NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008

Transcription

1 1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES British Polythene Industries PLC (the Company ) is a company domiciled and incorporated in the United Kingdom. The consolidated annual fi nancial statements (the fi nancial statements ) of the Company for the year ended 31 December 2008 incorporate the fi nancial statements of the Company and its subsidiaries (together referred to as the Group ). STATEMENT OF COMPLIANCE The consolidated fi nancial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ( adopted IFRSs ). The Company has elected to prepare its parent company fi nancial statements in accordance with UK GAAP. These are presented on pages 71 to 76. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated fi nancial statements. BASIS OF PREPARATION The fi nancial statements are prepared on the historical cost basis except for derivative fi nancial instruments, intangible assets acquired through business combinations, and the assets and liabilities of the defi ned benefi t pension scheme. These are stated at their fair value. The fi nancial statements have been prepared on a going concern basis. The reasons for this are outlined in the Finance Review on page 24. BASIS OF CONSOLIDATION Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the fi nancial statements of subsidiaries acquired to bring the accounting policies used into line with those used by the Group. All intra Group transactions, balances, income and expenses are eliminated on consolidation. The interest of minority shareholders is stated at the minority s proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of the minority interest are allocated against the interests of the parent. TURNOVER RECOGNITION Turnover from the sale of goods and services is measured at the fair value of the consideration, net of rebates, trade discounts, VAT and other sales-related taxes. Turnover from the sale of goods and services is recognised when the Group has transferred the signifi cant risks and rewards of ownership of the goods and services to the buyer, the amount of turnover can be measured reliably and it is probable that the economic benefi ts associated with the transaction will fl ow to the Group. LEASING AND HIRE PURCHASE Leases are classifi ed as fi nance leases when, on inception of the lease, the terms of the lease transfer substantially all the risks and rewards of ownership to the Group. All other leases are classifi ed as operating leases. Assets held under fi nance leases (including hire purchase contracts) are initially recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a fi nance lease obligation. Lease payments are apportioned between fi nance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly through the income statement as borrowing costs. Rentals payable under operating leases are charged to the income statement on a straight line basis over the term of the relevant lease. FOREIGN CURRENCIES Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at historical cost that are denominated in foreign currencies are translated at the rates prevailing at the date when the historical cost was determined. Gains and losses arising on retranslation are included in income and expense for the period. On consolidation, the assets and liabilities of the Group s overseas operations, including goodwill and fair value adjustments arising on the acquisition of a foreign entity, are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognised directly in the Group s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. GOVERNMENT GRANTS Government grants on capital expenditure are released through cost of sales over the expected useful lives of the relevant assets or the qualifying period if shorter. Grants of a revenue nature are credited to the consolidated income statement in the period in which the costs are incurred. RETIREMENT BENEFIT OBLIGATIONS Payments to defi ned contribution retirement benefi t schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefi t schemes are dealt with as payments to defi ned contribution schemes where the Group s obligations under the schemes are equivalent to those arising in a defi ned contribution retirement benefi t scheme. For defi ned benefi t retirement benefi t schemes, the cost of providing benefi ts in respect of each plan is determined in an annual actuarial report using the Projected Unit Credit Method. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the income statement and presented in the consolidated statement of recognised income and expense in accordance with IAS FINANCIAL STATEMENTS

2 The retirement benefi t obligation recognised in the balance sheet represents an actuarial assessment of the present value of the defi ned benefi t obligation as reduced by the fair value of scheme assets. TAXATION The tax expense represents the sum of the current taxes payable and deferred tax. The current tax payable is based on taxable profi t for the period. Taxable profi t differs from net profi t as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be available against which deductible temporary differences can be utilised. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised using tax rates that have been enacted or substantively enacted by the balance sheet date. Tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. GOODWILL Goodwill has been recognised on acquisitions of subsidiaries and represents the difference between the cost of acquisition and the Group s interest in the fair value of the identifi able assets and liabilities and contingent liabilities at the date of acquisition. Goodwill is stated at cost less any accumulated impairment losses. The carrying amount is allocated to cash-generating units and is tested annually for impairment. Any impairment is recognised immediately in income or expense and is not subsequently reversed. In respect of acquisitions prior to 1 January 2004, goodwill is included on the basis of its deemed cost, which represents the amount recorded under UK GAAP. The classifi cation and accounting treatment of business combinations that occurred prior to 1 January 2004 was not reconsidered in preparing the Group s opening IFRS balance sheet at 1 January On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profi t or loss on disposal, except for goodwill written off to reserves under UK GAAP prior to 1998 which has not been reinstated and is not included in determining any subsequent profi t or loss on disposal. Negative goodwill arising on an acquisition is recognised immediately in the consolidated income statement as a credit to profi t from operations. OTHER INTANGIBLE ASSETS Other intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation begins when an asset is available for use and is calculated on a straight line basis to allocate the cost of assets over their estimated useful lives as follows: Computer software Customer lists Other intangible assets 4-5 years 3-10 years 5 years The cost of intangible assets acquired in a business combination is the fair value at acquisition date. The cost of separately acquired intangible assets, including computer software, comprises the purchase cost and any directly attributable costs of preparing the asset for use. Computer software costs that are directly associated with the implementation of major business systems are capitalised as intangible assets. Other intangible assets currently comprise a property lease obtained on favourable terms on the acquisition of AT Films Inc. PROPERTY, PLANT AND EQUIPMENT Items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged to the income statement on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: Freehold buildings Leasehold buildings Plant and equipment years years 4-10 years Residual values and useful lives are reassessed annually. Assets held under fi nance leases/hire purchase are capitalised and depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. FINANCIAL STATEMENTS 49

