
Unwinding of discount on provisions	270		397
Deferred tax charge	722		-
Adjusted profit for the period	4,586		6,232

8.    Provisions    

Movements on provisions during the period were as follows:

            

	Pension schemes	Pension settlement costs	Other business provisions	Total
	£000	£000	£000	£000
At 29 April 2007	442	2,239	5,181	7,862
Utilised	(212)	(324)	(1,496)	(2,032)
(Credited)/charged to profit and loss account	-	(1,255)	515	(740)
Actuarial loss on pension schemes	220	-	-	220
Discount unwinding	-	-	270	270
At 26 April 2008	450	660	4,470	5,580

9    Accounting policies    

These financial statements are the first prepared since the transition on 29 April 2006 to International Financial Reporting Standards as adopted by the EU ('IFRS'). The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 

The following exemptions have been taken under IFRS 1 at the date of transition to IFRS ('Transition'):

-	The Group has elected not to apply IFRS 3, 'Business Combinations' retrospectively to acquisitions that took place before Transition.
-	The Group has elected to set all brought forward translation gains and losses in equity to zero at Transition. Translation gains and losses arising after Transition will be recycled to the income statement on disposal of the overseas subsidiaries to which they relate.
-	The Group has elected not to fair value all property, plant and equipment at Transition.

    

The following IFRSs, amendments and interpretations issued by the International Accounting Standards Board ('IASB') have become effective since 28 April 2007 but none has had a material impact on the results or the net assets of the Group:

-	IFRS 7, 'Financial Instruments - Disclosure' and the complementary amendment to IAS1, 'Presentation of Financial Statements - Capital Disclosures' introduces new disclosures relating to financial instruments and does not have any impact on the classification or valuation of the Group's financial instruments.
-	IFRIC 8, 'Scope of IFRS 2' requires consideration of transactions involving the issuance of equity instruments and does not have any impact on the Group's financial statements.

The following IFRSs and amendments have been issued by the IASB and the Group has chosen not to adopt them early. None is expected to have a material impact on the results or the net assets of the Group:

-	IFRS 8, 'Operating Segments' was issued in November 2006. It replaces IAS14, 'Segmental Reporting' and requires operating segments to be disclosed on the same basis as that used for internal reporting. It is required to be implemented by the Group from May 2009 but is not expected to have an impact on the results or the net assets of the Group
-	Amendment to IAS23, 'Borrowing Costs' was issued in March 2007. It removes the option of immediately expensing borrowing costs that are directly attributable to a qualifying asset and requires that such costs be capitalised. It is required to be implemented by the Group from May 2009, but is not expected to have a material impact on the results or the net assets of the Group.

Basis of preparation

These consolidated financial statements have been prepared in accordance with EU endorsed IFRS, IFRIC interpretations and the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value.

Basis of consolidation

The Group financial statements consolidate the results of Jacques Vert Plc ('the Company') and its subsidiary undertakings under acquisition accounting for the 52 weeks ended 26 April 2008. Under this method, the assets and liabilities of subsidiary undertakings acquired are incorporated at their fair value at the date of acquisition and the Group income statement includes only that proportion of the result of subsidiaries arising whilst meeting the definition of a subsidiary.

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. 

Revenue recognition

Revenue represents sales by the Group to third parties, net of returns, trade discounts and value added tax.

Retail revenue is shown net of unredeemed customer loyalty vouchers and a provision for customer returns representing the Group's estimate of the amount of product sold during the year that will be returned in the following year. 

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer which is generally when goods are delivered to the customer.

Borrowing costs

The costs of providing the committed borrowing facility to the Group are spread across the lifetime of the facility. Borrowing costs arising in relation to capital expenditure are not capitalised.

Exceptional items

Transactions that are material in size or have little or no impact on the core, continuing activities of the Group are considered significant enough to warrant specific disclosure in the primary financial statements. These are highlighted as Exceptional items in the Group income statement and analysed in the notes to the financial statements. Such transactions are treated consistently in each period that they arise.

Examples of events giving rise to the disclosure of exceptional items include, but are not limited to, changes in the fair value of a phantom option over 10 million shares in Jacques Vert Plc granted to a group pension scheme; materially ineffective cash flow hedges and the restructuring of the Group's operations.

Share based payments

The Group operates an equity settled Employee Share Ownership Plan ('ESOP'). The Group has also granted equity settled share options ('Options'). Share awards made under the ESOP and the Options are measured at fair value at the date of grant. The fair value is measured by use of the Black-Scholes model and expensed on a straight-line basis over the vesting period based on an estimate of the number of shares that will eventually vest. 

The level of vesting is reviewed annually and the charge is adjusted to reflect actual and estimated levels of vesting.

Shares held on behalf of the ESOP are shown as a deduction from shareholders' equity. The cost of the ESOP is borne by the Group.

Pensions

The Group operates several defined contribution and defined benefit schemes for its employees.  

With respect to the defined contribution schemes, the pension cost recognised in the Group income statement represents contributions payable to the scheme.

