(LWB) Low & Bonar

Low & Bonar PLC

Preliminary Results for the year ended 30 November 2011

ANOTHER YEAR OF SUBSTANTIAL PROFIT GROWTH,

WELL POSITIONED FOR FURTHER PROGRESS

Low & Bonar PLC ("Low & Bonar" or "the Group"), the international performance materials group, today announces its preliminary results for the year ended 30 November 2011.

Highlights

Continuing operations

            * before amortisation and non-recurring items

§ Substantial profit growth and accelerated progress towards targets

§ Good fundamental growth drivers and management initiatives outweighing the impact of a weaker macro-economic climate

§ Yarns business now profitable with further benefits from restructuring expected in 2012

§ Earnings per share up 35%, full year dividend increased by 31% to 2.1p (2.8x cover)

§ Confident of further growth underpinned by innovation, emerging market presence and efficiency improvement initiatives

Martin Flower, Chairman, said:

"These are excellent results during a period that has seen significant raw material inflation and macro-economic challenges within Europe and further demonstrate the quality of our business and its growth prospects.

The Group is targeting markets with strong fundamental growth drivers and continues to invest in a range of initiatives to sustain profitable growth through innovation, increased emerging market exposure and efficiency improvements.

The Group's good trading momentum has continued into the new year and the Board remains confident that the Group is well-positioned to make further progress towards our stated targets."

For further information, please contact:

A video interview with Low & Bonar's Chief Executive Steve Good and Finance Director Mike Holt in which they discuss the 2011 preliminary results announcement can be viewed at www.lowandbonar.com

Chairman's Statement

I am delighted to report another year of significant profit growth and progress for the Group.

Profit before tax, amortisation and non-recurring items rose 26% to £23.4m (2010: £18.6m) on revenues ahead by 13% at £388.7m.  Sales volumes were up 6% on last year and reflect strong fundamental growth drivers, increasing contribution from new products and emerging markets supported by a further recovery in some of the Group's heartland markets, albeit to a much lesser extent this year. Operating margins improved to 7.9% (2010: 7.5%) despite severe raw material price inflation for most of the year.  I am also pleased to report that, as a result of decisive actions, the Yarns business returned to profitability even though the demand for artificial grass yarns was depressed in its main markets.

Earnings per share increased by 35% based on profit before amortisation and non-recurring items aided by a lower tax rate of 25% (2010: 31%) which now includes tax benefits associated with innovation.  Statutory profit before tax from continuing operations was £23.4m (2010: £10.2m) with non-recurring income of £5.7m (2010: £1.6m loss), which principally relates to changes in the Group's UK defined benefit pension scheme, offsetting a £5.7m charge for amortisation (2010: £6.8m).

Results highlights

Continuing operations

*    before amortisation and non-recurring items

**  including debt related derivatives in 2010

Further commentary on these results and the divisional performances is contained in the Business Review.

Investing for further growth

During the year, the Group has made further investments in management initiatives to drive profitable growth.

The Group continues to focus on innovation to augment sales growth and improve margins in Western European and North American markets.  A number of new products were successfully launched during the year and the product development pipeline continues to improve.  A record 15.8% (2010: 14.3%) of sales came from new products developed in the last three years, close to our medium-term target.

The Group invested £12.1m (2010: £6.7m) in property, plant and equipment during the year to support volume growth in key markets and has already approved £7.9m of spend for 2012.  In addition, the Group is investing in a joint venture, Bonar Natpet, with National Petrochemical Industrial Company (NATPET) in Saudi Arabia which will design, manufacture and sell geotextile products for the fast growing civil engineering markets in the Middle East and the Indian subcontinent.  The Group is also actively looking for investment opportunities in Latin America and Asia to support international sales growth and further access higher growth emerging markets.

The Group has made significant investments to enhance its organisational capability and structure.  New appointments have been made within sales, marketing, operations and procurement to accelerate business development activities and margin improvement.  This will continue into 2012.  There has also been an increased focus on health and safety aligned to the Group's commitment to have zero work place accidents.

Increased dividend

Taking into account these excellent results and our confidence in the future prospects of the Group, the Board is recommending a final dividend of 1.4 pence per share (2010: 1.1 pence), increasing the full year dividend to 2.1 pence per share (2010: 1.6 pence).  Subject to shareholders' approval at the Annual General Meeting in March, the dividend will be paid on 19 April 2012 to members registered as of 23 March 2012.  The proposed full year dividend is covered 2.8x by earnings before amortisation and non-recurring items.

