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DATE:	Embargoed until 07.00am, Tuesday 13 January 2009
CONTACTS:	Paul Allen, Chief Executive Ian Johnson, Group Finance Director Jacques Vert Plc Tel: 08700 345636
	Alistair Mackinnon-Musson Nathan Field Hudson Sandler  Tel: 020 7796 4133 Email: jacquesvert@hspr.com
	Photographs available: Please contact Hudson Sandler, as above

 

 

JACQUES VERT PLC

 

INTERIM RESULTS

 

Jacques Vert Plc, the womenswear clothing retailer, is pleased to announce its Interim results for the 26 weeks ended 25 October 2008, together with an update on trading for the 11 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 960 outlets.

 

The key points are:

• Sales of £54.9m (2007: £58.3m) were 6.8% lower, compared with the previous year on a like for like basis

• Gross margin of 62.4% (2007: 62.4%) was in line with the previous year

• Operating profit from continuing operations was £1.3m (2007: £2.4m before exceptional items)

• Profit before tax was £1.1m (2007: £3.0m including an exceptional credit of £0.9m)

• Net cash at the period end of £4.0m (2007: £1.3m)

• Net assets increased to £27.0m (2007: £21.9m)

• Like for like sales fell by 5.4% in the 11 weeks since 25 October 2008, compared with the previous year

• With its strong balance sheet the Group is well positioned to weather the difficult economic climate

 Commenting, Steve Bodger, Chairman, said

 'The Group's sales and margin performance is creditable in an extremely challenging market. We expect the trading environment to continue in this way for some time and our continued emphasis will be on controlling costs, stocks and cash, thereby consolidating our strong balance sheet and cash position.' 

Chief Executive's Statement

Overview and Results

It is widely accepted that the UK retail market is going through an unprecedented period of turbulence. Since the banking crisis hit the headlines in September, the Group has experienced an extremely volatile and unpredictable sales environment.

Against this background, the Group announces Operating profit for the 26 weeks ended 25 October 2008 of £1.3m (2007: £2.4m) and Profit before tax of £1.1m (2007: £3.0m).

Sales for the 26 weeks ended 25 October 2008 at £54.9m (2007: £58.3m) are 5.8% down compared with the previous year. On a like for like basis, sales are down 6.8%.

In a market characterised by widespread discounting, we have worked hard to protect gross margin, which at 62.4% is in line with the previous year. 

Operating expenses were £33.0m (2007: £33.9m), reflecting both the lower sales volume and management's focus on reducing the overhead base. 

Balance Sheet

Net assets at the period end were £27.0m (2007: £21.9m).

The net change in the fair value of cash flow hedges during the period was a gain of £3.4m (2007: loss of £0.5m).

Cash generation during the period has been strong and at the period end the Group had net cash of £4.0m (2007: £1.3m).

Management of working capital has been a particular emphasis and at the period end total working capital of £14.8m (2007: £17.8m) was £3.0m lower than the previous year. 

Payments in respect of legacy provisions were £1.0m (2007: £1.9m). 

Current Trading and Future Prospects 

Sales in the 11 weeks since the period end declined on a like for like basis by 5.4%, compared with the previous year.

Following challenging trading conditions during November, customer reaction to sale has been strong and we believe our performance in December compares favourably with the market as a whole although the widely reported increase in the level of discounting in the market during this period has resulted in a slightly reduced Gross margin % achieved compared with the previous year.

As a result of this proactive stance, stock levels are lower than in the previous year. 

The Group has entered into forward exchange contracts in respect of substantially all its product purchasing commitments for the Spring and Autumn 2009 seasons and for a significant element of the Spring 2010 season.

The Board expects the challenging market conditions will continue for the remainder of the financial year and we are expecting the like for like sales trend to continue to be negative for some time to come. As previously emphasized, we will continue to focus on cash generation and we believe that the Group, with its strong balance sheet, is well positioned to weather the difficult economic climate.