3 IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS At each balance sheet date, the Group reviews the carrying amounts of its tangible assets and intangible assets with defi nite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where the asset does not generate cash fl ows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. Intangible assets with indefi nite useful lives and goodwill are tested for impairment annually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses in respect of assets other than goodwill, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately. INVENTORIES Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. TRADE AND OTHER RECEIVABLES Trade and other receivables are stated at their amortised cost less an allowance for irrecoverable amounts. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. 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 fl ows. TRADE AND OTHER PAYABLES Trade and other payables are stated at amortised cost. PROVISIONS A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and, when appropriate, the risks specifi c to the liability. INTEREST Interest is recognised in income or expense using the effective rate of interest method. Financing fees are amortised over the life of the related facility. EARNINGS PER SHARE The Group presents basic and diluted earnings per share (EPS) data for ordinary shares. Basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by dividing the profi t or loss attributable to ordinary shareholders by the weighted average number of shares outstanding adjusted for the effects of all dilutive potential ordinary shares. FINANCIAL INSTRUMENTS The Group s objectives, policies and processes for measuring and managing risk, and the Group s management of capital address the exposure to credit risk, liquidity risk and market risk from the use of fi nancial instruments. Further quantitative disclosures are included throughout these fi nancial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group s risk management framework. The Audit Committee oversees how management monitors compliance with the Group s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Certain derivative fi nancial instruments are designated as hedges in line with the Group s treasury policy. Hedges are classifi ed as follows: Fair value hedges that hedge the exposure to changes in the fair value of a recognised asset or liability. Cash fl ow hedges that hedge exposure to variability in cash fl ows that is either attributable to a particular risk associated with a recognised asset or liability or a forecast transaction. Net investment hedges that hedge exposure to changes in the value of the Group s interests in the net assets of foreign operations. For fair value hedges, any gain or loss from remeasuring the hedging instrument at fair value is recognised in the consolidated income statement. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and similarly recognised in the consolidated income statement. 50 FINANCIAL STATEMENTS

4 For cash fl ow hedges and net investment hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge, as defi ned by IAS 39 Financial Instruments: Recognition and Measurement, is recognised in equity, with any ineffective portion recognised in the consolidated income statement. When hedged cash fl ows result in the recognition of a non fi nancial asset or liability, the associated gains or losses previously recognised in equity are included in the initial measurement of the asset or liability. For all other cash fl ow hedges, the gains or losses that are recognised in equity are transferred to the consolidated income statement in the same period in which the hedged cash fl ows affect the consolidated income statement. Any gains or losses arising from changes in fair value of derivative fi nancial instruments not designated as hedges are recognised in the consolidated income statement. When a hedging instrument is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the consolidated income statement. SHARE-BASED PAYMENTS The fair value of equity settled employee share options granted is calculated at grant date and the resulting cost is charged to the income statement over the vesting period of the options with a corresponding increase in equity. The value of the charge is adjusted to refl ect expected and actual levels of options vesting. Failures to vest as a result of market conditions are not reversed. TREASURY SHARES When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are classifi ed as treasury shares and presented as a deduction from revenue reserves. KEY ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the consolidated fi nancial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Areas requiring the Directors to make judgements, estimates and assumptions are highlighted in these accounting policies and throughout the notes to the consolidated fi nancial statements. Key estimation and judgement areas are as follows: PROPERTY, PLANT AND EQUIPMENT Depreciation rates are regularly reviewed to ensure that they refl ect accurately useful lives and residual values are reviewed on an annual basis in line with market conditions. TRADE AND OTHER RECEIVABLES The recoverability of trade and other receivables are kept under constant review and provision is made where appropriate in line with disclosures in Note 15. TRADE AND OTHER PAYABLES Where the amount payable in respect of any liability is uncertain the amount provided in the accounts is based on the best estimate available at the time. DEFINED BENEFIT PENSION PLANS A qualifi ed independent actuary undertakes the estimation of the present value of the Group s obligations under defi ned benefi t pension schemes using assumptions taken from a range of possible actuarial assumptions. These assumptions may not be borne out in practice, especially due to the long timescales involved. Changes in the key assumptions, which include discount rates, infl ation, mortality and expected return on assets, could have a signifi cant effect on the profi t or loss for the period and the fi nancial position of the Group. Details of assumptions employed to determine the liability at 31 December 2008 are set out in Note 31. The valuation of scheme assets is based on the fair value at the balance sheet date. As these assets are not intended to be sold in the short-term, their value may change signifi cantly prior to realisation. TAXATION The Group is subject to income taxes in the jurisdictions in which it operates. Signifi cant judgements are required in determining the consolidated provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The amount of such liabilities is based on an assessment of various factors, such as experience of previous tax audits and differing interpretations of tax law. This assessment relies on estimates and assumptions and involves a series of complex judgements about future events. To the extent that the fi nal tax outcome of these matters is different from the amounts recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. STANDARDS AND INTERPRETATIONS NOT YET APPLIED A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2008 and have not been applied in preparing these fi nancial statements. IAS 1 PRESENTATION OF FINANCIAL STATEMENTS: A REVISED PRESENTATION (effective year ending 31 December 2009) will require the Group to present a statement of changes in equity accompanied by either a statement of comprehensive income or an income statement accompanied by a statement of other comprehensive income. AMENDMENT TO IAS 23 BORROWING COSTS (effective year ending 31 December 2009) removes the previously available option to expense all borrowing costs incurred on production of qualifying assets. It is not expected to have a signifi cant impact on the consolidated fi nancial statements. FINANCIAL STATEMENTS 51

