Avon Protection Regulatory News (AVON)

22 May 2006 07:02

Avon Rubber PLC22 May 2006 Embargoed until 0700 22 May 2006 AVON RUBBER PLC ("Avon Rubber" or "the Group") Proposed disposal of Avon Rubber's Automotive Division ("Avon Automotive") HIGHLIGHTS •Conditional agreement to sell Avon Automotive for a total value of £63 million •Disposal will allow the Group to develop opportunities in respiratory protection where Avon Rubber expects to achieve higher margins and growth •Avon Rubber will continue to develop its strong market positions in dairy, aerosol gaskets and engineered fabrications •Cash proceeds from sale will be used, in the first instance, to reduce debt Commenting on the disposal, Trevor Bonner, Chairman of Avon Rubber said: "The disposal signals a significant strategic advance for the Group allowingAvon Rubber to focus on the high growth potential the Board has identified forthe Group's respiratory protection products. Avon Rubber will continue todevelop its strong market positions in dairy, aerosol gaskets and engineeredfabrications. This combination of established businesses and growthopportunities provides a balanced portfolio of business activities for thefuture. The Board is excited about the opportunity to pursue its planned strategicdirection and is confident of the future opportunities for growth of thecontinuing businesses as this strategy is implemented." For further information: Avon Rubber p.l.c. 020 7067 0700Terry Stead, Chief Executive (until 2.00pm)Peter Slabbert, Finance Director ING Corporate Finance 020 7767 1000Simon NewtonVinesh Karia Weber Shandwick Square Mile 020 7067 0700Richard HewsRachel TaylorStephanie Badjonat ING Corporate Finance (the corporate finance division of ING Bank N.V., LondonBranch), which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Avon Rubber and no oneelse in connection with the Disposal and the associated related partyarrangements and will not be responsible to anyone other than Avon Rubber forproviding the protections afforded to clients of ING Bank N.V., London Branch orproviding advice in relation to the Disposal and the associated related partyarrangements, or any other matter referred to in this announcement. This announcement is not intended to and does not constitute, or form any partof, an offer to sell or an invitation to purchase any securities or thesolicitation of any vote or approval in any jurisdiction pursuant to theDisposal and the associated related party arrangements or otherwise. Persons whoare not resident in the United Kingdom, or who are subject to the laws of anyjurisdiction other than the United Kingdom, should inform themselves about, andobserve, any applicable legal and regulatory requirements. This announcement, including information included or incorporated by referencein this announcement, may contain "forward-looking statements" concerning theDisposal and the continuing Group. Generally, the words "will", "may", "should","continue", "believes", "expects", "intends", "anticipates" or similarexpressions identify forward-looking statements. The forward-looking statementsinvolve risks and uncertainties that could cause actual results to differmaterially from those expressed in the forward-looking statements. Many of theserisks and uncertainties relate to factors that are beyond the Company's abilityto control or estimate precisely, such as future market conditions and thebehaviours of other market participants, and therefore undue reliance should notbe placed on such statements. The directors of Avon Rubber assume no obligationand do not intend to update these forward-looking statements, except as requiredpursuant to applicable law. Overview The Board of Avon Rubber announced today, along with its interim results for thesix months ended 31 March 2006, that the Company has entered into a conditionalagreement to sell Avon Automotive to Petrol Automotive Holdings Inc. (the"Purchaser"), a company established and controlled by Red Diamond Capital, L.P.("RDC") and the Management Team led by Leland Richards (the "Disposal"). TheDisposal values Avon Automotive at £63.0 million, prior to the assumption by thePurchaser of certain long term liabilities amounting to £4.6 million. Afterworking capital adjustments, taxation and transaction costs, Avon Rubber expectsto receive cash of not less than £52.1 million. In view of the size of the Disposal relative to the Group, the Disposal isconditional upon the approval of Shareholders. This approval is to be sought atthe Extraordinary General Meeting ("EGM") of the Company to be held on 13 June2006 or as soon as possible thereafter, notice of which will be posted toShareholders shortly. Background to and reasons for the Disposal The focus in Avon Automotive has for