Interim Financial Report

Transcription

1 Interim Financial Report 2007 CONTENT Press release dated August 30, 2007, on First Half Statement by the Person responsible for the 2007 interim financial report 4. Statutory Auditors Review Report on the Condensed Interim Consolidated Financial Statements

2 CHARGEURS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Six month ended June 30, 2007

3 2 Consolidated Balance Sheet (in millions) Assets June 30, 2007 December 31, 2006 Non-current assets Property, plant and equipment (note 6) Intangible assets (note 7) Deferred tax assets (note 10) Non-current financial assets Investments in non-consolidated companies Investments in associates Long-term loans and receivables (note 9) Derivative instruments (note 14) - Other non-current assets (note 11) Current assets Inventories and work-in-progress (note 12) Trade and other receivables (note 13) Factored receivables* Derivative instruments (note 14) Other receivables and prepaid expenses (note 15) Cash and cash equivalents (note 16) Total Assets Equity and Liabilities June 30, 2007 December 31, 2006 Equity (note 17) Attributable to equity holders of the parent company Share capital (note 17) Share premium account Other reserves and retained earnings (note 17) Profit for the period Treasury stock (0.5) (1.0) Translation reserve (3.0) (1.8) Minority interests Total equity Non-current liabilities Long-term borrowings (note 20) Deferred tax liabilities (note 10) Pension and other post-employment benefit obligations (note 18) Provisions (note 19) Other non-current liabilities Current liabilities Trade payables Other payables (note 21) Factoring liabilities* Current income tax liability Derivative instruments (note 14) Short-term portion of long-term borrowings (note 20) Short-term bank loans and overdrafts (note 20) Total Equity and Liabilities Notes 1 to 32 are an integral part of the interim consolidated financial statements. *Receivables for which title has been transferred.

4 3 Consolidated Income Statements (in millions) First-half 2007 First-half 2006 Revenue Cost of sales (321.8) (308.5) Gross profit Distribution costs (41.9) (41.8) Administrative expenses (25.0) (26.3) Other operating income and expense (note 22) (5.9) (6.4) Operating profit Finance costs and other financial income and expense, net (note 24) (5.3) (3.6) Share of profit/(loss) of associates 0.7 (0.1) Pre-tax profit for the period Income tax expense (note 25) (2.9) (3.9) Profit for the period Attributable to: Equity holders of the parent company Minority interests Earnings per share (in ) - Basic earnings per share Diluted earnings per share Weighted average number of shares outstanding 10,245,114 10,074,233 Notes 1 to 32 are an integral part of the interim consolidated financial statements.

5 4 Consolidated Cash Flow Statements (in millions) Cash flows from operating activities First-half 2007 First-half 2006 Pre-tax profit of consolidated companies Adjustments (note 27) Income tax paid (2.2) (3.9) Cash flow Dividends from associates 0.3 Change in operating working capital (21.9) 9.5 Net cash from/(used by) operating activities (8.0) 19.1 Cash flows from investing activities Acquisitions of subsidiaries, net of cash acquired 0.3 Disposals of subsidiaries, net of cash transferred (0.2) Purchases of property, plant and equipment (6.0) (10.3) Proceeds from sales of property, plant and equipment Purchases of other non-current assets (0.4) Proceeds from sales of other non-current assets (a) 2.0 Other cash flows from investing activities Net cash used by investing activities (2.9) (1.6) Cash flows from financing activities Proceeds from issue of share capital Sale/(purchase) of treasury stock 0.6 Proceeds from new borrowings Repayments of borrowings (2.5) (27.1) Dividends paid to equity holders of the parent company (7.2) Net cash used by financing activities (8.7) (11.1) Net increase/(decrease) in cash and cash equivalents and bank overdrafts (19.6) 6.4 Cash and cash equivalents and bank overdrafts at beginning of period Effect of changes in foreign exchange rates (0.2) (1.8) Cash and cash equivalents and bank overdrafts at period-end Notes 1 to 32 are an integral part of the interim consolidated financial statements. (a) Reduction in the capital of an associated company