5 AMENDMENT TO IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS (effective year ending 31 December 2009) removes the requirement to record pre-acquisition dividends as a credit to investment rather than income in the parent company. It is not expected to have any impact on the consolidated fi nancial statements. AMENDMENT TO IAS 32 FINANCIAL INSTRUMENTS: PRESENTATION AND IAS 1 PRESENTATION OF FINANCIAL STATEMENTS PUTTABLE FINANCIAL INSTRUMENTS AND OBLIGATIONS ARISING ON LIQUIDATION (effective year ending 31 December 2009) provides exemptions from the existing requirements when certain circumstances are met. It is not expected to have any impact on the consolidated fi nancial statements. AMENDMENT TO IAS 39 FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT: ELIGIBLE HEDGED ITEMS (effective year ending 31 December 2010) clarifi es two hedge accounting issues: infl ation in a fi nancial hedged item and a one sided risk in a hedged item. It is not expected to have any impact on the consolidated fi nancial statements. AMENDMENTS TO IAS 39 AND IFRS 7: RECLASSIFICATION OF FINANCIAL INSTRUMENTS (effective year ending 31 December 2009) permits certain reclassifi cations of fi nancial assets. It is not expected to have any impact on the consolidated fi nancial statements. AMENDMENT TO IFRS 2 SHARE-BASED PAYMENTS VESTING CONDITIONS AND CANCELLATIONS (effective year ending 31 December 2009) clarifi es the defi nition of vesting conditions in relation to share-based payments, amongst other things. The Group has not yet determined the potential effect of the amendment; however, it is not expected to be signifi cant. IFRS 3 (REVISED) BUSINESS COMBINATIONS (effective year ending 31 December 2010) requires acquisition costs incurred in a business combination to be expensed as incurred rather than included in the cost of acquisition and determination of goodwill. It also brings about changes to the current accounting in relation to contingent consideration and various other aspects of accounting for business combinations. This will effect any future acquisitions by the Group. IFRS 8 OPERATING SEGMENTS (effective year ending 31 December 2009) is a disclosure standard which may result in changes to the segmental information currently disclosed, but will have no impact on the reported results or the fi nancial position of the Group. IFRIC 16 HEDGES OF A NET INVESTMENT IN A FOREIGN OPERATION (effective year ending 31 December 2009) provides guidance on hedging the foreign currency risk arising from net investments in foreign operations. It is not expected to have any impact on the consolidated fi nancial statements. IMPROVEMENTS TO IFRSS 2007 (effective year ending 31 December 2009) incorporates a number of non-urgent amendments to IFRSs. The Group has not yet determined the full potential effect of the amendments; however, they are not expected to be signifi cant. The Revision to IFRS 3, the amendments to IAS 27 and the amendment to IAS 39 relating to eligible hedged items have not yet been endorsed by the EU. The remaining standards and interpretations have been endorsed. There are a number of additional standards and interpretations not yet in force which are not relevant to the Group. These include amendments to IFRS 1 and IAS 27 relating to fi rst time adoption of IFRSs and IFRICs 12, 13, 15 and TURNOVER AND PROFIT FROM OPERATIONS An analysis of the Group s turnover and profi t from operations is as follows: BEFORE NET NET BEFORE NET NET RESTRUCTURING RESTRUCTURING RESTRUCTURING RESTRUCTURING COSTS COSTS TOTAL COSTS COSTS TOTAL Turnover by destination UK Other EC Non EC Cost of sales (423.2) (5.1) (428.3) (363.1) (1.7) (364.8) Gross profi t 57.5 (5.1) (1.7) 59.3 Distribution costs (19.8) (19.8) (18.1) (18.1) Selling and administration expenses (24.1) (0.3) (24.4) (27.5) 1.0 (26.5) Profi t from operations before employee profi t sharing scheme 13.6 (5.4) (0.7) 14.7 Amount applied to employee profi t sharing scheme (1.0) (1.0) (0.8) (0.8) Profi t from operations 12.6 (5.4) (0.7) FINANCIAL STATEMENTS

6 PROFIT FROM OPERATIONS IS STATED AFTER CHARGING/(CREDITING): COST OF SALES Depreciation of property, plant and equipment Operating lease charges plant buildings Restructuring costs relating to closures* SELLING AND ADMINISTRATION EXPENSES Depreciation of property, plant and equipment Amortisation of intangible assets Operating lease charges plant Restructuring costs relating to closures* Negative goodwill arising from business combinations* (0.1) Profi t on disposal of closed site* (1.2) Profi t on disposal of other fi xed assets (0.2) Auditors remuneration: Audit of these fi nancial statements Amounts receivable by auditors and their associates in respect of: audit of fi nancial statements of subsidiaries pursuant to legislation other services relating to taxation *ANALYSIS OF NET RESTRUCTURING COSTS Redundancy costs Impairment of property, plant and equipment 1.7 Other machinery and site related costs Profi t on disposal of closed site (1.2) Negative goodwill arising from business combinations (0.1) SEGMENT REPORTING Segment information is presented in respect of the Group s geographical and business segments. Inter-segment pricing is determined on an arms length basis. Segment results, assets and liabilities include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. PRIMARY SEGMENTS GEOGRAPHICAL The Group operates in three principal geographic regions UK & Ireland, Continental Europe, and North America. UK & Ireland includes all of the UK manufacturing and merchanting activities along with the Irish sales offi ce which distributes predominantly UK manufactured products. It also includes the manufacturing operation in China from which most of the output is exported for sale by the Group in the UK. Continental Europe comprises the manufacturing and merchanting activities located in Belgium, the Netherlands and France. North America comprises the manufacturing business in Canada with sales throughout North America. These three regions are the basis on which the Group reports its primary segment information. FINANCIAL STATEMENTS 53