People

On 1 October 2011, I was pleased to invite John Sheldrick to join the Board as a non-executive director.  John was Group Finance Director of Johnson Matthey Plc from 1995 until his retirement in 2009 and is a non-executive director of GKN plc and Fenner PLC and a former non-executive director of API Group PLC.  John's extensive financial experience will be of great value to the Board and the Audit Committee as will his background in international manufacturing as the Group pursues profitable growth through globalisation and product and process innovation.

On 28 February 2012, Chris Littmoden will be stepping down as a non-executive director of the Company after seven years.  I would like to take this opportunity to thank Chris for his valuable contribution to the Board during a period of significant change. 

As always, it is my pleasure to acknowledge the skills and dedication of employees throughout the Group who have once again delivered an exceptional performance.  Their skills, and the strength of the management team, are the real assets of the Group.

Outlook

These are excellent results during a period that has seen significant raw material inflation and macro-economic challenges within Europe and further demonstrate the quality of our business and its growth prospects.

The Group is targeting markets with strong fundamental growth drivers and continues to invest in a range of initiatives to sustain profitable growth through innovation, increased emerging market exposure and efficiency improvements.

The Group's good trading momentum has continued into the new year and the Board remains confident that the Group is well-positioned to make further progress towards our stated targets.

Martin Flower

7 February 2012

Business Review

Low & Bonar PLC is an international performance materials group using proprietary technologies to engineer polymers for a wide range of applications in niche industrial markets.

Significant growth in sales

It is pleasing to report a second consecutive year of strong sales growth despite a weaker macroeconomic climate and a lower contribution from recovering markets within Europe.  The impact of changes in foreign exchange rates was minimal.  In the first half of the year, against undemanding comparatives, sales grew by 17%.  In the second half of the year sales were 9% ahead of a tougher comparative which had been 14% higher than our 2009 performance.  Trading momentum in the fourth quarter was good although the third quarter was impacted by a much weaker than usual peak season for artificial grass yarns and margin optimisation actions within the Technical Coated Fabrics Division.  Volumes for the year increased by 6% and average prices were 7% higher as increasing raw material costs were gradually passed on to our customers and the quality of our sales mix continued to improve.

Strong fundamental growth drivers in our key markets were supported by a growing contribution from our internal growth initiatives.  Sales in our civil engineering and flooring markets improved by 20% and 18% respectively.  Our geographic focus and product leadership continues to enable us to increase market share and benefit from the growth of carpet tiles within the flooring market and the significant infrastructure investment taking place in newly industrialising regions. There was an equally strong performance in our transport segment which benefited from a partial recovery in the trailer market in the first half of the year and the growth of premium car brands in Asia.  Sales in our building product and industrial segments experienced solid growth in lacklustre markets which have not materially improved following the effects of the global financial crisis. In our leisure segment, a weak artificial grass yarn market was responsible for a 6% decline in sales.

The continued focus on product innovation to drive market share gain and increase margins has yielded record returns this year. Sales from recently developed products climbed to 15.8% (2010: 14.3%), close to our medium term target of 16%. We remain committed to creating excellence in innovation and delivering components which add real value to our customers' businesses. Sales growth was augmented by another strong performance in geographies outside of our heartland Western European and North American markets. Sales in the Middle East grew by almost a third with Eastern Europe up 18% and Asia up 14%. The weakness in the artificial grass market adversely impacted the overall proportion of non-heartland sales, nevertheless this ratio improved again to 21.8% from 21.1% last year.

Operating margins continue to improve

Operating margins increased to 7.9% (2010: 7.5%). The first stage in the restructuring of our underperforming Yarns business was successfully completed with the closure of our Ostend manufacturing site and the transfer of assets to our new facility in Abu Dhabi. This step was instrumental in restoring profitability to the business and made an important contribution to the improvement in the Group's operating margin. We expect additional benefits from the restructuring during 2012.

The biggest challenge throughout the year has been managing margins in extremely challenging  raw material polymer markets. Cost inflation was very high throughout the first half of the year. This abated during the third quarter as polyolefin prices began to soften which helped mitigate the ongoing increases in other key polymers.  During the course of the final quarter, and for the first time in two and a half years, aggregate raw material costs declined.  In the year as a whole raw material polymer inflation amounted to some £22m. Sales prices were regularly increased during the year with over £21m being recovered from our customers. The successful pass through of higher input costs has enabled the Group to grow operating margins again and demonstrates the overall strength of our market positions and product propositions.