Paul Allen

Chief Executive

13 January 2009

Unaudited consolidated income statement             

For the 26 weeks ended 25 October 2008

Note			26 weeks ended 25 October 2008			26 weeks ended  27 October 2007			52 weeks ended 26 April 2008
				£000			£000			£000
Continuing operations
Revenue				54,901			58,295			114,935
Cost of sales				(20,642)			(21,874)			(42,535)
Gross profit				34,259			36,421			72,400
Operating expenses
Distribution costs				(27,779)			(28,409)			(56,984)
Administrative expenses	2			(5,204)			(4,648)			(10,395)
Operating profit				1,276			3,364			5,021
Analysed between:
Operating profit before exceptional items				1,276			2,431			4,687
Net exceptional items	2			-			933			334
Finance income	3a			19			-			17
Finance expenses	3b			(158)			(400)			(718)
Profit before income tax				1,137			2,964			4,320
Income tax expense	4			(47)			(52)			(774)
Profit for the period from continuing operations				1,090			2,912			3,546
Loss for the period from discontinued operations	5			-			(329)			(1,906)
Profit for the period attributable to equity shareholders				1,090			2,583			1,640
Basic earnings per share  - total  - continuing operations	6			0.57p 0.57p			1.37p 1.54p			0.87p 1.87p
Diluted earnings per share  - total  - continuing operations	6			0.56p 0.56p			1.28p 1.44p			0.82p 1.77p

  

Unaudited consolidated statement of changes in equity

26 weeks ended 25 October 2008

	Share Capital	Share Premium	Other Reserve*	Hedge Reserve	Translation Reserve	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000
Balance at 28 April 2007	19,244	4,599	969	(359)	(295)	(4,459)	19,699
Profit for the period	-	-	-	-	-	2,583	2,583
Net change in fair value of cash flow hedges	-	-	-	(199)	-	-	(199)
Fair value of cash flow hedges transferred to inventories	-	-	-	(290)	-	-	(290)
Currency translation differences	-	-	-	-	(107)	-	(107)
Sales of own shares	-	-	-	-	-	25	25
Charge for employee share schemes	-	-	-	-	-	173	173
Balance at 27 October 2007	19,244	4,599	969	(848)	(402)	(1,678)	21,884

	Share Capital	Share Premium	Other Reserve*	Hedge Reserve	Translation Reserve	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000
Balance at 26 April 2008	19,244	4,599	969	200	-	(2,707)	22,305
Profit for the period	-	-	-	-	-	1,090	1,090
Net change in fair value of cash flow hedges	-	-	-	3,940	-	-	3,940
Fair value of cash flow hedges transferred to inventories	-	-	-	(555)	-	-	(555)
Currency translation differences	-	-	-	-	106	-	106
Charge for employee share schemes	-	-	-	-	-	120	120
Balance at 25 October 2008	19,244	4,599	969	3,585	106	(1,497)	27,006

* The Other Reserve relates to a business combination prior to the adoption of International Financial Reporting Standards ('IFRS') and was previously shown as a Merger Reserve under UK GAAP. The Group has elected not to revisit business combinations prior to transition to IFRS and, accordingly, has recognised a separate reserve in the financial statements.  

