Information on Subsidiary

Guinness Peat Group PLC 28 April 2005 Guinness Peat Group plc The following unaudited results of Coats Group Limited ("the Company") for the year to 31 December 2004 are released by Guinness Peat Group plc ("GPG") for information only. The Company, which became a subsidiary of GPG on 1 April 2004, is the holding company of the Coats Group. The operations of the Coats Group comprise almost entirely the operations of Coats Holdings Limited, previously named Coats Ltd, which was acquired by the Company's subsidiary, Coats plc, on 7 April 2003. Richard Russell Company Secretary Guinness Peat Group plc 28 April 2005 Contact: Blake Nixon (UK) 020 7484 3370 Gary Weiss (Australia) 00 61 2 8298 4302 Tony Gibbs (New Zealand) 0064 9 379 8888 28 April 2005 Coats Group Limited: unaudited results* for the year to 31 December 2004 Financial Summary Period ended Like-for-like1 31 December 2004 2003 2003 US$m US$m US$m Turnover - Thread 1,588 1,535 1,139 - Total 1,712 1,236 Operating profit before reorganisation, impairment of fixed assets, goodwill amortisation and exceptional items - Thread 105 110 94 - Total 103 89 Operating Profit 36 69 Pre-tax (loss)/profit (4) 47 Net cash inflow from operating activities 200 135 Capital expenditure 94 47 Net debt 402 672 Net gearing 86% 193% 1 The 2003 like-for-like comparatives include a full twelve months for 2003 and exclude the impact of exchange translation, acquisitions and disposals. *See note 8 for basis of preparation of this statement. Contacts: Roger Bevan Coats plc 020 8210 5000 Blake Nixon Guinness Peat Group plc 020 7484 3370 Chairman's statement Results In 2004, Coats Group Limited, in line with its operational objectives, delivered an exceptionally strong cash performance, albeit at the expense of underlying profit which was slightly lower. Net cash inflow from operating activities was US$199.7 million, including US$93.0 million due to improved management of working capital, and net debt was reduced by US$270.8 million. Although cash generation was the main priority, good progress was made in sales. Good growth of industrial thread in low-cost markets and strong crafts sales in North America more than offset the expected continued decline in industrial thread markets in Western Europe and North America. Overall, like-for-like growth in sales was 3% (see Operating and financial review), with 6% in crafts and 2% in industrial. The main disappointment was a slight decrease in underlying Thread operating margin - from 7.2% to 6.6% (as set out in the Operating and financial review) - due almost entirely to a sharp decline in activity in certain Western European industrial thread plants, as a result of accelerated migration of customers to low-cost regions and our stock reduction program. This offset benefits from earlier reorganisation projects. All other regions outside Europe delivered underlying growth in operating profit. The Company became a subsidiary of Guinness Peat Group plc on 1 April 2004. The operations of the Coats Group ("the Group") comprise almost entirely the operations of Coats Holdings Ltd, previously named Coats Ltd, which was acquired by the Company's subsidiary, Coats plc, on 7 April 2003. The reported comparative figures in the profit and loss and cash flow statements for 2003 therefore reflect Coats Holdings operations since that date. However in order to assist understanding of changes in underlying trading performance, pro-forma full year figures for 2003 have been provided in the segmental analysis in the Operating and financial review. Investment, reorganisation and disposals Rebalancing industrial thread capacity in line with anticipated customer migration continued to dominate the Group's spending priorities. During 2004 major new facilities for industrial thread and zips in Shenzhen, China were completed. At the same time several facilities in Western Europe and North America were closed or downsized. Towards the end of 2004, the Group entered into an agreement to acquire the crafts distribution business