During the year we continued to reinvest part of our margin growth in initiatives to help secure medium-term sales growth and margin expansion.  A new Group wide procurement function has been established to secure the benefits of scale and to share our expertise across all businesses. The quality and reach of our sales and marketing organisation has also been improved following a number of new appointments.

On track to achieve targets

At the start of 2010 the Group set out a number of explicit growth and efficiency targets which we believed to be achievable in the medium term.  The targets are set out below.

The Group made a good start in 2010 and has accelerated progress in 2011. Over the last two years sales and profit before tax have grown by 28% and 48% respectively with operating margins growing by 60bps. The commitment to improve innovation and increase the Group's exposure to emerging markets is bearing fruit although much remains to be done to excel in both areas. Strong operating cash conversion during this period of significant growth has allowed the Group to fund investments in key growth initiatives, reinstate dividends, and reduce total net debt by some £18m. We continue to operate within our target total debt to EBITDA range of 1.5 to 2.0 times ending the current year at 1.9 with a much simplified, flexible and longer term debt structure.  Return on capital employed has also improved to reach 16.8% at the end of this year.  

Confident of further progress

During the year the Group has taken actions and made investments to drive profitable growth. The level of capital expenditure was increased this year to support anticipated growth in our key markets. Capacity was added to our flooring business in Europe and China with investments approved to upgrade and extend capacity in the USA during 2012. In civil engineering our Saudi Arabian geotextile joint venture is expected to be operational in the fourth quarter of 2012 and will provide much needed capacity to service a fast growing market in the Middle East region. The investments made in people and structure, particularly in procurement, operations, sales and marketing functions, will further support progress.  In addition we have committed significant resources to assess market entry options in Latin America and Asia where we are currently under-represented. This will continue to be a focus for 2012 as the Group seeks to develop and establish solid foundations from which to build a global business.

The Group is well positioned to push ahead with its growth initiatives and is confident about making further progress in 2012.  We have the opportunity, ambition, and the resolve to develop a truly global, innovative performance materials business.

Performance Technical Textiles Division

Our Performance Technical Textiles division (comprising Colbond, Bonar Technical Fabrics, Bonar Yarns and Yihua Bonar) supplies products such as geosynthetics, artificial grass yarns, carpet tile backing, agrotextiles and construction fibres to the civil engineering, flooring, leisure, industrial and construction sectors. 

            * before amortisation and non-recurring items

Sales were 13% higher than last year and were not materially affected by changes in foreign exchange rates.  Operating margins increased 60bps to 8.6%. The year on year margin progression was stronger in the second half following the restructuring of the Yarns business and the success in securing higher selling prices to offset raw material inflation.  Raw material costs increased significantly in the first half of the year but in the second half began to stabilise, albeit at a high level.

Our civil engineering business grew strongly again.  Sales increased by 20% driven by robust growth and market share gain in heartland markets and continued progress in emerging markets.  Heartland sales growth benefited from an undemanding first quarter comparative which had been affected by adverse weather in 2010.  Sales growth continued throughout the year with good performances in our core German, French, Benelux and Scandinavian regions. Activities in tunneling projects and good progress made in structural fibres for concrete reinforcement were highlights.  In emerging markets the Middle East grew strongly in advance of commissioning our joint venture manufacturing plant in Saudi Arabia. China also increased significantly albeit from a small base.

Sales in our Flooring business also grew strongly again, advancing 18% this year. In Europe and the USA sales continue to benefit from positive substitution effects which assisted our specialty tile backings as they take a larger share of the total floor coverings market.  The launch of new products to sustain product leadership in this segment continues to augment performance and our focus on Asia led to a 31% sales increase in the region.  The transport sector also experienced robust sales growth.  Sales in Europe were strong with USA activity somewhat slower. We continued to benefit from our leading position in the premium automotive brands and their success in penetrating Asian markets.  Sales of our traditional building products posted solid growth in lacklustre markets which have yet to materially recover in either the commercial or residential segments.  The development of our 'green' product range to address this growing trend was pleasing.  Growth returned to our agrotextiles business, driven by an improved product range and development of sales into new territories; however, activity levels in the important Dutch market have yet to recover.  The sales performance of our artificial grass yarn business was disappointing.  Markets, as anticipated, were weaker than last year due to public funding constraints reducing demand in the dominant European and US markets.  Product availability during our Yarns restructuring project was also a contributory factor.