Unaudited consolidated balance sheet

At 25 October 2008

	Note		25 October  2008 £000		27 October 2007 £000		26 April 2008 £000
Non current assets
Intangible assets			2,431		2,431		2,431
Property, plant and equipment			4,301		4,861		4,444
Deferred income tax asset			2,638		3,360		2,638
			9,370		10,652		9,513
Current assets
Inventories			27,231		28,236		24,942
Trade and other receivables			10,019		12,106		11,802
Derivative financial assets			4,333		-		202
Cash and cash equivalents	8		3,996		2,252		2,511
			45,579		42,594		39,457
Current liabilities
Trade and other payables			(22,477)		(22,510)		(20,353)
Borrowings			-		(1,000)		-
Derivative financial liabilities			(201)		(997)		(10)
			(22,678)		(24,507)		(20,363)
Non current liabilities
Deferred income			(654)		(720)		(722)
Long-term provisions	7		(4,279)		(5,820)		(5,130)
Pension schemes	7		(332)		(315)		(450)
Total liabilities			(27,943)		(31,362)		(26,665)
Net assets			27,006		21,884		22,305
Equity
Called up equity share capital			19,244		19,244		19,244
Share premium account			4,599		4,599		4,599
Other reserve			969		969		969
Hedge reserve			3,585		(848)		200
Translation reserve			106		(402)		-
Retained earnings			(1,497)		(1,678)		(2,707)
Total shareholders' equity			27,006		21,884		22,305

  

Unaudited consolidated cash flow statement

For the 26 weeks ended 25 October 2008

	Note		26 weeks ended 25 October 2008 £000				26 weeks ended 27 October 2007 £000		52 weeks ended 26 April 2008 £000
Cashflows from operating activities
Operating profit			1,276				3,364		5,021
Depreciation charge			801				826		1,614
Charge for employee share schemes					120		173		382
Decrease in working capital			1,088				768		685
Decrease in provisions			(1,022)				(1,863)		(2,366)
Cash generated from continuing operations			2,263				3,268		5,336
Interest paid			(105)				(268)		(448)
Corporation tax paid			(125)				-		(41)
Cash flow from discontinued operations			-				(59)		(575)
Net cash flow from operating activities			(230)				2,941		4,272
Cashflows from investing activities
Disposal of subsidiary			-				-		530
Purchase of property, plant and equipment			(658)				(768)		(1,458)
Interest received			19				5		17
Discontinued operations		5	-				(3)		(6)
Net cash flow from investing activities			(639)				(766)		(917)
Cash flows from financing activities
Loan repayment			-				(3,500)		(4,500)
Sale of shares by ESOP Trust			-				28		28
Net cash flow from financing activities			-				(3,472)		(4,472)
Net increase / (decrease)  in cash and cash equivalents			1,394				(1,297)		(1,117)
Cash and cash equivalents at beginning of period			2,511				3,644		3,644
Exchange rate movement			91				(95)		(16)
Cash and cash equivalents at end of period		8	3,996				2,252		2,511

  Unaudited notes to the Interim Financial Statements

For the 26 weeks ended 25 October 2008

1.

Basis of preparation

The interim consolidated financial information is not audited and does not constitute statutory financial statements with the meaning of section 240 of the Companies Act 1985. The interim consolidated financial information should be read in conjunction with the annual financial statements for the year ended 26 April 2008, which have been prepared in accordance with IFRS.  Statutory accounts for the year ended 26 April 2008 were approved by the Board of directors on 7 July 2008 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain a statement under section 237 of the Companies Act 1985.

    

2.	Administrative expenses and exceptional items
	Administrative expenses include a number of exceptional items in the prior year that are material in size and/or nature. These are analysed as follows:

    

	26 weeks ended 25 October 2008 £000			26 weeks ended 27 October 2007 £000					52 weeks ended 26 April 2008 £000
Restructuring		-			-			(406)
Legacy business
Increase in other legacy provisions		-			-			(615)
Phantom option granted to the Jacques Vert (2006) pension scheme Trustee over 10 million shares in Jacques Vert Plc		-			933			1,355
Net exceptional items		-			933			334

Administrative expenses from continuing operations excluding exceptional items are analysed below:

	26 weeks ended 25 October 2008 £000		26 weeks ended 27 October 2007 £000				52 weeks ended 26 April 2008 £000
Administrative expenses	5,204		4,648			10,395
Add back: Net exceptional items	-		933			334
Administrative expenses excluding exceptional items	5,204		5,581			10,729