7 SEGMENT INFORMATION BY GEOGRAPHIC REGION UK & IRELAND CONTINENTAL EUROPE NORTH AMERICA ELIMINATIONS CONSOLIDATED TURNOVER External sales Inter-segment sales (2.8) (2.2) TOTAL TURNOVER (2.8) (2.2) PROFIT FROM OPERATIONS BEFORE NET RESTRUCTURING COSTS Net restructuring costs (5.4) (0.8) 0.1 (5.4) (0.7) (LOSS)/PROFIT FROM OPERATIONS (0.9) Net fi nancing costs (3.3) (2.4) PROFIT BEFORE TAX Tax (1.1) (3.0) PROFIT FOR THE YEAR SEGMENT ASSETS (4.5) (5.1) SEGMENT LIABILITIES (70.6) (63.6) (22.3) (22.1) (1.0) (1.4) (89.4) (82.0) NET SEGMENT ASSETS Net borrowings (76.0) (64.8) Taxation 3.0 (1.6) NET ASSETS PER BALANCE SHEET Capital expenditure Depreciation, amortisation and impairment Other adjustments to operating cash fl ows (2.9) (7.2) (0.1) (0.1) (2.9) (7.4) SECONDARY SEGMENTS BUSINESS The Group has the following principal secondary business segments: FILMS Single process of extruded polythene reels. CONVERTED Predominantly two or three stage process of extrusion, print and conversion. RECYCLED Recycles scrap from group and external sources and converts into predominantly recycled products. EXTERNAL EXTERNAL SEGMENT SEGMENT CAPITAL CAPITAL SALES SALES ASSETS ASSETS EXPENDITURE EXPENDITURE SEGMENT INFORMATION BY BUSINESS SEGMENT Films Converted Recycled Eliminations (4.5) (5.1) STAFF COSTS NUMBER NUMBER The average number of employees (including Executive Directors) was: Production 2,293 2,344 Administration Selling ,688 2, FINANCIAL STATEMENTS

8 STAFF COSTS: Wages and salaries Redundancy costs Employee profi t sharing scheme Social security costs Defi ned contribution pension scheme costs Defi ned benefi t pension scheme current service cost Details of Directors remuneration and shareholdings are shown on pages 37 to FINANCING COSTS Interest on bank loans and overdrafts Interest on other loans Interest on obligations under fi nance leases/hire purchase BORROWING COSTS Expected return on pension scheme assets (12.5) (11.3) Interest on pension liabilities NET RETIREMENT BENEFIT INCOME (0.9) (1.2) NET FINANCING COSTS TAX ON PROFIT ON ORDINARY ACTIVITIES RECOGNISED IN THE INCOME STATEMENT CURRENT TAX EXPENSE UK current tax at 28.5% on the profi ts of the year (2007: 30%) Current year (0.3) Adjustments for prior years 0.2 (0.2) 0.2 (0.5) Overseas current tax Current year Adjustments for prior years (0.1) (0.2) DEFERRED TAX EXPENSE Origination of temporary differences Change in UK tax rate Other adjustments for prior years (1.3) 1.3 (0.3) (0.6) 0.4 (1.9) 1.4 TOTAL TAX EXPENSE IN INCOME STATEMENT FINANCIAL STATEMENTS 55

9 FACTORS AFFECTING THE INCOME TAX EXPENSE The difference between the income tax expense for the period and the standard rate of corporation tax in the UK is explained below: % M % M RECONCILIATION OF EFFECTIVE TAX RATE Profi t before tax Current tax at 28.5% (2007: 30%) 28% % 3.5 Non-deductible expenses 3% 0.1 Depreciation on ineligible assets 3% 0.1 1% 0.1 Overseas tax rates 7% 0.3 1% 0.1 Capital gains 0% (3%) (0.4) Adjustments for prior years (13%) (0.5) (3%) (0.3) TOTAL TAX EXPENSE IN INCOME STATEMENT 28% % 3.0 DEFERRED TAX CHARGE RECOGNISED DIRECTLY IN EQUITY Relating to retirement and employee benefi ts current (3.5) 2.3 change in UK tax rate 0.7 (3.5) DIVIDENDS AMOUNTS RECOGNISED AS DISTRIBUTIONS TO EQUITY HOLDERS IN THE YEAR: Final dividend for the year ended 31 December 2007 of 15.0p per share (2006: 15.0p) Interim dividend for the year ended 31 December 2008 of 7.0p per share (2007: 7.0p) Proposed fi nal dividend for the year ended 31 December 2008 of 7.5p per share (2007: 15.0p) The proposed fi nal dividend is to be approved by shareholders at the Annual General Meeting on 14 May 2009 and has not been included as a liability as at 31 December EARNINGS PER ORDINARY SHARE WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES Issued ordinary shares at 1 January 26,498 26,462 Effect of shares issued 33 Effect of own shares held (257) (270) WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES 26,241 26,225 Effect of share options and long-term incentive plan shares in issue 42 DILUTED WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES 26,241 26,267 Profi t attributable to ordinary shareholders 2.8m 8.5m Profi t attributable to ordinary shareholders before net restructuring costs 6.7m 9.0m Basic earnings per ordinary share 10.67p 32.41p Diluted earnings per ordinary share 10.67p 32.36p Diluted earnings per ordinary share before net restructuring costs 25.53p 34.26p 56 FINANCIAL STATEMENTS

10 9. GOODWILL Balance at 1 January Exchange adjustments 0.1 BALANCE AT 31 DECEMBER Goodwill has been tested for impairment in accordance with IAS 36 Impairment of Assets at 31 December 2008 and 31 December 2007 and no impairments have been identifi ed. 10. OTHER INTANGIBLE ASSETS OTHER OTHER CUSTOMER COMPUTER INTANGIBLE CUSTOMER COMPUTER INTANGIBLE LISTS SOFTWARE ASSETS TOTAL LISTS SOFTWARE ASSETS TOTAL COST Balance at 1 January Exchange adjustments Acquisitions through business combinations Additions Balance at 31 December AMORTISATION Balance at 1 January Exchange adjustments Amortisation charge in the year Balance at 31 December CARRYING AMOUNT AT 31 DECEMBER Carrying amount at 1 January Other intangible assets currently comprise a property lease entered into at less than an economic rent on the acquisition of AT Films Inc in PROPERTY, PL ANT AND EQUIPMENT LAND AND PLANT AND LAND AND PLANT AND BUILDINGS EQUIPMENT TOTAL BUILDINGS EQUIPMENT TOTAL COST Balance at 1 January Effect of movements in foreign exchange Additions Acquisitions through business combinations Disposals (4.0) (4.0) (0.6) (12.5) (13.1) BALANCE AT 31 DECEMBER DEPRECIATION AND IMPAIRMENT Balance at 1 January Effect of movements in foreign exchange Depreciation charge for the year Impairment charge (see Note 2) Disposals (4.0) (4.0) (0.2) (12.1) (12.3) BALANCE AT 31 DECEMBER CARRYING AMOUNT AT 31 DECEMBER Carrying amount at 1 January The carrying amount of plant and equipment includes 6.2 million (2007: 1.9 million) in respect of assets held under fi nance leases/hire purchase. FINANCIAL STATEMENTS 57