some time been on improving operationalproductivity, cost control and financial discipline in the face of challengingmarket conditions. Whilst this strategy has led to improved results within AvonAutomotive, the Board has decided to concentrate the future direction of theGroup on its Protection and Engineered Products businesses, where the Boardbelieves Avon Rubber can sustain higher margins and growth. Avon Automotive operates in a highly competitive market, supplying customers whoare considerably larger than itself. A significant feature of the market is theexpectation of annual price reductions from component suppliers. UnderInternational Financial Reporting Standards ("IFRS"), Avon Automotive achieved a4.2 per cent return on sales in the six months ended 31 March 2006 and a 4.7 percent return in the year ended 30 September 2005, before exceptional items andany allocation of central costs. These low margins coupled with price reductionsand increasing raw material costs have led the Group progressively to relocatemany activities to lower labour cost areas with the resultant costs of closurein the higher labour cost areas. The Board believes this pattern is likely tocontinue into the future. The low margins also make the business vulnerable to relatively small volumechanges. Historically, Avon Automotive in North America has been predominantly asupplier to the Big 3 automotive companies. Whilst the overall number ofvehicles sold in North America has remained at an historically high level, theBig 3 manufacturers have lost market share and this is expected to continue.This could result in a substantial risk to the Avon Automotive business if salesto new domestic manufacturers cannot be grown to offset any reduction. Whilst Avon Automotive has continued to be cash generative, it is the Board'sview that this cash generation is not sufficient to fund the combination of anyfuture automotive plant closures, and expansion, particularly into the growingChinese market, and the accelerated development and expansion in the Group'srespiratory protection activities. Accordingly, the Board reviewed the future ofthe automotive business within the Group and concluded that the sale of AvonAutomotive was in the best interests of Shareholders. The Board appointed INGCorporate Finance to determine how value may be realised for Shareholders. TheBoard received a number of expressions of interest in the business, whichconcluded with an approach from RDC, in conjunction with the Management Team ledby Leland Richards (Divisional Managing Director of Avon Automotive and a formerdirector of Avon Rubber), expressing an interest in acquiring Avon Automotive.The discussions with RDC culminated in the Disposal announced today. Use of proceeds and capital structure The expected net proceeds from the Disposal of not less than £52.1 million arerequired by the Group's lending banks, in the event of a disposal of thisnature, to be applied, in the first instance to reduce indebtedness resultingfrom previous investments and acquisitions in respiratory protection. The Disposal represents an opportunity to review the appropriate capitalstructure for the Group. The appropriate capital structure will need to bedetermined by the Board having balanced a number of important factors, includingperceived growth/acquisition opportunities (most notably in respiratoryprotection), product development programmes, restructuring plans, on-goingpension obligations and distribution policy. The Board intends to updateShareholders on this review at the time of the Group's preliminary results forthe period ending 30 September 2006. Information on Avon Automotive Avon Automotive is an international manufacturer of advanced polymer products,predominantly for supply to the automotive industry. For the year ended 30 September 2005, under IFRS, Avon Automotive generated anoperating profit before exceptional items of £8.8 million and an operatingprofit after exceptional items of £2.1 million on turnover of £186.4 million. Inthe six months ended 31 March 2006, under IFRS, Avon Automotive generated anoperating profit before exceptional items of £4.0 million and an operatingprofit after exceptional items of £4.0 million on turnover of £96.7 million. Alloperating profits stated in this paragraph are before any allocation of centralcosts. As at 31 March 2006, under IFRS, Avon Automotive had net operating assetsof £48.0 million and gross assets of £93.2 million. The IFRS financialinformation for Avon Automotive for the period ended 31 March 2006 and thecomparative information for the year ended 30 September 2005 and the periodended 31 March 2005 has not been audited. Further financial information on Avon Automotive is set out at Annex A. Principal terms of the