With respect to the defined benefit schemes:

-	Valuations are performed triennially by an independent qualified actuary.
-	A credit representing the expected return on the schemes' assets during the year is included within interest to the extent that it will reduce the future commitments of the Group to the schemes.
-	A charge representing the expected increase in the schemes' liabilities during the year is included to the extent that it will increase the future commitments of the Group to the schemes.
-	The differences between the market value of the assets and liabilities of the schemes are shown as assets or liabilities in the balance sheet. Pension scheme assets are recognised only to the extent that they will decrease future payments that otherwise would be due to the schemes from the Group.
-	Actuarial gains and losses on the schemes are recognised for the period in the Statement of recognised income and expense.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisitions over the Group's interest in the fair value of the identifiable assets and liabilities of the acquired entities at the date of acquisition.

Goodwill is recognised as an asset and is assessed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

Upon disposal of a subsidiary the attributable goodwill is included in the calculation of the profit or loss arising on disposal.

Taxation

The tax charge comprises current tax payable and the movement on deferred tax assets.

The current tax payable is provided on taxable profits using tax rates enacted or substantively enacted at the balance sheet date. 

Deferred tax is recognised in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. 

Deferred tax is recognised at tax rates that are enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. 

Deferred tax assets are recognised to the extent that it is more likely than not that future taxable profits will be available against which the temporary differences can be utilised.

Deferred tax liabilities on net earnings in overseas subsidiaries are provided only to the extent that at the balance sheet date it is probable that dividends will be remitted to the UK.

Property, plant and equipment 

Property, plant and equipment are stated at the lower of cost less accumulated depreciation and recoverable amount. Depreciation is calculated so as to write off the cost of property, plant and equipment less any residual value over their estimated useful economic lives by equal annual instalments at the following rates:

Leasehold improvements	Remaining period of the lease
Plant, fixtures and equipment	10% - 33%
Freehold property	2% - 5%

Land is not depreciated.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Asset carrying values are written down immediately to the estimated recoverable amount where the estimated recoverable amount is less than the carrying value.

Operating leases

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the life of the lease.

The value of any lease incentives received on leasehold properties is recognised as deferred income and released to the income statement on a straight-line basis over the life of the lease.

Inventories

Inventories and work in progress are valued at the lower of cost and net realisable value. Cost comprises the cost of direct materials and labour and an appropriate proportion of overheads. Net realisable value is the value at which inventories and work in progress can be realised in the ordinary course of business.

Foreign currencies

Transactions denominated in foreign currencies are translated at the exchange rates at the date of the transaction. Foreign exchange gains and losses arising from such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

The results and financial position of subsidiaries which have a functional currency other than Sterling are translated for consolidated accounts as follows:

-	assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet
-	income and expenses for each income statements presented are translated at weighted average exchange rates
-	all resulting exchange differences are recognised as a separate component of equity until the disposal of the relevant subsidiary when they are recycled to the income statement

Financial instruments

a.    Trade receivables and payables

Trade receivables are recorded at their nominal amount less an allowance for any doubtful debts. Trade payables are held at their nominal value

b.    Derivative financial instruments

The Group uses derivative financial instruments, in particular forward currency contracts, to manage the financial risks associated with the Group's underlying business activities and the financing of those activities. Such financial instruments are initially recorded at fair value and are thereafter revalued to fair value at each balance sheet date. The Group does not enter into speculative currency contracts. 

Gains or losses on derivative financial instruments that are designated as effective hedges against future cash flows are recognised directly in equity ('hedge accounting'). Any gain or loss relating to an ineffective hedge or a derivative financial instrument that does not qualify for hedge accounting is immediately recognised in the income statement, and where material as an exceptional item. 

Where a hedged commitment results in the recognition of an asset or a liability, the gain or loss on the hedge previously recognised in equity is thereafter included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged commitment affects profit and loss. 

Hedge accounting ceases in respect of a financial instrument when it expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. The cumulative gain or loss relating to the instrument that has previously been recognised in equity is retained in equity until the hedged transaction occurs.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and short term deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Provisions

Provisions are recognised when either a legal or constructive obligation, as a result of a past event, exists at the balance sheet date and where the likely outcome and the amount of the obligation can be measured with reasonable certainty.

Impairments

Impairments are made against Group assets under the following conditions:

Goodwill

Goodwill is allocated to the Group's cash generating units (CGU's) and the recoverable amount of each CGU is determined based on a value-in-use calculation. Goodwill is tested annually for impairment.

Property, plant and equipment

Property, plant and equipment is tested when circumstances indicate a possible impairment. In those circumstances a value-in-use calculation is performed.

Assumptions used in the calculations for Goodwill and Property, plant and equipment are based on performance and the latest financial plans approved by the board. If the recoverable amount of a CGU is less than the carrying value of all assets allocated to that CGU, an impairment is recognised. 

Goodwill is the first asset class to be impaired, followed by Property, plant and equipment.

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