24th Apr 2009 17:00
AGA RANGEMASTER GROUP PLC (the "Company")ANNUAL FINANCIAL REPORT - DTR 6.3.5 Disclosure
Following the release on 13 March 2009 of the Company's Preliminary Results Announcement for the financial year ended 31 December 2008 (the "Preliminary Announcement"), the Company announced on 27 March 2009 that the 2008 Annual Report and Accounts, the Notice of Annual General Meeting and Form of Proxy for the 2009 Annual General Meeting had been published. These documents were despatched to shareholders on 27 March 2009 and made publicly available on the Aga Rangemaster Group plc website (www.agarangemaster.com). The direct link to the pdf file is: www.agarangemaster.com/Siteimages/Site_301/Pdf/ 2008ReportAndAccounts.pdf
In compliance with 9.6.1 of the Listing Rules, on 27 March 2009 the Company submitted to the UK Listing Authority two copies of the 2008 Annual Report and Accounts, the Notice of Annual General Meeting and the Form of Proxy for the 2009 Annual General Meeting. Printed copies of the documents may be obtained by writing to the Company Secretary, Aga Rangemaster Group plc, Juno Drive, Leamington Spa, Warwickshire CV31 3RG.
In accordance with paragraph 6.3.5 (2) (b) of the Disclosure and Transparency Rules (DTR) additional information is set out in the appendices to this announcement.
The Preliminary Announcement includes an indication of the important events that occurred during the year, a condensed set of the financial statements and confirmation that the Company's auditor had reported on the accounts and its reports were unqualified and did not contain any statements under section 237 (2) or (3) of the Companies Act 1985. The Independent Auditor's Report on the Group financial statements is set out in full on page 69 of the 2008 Annual Report and Accounts and the Independent Auditor's Report on the parent company financial statements is set out in full on page 77 of the 2008 Annual Report and Accounts.
References to page numbers and notes to the accounts set out in the Appendices below refer to page numbers and notes to the accounts in the Company's 2008 Annual Report and Accounts.
APPENDIX A - DIRECTORS' RESPONSIBILITY STATEMENT
The 2008 Annual Report and Accounts contain a responsibility statement in compliance with paragraph 4.1.12 of the DTR signed by order of the Board by William McGrath, Chief Executive and Shaun Smith, Finance Director. The directors' responsibility statement is set out on page 38 of the 2008 Annual Report and Accounts for the Group. This statement is set out below in full and unedited text. This states that on 13 March 2009, the date of approval of the 2008 Annual Report and Accounts:
"Each of the directors (whose names and functions are referred to on page 23 of the 2008 Annual Report and Accounts) confirm that to the best of their knowledge:
• the Group financial statements, prepared in accordance with IFRS as adopted by the EU and the Company financial statements prepared under UK GAAP, have been followed and give a true and fair view of the assets, liabilities, financial position and profit of the Group and the Company and;
• the chief executive's review, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties they face."
The directors' responsibility statement is set out on page 76 of the 2008 Annual Report & Accounts for the parent company. This statement is set out below in full and unedited text:
"The following statement, which should be read in conjunction with the statement of auditors' responsibilities set out on page 77, is made with a view to distinguishing the respective responsibilities of the directors and of the auditors in relation to the accounts.
The directors are required to prepare financial statements for each financial year which comply with the provisions of the Companies Act 1985 and give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss for that year.
The directors consider that in preparing the financial statements on a going-concern basis, the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all accounting standards which they consider to be applicable have been followed.
The directors are responsible for ensuring that the Company maintains accounting records which disclose with reasonable accuracy the financial position of the Company and which enable them to ensure that the financial statements comply with the Companies Act 1985.
The directors are responsible for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities."
APPENDIX B - RISKS AND UNCERTAINTIES
The principal risks and uncertainties are set out pages 16 to 18 of the 2008 Annual Report and Accounts. The full and unedited text relating to these disclosures are set out below:
"In order to achieve our business objectives, the Group must respond effectively to the associated risks. The Group has established risk management procedures, involving the identification and monitoring of operational, regulatory, financial and market driven factors, at various levels throughout the business. The Group takes a proactive approach to managing risk and our risk management processes are further described on pages 29 and 30. These processes also help to identify business, product and performance opportunities. The board and the executive management committee regularly review material risks identified. However, it is not possible to mitigate fully all risks that the Group encounters.