Disposal Under the Sale and Purchase Agreement, which was signed on 19 May 2006, AvonRubber has agreed to sell, or to procure the sale of, Avon Automotive to thePurchaser. The value attributable to Avon Automotive is £63.0 million, on a cash and debtfree basis, subject to the assumption by the Purchaser of certain long termliabilities relating to employee retirement medical benefits and product recallprovisions amounting in total to £4.6 million. Avon Rubber expects to receivenet proceeds of not less than £52.1 million. The net proceeds are arrived atafter estimated transaction costs (£4.0 million), taxation (£1.9 million) andexpected working capital adjustments (£0.4 million). The Disposal, which is expected to be completed in June 2006, is conditional,inter alia, on the approval of Shareholders at the EGM. The Sale and PurchaseAgreement will terminate automatically if this approval is not received on orbefore 31 July 2006. The Purchaser is entitled to terminate the Sale andPurchase Agreement at any time before completion where any of the warrantiesgiven by Avon Rubber under the agreement cease to be true in all materialrespects or on the occurrence of certain specified events, including thebusiness of Avon Automotive suffering a material adverse change. Financial effects of the Disposal The Disposal is expected to be earnings dilutive in the current financial year.The Board believes that the actions and opportunities set out below provide theopportunity for growth in the future. An unaudited pro forma statement of netassets of the Group as at 31 March 2006 is set out at Annex B for illustrativepurposes only. At that date, the Group had consolidated net assets of £42.1million. As shown in that statement, the illustrative consolidated net assets of theGroup as at 31 March 2006, on a pro forma basis and adjusted to reflect theDisposal as if completion had occurred at that date, would have been £42.1million. It should be noted that the pro forma statement includes an amount of£4.5 million in respect of working capital adjustments relating to the Disposal.As noted above, the expected working capital adjustments at completion willamount to £0.4 million. The Disposal would have had a positive cash impact of£50.0 million (before taxation) based on the working capital position as at 31March 2006. Based on the projected working capital at completion the Disposal isexpected to have a positive cash impact of £54.1 million before taxation and£52.1 million after taxation. Related party arrangements The Avon Automotive businesses currently report to Leland Richards, DivisionalManaging Director. Following completion, Mr Richards, together with the othermembers of the Avon Automotive senior management team, will remain with thedisposed businesses. Mr Richards is deemed to be a related party under theListing Rules so far as his involvement in the Disposal is concerned, as he hasbeen a director of the Company during the last 12 months prior to the date ofthe transaction. As at 19 May 2006, Mr Richards held 39,534 Shares, representingapproximately 0.14 per cent of Avon Rubber's issued share capital. Mr Richardswill abstain from voting at the EGM on the resolution to approve the Disposaland additionally has undertaken to take all reasonable steps to ensure that hisassociates, where relevant, will abstain from voting on that resolution. As MrRichards ceased to be a director of the Company on 21 July 2005, he has not beenparty to the Board's decision to proceed with the Disposal. The Company has agreed with Mr Richards and other members of the Management Teamto make a payment on successful completion of the Disposal. As this payment isconnected with the Disposal, in the case of Mr Richards the anticipated paymentof £311,458 amounts to a related party transaction under the Listing Rules. Thetransaction with Mr Richards is, however, classed as a smaller related partytransaction for the purposes of the Listing Rules. As such, the transaction withMr Richards does not require the consent in general meeting of the Company, butin accordance with the Listing Rules the Company will notify the UK ListingAuthority ("UKLA") in writing of the terms of the transaction with Mr Richardsand ING Corporate Finance will confirm to the UKLA that the terms of the relatedparty transaction are fair and reasonable so far as Shareholders are concerned.The Company will undertake to the UKLA in writing to include details of therelated party transaction in its next published Annual Report. The Group - Businesses, strategy and prospects Respiratory protection The Board has identified respiratory protection as a major growth opportunityfor the Group. Having supplied the UK military with respirators for over 50years, the Group won the development