of Almedahls in Sweden and Norway. This business, which has an annual turnover of approximately US$27 million, fills a gap in our coverage of the Western European crafts market and is expected to make a modest contribution to earnings from 2006 onwards. The sale of the last significant non-thread business, UK Bedwear, was completed in February 2005. During 2004, various surplus properties were sold with proceeds amounting to US$42.6 million (2003 - US$50.9 million). In addition, the sale of investments and other surplus assets generated cash of US$63.5 million (2003 - US$9.0 million). In most cases, the availability of surplus properties is the direct result of operational restructuring and, although there may be timing differences, to a large extent their sale will offset the associated cash reorganisation costs. In 2004, property disposals more than covered cash reorganisation costs of US$36.2 million (2003 - US$29.7 million). European Commission Investigation As previously reported by the Group, over the last three years the Group has been co-operating with the European Commission in their investigation into former trading practices in the European haberdashery and thread markets. The investigation has been split into three sub-cases covering hand-sewing needles, industrial thread and fasteners. In October 2004 the Commission reached a decision on hand-sewing needles which included a fine of Euro 30 million in respect of alleged infringements. We are vigorously contesting the Commission's decision in an appeal which has been lodged with the Court of First Instance in Luxembourg. A final decision by the Court is likely to take two to three years and it is also not certain when the Commission will issue its decisions in respect of the other cases. However, full provision has been made for any anticipated eventual payment. Refinancing On 30 March 2004, the Group refinanced its principal financing facilities through a new secured banking facility. As at 31 December 2004, this facility totalled US$635.8 million, of which US$17.8 million expires within one year, US$44.6 million expires between one and two years, US$435.6 million expires between two and five years and US$137.8 million expires after five years. Prospects 2005 will be another year of reorganisation and consolidation, the full benefits of which are expected to be reflected in 2006 and beyond. Investment in new plant and reorganisation spend in 2005 is expected to remain at a similar level to 2004. As in 2004, disposal of surplus assets should largely compensate in terms of cash flow. This spend should start to reduce from 2006. Given the nature of the textiles and clothing industry, there will inevitably be an ongoing requirement for further adjustments in capacity at specific locations but the associated cost of transfer is expected to be significantly lower than in recent years. The investment and reorganisation undertaken in 2004 and in previous years will begin to yield operating benefits in 2005. Although it is still too early to determine the final impact of the removal of textile quotas, the Group is well placed to take advantage of its leading market positions in crafts and industrial thread. Overall demand remains reasonably firm, with sales in the first quarter 3% ahead of previous year on a like-for-like basis. Operating and financial review Thread trading Underlying operating profit before reorganisation, impairment, goodwill amortisation and exceptional costs: US$104.8 million (2003 full year pro-forma - US$110.3 million) (see below). On a like-for-like basis, including a full twelve months for 2003 and excluding the impact of exchange translation, acquisitions and disposals, underlying sales grew by 3%. This reflected strong growth in the South American and Asian businesses and in the North American craft business. Operating profit on the same basis, and before reorganisation, impairment, goodwill amortisation and exceptional costs, decreased by 5%. This reflected the Group's focus on cash generation and the impact of