11 Capital commitments at 31 December were as follows: Contracts placed for future capital expenditure relating to property, plant and equipment not provided in the fi nancial statements INVESTMENTS At 31 December 2008 and 31 December 2007, the Group held external investments totalling 0.1 million. 13. SUBSIDIARY UNDERTAKINGS Except as indicated below, the Company owns the whole issued share capital of all subsidiary undertakings. The principal subsidiary undertakings are as follows: COMPANY COUNTRY OF INCORPORATION TRADE British Polythene Limited England Polythene Manufacturer AT Films Inc* Canada Polythene Manufacturer BPI plc England Property Company BPI Europe BV* Netherlands Holding Company Combipac BV* Netherlands Polythene Manufacturer Formipac France SA* France Distribution Company Irish Polythene Industries Limited Republic of Ireland Distribution Company Venture Hong Kong Limited (75% owned)* Hong Kong Holding Company Xinhui Alida Polythene Limited + China Polythene Manufacturer * Shares held through an intermediate holding company + 20% owned through a subsidiary undertaking 14. INVENTORIES Raw materials Work in progress Finished goods Cost of sales includes a charge refl ecting the effect of movements in stock provisions totalling 0.8 million (2007: 0.2 million) TRADE AND OTHER RECEIVABLES Trade receivables Prepayments and accrued income Other receivables The Directors consider that the carrying amount of trade and other receivables approximates to their fair value FINANCIAL STATEMENTS

12 CREDIT RISK Credit risk is the risk of fi nancial loss to the Group if a customer or counterparty fails to meet its contractual obligations and arises principally from amounts receivable from customers. The Group s exposure to credit risk is infl uenced mainly by the individual characteristics of each customer and before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer s credit quality and defi nes credit limits by customer. Limits and scoring attributed to customers are reviewed once a year. In addition, the Group has a policy of insuring certain debtors. The geographical profi le of credit risk over the year is broadly in line with that of turnover by destination as disclosed in Note 2. EXPOSURE TO CREDIT RISK The carrying amount of fi nancial assets, which includes trade receivables net of impairment losses as stated below and cash of 0.4 million (2007: 0.6 million), represents the Group s maximum exposure to credit risk at each year end. IMPAIRMENT LOSSES The ageing of trade receivables at the reporting date was as follows: GROSS IMPAIRMENT GROSS IMPAIRMENT Not past due days overdue Over 30 days overdue An impairment allowance has been made for estimated irrecoverable amounts from the sale of goods In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The Group has no signifi cant concentration of credit risk, with exposure spread over a large number of counterparties and customers in many different markets and sectors. This is discussed further within the Finance Review, on page 24. Accordingly, the Directors believe that there is no further provision required in excess of the allowance for doubtful debts. 16. BANK AND OTHER BORROWINGS Bank overdrafts Bank loans Other loan Finance leases/hire purchase BANK OTHER LOANS BANK OTHER LOANS OVERDRAFT & BORROWINGS TOTAL OVERDRAFT & BORROWINGS TOTAL REPRESENTED BY: Amounts falling due within one year Amounts falling due after more than one year FINANCIAL STATEMENTS 59

13 The following analysis details outstanding borrowings, the facilities available to the Group and the undrawn amounts at the balance sheet date. LESS THAN BETWEEN BETWEEN LESS THAN BETWEEN BETWEEN 1 YEAR 1-2 YEARS 2-5 YEARS TOTAL 1 YEAR 1-2 YEARS 2-5 YEARS TOTAL MATURITY Cash at bank (0.4) (0.4) (0.6) (0.6) Bank overdrafts CASH AND CASH EQUIVALENTS IN THE CASH FLOW STATEMENT Bank loans Other loan Finance leases/hire purchase Undrawn facilities Bank overdrafts Bank loans Finance leases/hire purchase TOTAL FACILITIES FIXED RATE FLOATING RATE CASH AT BANK TOTAL FIXED RATE FLOATING RATE CASH AT BANK TOTAL CURRENCY AND INTEREST RATE PROFILE Currency Sterling placement Sterling (0.1) Euro (0.2) (0.1) 34.5 Other (0.1) (0.5) (0.4) (0.6) year unsecured fi xed term facility with a major fi nancial institution at a fi xed interest rate of 6.73%. 2. The fl oating rate borrowings are all rolled over on periods of 3 months or less based on the appropriate LIBOR or base rates. 17. OTHER FINANCIAL INSTRUMENTS LIQUIDITY RISK Liquidity risk is the risk that the Group will not be able to meet its fi nancial obligations as they fall due. The Group manages liquidity risk by maintaining adequate banking facilities, by continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial assets and liabilities. The Group has at its disposal additional undrawn facilities which further reduces liquidity risk. Refer to the Finance Review on page 24 for further discussion of liquidity risk. The following analysis details the contractual maturities of fi nancial liabilities at the balance sheet date including interest and principal cash fl ows, using undiscounted cash fl ows. LESS THAN BETWEEN BETWEEN LESS THAN BETWEEN BETWEEN 1 YEAR 1-2 YEARS 2-5 YEARS TOTAL 1 YEAR 1-2 YEARS 2-5 YEARS TOTAL CONTRACTUAL CASH FLOWS ANALYSED BY MATURITY DATE Trade and other payables Bank overdrafts Bank loans Other loan Finance leases/hire purchase FINANCIAL STATEMENTS

