The Directors of Fisher & Paykel Healthcare Corporation Limited at any time during or since the end of the half year are as follows:

Transcription

1 2646 Interim Report 26/11/04 3:40 PM Page 1 E X P A N S I O N Interim Report 2005

2 GROUP STRUCTURE * OWNS: *Fisher & Paykel Healthcare Limited *Fisher & Paykel Healthcare Pty Limited (Australia) *Fisher & Paykel Healthcare Properties Limited Fisher & Paykel Healthcare Limited (UK) Fisher & Paykel Holdings Inc. (USA) Fisher & Paykel Healthcare K.K. (Japan) FISHER & PAYKEL HOLDINGS INC (USA) OWNS: Fisher & Paykel Healthcare Inc. (USA) FISHER & PAYKEL HEALTHCARE LIMITED (UK) OWNS: Fisher & Paykel Healthcare SAS (France) Fisher & Paykel Holdings GmbH (Germany) FISHER & PAYKEL HOLDINGS GMBH (GERMANY) OWNS: Fisher & Paykel Healthcare GmbH & Co KG (Germany) ALL COMPANIES ARE WHOLLY OWNED *COMPANIES OPERATING UNDER A NEGATIVE PLEDGE AGREEMENT DIRECTORS DETAILS The Directors of Fisher & Paykel Healthcare Corporation Limited at any time during or since the end of the half year are as follows: Gary Paykel Michael Daniell Michael Smith Prof. Adrienne Clarke Sir Colin Maiden Dr Nigel Evans Lindsay Gillanders Chairman, Non-Executive Managing Director and Chief Executive Officer Deputy Chairman, Non-Executive, Independent Non-Executive, Independent Non-Executive, Independent Non-Executive, Independent Non-Executive During the six months to 30 September 2004: At the Annual Meeting of Shareholders held on 12 August 2004 Professor Adrienne Clarke and Dr Nigel Evans retired by rotation in accordance with the Company s constitution, and were re-elected to the Board. EXECUTIVES DETAILS Michael Daniell, Managing Director and Chief Executive Officer Senior Management Lewis Gradon, Senior Vice-President Research and Development Paul Shearer, Senior Vice-President Sales and Marketing Tony Barclay, Chief Financial Officer and Company Secretary DIRECTORY The details of the Company s principal administrative and registered office in New Zealand are: 15 Maurice Paykel Place, East Tamaki, Auckland, New Zealand Telephone: Facsimile: Postal Address PO Box 14348, Panmure, Auckland, New Zealand Internet Address Address investor@fphcare.co.nz Share Registry In New Zealand Computershare Investor Services Limited Level 2, 159 Hurstmere Road, Takapuna, Auckland Postal Address Private Bag 92119, Auckland 1020, New Zealand Telephone: Facsimile: Internet address: enquiry@computershare.co.nz The details of the Company s registered office in Australia are: New Street, Ringwood, Victoria 3134, Australia Telephone: Facsimile: Postal Address PO Box 167, Ringwood, Victoria 3134, Australia In Australia Computershare Investor Services Limited Level 4, 60 Carrington Street, Sydney, NSW 2000 Postal Address GPO Box 7045, Sydney, NSW 1115, Australia Telephone: Facsimile: Internet address: sydney.services@computershare.com.au Stock Exchanges The Company s ordinary shares are listed on the NZSX and the ASX. Incorporation The Company was incorporated in Auckland, New Zealand.