accelerated migration on production levels in Western Europe, which masked generally good performances in other parts of the Group. In the following comments on Thread regional performance, all comparisons with 2003 are based on the table below: Thread like-for-like sales and operating profit* 2003 2003 2004 comparatives 1 January Exchange Acquisitions/ 2003 reported Increase/ (see note (see note 1) -7 April retranslation disposals underlying 1) (decrease) US$m US$m US$m US$m US$m US$m % External Sales UK and Europe 425.8 147.0 51.2 624.0 606.5 (3) North America 304.6 96.9 1.7 2.4 405.6 412.6 2 South America 113.2 27.8 1.3 142.3 169.1 19 Asia 295.1 85.5 3.8 (20.9) 363.5 399.3 10 Total 1,138.7 357.2 56.7 (17.2) 1,535.4 1,587.5 3 Operating Profit* UK and Europe 18.8 5.8 0.6 25.2 4.3 (83) North America 6.4 (2.9) 0.5 (0.1) 3.9 8.2 110 South America 11.5 2.4 0.1 14.0 17.1 22 Asia 52.2 12.0 0.1 (1.6) 62.7 64.5 3 Corporate** 5.3 (1.0) 0.2 4.5 10.7 138 Total 94.2 16.3 1.4 (1.6) 110.3 104.8 (5) * pre reorganisation, impairment, goodwill amortisation and exceptional costs. ** pre-goodwill amortisation of US$18.2 million in 2004 and US$0.2 million in 2003. UK and Europe Sales -3%; OP -83% The market for industrial thread in Western Europe continued to decline as a result of customer migration to Eastern Europe and Asia. Zip sales were also affected by a fashion swing towards other fasteners. Continued growth in our industrial thread sales in Eastern Europe did not fully offset these negative trends. Modest growth was achieved in crafts, with a strong performance in handknittings offset by weak demand for embroidery and sewing thread. Despite past and current downsizing projects, the pace of the decline in Western European industrial thread sales had a significant impact on operating margins. This was exacerbated by the drive to reduce inventory levels which temporarily reduced production levels and, therefore, overhead recoveries. Benefits from the new bulk production unit in Romania were offset by losses in Italy, France and the UK. North America Sales +2%; OP +110% Strong growth in crafts sales was driven by a buoyant handknittings market and recovery from the destocking by major customers which had depressed 2003 reported sales. Industrial sales continued to decline as a result of migration of apparel production to Asia. Improvement in operating profit came from recovery in crafts margins but industrial thread continued in loss. Benefits from restructuring and the new plant in Mexico have taken longer to come through than originally envisaged, but by the end of the year transitional operating issues had been largely resolved. South America Sales +19%; OP +22% Improved economic conditions led to the best performance from the region in recent years. Growth was generally strong across the region and all product categories, with a particularly strong performance by industrial thread and zips in Brazil. Asia Sales +10%; OP +3% Industrial thread sales continued to grow strongly. Sales growth in the region more than offset the declines experienced in North America/Western Europe, reflecting the benefit of our relationships with global retailers and brand owners. Although much of the growth was in premium corespun thread, operating margins were slightly lower. This was mainly as a result of a drive to reduce global grey thread stocks which led to lower capacity utilisation in the first half of the year. Nevertheless, at 16.2% (2003 - 17.2%), operating margins remain highly respectable. Corporate The US$10.7 million (2003 - US$4.5 million) underlying profit reflects increased royalties and technical fees. Thread reorganisation, impairment and exceptional costs. We continued to make progress in the year in downsizing Western Thread capacity, including in the UK, France and the US, whilst expanding in low cost locations. Thread reorganisation costs of US$45.6 million (2003 - US$19.5 million) were incurred. The reorganisation programme, which will continue in 2005, is principally designed to reduce the cost base of