contract for the United States JointServices General Purpose Mask ("JSGPM") in 1999. This is now entering theproduction phase and forms the basis for the Group's expansion in respiratoryprotection. In early 2005 the Board agreed the strategic direction for respiratoryprotection and identified the additional technologies that it wished to developor acquire. The first of these was Self Contained Breathing Apparatus ("SCBA").Having already made the decision to seek a disposal of Avon Automotive, theGroup acquired International Safety Instruments ("ISI") in June 2005 mainly tobring SCBA technology into the Group. The cost of the acquisition was £12.7million and ISI is performing strongly, producing a consistent level ofearnings. In addition, the Group has acquired the technology associated with thedesign and manufacture of the filters for the JSGPM respirators and is investingin production capability to manufacture a range of respiratory protectionfilters, the first of which are now being produced. The Group has also investedin the development of an escape hood which is designed to give 20 minutesChemical, Biological, Radiological and Nuclear ("CBRN") protection. Sales ofthis product are expected to start in the second half of this financial year. Inorder to develop a range of products to enable the Group to grow its respiratoryprotection business, ongoing investment in product development will be necessaryand, in due course, consideration will be given to the acquisition oftechnologies and other businesses. Non protection business In addition to the respiratory protection business, the Group will maintain itsexisting operations primarily in the dairy, aerosol gaskets and engineeredfabrications markets. The dairy market is served from Hi-Life, Wisconsin, USAand Hampton Park West, UK. The principal product offering from both sites forthis market is milking machine liners. Aerosol gaskets are manufactured atHampton Park West. Avon Engineered Fabrications based in Picayune, Mississippi,USA supplies skirts for air cushioned vehicles and portable storage tanks forfuel and water. Strategy The Group has a number of well established businesses that are operatingeffectively, producing consistent levels of profit and generating cash. TheGroup also has significant growth opportunities, particularly in the area ofrespiratory protection and, in the immediate future, the business will requireinvestment to grow and develop a broader product offering. Additionally, the UKoperations offer the opportunity of substantially improved performance. Thesebusinesses have underperformed and actions are being taken to bring them back toprofitability. The established businesses include the North American dairy business and ISI,which have both performed strongly, and Avon Engineered Fabrications, which hasexperienced substantial growth. All of these businesses are generatingconsistent levels of earnings and the Board would expect this to continue. The major growth opportunity is in respiratory protection. The Group has a longhistory in providing respiratory protection, particularly to the militarymarket. The Group has been awarded the contract to supply the new US militaryrespirator and production has already started. A facility to manufacture filtersis being established in Cadillac, Michigan, alongside the manufacturingoperation for the respirator. The Board expects sales to the US Department ofDefense to grow significantly over the coming months. This will form the basefor the Group to be able to address other military and homeland securitymarkets. In addition, sales of the new escape hood are expected to start beforethe end of the current financial year. There are further new products beingdeveloped in the area of respiratory protection and the Board would expect tosee growth continuing in future years. The contractual nature of these saleswill result in a proportion of the growth being in large discrete contracts. Inorder to smooth the various market provisioning cycles the Group is targetingnot only military but also the fire (through ISI), homeland security,industrial, law enforcement and medical markets. The Group has some underperforming businesses, particularly in the UK. The Boardis taking steps to improve the performance of its UK operations near Melkshamand a proposed reduction in the workforce has been announced today. The UKmixing facility is currently operating at a loss and actions are being taken toeliminate this. Both of these areas, whilst not offering significant scope fortop-line growth, offer the opportunity for meaningful margin improvement. Thereduced size of the Group will necessitate a reduction in corporate overheads.Some of these cost reductions were implemented last July in advance of