3 HALF YEAR REVIEW At Fisher & Paykel Healthcare, our purpose is to increase shareholder value by profitably developing, manufacturing, marketing and selling worldwide, healthcare devices which improve patient care and outcomes. Our results for the six months ended 30 September 2004 support this objective, with record revenue and operating profit, significant new product introductions, growing investment in research and development, expansion of our international sales activities and an increased interim dividend. We have expanded our product ranges in each of our core product groups and now offer a broad suite of products for both hospitals and the home care market. We are developing a new market opportunity with technology to improve outcomes in keyhole surgery and we have made encouraging progress in developing systems to treat Chronic Obstructive Pulmonary Disease (COPD). We are investing in the future, extending our manufacturing and R&D facilities in Auckland, as we continue to broaden the reach of our international sales force. Each of these developments underlines our commitment to grow value for shareholders through positioning ourselves well for long-term growth. In US dollar terms, revenue increased by 24% and operating profit increased by 25% over the prior comparable six month period. Operating profit in NZ dollars increased by 13% to NZ$41.7 million and our operating margin continued to be very strong at 35.5% for the six months. Profit after tax grew 11% to NZ$28.1 million compared with NZ$25.2 million in the comparable prior half year period. Strong acceptance of new products in each of our respiratory humidification, obstructive sleep apnea (OSA), and neonatal and warming categories helped to generate these results. Revenue from these three core product groups grew 25% in US dollar terms over Our performance is reflected in the Directors' approval of an increased dividend for the period of NZD 5 cents per ordinary share carrying full imputation credit. the prior comparable period, reflecting the valuable contribution made by our expanded product range. Total revenue, including distributed products, was US$75.0 million. This equates to NZ$117.4 million, up 12% on last year despite an average 11% appreciation of the NZ dollar against the US dollar. Our performance is reflected in the Directors' approval of an increased dividend for the period of NZD 5 cents per ordinary share carrying full imputation credit. This dividend is equivalent to 25 cents per share prior to October s five for one subdivision. Non-resident shareholders will receive a supplementary dividend of cents per share. The interim dividend will be paid on 3 December 2004, with a record date of 23 November and an ex-dividend date of 17 November for the ASX and 24 November for the NZX. The interim dividend represents 90% of first half after-tax profit in line with the company s current policy. In September we announced an extension, to 31 March 2005, of our NZ$27.5 million share buyback program. During the six months ended 30 September 2004 we repurchased a total of 3,186,050 shares at an average price of NZ$2.52 per share. 3

4 REVENUE BY PRODUCT GROUP Six Months Ended 30 September Six Months Ended 30 September Percentage Percentage variation US$000 US$000 Product Group NZ$000 NZ$000 variation +16% 32,028 37,223 Respiratory humidification 58,267 55,746 +5% +34% 21,833 29,223 Obstructive sleep apnea 45,694 37, % +46% 4,001 5,850 Patient warming and neonatal care 9,153 6, % +25% 57,862 72,296 Core products sub-total 113, , % +12% 2,467 2,752 Distributed 4,314 4,280 +1% +24% $60,329 $75,048 Total $117,428 $104, % RESPIRATORY HUMIDIFICATION Ongoing acceptance of our sophisticated MR850 humidifier system and strong growth in adult and neonatal breathing circuits contributed to first half growth in revenue of 16% to US$37.2 million in this product group. Our humidifier systems and consumables incorporate features to improve humidity delivery and patient care. Our most recent advance in respiratory humidification, the dry tube breathing circuit, has been very well received by customers. We are ramping up manufacturing capacity as we progressively introduce this new technology to our international markets. During the half year sales of our new entry level humidifier controller increased steadily. The MR810 represents another step in our drive to address new patient groups and, with its ability to operate with heated breathing circuits, is designed to improve humidity levels for patients receiving ventilation or oxygen therapy. We continue to make good progress in our project to develop a system to help treat home patients with Chronic Obstructive Pulmonary Disease (COPD). We see this system, which combines technology from our OSA and critical care products, as having the potential to serve a significant new patient group and open up a potentially large new market for our humidifier and breathing system technologies. OBSTRUCTIVE SLEEP APNEA In our OSA product group, total revenue from flow generators and masks grew a spectacular 73%, in US dollars, against the first half of last year. This primarily reflected growing market share for our expanded range of flow generators and masks. Overall OSA product group revenue grew a very encouraging 34% to US$29.2 million. Our gains in market share were a result of growth in sales to a wide range of customers, both in North America and international markets. Our HC407 FlexiFit nasal mask, and our HC431 FlexiFit full face mask, which were introduced in March and May respectively, have both been very well received by dealers and OSA patients in our major international markets. We have continued to expand our range of easy to fit and use premium masks. Our latest additions, the second generation Oracle oral mask and the Infinity direct nasal mask, were introduced in October. Our new flow generators have also been very well received by customers. The HC230 range includes our patented Ambient Tracking Plus technology, which ensures minimal condensation and avoids the potential of water in the tube affecting pressure delivery and efficacy. The new flow generator range also offers an increased pressure range, altitude compensation and an enhanced user interface. The HC600 series breaks new ground with our proprietary ThermoSmart technology, which applies our world leading critical care humidification technology to OSA therapy. The HC600 incorporates a heated breathing tube which provides optimal levels of humidity independent of external conditions. We believe that the benefits of ThermoSmart will include reduced symptoms due to airway drying, improved patient comfort and more effective continuous positive airway pressure (CPAP) therapy. 4