our industrial businesses in Western Europe and North America to address the migration of customers to lower cost regions. Thread exceptional operating costs of US$3.8 million (2003 - US$nil) were accounted for in the year, largely in respect of the refinancing exercise completed in March 2004. Non-Thread The refocusing of the Group on Thread has been completed, with the sale of our Bedwear business on 14 February 2005. Sales in 2004 from non-thread businesses of US$124.4 million (2003 - US$97.1 million) predominantly relate to Bedwear. The results of Bedwear have been included within discontinued operations and the 2003 categorisation between continuing and discontinued operations has been prepared accordingly. Including related property sold separately, proceeds (net of expenses) from the disposal of Bedwear totalled approximately US$19.0 million, resulting in an overall loss on disposal of approximately US$15.0 million, which is recognised in 2005 under UK accounting standards. In addition, assets retained are expected to realise approximately US$4.0 million in cash. Interest and tax Net interest costs rose to US$41.8 million (2003 - US$23.1 million), largely due to the fact that 2003 included a US$18.0 million net exchange gain on foreign currency borrowings. The stated interest expense includes a non cash element of US$7.0 million (2003 -US$5.1 million), largely arising from the unwinding of the discount on future pension liabilities. A loss before tax of US$4.1 million (2003 - US$46.7 million profit) was recorded, reflecting the higher reorganisation and net interest costs. The tax charge of US$14.3 million (2003 - US$18.1 million) reflects expenses not deductible for tax purposes and losses which cannot be recognised. This charge is primarily made up of tax on profits of overseas subsidiaries net of a deferred tax credit of US$12.3 million (2003 - charge of US$3.6 million). Goodwill US$169.1 million of goodwill has arisen in the year in respect of the finalisation of the fair value adjustments in respect of the acquisition of Coats Holdings Ltd in the year ended 31 December 2003. This includes provisions made in respect of the European Commission investigation, referred to in the Chairman's statement. The Directors consider that the disclosure at this stage of further details in respect of these provisions could seriously prejudice the outcome of the investigation. Therefore no analysis has been included in this report of these fair value adjustments. The goodwill amortisation charge arising in the year of US$18.2 million (2003 - US$0.2 million) reflects this additional goodwill. Balance sheet and cash flow Net cash inflow from operating activities was US$199.7 million (2003 - US$135.4 million), including the benefit of a US$93.0 million (2003 - US$39.9 million) reduction in working capital. Stock reduced significantly over 2003 levels, resulting in a US$54.7 million (2003 - US$14.9 million) cash inflow. US$33.4 million (2003 - US$18.4 million) tax was paid, broadly comparable with the Group's current tax charge of US$26.5 million (2003 - US$14.5 million). The Group continues to make significant investments in its Thread business and capital expenditure was US$93.6 million (2003 - US$46.8 million). After adjusting for opening and closing year-end creditors, actual associated cash outflow was US$92.7 million (2003 - US$76.1 million). The principal project was the expansion of thread and zip capacity in China, culminating in the opening of a major new plant (80,000 sq.m) in Shenzhen just before the year-end. The disposal of businesses and surplus assets generated US$65.2 million (2003 - US$59.7 million). In addition, current asset investments were realised for cash of US$40.9 million (2003 - US$0.2 million). As part of the refinancing exercise completed in March 2004, new share capital of US$135.7 million (2003 - US$280.6 million) was subscribed. The net result of the above was a US$270.8 million reduction in the Group's net debt to US$401.5 million at 31 December 2004, compared to US$672.3 