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Inveresk PLC

('Inveresk' or the 'Company')

Share Price Suspension

Inveresk announces that it has today requested the AIM team of the London Stock Exchange to suspend its shares with immediate effect due to the fact that, for the reasons highlighted below, the Directors are unable at this time to sign off the Report and Accounts for the year ended 31st December 2008 pending the outcome of litigation which is material in all respects to the numbers contained therein.

The chronology of events is as follows:-

Inveresk's Claims against Tullis Russell Papermakers Limited

On 15th February 2008 in the Court of Session in Edinburgh, Lord Drummond Young handed down a robust judgement in favour of Inveresk in support of an action brought by Inveresk against Tullis Russell Papermakers Ltd ('TR') who had failed to pay Additional Consideration due under an Asset Sale Agreement dated 8th June 2005. The payment obligation arose from TR's certification of retained sales tonnage for the 12 months ending on 8th November 2006. TR had sought  to amend the retained sales tonnage following certification. Lord Drummond Young found that TR were not entitled to do so under the terms of the contract. The revisals were not, in any event, accepted by Inveresk.

On 3rd June 2008 in the Court of Appeal (the Inner House) in Edinburgh TR challenged Lord Drummond Young's judgement and stated (amongst other things) that they believed that he had gone too far in his judgement. TR then made changes to its case and this resulted in the case being once again referred to the Outer House of the Court of Session for a re-hearing.

The re-hearing took place before Lord Glennie in July 2008 and his judgement was handed down on 29th August 2008. This was similarly robust in its support of Inveresk's entitlement to Additional Consideration sought by Invereskand also rejected TR's application for retention of the funds claimed together with interest in relation to a separate action. This right to retention was claimed by TR pursuant to their separate case against Inveresk seeking damages for alleged breach of contract.     Inveresk deny that damages are due and a proof (trial) has been fixed in that action for October.

On 18th and 19th November 2008 the case was once again considered by the Court of Appeal in Edinburgh but was only part heard in respect of the substantive issue and could only be concluded in respect of the argument on retention on 4th - 6th March 2009. Regrettably, almost 4 months later the Court of Appeal has not yet issued its judgement. Inveresk is disappointed that, bearing in mind the two robust first instance judgements and the financial obligations which fall upon TR as a consequence, this delay in reaching a final conclusion effectively results in retention by default.

Tullis Russell's claims against Inveresk

In parallel to the above TR issued proceedings against Inveresk back in April 2007 alleging breach of contract and claiming damages which Inveresk deny. 

The process has been long, complicated and voluminous in terms of documentation. After a year, having changed much of their original pleadings TR then sought to rely on a report prepared by an Expert in Economics to justify their claim in damages. Inveresk consider the damages claim to be both flawed and unfounded. At the end of March 2009 as a result of evidence obtained from third party customers Inveresk formed the view that the basis of TR's claims was not merely erroneous but also totally lacking in substance. This new evidence in Inveresk's opinion currently renders the report of TR's Expert fundamentally flawed. Unlike in the English Court system, in Scotland there is no comparable 'strike-out' mechanism. This matter is now before the Court and the outcome of the dispute will be determined when the case comes to trial in the latter part of October and early November 2009. The onus to prove this case through evidence lies with TR.

Reason for Suspension

The Board of Inveresk remains entirely comfortable with its position on both of the above litigations. There is, however, much frustration with the Court process and in the time being taken to obtain a judgement against the other party.

Inveresk has made appropriate arrangements to see this litigation to a conclusion and has funding in place to support the expense arising from these cases in the expectation that justice will eventually prevail and that further Court orders as to costs will be imposed on TR in due course.

Under the new regime of IFRS accounting regulations the outcome of the first case on Additional Consideration is both material and pivotal to the audited results as at 31st December 2008 which we are due to report to shareholders and the market. As a consequence of the delay in reaching a conclusion in the Court process in respect of Hearings held as long ago as 18th/19th November 2008 and 4th-6th March 2009 the Directors of Inveresk together with their external auditors are unable to sign-off their Report and Accounts as at 31st December 2008 until such time as the outcome of this litigation becomes known. The Additional Consideration (plus interest) to which Inveresk is entitled flows directly to profit. We are unable to comply with the income recognition rules under IFRS until such time as the outcome of the Appeal is known.

We intend to keep shareholders fully apprised as the above litigation advances through the Court system and the Directors of Inveresk remain confident that in the fullness of time this litigation will be resolved in the Company's favour.

For further information please contact:

Inveresk PLC

Alan Walker

Tel:         01353 725856

Mob:      07800 951151

Email:    jafw@bedfordhs.co.uk

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