thedisposal but further reductions will be necessary and will be announced in duecourse. Outlook The Disposal signals a significant strategic advance for the Group, allowingAvon Rubber to focus on the high growth potential the Board has identified forthe Group's respiratory protection products. Avon Rubber will continue todevelop its strong market positions in dairy, aerosol gaskets and engineeredfabrications. This combination of established businesses and growthopportunities provides a balanced portfolio of business activities for thefuture. The Group is targeting respiratory protection as its major growth area,particularly related in the short term to the new US military respirator andassociated filters, and an escape hood which provides emergency protection fromCBRN threats. Longer term, the Group has an exciting range of new products beingdeveloped and will explore appropriate acquisitions to enhance its technologies. Avon Rubber's recent acquisition, ISI, together with the North American dairybusiness and the engineered fabrications business in Mississippi are operatingin line with the Board's expectations and delivering consistent levels ofearnings. The Board is taking steps to improve the performance of the continuingUK operations. The expected growth from respiratory protection will build onthis foundation. The Board is excited about the opportunity to pursue its planned strategicdirection and is confident of the future opportunities for growth of thecontinuing businesses as this strategy is implemented. Expected Timetable of Principal Events Latest time and date for receipt of Forms of Proxy 48 hours prior to the EGM Extraordinary General Meeting 10 a.m. on 13 June 2006 or shortly thereafter Expected date of completion of the Disposal 23 June 2006 For further information: Avon Rubber p.l.c. 020 7067 0700Terry Stead, Chief Executive (until 2.00pm)Peter Slabbert, Finance Director ING Corporate Finance 020 7767 1000Simon NewtonVinesh Karia Weber Shandwick Square Mile 020 7067 0700Richard HewsRachel TaylorStephanie Badjonat ING Corporate Finance (the corporate finance division of ING Bank N.V., LondonBranch), which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Avon Rubber and no oneelse in connection with the Disposal and the associated related partyarrangements and will not be responsible to anyone other than Avon Rubber forproviding the protections afforded to clients of ING Bank N.V., London Branch orproviding advice in relation to the Disposal and the associated related partyarrangements, or any other matter referred to in this announcement. This announcement is not intended to and does not constitute, or form any partof, an offer to sell or an invitation to purchase any securities or thesolicitation of any vote or approval in any jurisdiction pursuant to theDisposal and the associated related party arrangements or otherwise. Persons whoare not resident in the United Kingdom, or who are subject to the laws of anyjurisdiction other than the United Kingdom, should inform themselves about, andobserve, any applicable legal and regulatory requirements. This announcement, including information included or incorporated by referencein this announcement, may contain "forward-looking statements" concerning theDisposal and the continuing Group. Generally, the words "will", "may", "should","continue", "believes", "expects", "intends", "anticipates" or similarexpressions identify forward-looking statements. The forward-looking statementsinvolve risks and uncertainties that could cause actual results to differmaterially from those expressed in the forward-looking statements. Many of theserisks and uncertainties relate to factors that are beyond the Company's abilityto control or estimate precisely, such as future market conditions and thebehaviours of other market participants, and therefore undue reliance should notbe placed on such statements. The directors of Avon Rubber assume no obligationand do not intend to update these forward-looking statements, except as requiredpursuant to applicable law. Annex A FINANCIAL INFORMATION ON AVON AUTOMOTIVE 1. Nature of financial information The following financial information relating to the entities which make up AvonAutomotive has been extracted without material adjustment from the consolidationschedules which support the interim financial statements of Avon Rubber for thesix months ended 31 March 2006 and 31 March 2005 and the financial statements ofAvon Rubber for the three years ended 30 September 2003, 30 September 2004, and30 September 2005. The financial information contained in sections 2 and 3 of this Annex A does notconstitute statutory accounts for any company within the meaning of Section 240of the Companies Act, 1985 (as amended) ("Act"). The