million at the start of the year. Shareholders' funds increased from US$262.9 million to US$388.1 million, reflecting the US$24.0 million (2003 - US$19.5 million profit) retained loss for the year, offset by the new share capital injection referred to above and a US$13.5 million exchange gain (2003 - US$37.2 million loss) recognised in reserves. Consolidated profit and loss account Period ended 31 December 2004 2003 unaudited unaudited For the year ended 31 December 2004 US$m US$m Notes Turnover Continuing operations 1,587.5 1,148.6 Discontinued operations 124.4 87.2 1 1,711.9 1,235.8 Cost of sales (1,144.6) (813.6) Gross profit 567.3 422.2 Distribution costs (346.3) (250.7) Administrative expenses (186.2) (103.9) Other operating income 0.7 1.1 Operating profit 1&2 35.5 68.7 Continuing operations 37.2 74.1 Discontinued operations (1.7) (5.4) Share of operating profits of associated companies 1.5 1.1 Profit on sale of fixed assets of continuing operations 0.7 - Profits on ordinary activities before interest 37.7 69.8 Interest receivable and similar income 8.5 24.3 Interest payable and similar charges (50.3) (47.4) Net interest payable (41.8) (23.1) (Loss)/profit on ordinary activities before taxation (4.1) 46.7 Tax on (loss)/profit on ordinary activities 3 (14.3) (18.1) (Loss)/profit on ordinary activities after taxation (18.4) 28.6 Equity minority interests (5.6) (9.1) (Loss)/profit for the financial period transferred (from)/to (24.0) 19.5 reserves Balance Sheet 2004 2003 unaudited unaudited At 31 December 2004 Notes US$m US$m Fixed assets Goodwill 4 215.9 65.4 Negative goodwill 4 (2.4) (2.8) 213.5 62.6 Tangible assets 585.4 623.4 Investments 0.3 7.5 799.2 693.5 Current assets Stocks 337.7 401.3 Debtors due within one year 359.4 364.9 Debtors due in more than one year 94.7 90.7 Investments 3.7 42.8 Cash at bank and in hand 141.4 111.7 936.9 1,011.4 Creditors - amounts falling due within one year Bank overdrafts (23.0) (32.5) Other creditors (406.5) (1,110.9) (429.5) (1,143.4) Net current assets/(liabilities) 507.4 (132.0) Total assets less current liabilities 1,306.6 561.5 Creditors - amounts falling due after more than one year Other creditors (477.8) (5.4) Provisions for liabilities and charges (363.0) (208.5) Net assets 465.8 347.6 Capital and reserves Called up share capital 4.2 2.8 Share premium account 412.1 277.8 Profit and loss account (28.2) (17.7) Equity shareholders' funds 388.1 262.9 Equity minority interests 51.5 58.5 Non-equity minority interests 26.2 26.2 Total capital employed 465.8 347.6 Cash flow statement Period ended 31 December 2004 2003 unaudited unaudited For the year ended 31 December 2004 Notes US$m US$m Net cash inflow from operating activities 5 199.7 135.4 Returns on investments and servicing of finance Interest received 6.2 3.4 Interest paid (39.0) (38.9) Cost of financing convertible debt - (2.3) Interest element of finance lease rental payments (0.2) (0.2) Income from investments 0.6 0.2 Dividends paid to pre-acquisition shareholders of Coats Holdings - (25.4) Ltd Dividends paid to minority shareholders (10.7) (5.4) Net cash outflow for returns on investments and servicing of (43.1) (68.6) finance Taxation (33.4) (18.4) Capital expenditure and financial investment Purchase of tangible fixed assets (92.7) (76.1) Sale of tangible fixed assets 59.1 60.0 Sale of fixed asset investments 3.7 0.5 Net cash outflow for capital expenditure and financial investment (29.9) (15.6) Acquisitions and disposals Purchase of subsidiary undertakings (4.6) (669.9) Net cash acquired with subsidiaries 0.8 27.7 Sale of subsidiary undertakings 2.9 (0.8) Net cash disposed with subsidiaries (0.5) - Net cash outflow for acquisitions and disposals (1.4) (643.0) Management of liquid resources Decrease/(increase) in short term deposits 17.4 (5.4) Purchase of current asset investments - (0.5) Sale of current asset investments 40.9 0.2 Net cash inflow/(outflow) from management of liquid resources 58.3 (5.7) Financing Issue of ordinary share capital 135.7 280.6 (Decrease)/increase in borrowings (252.0) 378.0 Net cash (outflow)/inflow from financing (116.3) 658.6 Increase in cash 33.9 42.7 Reconciliation of net cash flow to movement in net debt Increase in cash 33.9 42.7 Cash outflow/(inflow) from change in debt and lease financing 252.0 (378.0) Cash (inflow)/outflow from change in short term deposits (17.4) 5.4 Change in net debt resulting from cash flows 268.5 (329.9) New finance leases - (0.3) Deposits acquired with subsidiaries - 21.0 Loans and finance leases dispose/(acquired) with subsidiaries 1.7 (342.3) Other (3.4) - Exchange 4.0 (20.8) Decrease/(increase) in net debt 270.8 (672.3) Net debt at start of period (672.3) - Net debt at 31 December 2004 6 (401.5) (672.3) Notes 1. Analysis of turnover, operating profit and net assets by product Turnover Operating Net assets profit Year ended Period Year ended Period ended 31 ended 31 31 December 31 31 December 31 December December December December 2004 2003 2004 2003 2004 2003 unaudited unaudited unaudited unaudited unaudited unaudited US$m US$m US$m US$m US$m US$m Thread UK and Europe 606.5 425.8 4.3 18.8 174.1 233.3 North America 412.6 304.6 8.2 6.4 241.5 273.0 South America 169.1 113.2 17.1 11.5 98.4 110.2 Asia 399.3 295.1 64.5 52.2 258.7 244.2 Corporate - - (7.5) 5.1 62.6 55.9 Total Thread 1,587.5 1,138.7 86.6 94.0 835.3 916.6 Reorganisation costs (45.6) (19.5) Exceptional items (3.8) - Thread operating profit 37.2 74.5 Other businesses India Textiles - 9.9 - (0.1) - 9.4 Bedwear 124.3 83.9 (1.2) (4.2) 29.8 34.7 Fashion Retail 0.1 3.3 (0.3) (1.2) (1.8) 8.9 Total other businesses 124.4 97.1 (1.5) (5.5) 28.0 53.0 Reorganisation costs (0.2) (0.3) Other businesses operating loss (1.7) (5.8) Total Group 1,711.9 1,235.8 35.5 68.7 863.3 969.6 Associated companies 1.5 1.1 Profit on sale of fixed assets 0.7 - Profit before interest 37.7 69.8 Net interest payable (41.8) (23.1) (Loss)/profit before tax (4.1) 46.7 Tax on (loss)/profit (14.3) (18.1) (Loss)/profit after tax (18.4) 28.6 Net debt (401.5) (672.3) Other fixed and current asset 4.0 50.3 investments Net assets per consolidated balance 465.8 347.6 sheet Turnover, operating profit and operating profit margins for the Thread business before reorganisation and exceptional costs were: Turnover Operating Operating margin profit Year ended Period ended Year ended Period ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 31 December 2004 2003 2004 2003 2004 2003 unaudited unaudited unaudited unaudited unaudited unaudited US$m US$m US$m US$m % % Thread UK and Europe 606.5 425.8 4.3 18.8 0.7 4.4 North America 412.6 304.6 8.2 6.4 2.0 2.1 South America 169.1 113.2 17.1 11.5 10.1 10.2 Asia 399.3 295.1 64.5 52.2 16.2 17.7 Corporate - - (7.5) 5.1 - - Total Thread 1,587.5 1,138.7 86.6 94.0 5.5 8.3 2. Operating profit is stated after charging: Year ended Period ended 31 December 31 December 2004 2003 unaudited unaudited US$m US$m Reorganisation costs and impairment of fixed assets Thread UK and Europe 28.8 5.7 North America 9.2 12.1 South America 1.5 0.7 Asia 4.6 0.1 Coporate 1.5 0.9 Total Thread 45.6 19.5 India Textiles - 0.3 Continuing operations 45.6 19.8 Discontinued operations Bedwear 0.2 - Total 45.8 19.8 Product category analysis of exceptional items Thread UK and Europe 0.1 - Corporate 3.7 - Total 3.8 - For the year ended 31 December 2004, Thread exceptional items largely represent Group refinancing costs. 3. Tax on (loss)/profit on ordinary activities Year ended Period ended 31 December 31 December 2004 2003 unaudited unaudited US$m US$m UK taxation based on profit for the period: Corporation tax at 30% 18.3 5.1 Double taxation relief (18.3) (5.1) Total UK taxation - - Overseas taxation: Current taxation 29.1 14.5 Deferred taxation (10.9) 3.6 18.2 18.1 Prior year adjustments - Current taxation (2.6) - (1.4) - Deferred taxation (4.0) - Associated companies taxation 0.1 - 14.3 18.1 4. Goodwill and acquisitions Amortisation Cost and impairment Net Positive goodwill unaudited unaudited unaudited US$m US$m US$m At beginning of year 67.7 2.3 65.4 Acquisitions 169.1 - 169.1 Amortised in the year - 18.6 (18.6) Carried forward at 31 December 2004 236.8 20.9 215.9 Negative goodwill At beginning of year 4.8 2.0 2.8 Amortised in the year - 0.4 (0.4) Carried forward at 31 December 2004 4.8 2.4 2.4 The positive goodwill arising in the year relates to the finalisation of the fair value adjustments in respect of the acquisition in the year ended 31 December 2003 of Coats Holdings Ltd (formerly Coats Ltd). 