The division also progressed well towards the Group's two internal growth initiatives.  Sales outside of our heartland increased to 20.2% (2010: 19.6%) and sales from recently developed products advanced to 15.5% (2010: 14.2%). In order to accelerate progress in establishing a global business a number of projects are being undertaken to assess entry options in Asia and Latin America.  There were important contributions to the improvement in sales from new products across all sectors including innovations in new structural fibres in concrete reinforcement, improved yarns for sports and landscaping applications, the development of "Face to Face", a unique US tile backing product, and new flame retardant products for industrial greenhouses.  The new product pipeline is very healthy and focused on products which deliver improved sustainability, functionality, and efficiency features.

The Yarns restructuring project was successfully completed on time, on budget, delivered the anticipated cost savings and returned the Yarns business to profitability. The closure of the Ostend site during the year now enables the business to operate from a much lower manufacturing cost base.  In parallel, investments are being made to enhance the product range and to pursue our strategy of being the yarn supplier of choice to the independent grass tufter.   In 2012 we expect to make further progress in both our product offering and manufacturing efficiencies.

Investment projects to expand capacities for flooring products in China and Europe were successfully commissioned during the year. These will be augmented in 2012 with the upgrade and expansion of capacity in the USA. Our joint venture in Saudi Arabia is progressing well and we should be manufacturing in this important growth region before the end of 2012. The building is under construction and key equipment items  have been ordered.

There has been an enhanced focus across the Group on improving our health and safety performance with the aim of being 'best in class' and  having a 'zero tolerance' approach to any workplace accidents. The division has made good progress this year, significantly reducing its lost time accident rate and successfully progressing site based improvement programs. This progress will continue to be underpinned by committed and visible leadership in this area.

The division is well positioned to grow, with innovative products in its attractive heartland markets and is accelerating its exposure to emerging markets which have significant growth opportunities for its existing products and technologies.

Technical Coated Fabrics Division

Our Technical Coated Fabrics division, essentially consisting of Mehler Texnologies (MTX), supplies products such as side curtains for lorry trailers, advertising banners, tensioned structures, awnings, marquees and tarpaulins to the print, architectural and transport markets. 

            * before amortisation and non-recurring items

Sales increased by 13% in the year and were not materially affected by changes in exchange rates.  Volumes were 7% higher than 2010, but were flat during the second half as the business focused on increasing margins.  Margins improved in the second half but were 20bps lower at 9.0% for the full year as the division was slower to recover the full extent of raw material cost increases from its customers.    The division also reinvested part of its margin growth in enhancing organisational capability to accelerate progress on growth and efficiency initiatives.

During the first half of the year sales in the trailer market continued to recover well however in the second half progress slowed.  Our permanent and semi-permanent architectural membranes for building applications grew strongly in both heartland and emerging markets.  In Europe important reference projects were secured and this was augmented by a continuation of the impressive development of sales in the Middle East. The industrial segment also performed well with good growth in mining and tunneling applications.  Sales in both the leisure and print segments were subdued. Strong growth with new leisure ranges in Eastern Europe was outweighed by a weaker Italian market where 'bottom-slicing' of unattractive business also contributed. Increased Asian competition in the lower end of the print market restricted growth in Europe, with improvements in the USA compensating. 

Divisional sales outside of the heartland grew by 17% with good progress in Eastern Europe and the Middle East. The proportion of non heartland sales increased to 25.3% (2010: 24.5%) and there was an improved contribution from recently developed products which this year amounted to 16.4% (2010: 14.6%) of total sales.  New products in the boat and leisure markets and improved architectural membranes contributed.  A large proportion of our development activities are focused on the architectural membrane markets with projects to extend the lifetime, functionality and recyclability of these products being important drivers of future growth.

The division has also made significant improvements in the management of health and safety and delivered a much improved performance this year. Progress has also been made in improving operating efficiencies and the division has a number of ongoing projects which can accelerate this progress. In addition there are benefits to come from projects which are focused on improving sales margin management and customer service levels. These 'self help' projects will be the important drivers of short term value creation for the division.