14 Obligations under fi nance leases/hire purchase are as follows: MINIMUM MINIMUM LEASE FINANCE LEASE FINANCE PAYMENTS COSTS CAPITAL PAYMENTS COSTS CAPITAL Amounts payable under fi nance leases/hire purchase: Less than one year Between one and fi ve years Capital represents the carrying value of a four year hire purchase arrangement, repayable by quarterly instalments and excludes contingent rents for future fi nance costs calculated by reference to bank base rate on each quarterly payment date. The fi nance lease held in 2007 was denominated in euros. The hire purchase arrangement entered into in 2008 is denominated in sterling. FAIR VALUE FINANCIAL ASSETS Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value. INVESTMENTS The fair value of investments is based on estimates of likely sales values of the investments. FIXED RATE BORROWINGS The fair value is based on the quoted market prices of comparable debt issued by other companies. CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE FAIR VALUES Fixed asset investment Fixed rate borrowings other loan (20.0) (20.1) (20.0) (20.0) (19.9) (20.0) (19.9) (19.9) CASH AT BANK, BORROWINGS DUE WITHIN 1 YEAR, FLOATING RATE BORROWINGS DUE AFTER MORE THAN 1 YEAR, TRADE PAYABLES, TRADE RECEIVABLES AND OTHER CURRENT LIABILITIES The carrying value approximates to fair value either because of the short maturity of the instruments or because the interest rates are reset after periods of not greater than six months. FINANCE LEASES/HIRE PURCHASE The fair value of the obligations approximates to their carrying amount. MARKET RISK Market risk is the risk that changes in market prices, such as interest rates and foreign currency exchange rates, will affect the Group s income or the value of its holdings of fi nancial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Generally the Group seeks to minimise this risk through hedge arrangements designed to manage a proportion of the Group s overall exposure. HEDGING NET INVESTMENT IN OVERSEAS OPERATIONS The Group has a policy of maintaining borrowings in the currency of most of its overseas operations to cover the net asset position in those companies. CASH FLOW HEDGE FOREIGN CURRENCY Sales orders in currency are covered in most instances at the time of receipt by the creation of a currency overdraft. Purchases are covered with forward contracts or reduction in borrowings in the relevant currency where appropriate. Any signifi cant exception to this is approved at Board level. Any cash fl ow and profi t effect would crystalise within six months of the year end when the forecast transactions being hedged materialise. The value of these hedges at 31 December 2008 was 0.7 million (2007: 0.3 million). No ineffectiveness was recognised in the income statement in relation to cash fl ow hedges. FINANCIAL STATEMENTS 61

15 CURRENCY RISK The Group s signifi cant exposure to foreign currency risk at 31 December 2008 is as follows: EUR CAD EUR CAD M $M M $M Trade receivables Trade payables (18.2) (1.7) (22.0) (2.5) Gross balance sheet exposure (3.8) 1.6 (4.9) (0.9) The following signifi cant exchange rates applied during the year: AVERAGE RATE CLOSING RATE EUR CAD INTEREST RATE MANAGEMENT Exposure to fl uctuating interest rates is managed by maintaining a proportion of the Group s debt on a fi xed basis and topping this up as appropriate with derivative fi nancial instruments to maintain the desired fi xed/variable mix. Due to the seasonal nature of working capital requirements funded by borrowings this is done by fi xing a value rather than a percentage. SENSITIVITY ANALYSIS In managing interest rate and currency risks the Group aims to reduce the impact of short-term fl uctuations on the Group s earnings. Over the longer term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings. At 31 December 2008, it is estimated that a change of 100 basis points in interest rates would result in a change of 0.5 million in profi t before tax. This has been calculated by taking 1% of the Group s fl oating rate borrowings as at 31 December It assumes that all other variables, including foreign currency, remain constant. In 2007, the estimated change in profi t before tax was calculated as 0.3 million, using the same method and assumptions. It is estimated that a change of 10 euro cents against the value of sterling over the period would result in an increase or decrease in profi t or loss by 0.5 million. This has been determined by calculating the effect of such a change on the translation of our European results. In 2007, the impact was estimated at 0.5 million, using the same method. It is estimated that a fall in the discount rate of 0.5% would increase the pension scheme defi cit by 15 million, an increase in life expectancy of one year would increase it by 4 million and a fall in equity markets of 10% would increase it by 5 million. 18. TRADE AND OTHER PAYABLES Trade payables Other taxes and social security Accruals and deferred income Other payables The Directors consider that the carrying amount of trade payables approximates to their fair value CURRENT TAX LIABILITIES Current tax receivable (0.7) (1.1) Current tax payable The net current tax liability represents the estimated amount of income taxes payable in respect of current and prior periods FINANCIAL STATEMENTS