5 PATIENT WARMING AND NEONATAL CARE Patient warming and neonatal care product group revenue grew an impressive 46% in US dollar terms to US$5.9 million, reflecting very strong revenue growth from both warmers and neonatal breathing systems, including our infant CPAP system and our Neopuff infant resuscitator. INTERNATIONAL SALES We have continued to add to our teams in North America, Europe and Asia to increase our geographical coverage and to support ongoing growth. During the six months, as well as expanding our existing sales and marketing teams, we have established a marketing support office in Japan, a Middle East regional sales support office in Dubai and direct sales in Switzerland. North America generated 44% of our revenues for the half-year, with Europe contributing 30%, Asia/Pacific 22% and Other 4%. RESEARCH AND DEVELOPMENT Increasing research and development activity is critical to our ability to increase earnings through the introduction of new products in our core product groups. For the six months research and development expenditure increased 21% to NZ$8.2 million, compared with NZ$6.8 million for the first half of the 2003 financial year. This increase in R&D activity has seen several important new products introduced already this year. Further significant new products are in development including new humidifier systems, flow generators and masks. In New Zealand and Australia we are pilot marketing a system which humidifies the dry carbon dioxide gas used to inflate the abdomen during keyhole laparoscopic surgery. Clinical evidence suggests that post operative pain, recovery time, time to return to normal activities and risk of adhesions can all be reduced by humidifying the dry insufflation gas. OUTLOOK Site works have started for a 23,300m 2 building in addition to the existing 28,000m 2 facility on our Auckland site. This will provide space for increased manufacturing and R&D capacity on completion in mid Our strong performance in the six months to 30 September 2004, coupled with the introduction of new products and growth in our international sales activities give us confidence of a positive result for the full year. At 30 September 2004 we had in place a mix of foreign exchange contracts and call options, the majority of which are up to 18 months forward, with a face value of approximately NZ$267 million. These instruments are at average exchange rates of approximately 0.43 US dollars and 0.43 Euros to the NZ dollar and are to protect the company from exchange rate volatility. We will also continue to grow our international sales activities. For the full year we expect a continuation of strong US dollar revenue growth with full year revenue to be in the range of US$155 million to US$160 million. We expect operating margin percentage to continue to be in the mid thirties. GARY PAYKEL Chairman MICHAEL DANIELL Managing Director Chief Executive Officer 5

6 Accountants Report To the shareholders of Fisher & Paykel Healthcare Corporation Limited PricewaterhouseCoopers 188 Quay Street Private Bag Auckland, New Zealand DX CP24073 Telephone Facsimile We have reviewed the interim consolidated financial statements on pages 7 to 12. The interim consolidated financial statements provide information about the past consolidated financial performance and consolidated cash flows of the Group for the period ended 30 September 2004 and its consolidated financial position as at that date. This information is stated in accordance with the accounting policies set out on pages 38 to 41 of the most recent Annual Report. Directors responsibilities The Company s Directors are responsible for the preparation and presentation of the interim consolidated financial statements that present fairly the consolidated financial position of the Group as at 30 September 2004 and its consolidated financial performance and consolidated cash flows for the period ended on that date. Accountants responsibilities We are responsible for reviewing the interim consolidated financial statements presented by Management and the Directors in order to report whether, in our opinion and on the basis of the procedures performed by us, anything has come to our attention that would indicate that the interim consolidated financial statements do not present fairly the matters to which they relate. Basis of opinion A review is limited primarily to enquiries of Group personnel and analytical review procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit on the interim consolidated financial statements and, accordingly, we do not express an audit opinion. We have reviewed the interim consolidated financial statements of the Group for the period ended 30 September 2004 in accordance with the Review Engagement Standards issued by the Institute of Chartered Accountants of New Zealand. We have no relationship with or interests in the Company or any of its subsidiaries other than in our capacity as accountants conducting this review, auditors of the annual financial statements and providers of other assurance related services. Review opinion Based on our review, nothing has come to our attention that causes us to believe that the interim consolidated financial statements do not present fairly the consolidated financial position of the Group as at 30 September 2004 and its consolidated financial performance and consolidated cash flows for the period ended on that date. Our review was completed on 10 November 2004 and our review opinion is expressed as at that date. Chartered Accountants Auckland 6