Financial Review

Pre-tax profit

Profit before tax, amortisation and non-recurring items increased by 26% to £23.4m (2010: £18.6m), reflecting a £4.8m increase in operating profits to £30.6m (2010: £25.8m).  Interest costs were unchanged in total at £7.2m (2010: £7.2m) as notional interest on pension liabilities fell to £1.2m (2010: £2.3m) and borrowing costs increased to £6.0m (2010: £4.9m) as a result of higher rates following the refinancing during 2010.  Statutory profit before tax was £23.4m (2010: £10.2m), with a net non-recurring credit of £5.7m (2010: £1.6m loss) offsetting a £5.7m charge for amortisation (2010: £6.8m).

Non-recurring items

A net non-recurring credit of £5.7m arose from continuing operations during the year.  In February 2011 the UK pension scheme was closed to future accrual and, following the changes to link statutory indexation to CPI, deferred members have been notified of the switch from RPI to CPI in calculating their future pension increases.  As a result of these actions, a non-recurring credit of £6.0m has been recorded in the income statement.  During the year, the Group has incurred £0.3m of set-up costs in respect of its joint venture in Saudi Arabia.

The Group also received a 25% reduction on appeal of the €12.24m fine imposed by the European Commission in 2005 for infringing Article 81 of the European Community Treaty in connection with a cartel relating to industrial bags, a market the Group exited in 1997 following the sale of its Belgian packaging business.  The reimbursement, including interest and net of associated legal costs, totalled £2.2m and has been treated as a non-recurring credit within discontinued operations.  The reimbursement was received in December 2011.

Taxation

The overall tax charge on the profit before tax was £4.2m (2010: £3.8m). The tax charge on  profit from continuing operations before amortisation and non-recurring items was unchanged at £5.8m as increased profits were mitigated by a lower overall tax rate of 25% (2010: 31%).  The lower rate reflects the benefit of 'Innovation Box' credits in the Netherlands for profits derived from innovation and includes a prior year adjustment equivalent to 2%. The underlying tax rate for 2012 is expected to be around 27%.

Acquisitions

During the year, the Group has advanced £1.7m towards its 50/50 joint venture, Bonar Natpet, in Saudi Arabia with National Petroleum Industrial Company (NATPET).  In total, the Group's initial equity investment will be £5.4m.  As noted above, non-recurring start-up costs of £0.3m have been incurred.  The joint venture is expected to be operational in the final quarter of 2012.  There have been no other acquisitions and no disposals in the period. 

Cash

Overall net debt increased to £85.3m from £77.9m as a result of increased capital expenditure, investment in Bonar Natpet and the restructuring of the Yarns business.  Although improvements in working capital efficiency were made during the year, the percentage of trade working capital reducing from 22% last year (2009: 28%) to 21% of revenues, the amount of cash invested in working capital at year end increased by £11.1m due to both volume growth and higher prices.  The Group also simplified its debt structure during the year settling in full all remaining debt related derivatives which amounted to £16.9m (2010: partial settlement of £9.3m).  

The analysis of the Group's total external debt is as follows:

The gearing ratio of total external debt to EBITDA was marginally better at 1.9x (2010: 2.0x). 

Pensions

The charges for pensions are calculated in accordance with the requirement of IAS 19 Employee Benefits.  During the year the Group's UK defined benefit scheme continued to adopt a lower risk investment strategy in which the interest rate and inflation risks were more closely hedged and the exposure to equities reduced to around 22% of the scheme's assets (2010: 25%). The UK scheme deficit has fallen to £6.1m (2010: £17.9m), principally due to non-recurring credits of £6.0m arising from the change in indexation legislation and the closure of the scheme to future accrual, and additional cash contributions from the Group of £3.0m (2010: £3.0m).  The deficit in the Group's overseas schemes in Germany, Belgium and the USA was unchanged at £8.1m (2010: £8.1m).

Return on capital

The Group's return on operating capital employed further improved during the year to 16.8% (2010: 15.2%).

Dividends

Taking into account these excellent results and our confidence in the future prospects of the Group, the Board is recommending a final dividend of 1.4 pence per share (2010: 1.1 pence), increasing the full year dividend to 2.1 pence per share (2010: 1.6 pence).  Subject to shareholders' approval at the Annual General Meeting in March, the dividend will be paid on 19 April 2012 to members registered as of 23 March 2012.  The proposed full year dividend is covered 2.8 x by earnings before amortisation and non-recurring items.