statutory accounts for AvonRubber in respect of each of the last three financial years have been deliveredto the Registrar of Companies. The auditors' reports in respect of those statutory accounts for the three yearsended 30 September 2003, 30 September 2004 and 30 September 2005 wereunqualified and did not contain statements under Section 237(2) or (3) of theAct. PricewaterhouseCoopers LLP was the auditor of Avon Rubber in respect of thethree years ended 30 September 2003, 30 September 2004 and 30 September 2005. The audited financial information on Avon Automotive has been prepared underUnited Kingdom Generally Accepted Accounting Principles ("UK GAAP") using theaccounting policies set out in the respective Annual Reports of Avon Rubber forthe years ended 30 September 2003, 30 September 2004 and 30 September 2005. The unaudited financial information on Avon Automotive for the year ended 30September 2005 and the six months ended 31 March 2005 and 31 March 2006 has beenprepared on the basis of the recognition and measurement requirements of IFRSand International Accounting Standards currently in issue that either areadopted by the EU and will be effective (or available for early adoption) at 30September 2006 or are expected to be adopted and effective (or available forearly adoption) at 30 September 2006, being Avon Rubber's first annual reportingdate at which it is required to use accounting standards adopted by the EU.Based on these recognition and measurement requirements, management has madeassumptions about the accounting policies expected to be applied when AvonRubber's first annual financial statements are prepared in accordance withaccounting standards adopted by the EU for the year ending 30 September 2006.The unaudited financial information on Avon Automotive set out in sections 2 and3 of this Annex A is included in the Group's Interim Results for the six monthsended 31 March 2006, announced today. Some entities within the Group include both Automotive and non Automotiveoperations. Avon Rubber did not allocate the interest costs of such entitiesbetween these segments, and does not consider that a meaningful allocation canbe produced. In addition it is not possible to provide a meaningful allocationof tax balances nor other finance income. 2. Profit and loss accounts IFRS UK GAAP ------------------ ------------------ Six months ended Year ended Year ended 31 March 30 September 30 September ------------------ ------------- -------------- 2006 2005 2005 2005 2004 2003 Unaudited Unaudited Unaudited Audited Audited Audited ---------- ---------- ---------- ---------- ---------- ---------- £000 £000 £000 £000 £000 £000Turnover 96,702 90,372 186,391 186,391 177,289 181,781Cost of sales (85,587) (80,547) (166,127) (166,127) (156,831) (156,267) ---------- ---------- ---------- ---------- ---------- ----------Gross profit 11,115 9,825 20,264 20,264 20,458 25,514Net operating expenses (7,072) (6,590) (11,463) (11,497) (12,799) (17,794) ---------- ---------- ---------- ---------- ---------- ----------Operating profit profit before exceptional items 4,043 3,235 8,801 8,767 7,659 7,720Exceptional items - (1,760) (6,734) (6,734) - - ---------- ---------- ---------- ---------- ---------- ----------Total operating profit 4,043 1,475 2,067 2,033 7,659 7,720 ========== ========== ========== ========== ========== ========== 3. Balance sheets IFRS ----------------------- As at As at 31 March 30 September --------------------------- ------------ 2006 2005 2005 ------ ------ ------- Unaudited Unaudited Unaudited ----------- ----------- ------------ £000 £000 £000ASSETS Non-current assetsGoodwill - 10,270 10,078Intangible assets 5,282 5,715 6,072Property plant and equipment 34,421 41,351 40,639Investments accounted for using theequity method 146 74 146 Deferred tax asset 708 512 750 ---------- ----------- ------------ 40,557 57,922 57,685 Current assets Inventories 14,336 14,852 14,559Trade and other receivables 38,289 37,708 40,382Cash and cash equivalents - - - ----------- ----------- ------------ 52,625 52,560 54,941 ----------- ----------- ------------ Total assets 93,182 110,482 112,626 ----------- ----------- ------------LIABILITIES Current liabilitiesFinancial liabilities - - 2Trade and other payables 36,594 33,642 41,021Current tax liabilities 338 257 196 ----------- ----------- ------------ 36,932 33,899 41,219Net current assets 15,693 18,661 13,722Non current liabilities Financial liabilities - - -Deferred tax liability 1,487 996 1,460Retirement benefit liability 5,048 2,396 5,301Provisions 1,682 3,574 2,324 ----------- ----------- ------------ 8,217 6,966 9,085 Total liabilities 45,149 40,865 50,304 ----------- ----------- ------------NET ASSETS 48,033 69,617 62,322 =========== =========== ============ Annex B PRO FORMA STATEMENT OF NET ASSETS The following unaudited pro forma statement of net assets of the continuingGroup has been prepared under IFRS for illustrative purposes only to show howthe Disposal might have affected the net assets of the Group if it had occurredon 31 March 2006. Because of its nature, the pro forma statement addresses ahypothetical situation and does not, therefore, represent the continuing Group'sactual financial position or results. Adjustments ------------------------- Group(1) Avon Disposal(3) Use of Pro forma(5) Automotive(2) proceeds(4) ------------ ------------ ------------ ------------ ------------ £000 £000 £000 £000 £000ASSETS Non-current assetsGoodwill 6,338 - - - 6,338Intangible assets 10,456 - - - 10,456Property, plant and equipment 31,613 - - - 31,613Investments accounted for using the equity method - - - - -Trade and other receivables 597 - - - 597Deferred tax asset 2,620 - - - 2,620 ------------ ------------ ------------ ------------ ------------ 51,624 - - - 51,624 ------------ ------------ ------------ ------------ ------------ Current assetsInventories 9,072 - - - 9,072Trade and other receivables 16,492 - - - 16,492Cash and cash equivalents 7,808 - 49,977 (49,977) 7,808 ------------ ------------ ------------ ------------ ------------ 33,372 - 49,977 (49,977) 33,372Assets classified as held for sale 93,182 (93,182) - - - ------------ ------------ ------------ ------------ ------------ 126,554 (93,182) 49,977 (49,977) 33,372 ------------ ------------ ------------ ------------ ------------Total assets 178,178 (93,182) 49,977 (49,977) 84,996 ------------ ------------ ------------ ------------ ------------LIABILITIES Current liabilitiesFinancial liabilities 44,053 - - (44,053) -Trade and other 12,935 - - - 12,935 payablesCurrent tax liabilities 3,008 - 1,944 - 4,952 ------------ ------------ ------------ ------------ ------------ 59,996 - 1,944 (44,053) 17,887Liabilities directly associated with assets classified as held for sale 45,149 (45,149) - - - ------------ ------------ ------------ ------------ ------------ 105,145 (45,149) 1,944 (44,053) 17,887 ------------ ------------ ------------ ------------ ------------Net current assets/(liabilities) 21,409 (48,033) 48,033 (5,924) 15,485Non-current liabilities Financial liabilities 20,246 - - (5,924) 14,322Deferred tax liabilities 1,682 - - - 1,682Other non-current liabilities 1,153 - - - 1,153Retirement benefit liability 4,952 - - - 4,952Provisions 2,879 - - 2,879 ------------ ------------ ------------ ------------ ------------ 30,912 - (5,924) 24,988 ------------ ------------ ------------ ------------ ------------Total liabilities 136,057 (45,149) 1,944 (49,977) 42,875 ------------ ------------ ------------ ------------ ------------ Net assets 42,121 (48,033) 48,033 - 42,121 ============ ============ ============ ============ ============ Notes: (1) The net assets of the Group as at 31 March 2006 have been extracted without material adjustment from the unaudited Interim Results of Avon Rubber for the six months ended 31 March 2006. (2) The net assets of Avon Automotive as at 31 March 2006 have been extracted without material adjustment from the financial information on Avon Automotive set out in Annex A. In accordance with IFRS 5 "Non-current assets held for sale and discontinued operations", in the balance sheet at 31 March 2006 in Avon Rubber's interim statement of results for the six months then ended, all assets of Avon Automotive are shown in the single line "assets classified as held for sale" and all liabilities of Avon Automotive are shown in the single line "liabilities directly associated with assets classified as held for sale". The adjustment is therefore made against those line items. (3) The Disposal adjustments comprise: (a) an adjustment to cash of £49,977,000, representing: £'000 --------- Gross cash proceeds 63,000Deduction in respect of assumed long termliabilities (4,573)Working capital adjustment, calculated based on AvonAutomotive's actual working capital at 31 March 2006(see note (5)) (4,450)Transaction costs (4,000) --------- 49,977 ========= (b) an adjustment to current tax liabilities of £1,944,000, representing the tax payable on the Disposal. (4) The net proceeds are used to repay outstanding debt. (5) The actual working capital adjustment will be dependent on the level of Avon Automotive's working capital at Completion. Based on the expected movement in Avon Automotive's working capital balances between 31 March 2006 and Completion, it is expected that the actual cash received at Completion will be higher than that shown in this pro forma net asset statement. This information is provided by RNS The company news service from the London Stock Exchange