3.    Finance income and expenses    

	26 weeks ended 25 October 2008 £000		26 weeks ended 27 October 2007 £000		52 weeks ended 26 April 2008 £000
a. Finance income
Interest receivable	19		-		17
b. Finance charges
Interest payable	(105)		(264)		(448)
Unwinding of discount relating to provisions	(53)		(136)		(270)
	(158)		(400)		(718)
Net finance expense	(139)		(400)		(701)

4.	Income tax expense
	No UK income tax expense has been recognised in the period to 25 October 2008 (period ended 27 October 2007: £nil; year to 26 April 2008: £nil). A charge of £47,000 has been included in the period to 25 October 2008 relating to tax on overseas operations (period ended 27 October 2007: £52,000 charge; year ended 26 April 2008: £52,000 charge).

  

5.	Discontinued operations
	On 31 January 2008, Bairdwear Interfashion PVT Ltd ('Interfashion'), a wholly owned subsidiary, was disposed of by the Group. Accordingly, the results of the subsidiary have been disclosed as discontinued operations at 27 October 2007 and 26 April 2008.

    

6.

Earnings per Share Basic/diluted earnings per share

The basic earnings per share have been calculated by dividing the profit after taxation for the period by 191,952,742 October 2007: 189,204,269; 26 April 2008: 189,131,344 being the weighted average number of shares in issue during the period excluding those held by the Employee Share Ownership trust ('the Trust'). At 25 October 2008, 488,637 shares were held by the Trust (October 2007: 3,239,809 and 26 April 2008: 734,209). 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 awards under the Company's long-term incentive plan ('the Plan') to the extent that performance criteria attached to those awards are expected to be met.

	26 weeks ended 25 October 2008 £000		26 weeks ended 27 October 2007 £000		52 weeks ended 26 April 2008 £000
Basic earnings per share
- continuing	0.57p		1.54p		1.87p
- discontinued	-		(0.17)p		(1.00)p

Diluted earnings per share
- continuing	0.56p		1.44p		1.77p
- discontinued	-		(0.16)p		(0.95)p

	Adjusted earnings per share
	The Directors consider that an appropriate measure of performance of the Group is the adjusted earnings per share for 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:

Adjusted profit for the period:	26 weeks ended 25 October 2008  £000		26 weeks ended 27 October 2007 £000		52 weeks ended 26 April 2008 £000
Profit for the period	1,090		2,583		1,640
Loss from discontinued operations	-		329		1,906
Profit for the period from continuing operations	1,090		2,912		3,546
Exceptional items	-		(933)		(334)
Shared based payments	120		173		382
Unwinding of discount on provisions	53		136		270
Deferred tax charge	-		-		722
Adjusted profit for the period - continuing	1,263		2,288		4,586
Adjusted earnings per share - Basic - continuing operations	0.66p		1.21p		2.42p
Adjusted earnings per share - Diluted - continuing operations	0.65p		1.13p		2.29p

7.    Provisions    

	Pension schemes		Pension settlement costs		Other legacy business provisions		Total
	£000		£000		£000		£000
At 29 April 2007	442		2,239		5,181		7,862
(Credited) to income statement	-		(933)		-		(933)
Utilised	(127)		(66)		(737)		(930)
Unwinding of discount	-		-		136		136
At 27 October 2007	315		1,240		4,580		6,135

            

	Pension schemes		Pension settlement costs		Other legacy business provisions		Total
	£000		£000		£000		£000
At 27 April 2008	450		660		4,470		5,580
Utilised	(118)		(69)		(835)		(1,022)
Unwinding of discount	-		-		53		53
At 25 October 2008	332		591		3,688		4,611

At 26 April 2008, the Jacques Vert (2006) pension scheme was valued by independent actuaries at a net surplus of £17.1m. Repayment of any surplus on this scheme to the Group is at the discretion of the Trustee. As the Group is unable to require the Trustee to make a repayment, the surplus has not been recognised in the Group balance sheet.

Other legacy provisions relate to vacant leasehold property, dilapidations and claims against the Group in respect of industrial diseases, mainly asbestosis. Where applicable, future liabilities have been discounted using a rate of 10% per annum.