16 20. DEFERRED TAX ACCELERATED OTHER ACCELERATED OTHER CAPITAL EMPLOYEE TIMING CAPITAL EMPLOYEE TIMING ALLOWANCES BENEFITS DIFFERENCES TOTAL ALLOWANCES BENEFITS DIFFERENCES TOTAL At 1 January 6.9 (5.0) (0.6) (10.0) (0.1) (3.4) On acquisition (0.1) Charge/(credit) to income (3.2) (1.9) 2.1 (0.7) 1.4 (Credit)/charge to equity (3.5) (3.5) Exchange differences AT 31 DECEMBER 7.8 (7.3) (3.8) (3.3) 6.9 (5.0) (0.6) 1.3 Net deferred tax liabilities 3.8 (0.1) (0.1) Net deferred tax assets 4.0 (7.2) (4.1) (7.3) 4.2 (4.9) (1.2) (1.9) Accelerated capital allowances relate to property, plant and equipment and computer software. 7.8 (7.3) (3.8) (3.3) 6.9 (5.0) (0.6) 1.3 Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and liabilities relate to income taxes levied by the same tax jurisdictions. 21. GOVERNMENT GRANTS Government grants relate primarily to regional selective assistance received on the achievement of certain job creation and job protection targets as well as related capital expenditure. The grants could be repayable in the event that numbers employed at the relevant sites drop below these target levels during a specifi ed monitoring period. 22. SHARE CAPITAL AUTHORISED Equity 80,227,336 (2007: 80,227,336) ordinary shares of 25p each ALLOTTED CALLED UP AND FULLY PAID Equity 26,498,160 (2007:26,498,160) ordinary shares of 25p each AVERAGE 2007 NUMBER OF DATE OF PURCHASE NUMBER OF SHARES ISSUE PRICE SHARES MOVEMENTS IN EQUITY SHARE CAPITAL At 1 January 26,498,160 26,461,762 Exercise of SAYE options Various ,398 AT 31 DECEMBER 26,498,160 26,498,160 The Company has one class of ordinary shares which carries no right to fi xed income. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regards to the Company s residual assets. The Company has granted options over its ordinary shares (see Note 30). 23. SHARE PREMIUM ACCOUNT At 1 January On shares issued 0.1 AT 31 DECEMBER FINANCIAL STATEMENTS 63

17 24. OTHER RESERVES FOREIGN CAPITAL CURRENCY TOTAL REDEMPTION CAPITAL HEDGING TRANSLATION OTHER RESERVE RESERVE RESERVE RESERVE RESERVES M At 1 January (0.3) 7.4 Movement during the year (0.4) (0.4) Movement on retranslation of overseas operations AT 31 DECEMBER (0.7) FOREIGN CAPITAL CURRENCY TOTAL REDEMPTION CAPITAL HEDGING TRANSLATION OTHER RESERVE RESERVE RESERVE RESERVE RESERVES M At 1 January (0.3) 7.4 Movement during the year (0.3) (0.3) Movement on retranslation of overseas operations At 31 December (0.3) 7.4 CAPITAL REDEMPTION RESERVE was created on the repurchase and cancellation of ordinary and preference shares in previous years. CAPITAL RESERVE was created on the acquisition of a subsidiary. HEDGING RESERVE comprises the effective portion of the cumulative net change in the fair value of cash fl ow hedging instruments related to forecast hedging transactions that have not yet occurred. FOREIGN CURRENCY TRANSLATION RESERVE comprises all foreign exchange differences arising from the retranslation of fi nancial statements of foreign operations, as well as the translation of liabilities that hedge the Company s net investment in foreign operations. 25. RETAINED EARNINGS At 1 January Profi t for the year Dividends to shareholders (5.8) (5.8) Actuarial (losses)/gains on defi ned benefi t pension schemes (12.3) 8.4 Tax on items taken directly to equity 3.5 (3.0) Decrease in own shares held 0.1 Movement relative to shares vested under the restricted share plan (0.4) IFRS 2 charge in relation to equity settled transactions AT 31 DECEMBER OWN SHARES HELD COST OF OWN SHARES HELD At 1 January Shares purchased 0.3 Movement relative to shares vested under the restricted share plan (0.4) AT 31 DECEMBER The cost of own shares held represents shares held by the British Polythene Industries Employee Share Ownership Trust to satisfy the Company s liabilities under the restricted share plan and the long-term incentive plan. The market value of the shares is 0.5 million (2007: 0.7 million). 64 FINANCIAL STATEMENTS

18 DATE OF AVERAGE DATE OF AVERAGE PURCHASE/ PURCHASE NUMBER PURCHASE/ PURCHASE NUMBER ALLOCATION PRICE OF SHARES ALLOCATION PRICE OF SHARES MOVEMENTS IN THE NUMBERS OF SHARES HELD At 1 January 260, ,456 No of shares allocated to employees 3/3/08 (4,000) Various (89,625) Shares purchased Various ,000 AT 31 DECEMBER 256, , MINORITY INTERESTS At 1 January Foreign exchange movements 0.2 AT 31 DECEMBER Minority interests comprise a 25% holding in the ordinary share capital of Venture Hong Kong Limited, along with the related share in the results of the Company up to 31 December 2008 as adjusted to refl ect Group accounting policies. Venture Hong Kong Limited holds a 20% minority interest in Xinhui Alida Polythene Limited. 28. OPERATING LEASE ARRANGEMENTS At 31 December, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: PLANT AND PLANT AND EQUIPMENT BUILDINGS TOTAL EQUIPMENT BUILDINGS TOTAL Less than one year Between one and fi ve years More than fi ve years None of the operating leases include contingent rentals. A number of the leased buildings have been sublet to external tenants. At 31 December, the Group expects to receive future sublease rentals which fall due as follows: BUILDINGS BUILDINGS Less than one year Between one and fi ve years During the year ended 31 December 2008, 2.6 million (2007: 2.7 million) was recognised as an expense in the consolidated income statement in respect of operating leases, comprising 3.0 million (2007: 3.1 million) operating lease rentals less 0.4 million (2007: 0.4 million) sublease rentals. 29. CONTINGENT LIABILITIES Contingent liabilities of the Group in respect of VAT indemnities amount to 0.8 million (2007: 0.8 million). FINANCIAL STATEMENTS 65