Risks and uncertainties

Responsibility statement of the Directors on the Annual Report and Accounts

The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the year ended 30 November 2011. Certain parts thereof are not included within this Preliminary Announcement.

The Directors confirm, to the best of their knowledge, that:

·          the financial statements, prepared in accordance with IFRS, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and

·          the management report, which comprises the Chairman's Statement and the Business Review, includes a fair review of the development and performance of the business and of the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Directors

The Directors of the Company are:

Martin Flower, Chairman

Steve Good, Chief Executive Officer

Mike Holt, Group Finance Director

Steve Hannam, Non-Executive Director

Folkert Blaisse, Non-Executive Director

Chris Littmoden, Non-Executive Director

John Sheldrick, Non-Executive Director

Related party transactions

There are no related party transactions requiring disclosure.

Steve Good                             Mike Holt

7 February 2012                        7 February 2012

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, the terms "believes", "estimates", "anticipates", "expects", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts.

By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity may differ materially from the impression created by the forward looking statements contained in this announcement. In addition, even if the results of operations, financial condition, and liquidity are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: changes in the competitive framework in which the Group operates and its ability to retain market share; the Group's ability to generate growth or profitable growth; the Group's ability to generate sufficient cash to service its debt; the Group's ability to control its capital expenditure and other costs; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; and general local and global economic, political, business and market conditions. In light of these risks, uncertainties and assumptions, the events described in the forward looking statements in this announcement may not occur.

Other than in accordance with its legal or regulatory obligations, the Group does not undertake any obligation to update or revise publicly any forward looking statement, whether as a result of new information, future events or otherwise.

Consolidated Income Statement

for the year ended 30 November

Consolidated Statement of Other Comprehensive Income

for the year ended 30 November

Consolidated Balance Sheet

as at 30 November

Consolidated Cash Flow Statement

for the year ended 30 November

Consolidated Statement of Changes in Equity

for the year ended 30 November

Notes

1.  Basis of preparation

The financial statements are presented in pounds sterling, rounded to the nearest hundred thousand pounds.  They are prepared on the historical cost basis except for the revaluation to fair value of certain financial instruments.

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU (adopted IFRS).   During the year, the Group has adopted the following new Standards, Interpretations and Amendments, none of which have had a significant impact on the Group financial statements:

·      Amendment to IFRS 2 Share-based Payment (Group cash-settled share-based payment transactions).

·      Amendment to IAS 32 Financial Instruments: Presentation (Classification of rights issues).

·      IFRIC 19 Extinguishing Financial Instruments with Equity Instruments.

·      Improvements to IFRS 2010.

At the date of authorisation of these financial statements, there are a number of Standards and Interpretations in issue but not yet effective and which have not yet been applied in these financial statements.  The Directors anticipate that adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group, except:

·      The Amendments to IAS 19 Employee Benefits, effective for the year ending 30 November 2014, will alter the measurement, recognition and disclosure requirements for the Group's defined benefit pension plans. 

·      The adoption of IFRS 9 Financial Instruments, effective for the year ending 30 November 2016, will affect the measurement and disclosure of the Group's financial instruments. 

The annual report and financial statements for the year ended 30 November 2011 were approved by the Board of Directors on 7 February 2012 along with this preliminary announcement, but have not yet been delivered to the Registrar of Companies.  The financial information contained in this preliminary announcement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The auditor's report on the statutory accounts for the year ended 30 November 2011 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.  The statutory accounts of Low & Bonar PLC for the year ended 30 November 2010 have been delivered to the Registrar of Companies.  The auditor's report on the statutory accounts for the year ended 30 November 2010 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2. Segmental information

For the purposes of management reporting to the chief operating decision maker, the Group is organised into two reportable operating divisions: Performance Technical Textiles and Technical Coated Fabrics.  Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. 

The Group's principal activities are in the international manufacturing and supply of those performance materials commonly referred to as technical textiles.  The global technical textiles industry comprises, inter alia, fibres, yarns, woven fabrics and non-woven fabrics serving diverse markets such as the hygiene, automotive, construction, industrial and healthcare markets.  The Group's business is focused on two areas of activity in the international technical textiles industry: the production and supply of (a) performance technical textiles and (b) technical coated fabrics for use in the transport, print and architectural markets.

Unallocated items comprise mainly cash and cash equivalents, interest-bearing loans, borrowings, derivative assets and liabilities, post-employment benefits, taxation balances and corporate assets and expenses.  Intra-segment sales are not material.