7 7 UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL PERFORMANCE Year Six Months Six Months Six Months Six Months Year Ended Ended Ended Ended Ended Ended 132,056 60,329 75,048 Operating revenue 117, , ,865 38,468 17,769 21,097 Cost of sales 33,010 30,898 62,590 93,588 42,560 53,951 Gross profit 84,418 74, ,275 Operating expenses: 36,350 17,399 22,034 Selling, general and administrative expenses 34,477 30,255 59,145 8,675 3,890 5,243 Research and development expenses 8,203 6,764 14,115 45,025 21,289 27,277 Total operating expenses 42,680 37,019 73,260 48,563 21,271 26,674 Operating profit 41,738 36,984 79,015 Other income (expenses), net: 1, Interest income (expense), net , Other income , Total other income (expenses), net 1, ,920 49,743 21,803 27,489 Profit before taxation 43,014 37,910 80,935 (16,125) (7,289) (9,512) Taxation (14,884) (12,674) (26,236) 33,618 14,514 17,977 Profit after taxation 28,130 25,236 54, cps 2.8 cps 3.5 cps Basic earnings per share (i) 5.5 cps 4.9 cps 10.7 cps 6.4 cps 2.8 cps 3.4 cps Diluted earnings per share (i) 5.4 cps 4.8 cps 10.4 cps 512,119, ,183, ,851,500 Weighted average basic shares outstanding (i) 508,851, ,183, ,119, ,113, ,077, ,502,395 Weighted average diluted shares outstanding (i) 522,502, ,077, ,113,140 (i) Note that shares outstanding, and therefore earnings per share, has been adjusted to allow for the subsequent 5 for 1 share subdivision on 1 October UNAUDITED CONSOLIDATED STATEMENTS OF MOVEMENTS IN EQUITY Year Six Months Six Months Six Months Six Months Year Ended Ended Ended Ended Ended Ended Shareholders equity at the beginning of 106, , ,400 the period 191, , ,817 33,618 14,514 17,977 Profit after taxation 28,130 25,236 54,699 19,151 7,437 1,379 Movement in currency translation reserve 368 (341) (1,930) 52,769 21,951 19,356 28,498 24,895 52, Issue of share capital Increase in equity from disposition of unallocated shares (1,484) - (5,094) Repurchase of share capital (8,048) - (2,201) (31,663) (15,726) (18,070) Dividends (28,547) (27,658) (52,244) Shareholders equity at the end of the 126, , ,727 period 183, , ,225

8 UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION NOTES ASSETS Current assets 20,212 13,795 11,531 Cash and bank balances 17,226 23,212 30,578 11,237 17,651 14,727 Short-term investments 22,000 29,700 17,000 32,484 28,195 34,424 Debtors and prepayments 3 51,426 47,442 49,143 15,914 14,622 18,225 Inventories 4 27,226 24,604 24, ,462 Taxation 3,678 1,581 1, Employee share ownership plans loans ,987 75,380 81,587 Total current assets 121, , ,521 Long-term assets 47,291 42,794 48,859 Property, plant and equipment 72,989 72,008 71,545 1,475 1,251 1,518 Patents and trademarks 2,268 2,105 2, , Employee share ownership plans loans 161 2, ,559 6,434 3,533 Debtors and prepayments 3 5,278 10,827 11,436 1,190 1,184 1,076 Goodwill on consolidation 1,608 1,993 1,800 9,059 5,248 8,218 Deferred taxation 12,277 8,830 13, , , ,899 Total assets 216, , ,173 LIABILITIES Current liabilities 4,181 2,052 4,639 Bank overdrafts 6,930 3,453 6,326 7,145 6,307 7,614 Trade creditors 11,375 10,613 10, Provisions 1,002 1, ,189 1,232 Borrowings 1,841 2,001-1,581 1, Taxation 982 2,021 2,392 6,715 9,047 6,693 Other liabilities 5 10,000 15,221 10,159 20,115 20,476 21,506 Total current liabilities 32,130 34,454 30,433 Long-term liabilities Provisions , Borrowings - - 1, Other liabilities ,778 20,746 22,172 Total liabilities 33,124 34,908 32,948 SHAREHOLDERS EQUITY 126, , ,727 Shareholders equity 183, , , , , ,727 Total shareholders equity 183, , , , , ,899 Total liabilities and shareholders equity 216, , ,173 8