19 30. SHARE-BASED PAYMENTS LONG-TERM INCENTIVE PLAN In 2005 the Group introduced a new Long-Term Incentive Plan for senior executives. Shares are conditionally awarded under this plan and vest in employees based on the following performance criteria. The EPS part of an award will vest if the Company s EPS growth is at least RPI plus 10% per annum over the performance period; no shares will vest if EPS growth is not at least RPI plus 3% per annum. For performance between these two points, vesting will occur on a sliding scale. For the portion of the award based on Total Shareholder Return ( TSR ), no vesting will occur for ranking below median. At the median 10% of the award will vest with the full 50% vesting for a ranking at or above the upper quartile. Vesting occurs on a sliding scale between these two points. LTIP LTIP Outstanding at the beginning of the year 773, ,500 Granted during the year 399, ,000 Exercised during the year Forfeited/lapsed during the year (371,674) (14,576) Outstanding at the end of the year 801, ,924 Exercisable at the end of the year The awards granted in 2006, which were due to vest in 2009, lapsed due to performance criteria not being achieved. SAVINGS RELATED SHARE OPTION SCHEME The employee savings related share option scheme is open to almost all UK employees. Employees save over three or fi ve years at the end of which shares can be purchased during the following six month period. During the period the Group did not issue any shares (2007: 36,398 shares at a weighted average price of 2.66) under this scheme. Grants of options were made on 19 October 2006 and 9 October 2007 at a price 10% below the market price on the date of offer and on 13 October 2008 at market price. At 31 December 2008 the individual options, not yet exercised, of Directors and other employees under the savings related share option scheme are as follows: DATE FROM WHICH OTHER DATE OF GRANT EXERCISABLE EXPIRY DATE OPTION PRICE DIRECTORS EMPLOYEES TOTAL Savings Related Scheme 19/10/06 1/12/09 31/5/ p 76,732 76,732 Savings Related Scheme 19/10/06 1/12/11 31/5/ p 131, ,465 Savings Related Scheme 9/10/07 1/12/10 31/5/ p 40,031 40,031 Savings Related Scheme 9/10/07 1/12/12 31/5/ p 38,873 38,873 Savings Related Scheme 13/10/08 1/12/11 31/5/ p 14,194 85,357 99,551 Savings Related Scheme 13/10/08 1/12/13 31/5/ p 4, , ,256 AT 31 DECEMBER , , ,908 At 31 December , , ,596 A charge to the income statement for all of these schemes has been based on the Binomial model and the inputs into the model are as follows: SAYE SAYE SAYE LTIP LTIP LTIP YEAR OF GRANT Share price Exercise price Nil Nil Nil Expected volatility 43.59% 30.75% 24.79% 36.36% 26.26% 18.94% Expected life 3/5 years 3/5 years 3/5 years 3 years 3 years 3 years Risk-free rate 4.11% 5.01% 4.88% 4.50% 4.40% 4.15% Expected dividends 11.28% 5.85% 4.93% 8.53% 5.11% 4.55% Expected volatility was determined by calculating the historical volatility of the Group s share price over the three years immediately preceding grant. The expected life used in the model has been adjusted, based on management s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The Group recognised total expenses of 0.4 million relating to equity-settled share-based payment transactions in 2008 (2007: 0.1 million). 66 FINANCIAL STATEMENTS

20 31. RETIREMENT AND EMPLOYEE BENEFIT OBLIGATIONS NON NON NON NON CURRENT CURRENT 2008 CURRENT CURRENT 2007 ASSETS LIABILITIES TOTAL ASSETS LIABILITIES TOTAL Defi cit in British Polythene defi ned benefi t pension scheme (25.7) (25.7) (17.6) (17.6) Other employee benefi t obligations (see below) (1.4) (1.4) (1.5) (1.5) RETIREMENT AND EMPLOYEE BENEFIT OBLIGATIONS (27.1) (27.1) (19.1) (19.1) Related deferred tax asset (Note 20) (27.0) (19.8) 4.9 (19.0) (14.1) BRITISH POLYTHENE DEFINED BENEFIT SCHEME The assets of the defi ned benefi t section of the British Polythene Pension Scheme are invested in a self-administered trust fund and are separated from the Group s business assets. The scheme was closed to new entrants in June A full actuarial valuation in relation to the scheme was carried out on 5 April 2008 and was updated by the actuary at 31 December The previous valuation was carried out on 6 April 2005 and was updated by the actuary at 31 December 2005, 2006 and The present value of the defi ned benefi t obligation, the related current service cost and past service cost were measured using the projected unit credit method. The major assumptions used by the actuary in the valuations were: Rate of increase in pensionable earnings 2.60% 3.20% Rate of increase in pensions in payment service up to 31 December % 3.20% service from 1 January % 2.40% Rate of increase in deferred pensions 2.60% 3.20% Discount rate applied to scheme liabilities 6.50% 5.80% Infl ation assumption 2.60% 3.20% Life expectancy: Male aged 60 (current life expectancy) Female aged 60 (current life expectancy) Male aged 45 (life expectancy at age 60) Female aged 45 (life expectancy at age 60) The assumptions used by the actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. NET PENSION LIABILITY The amount included in the consolidated balance sheet at 31 December 2008 is as follows: LONG-TERM RATE LONG-TERM RATE OF RETURN + VALUE OF RETURN + VALUE Equities 7.75% % 88.6 Corporate bonds 5.33% % 22.5 Government securities 3.59% % 19.8 LDI holdings 5.33% % 35.3 Other 7.44% % 18.8 Fair value of scheme assets Present value of scheme liabilities (176.7) (202.6) DEFICIT IN THE SCHEME (25.7) (17.6) Related deferred tax asset NET PENSION LIABILITY (18.5) (12.7) + The rates quoted are the expected net rate of return after allowing for investment expenses. The fair value of the Scheme assets are not intended to be realised in the short-term and may be subject to signifi cant change before they are realised. The present value of the Scheme liabilities is derived from cash fl ow projections over a long period and is thus inherently uncertain. FINANCIAL STATEMENTS 67