This section highlights a number of potential risks and uncertainties which could have a material impact on the Group's long-term performance and achievement of its strategy. Risks listed do not compose all risks faced by the Group and are not in any order of priority.
In current economic conditions with major financial imbalances and large commercial organisations seeing unprecedented difficulties, the impact on the Group can be sudden and material. This makes awareness and flexibility key to mitigating risks in rapidly changing conditions and important in identifying relevant business opportunities.
Economic and market conditions
The Group derives most of its revenues from sales of consumer appliances and other household products. Financial and operating performance depends, on factors which affect the level of consumer and retail spending. The economic environment, unemployment levels, interest rates, consumer debt levels, the availability of credit and many other factors including changes in consumer preferences and trends can influence consumer spending decisions.
The board recognizes the need to monitor economic changes and market conditions in order to react in the best interest of the Group.
Competitive environment
The markets in which the Group competes are fragmented and many of the Group's competitors are larger than ourselves with potentially more resources. The Group is subject to their competitive actions and, although the Group believes that the performance and price characteristics of its products provide competitive solutions for its customers' needs, there can be no assurance that existing customers will continue to choose its products over products offered by competitors. The Group continues to monitor developments in the markets in which it operates, its key competitors and their strategies and it develops its strategy to mitigate these risks.
Suppliers and supply chain management
The Group is dependent on its supply base for raw materials, utilities and some components. Volatility and changes in the pricing and availability of these could have a significant impact on the Group's results. In particular, the prices of steel and utilities have been extremely volatile in recent years. However, there can be no assurance that the Group will continue to secure supply of these commodities on the same pricing and other terms as currently supplied. In the current market conditions this can be difficult. The Group continually reviews its supply chain and where possible has identified multiple sources of supply and/or contingency plans. The procurement teams continue to monitor suppliers to ensure they have the ability to meet demand; they remain price competitive and provide assurance on the quality of goods being supplied.
Dividend payments
The dividend policy is kept under review as performance levels change. The ability of the Company to pay dividends on the ordinary shares in the normal course is dependent on its profitability, trading performance, actual and potential liabilities and the extent to which, as a matter of law, it has available to it sufficient distributable reserves out of which any proposed dividend may be paid. The Company's ability to pay dividends is also dependent upon receipt by it of dividends and other distributions from subsidiaries. Further returns of cash other than in the ordinary course are subject to agreement with the Trustee of the Group's main United Kingdom pension scheme.
Pension scheme funding
The value of the assets and liabilities of the Aga Rangemaster Group's defined benefit pension schemes is significant compared to the market capitalisation of the Company. As at 31st December 2008, the schemes were in overall surplus on an IAS 19 basis. Further details are set out in note 5 to the accounts. The next full actuarial valuation of the Group's main United Kingdom scheme is being carried out by the Trustee of the scheme as at 31st December 2008, and the results of this valuation are expected to be known, by no later than the end of June 2010. Pension scheme valuations can be impacted from time to time by a number of factors, including falls in the market value of scheme assets, the expectation of lower returns on investments or of higher rates of inflation and further improvements in life expectancies. The level of risk associated with market movements is significant even though the scheme has matched assets and liabilities to a greater extent than many schemes. The Company works closely with the scheme trustees and specialist advisers in managing the inherent risks of such schemes, and the Company and the Trustee of the Group's main United Kingdom scheme have put in place a long-term funding and investment strategy agreement which aims to move the scheme systematically to a self sufficiency funding position by 2020. There is a risk that the Company may need to add to the level of bank guarantees provided in the period up to 2020 or to make further substantial contributions to the defined benefit pension schemes in the future.
Effect of legislation or other regulatory action
The Group is subject to various laws and regulations around the world and operates in sectors which may be affected by changes in the regulatory environment. Failure to comply with laws and regulations, including health and safety and environmental regulations, taxation, operational and competition matters could impose additional costs on, or have an adverse impact on the performance of or damage the reputation of the businesses carried on by the Group.
Divestments
Following the sale of the pipe systems and the foodservice businesses and Domain home furnishing business, along with some smaller divestments, there remains some potential for legacy claims. The sale and purchase agreements governing the sales of these businesses contain certain warranties and indemnities in favour of the purchasers and suitable provisions have been made. Indemnities cover the potential costs of litigation relating to the price at which certain minority shareholders in Friatec, a business acquired in 1998, were purchased.