9 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS NOTES Year Six Months Six Months Six Months Six Months Year Ended Ended Ended Ended Ended Ended CASH FLOWS FROM OPERATING ACTIVITIES 145,677 68,902 86,905 Receipts from customers 135, , , Dividends received 4-4 1, Interest received 892 1,207 2,355 (94,952) (43,402) (56,008) Payments to suppliers and employees (87,647) (75,430) (153,984) (15,197) (5,338) (9,463) Taxation paid (14,807) (9,278) (24,726) (307) (32) (63) Interest paid (99) (56) (499) 36,670 20,824 21,944 Net cash flow from operations 6 34,324 36,189 60,177 CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Sale of property, plant and equipment (5,861) (2,762) (3,924) Purchase of property, plant and equipment (6,140) (4,800) (9,536) 60,553 36,963 23,406 Sale of short-term investments 36,624 64,238 98,525 (49,636) (33,978) (26,506) Purchase of short-term investments (41,474) (59,051) (80,761) 5, (6,474) Net cash flow from (used in) investing activities (10,130) 402 8,247 CASH FLOWS (USED IN) FINANCING ACTIVITIES 1, Employee share purchase schemes , Issue of share capital (1,484) - (5,143) Repurchase of share capital (8,048) - (2,201) Disposition of unallocated employee share scheme shares ,933 New borrowings 3, (26) - (1,933) Repayment of borrowings (3,025) - (42) (31,663) (15,914) (18,244) Dividends paid (28,547) (27,658) (52,244) Supplementary dividends paid to (2,359) (1,150) (1,647) overseas shareholders (2,577) (1,998) (3,838) (34,109) (16,605) (24,398) Net cash flow (used in) financing activities (38,177) (28,859) (56,013) 7,629 4,450 (8,928) Net increase (decrease) in cash (13,983) 7,732 12,411 6,769 6,769 16,031 Opening cash 24,252 12,230 12,230 1, (211) Effect of foreign exchange rates 27 (203) (389) 16,031 11,743 6,892 Closing cash 10,296 19,759 24,252 RECONCILIATION OF CLOSING CASH 20,212 13,795 11,531 Bank 17,226 23,212 30,578 (4,181) (2,052) (4,639) Bank overdrafts (6,930) (3,453) (6,326) 16,031 11,743 6,892 10,296 19,759 24,252 9

10 NOTES TO THE FINANCIAL STATEMENTS 1. ORGANISATION AND BASIS OF PRESENTATION Fisher & Paykel Healthcare Corporation Limited and its subsidiaries ("the Company") is a leading designer and manufacturer of heated humidification products for use in respiratory care and the treatment of obstructive sleep apnea. The Company also offers an innovative range of patient warming devices and neonatal care products. The Company's headquarters and manufacturing operations are located in New Zealand, with products sold in over 90 countries worldwide. Principal distribution and sales sites are located in the United States, the United Kingdom, Australia and Europe. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Financial Reporting Standard No 24, Interim Financial Statements, issued by the Institute of Chartered Accountants of New Zealand, and are presented in New Zealand dollars. The accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by NZ GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended 30 September 2004 are not necessarily indicative of the results that may be expected for the financial year ending 31 March The New Zealand dollar unaudited condensed consolidated financial statements have been translated into US dollars to assist in the understanding of the Company's financial results. 2. ACCOUNTING POLICIES All significant accounting policies have been applied on a basis consistent with those used in the audited financial statements for the year ended 31 March DEBTORS AND PREPAYMENTS CURRENT 22,632 17,921 21,799 Trade debtors 32,565 30,155 34,239 (311) (358) (303) Less allowance for doubtful accounts (452) (603) (471) 22,321 17,563 21,496 32,113 29,552 33,768 4,800 6,594 5,636 Unrealised gain on foreign currency instruments 8,420 11,096 7, Foreign currency option premium prepaid ,335 3,657 7,275 Other debtors and prepayments 10,867 6,153 8,071 32,484 28,195 34,424 51,426 47,442 49,143 TERM 6,143 5,475 3,289 Unrealised gain on foreign currency instruments 4,914 9,213 9,294 1, Other debtors and prepayments 364 1,614 2,142 7,559 6,434 3,533 5,278 10,827 11, INVENTORIES 5,385 4,146 5,565 Materials 8,313 6,976 8,146 11,743 11,340 14,331 Finished products 21,410 19,082 17,766 (1,214) (864) (1,671) Provision for obsolescence (2,497) (1,454) (1,836) 15,914 14,622 18,225 27,226 24,604 24,076 10