8.    Net funds        

	25 October 2008 £000		27 October 2007 £000		26 April 2008  £000
Cash and cash equivalents	3,996		2,252		2,511
Bank loans	-		(1,000)		-
Net funds	3,996		1,252		2,511

9.    Accounting policies        

Basis of preparation

The accounting policies applied in the interim financial information are consistent with the financial statements for the year ended 26 April 2008.

The following IFRS, amendments and interpretations issued by the International Accounting Standards Board ('IASB') have become effective since 26 April 2008 but none has had a material effect on the results or the net assets of the Group:

• IFRIC 14, IAS19, the limit on a defined benefit asset, minimum funding requirements and their interpretation provides guidance on assessing the limit in IAS19 on the amount of a defined benefit asset that can be recognised in the Group's financial statements. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. IFRIC 14 has not had a material impact on the Group's financial statements.

• Revisions to IAS23, Borrowing Costs; IAS27, Consolidated and Separate Financial Statements; and IFRS3, Business Combinations have not has a material impact on the Group's financial statements. 

IFRS 8, Operating Segments was issued in November 2006. It replaces IAS 14, 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 and will have no effect on the results or the net assets of the Group.

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 26 weeks ended 25 October 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 applicable 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 period that will be returned in the following period. 

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 Group disclosure in the primary financial statements. These are highlighted as exceptional items in the 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.

Discontinued operations

Operations of the Group are considered as discontinued if they meet the following criteria:

• The operation has been disposed of; or

• The operation is a major line of business or geographical area of operations which is actively marketed for sale at the balance sheet date; and

• The sale of the operation is considered highly probable.

All other activities are considered as continuing operations.

Where an operation is discontinued, the post tax profit for the period together with any profit or loss on disposal is shown separately in the income statement. The assets and liabilities of the discontinued operation are shown as 'held for sale' at the lower of their carrying value and their fair value less any costs of sale.

Share based payments

The Group operates an equity settled Employee Share Ownership Plan ('the Plan'). The Group has also granted equity settled share options ('Options'). Share awards made under the Plan 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 shares that will eventually vest. 

The level of vesting is reviewed annually and a charge is recognised in the income statement, with a corresponding adjustment to equity, to reflect actual and estimated levels of vesting. 

Shares held by the Employee Share Ownership Trust ('the Trust') to meet the commitments of the Plan are shown as a deduction from shareholders' equity.

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 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.

• A charge representing the expected increase in the schemes' liabilities during the year is included within interest.

• 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 and the credits and charges above are recognised only to the extent that they will affect future cashflows between the schemes and the Group.

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.

Taxation

The tax charge comprises current tax payable and deferred tax and is recognised in the income statement, except where the charge relates to tax assets or liabilities held in equity.

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 and 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 period 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 statement 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 doubtful debts where appropriate. 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 and effective as 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 when a financial instrument 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 comprises 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.

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.

Critical estimates and judgments

The preparation of financial statements under IFRS requires management to make estimates that affect the reported amounts of assets and liabilities, income and expenses. 

These estimates are based on historical experience and various other factors that are believed to be reasonable in the particular circumstance. Actual results may differ from these estimates.

The Group's significant judgment areas relate to the recognition of pension scheme assets, legacy business provisions including industrial diseases, together with the assessment of the highly probable nature of cash flow hedges as follows: 

    a) Pension scheme assets - Jacques Vert (2006) Pension Scheme

Any repayment to the Group of the surplus held within the scheme at 26 April 2008 is at the discretion of the pension scheme Trustee. It is currently considered that no repayment will be made to the Group in the future.

    b) Legacy business provisions

The level of provisions held against legacy activities is assessed with reference to payments made during the period and, where relevant, to independent advice.

    c) Cash flow hedges

Cash flow hedges are tested for effectiveness based on estimated currency requirements assuming a substantially consistent supplier base. 

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ENDIR UUOWRKWRAAAR