Intellectual property
The Group relies on confidential know how, patents, trademarks, copyrights and design rights to protect proprietary technology and other rights relating to our renowned brands and trading styles. We monitor market developments closely to identify potential violations of our proprietary rights without authorisation and take appropriate legal action where this option is available.
Treasury policy
The Group operates a central treasury which operates in accordance with a treasury policy and procedures manual setting out guidelines for managing foreign exchange, interest rate, credit risk and financial instruments to be used in managing these risks.
The objective of the treasury policy is to manage the Group's financial risk and to ensure that adequate financial resources are available for the development of the business. The Group's treasury strategy, policy and controls are approved by the board. Further details of the main financial risks are set out in note 19 to the accounts.
Currency
The Group's main transaction exposures are in respect of products manufactured in one currency region and sold in another currency and exposure through the movement in exchanges rates on purchases of raw materials and other goods that are not denominated in sterling. These are mainly imports from Asia and the US which are denominated in US Dollars and imports from Europe which are denominated in Euros. These currency outflows are offset by inflows of US Dollars relating to UK exports to US markets and inflows of Euros in respect of UK exports to the eurozone respectively. The main translation risk is that the results of non-UK businesses will translate into differing sterling values depending on the exchange rate. Further details relating to financial instruments are set out in note 19 to the accounts.
The treasury policy sets out a framework through which the majority of the Group's forecast foreign currency transactions are hedged.
Liquidity and funding risk
The Group's funding objective is to have sufficient long-term committed facilities, in addition to uncommitted facilities and finance lease agreements, to meet its funding needs. An analysis of the Group's facilities is detailed in note 19 to the accounts.
The Group maintains relationships with several large financial institutions. The Group's committed loan facilities have two principal financial covenants, interest cover and net debt : EBITDA. The Group complied with them at the end of the year.
The Group has sound and long established arrangements in place with its relationship banks who offer committed and uncommitted facilities, which together with cash surpluses, provide adequate funding for the Group's operations. In the ordinary course, no committed facilities are due for renewal until 2010. New facilities, if required are expected to be available from existing lenders although this cannot be assured in light of the current market conditions.
Trade credit
Trade credit is less readily available following the deterioration in the financial sector. The Group monitors closely the availability of trade finance to its customers and suppliers - given the constraint on the business this can become.
The ability for the Group and its principal operating businesses to maintain trade credit insurance on our customers is a significant issue for the Group. Where insurers inform us it is their intention to withdraw or reduce trade credit insurance cover on our customers we undertake detailed analysis on commercial and financial information available to us to establish whether we are able to continue to trade.
In addition, the ability of our suppliers to maintain credit insurance on the Group and its principal operating businesses is an important issue. We have excellent relationships with our suppliers and we continue to work closely with them on a normal commercial basis. A reduction in the level of cover available to suppliers may impact on our trading relationship with them and may have a significant effect on cash flows.
Possible volatility of the price of shares in the Company
The market price of the ordinary shares may be affected by a variety of factors including, but not limited to, all of the factors set out above. Shareholders should be aware that the value of the ordinary shares can decrease as well as increase and may not always reflect the underlying asset value or prospects of the Group."
APPENDIX C - RELATED PARTY TRANSACTIONS
The related party transactions are set out in note 29 to the Group accounts on page 68 of the 2008 Annual Report and Accounts. The full and unedited text relating to these disclosures are set out below:
"The Group recharges the Group pension scheme with the cost of administration and independent advisers paid by the Group. The total amount recharged in the year to 31st December 2008 was £0.2m (2007: £0.2m). The amount outstanding at the year end was £nil (2007: £nil).
Directors' compensation
Details of the directors' compensation, share options, Long-Term Incentives and pensions are set out in the remuneration report on pages 32 to 37.
Key management's compensation
The compensation for the key management team at the balance sheet date is setout below: 2008 2007 £m £m Salaries and short-term benefits 0.7 0.5Post employment benefits 0.1 -Share based payments - 0.2Contributions to defined benefit contribution plans - 0.1 _____________________________________________________________ Total emoluments to key management 0.8 0.8 _____________________________________________________________
In respect of the parent company, the related party transactions are set out in note 14 to the parent company accounts on page 76 of the 2008 Annual Report and Accounts. The full and unedited text relating to these disclosures are set out below:
"The Company has taken advantage of the exemption permitted by FRS 8 not to disclose any transactions or balances with entities that are 90% or more controlled by the Aga Rangemaster Group plc."
vendorRelated Shares:
AGA.L