11 NOTES TO THE FINANCIAL STATEMENTS 5. OTHER LIABILITIES CURRENT 3,705 3,528 4,994 Employee entitlements 7,460 5,937 5, Unrealised loss on foreign currency instruments - 1, ,842 - Foreign currency option premium liability - 4,782-2,890 1,865 1,699 Other creditors and accruals 2,540 3,137 4,373 6,715 9,047 6,693 10,000 15,221 10,159 TERM Other creditors and accruals Year Six Months Six Months Six Months Six Months Year Ended Ended Ended Ended Ended Ended 6. CASH FLOW RECONCILIATION 33,618 14,514 17,977 Profit after taxation 28,130 25,236 54,699 Add (deduct) non-cash items: 4,656 2,258 2,618 Depreciation 4,097 3,924 7, Amortisation of patents Amortisation of goodwill Accrued interest income Movement in provisions (123) (4,767) (956) 841 Movement in deferred tax 1,428 (1,075) (5,950) Movement in working capital 3,383 2,182 3,344 Payables and accruals 403 (1,984) (4,037) (6,270) Debtors and prepayments 619 3,293 (2,808) (3,053) (2,982) (1,682) Inventories (2,199) (1,930) (841) Provision for taxation net of supplementary 4,260 2,662 (808) dividend paid (1,103) 4,697 7,081 Movement in unrealised revaluations of 2,094 1,655 2,017 foreign currency instruments 3,040 4,386 6,963 2, (2,761) Foreign currency exchange translation (603) (1,046) (3,238) Gain on sale of land included within investing - - (364) activities (570) ,670 20,824 21,944 Net cash flow from operations 34,324 36,189 60,177 11

12 NOTES TO THE FINANCIAL STATEMENTS 7. FINANCIAL INSTRUMENTS Through its importing and exporting activities the Group generates a number of internal foreign currency hedges. General policy is to monitor current and anticipated future foreign currency trading cash flows, and advice is taken on likely foreign currency rate trends. The Company enters into foreign currency option contracts and forward foreign currency contracts in managing its foreign exchange risk. The purpose of the Company s foreign currency hedging activities is to protect the Company from exchange rate volatility with respect to New Zealand dollar net cash movements resulting from the sales of products in foreign currency to foreign customers, and the purchase of raw materials in foreign currency from foreign and domestic suppliers. The company enters into foreign currency option contracts and forward foreign currency contracts to hedge anticipated net sales/costs originating in New Zealand and denominated principally in US dollars, Euros, British pounds and Australian dollars. The terms of the foreign currency option contracts and forward foreign currency contracts generally do not exceed three years, however the foreign currency option contracts can be up to five years. As at 1 April 2001 the Company adopted Statement of Financial Accounting Standards No 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as amended, which standardises the accounting for derivative instruments. The Company s hedging contracts were not designated as accounting hedges under SFAS 133 because of the restrictive definitions and therefore were marked to market with the resulting gains and losses being recognised in earnings in the period of change. Unrealised gains or losses were recognised as incurred on the Statement of Financial Position as either other assets, within debtors and prepayments, or liabilities and were recorded as gains or losses on the Statement of Financial Performance. Unrealised gains and losses on currency derivatives were determined based on dealer quoted prices. As at 6 November 2002 the Company designated its hedging contracts and options as accounting hedges under Statement of Standard Accounting Practice No 21, Accounting for the Effects of Changes in Foreign Currency Exchange Rates (SSAP 21). As a result of this change in policy, the mark to market fair value recorded at 6 November 2002 under SFAS 133 is retained on the Statement of Financial Position and will be offset against the gain/loss on settlement of the contracts. Movements in the mark to market fair values subsequent to 6 November 2002 are deferred and will be reflected in the Statement of Financial Performance when the anticipated transactions occur. The foreign currency exchange rates used in the mark to market adjustment as at 6 November 2002 (USD , AUD , GBP , EUR ), have become the effective hedge rates for the foreign currency option contracts and forward foreign currency contracts in place on this date. Notional principals of foreign exchange and option contracts amounts outstanding were as follows: ,372 Purchase commitments forward exchange contracts 2, , , ,239 Sale commitments forward exchange contracts 240, , ,236 32, ,836 17,532 Put option contracts purchased 26, ,672 49,034 Call option contracts sold 8. COMMITMENTS There has been no material movement in capital expenditure or lease commitments from that disclosed in the 2004 Annual Report. 9. CONTINGENCIES We are unaware of the existence of any contingencies that would have a material impact on the operations of the Company. 12