5. Reconciliation of operating profit to net cash inflow from operating activities Year ended Period Ended 31 December 31 December 2004 2003 unaudited unaudited US$m US$m Operating profit 35.5 68.7 Depreciation 62.3 43.1 Amortisation of goodwill 18.2 0.2 Reorganisation costs 43.4 19.8 Exceptional items 3.8 - Decrease in stocks 54.7 14.9 Derease in debtors 10.9 6.9 Increase in creditors 27.4 18.1 Other non-cash movements (18.6) (6.6) Net cash inflow from normal operating activities 237.6 165.1 Net cash outflow in respect of reorganisation costs and exceptional items: Utilisation of provisions - closures and reorganisation (36.2) (29.7) - operating exceptional items (3.8) - - non-cash asset write down 2.1 - Net cash inflow from operating activities 199.7 135.4 Continuing operations 195.3 129.8 Discontinued operations 4.4 5.6 199.7 135.4 6. Net debt 2004 2003 unaudited unaudited US$m US$m Cash at bank and in hand 128.3 83.4 Bank overdrafts (23.0) (32.5) Net cash 105.3 50.9 Short term deposits 13.1 28.3 Loans (519.6) (750.0) Lease finance (0.3) (1.5) Total (401.5) (672.3) 7. Bedwear disposal The Group's Bedwear business (Dorma Group) was sold on 14 February 2005. Including related property sold separately, proceeds (net of expenses) from the disposal of Dorma totalled approximately US$19.0 million resulting, at the Coats Group Limited level, in an overall loss on disposal of approximately US$15.0 million, which is recognised in 2005 under UK accounting standards. In the books of Guinness Peat Group plc, Dorma was accounted for at 31 December 2004 as an investment held for resale and the loss on disposal is treated as a fair value alignment (see note 9). 8. Basis of preparation Coats Group Limited is incorporated in the British Virgin Islands. It does not prepare consolidated statutory accounts and therefore the financial information contained in this announcement does not constitute full financial statements and has not been, and will not be, audited. This financial information has been prepared in accordance with United Kingdom accounting standards. Following the refocusing of the Group on Thread, a review has taken place of the functional currency of the Group. Given the markets in which the Group operates and the global dimension of the business, the US dollar is the functional currency. In order to reflect more appropriately the underlying results of the business, the Group's results in these financial statements are prepared and presented in US dollars. The principal exchange rates (to the US dollar) used in preparing the financial statements are as follows: Average Sterling 0.55 0.61 Euro 0.80 0.88 Year end Sterling 0.52 0.56 Euro 0.73 0.79 9. Balance Sheet Consolidated by Guinness Peat Group plc The Balance Sheet consolidated by Guinness Peat Group plc in its annual accounts and disclosed in its Chairman's Report differs from that disclosed as follows: GPG fair value US$:GBP @ adjustments & Deconsolidation Reported by GPG 1.9199 other adjs of Dorma US$m £m £m £m £m Tangible assets 585.4 305 305 Intangible asset (Goodwill) 213.5 111 19 9 139 Net current assets and investments 507.7 264 (38) (4) 222 Total assets 1,306.6 680 (19) 5 666 Net Debt (210) (1) (211) Creditors falling due after more (477.8) (249) 249 0 than one year Provisions for liabilities and (363.0) (189) (4) (193) charges Minority interests (77.7) (40) (40) Shareholders Funds 388.1 202 20 0 222 The other adjustments include the reclassification of loans, overdrafts and cash to net debt. This information is provided by RNS The company news service from the London Stock Exchange

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