6 5 Consolidated Statement of Changes in Equity (in millions) Share capital Share premium account Other reserves and retained earnings Translation reserve Treasury stock Equity attributable to equity holders of the parent company Minority interests Total At December 31, (1.1) Exchange difference on translating foreign operations (9.6) (9.6) (0.5) (10.1) Dividends paid Gains and losses on cash flow hedges Gains and losses on financial instruments Changes in treasury stock Issue of share capital Cancellation of shares Profit for the period Other At June 30, (1.0) At December 31, (1.8) (1.0) Exchange difference on translating foreign operations (1.2) (1.2) (0.1) (1.3) Dividends paid (6.7) (6.7) (0.5) (7.2) Gains and losses on cash flow hedges Gains and losses on financial instruments Changes in treasury stock Issue of share capital Cancellation of shares Profit for the period Other At June 30, (3.0) (0.5) Notes 1 to 32 are an integral part of the interim consolidated financial statements.

7 6 Notes to the interim consolidated financial statements 1- General information 2- Summary of significant accounting policies 3- Financial risk management 4- Use of accounting estimates and assumptions 5- Acquisitions - Disposals NOTES to the Balance Sheet 6- Property, plant and equipment 7- Goodwill and other intangible assets 8- Finance leases 9- Long-term loans and receivables 10- Deferred taxes 11- Other non-current assets 12- Inventories and work-in-progress 13- Trade receivables 14- Derivative instruments 15- Other receivables and prepaid expenses 16- Cash and cash equivalents 17- Equity 18- Pension and other post-employment benefit obligations 19- Provisions 20- Borrowings 21- Other payables and factoring liabilities NOTES to the Income Statement 22- Other operating income and expense 23- Employees 24- Finance costs and other financial income and expense 25- Income tax expense 26- Earnings per share NOTES to the Cash Flow Statement 27- Cash flows from operating activities NOTES Additional Information 28- Commitments and contingencies 29- Related party transactions 30- Information by business segment 31- Subsequent events 32- Seasonal fluctuations in business

8 7 1. General Information and its subsidiaries (the Group) are organized around four business lines, Wool (wool processing), Fashion (design and marketing of mainly wool-based fabrics, including organizing production), Interlining (interlining and technical fabrics production and marketing) and Protective Films (development and marketing of technical solutions to protect steel, aluminum, plastic and other surfaces during the production process). is a société anonyme governed by the laws of France. Its headquarters are located at 38, rue Marbeuf, Paris, France. shares are listed on Euronext. The interim consolidated financial statements for the six months ended June 30, 2007 were approved by the Board of Directors on August 29, All amounts are expressed in millions of euros, unless otherwise specified. 2. Summary of significant accounting policies 2.1 Basis of preparation The consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union. The interim financial statements for the six months ended June 30, 2007 are condensed financial statements prepared in accordance with IAS 34 Interim Reporting. They do not therefore include all the disclosures contained in a full set of financial statements and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, The accounting policies applied to prepare the condensed interim consolidated financial statements for the six months ended June 30, 2007 are unchanged compared with those used to prepare the annual consolidated financial statements for the year ended December 31, The following new standards, amendments to existing standards and interpretations are applicable in financial periods commencing on or after January 1, Standards, amendments and interpretations affecting the Group: - IFRS 7 Financial Instruments: Disclosures. - IAS 1 Amendment: Capital Disclosures (resulting from the adoption of IFRS 7). These two standards will be applied in the full set of financial statements for the year ending December 31, IFRIC 10 Interim Financial Reporting and Impairment - IFRIC 9 Reassessment of Embedded Derivatives. Standards, amendments and interpretations not applicable by the Group: - IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies. - IFRIC 8 Scope of IFRS 2.

9 8 The following new standards, amendments to existing standards and interpretations applicable in future years have not been early adopted by the Group: - IAS 23 Amendment: Borrowing Costs - IFRS 8 Operating Segments - IFRIC 12 Service Concession Arrangements - IFRIC 11 Group and Treasury Share Transactions. During the first half of 2007, a development project fulfilled the criteria requiring the costs to be capitalized under IAS 38. In the consolidated financial statements for the year ending December 31, 2007, the following paragraph will be added to Note 2.6 Intangible Assets: An intangible asset arising from development is recognized if, and only if, all of the following can be demonstrated: - The technical feasibility of completing the intangible asset so that it will be available for use or sale. - The Group s intention to complete the intangible asset and use or sell it. - Its ability to use or sell the intangible asset. - How the intangible asset will generate probable future economic benefits. - The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. - The Group s ability to measure reliably the expenditure attributable to the intangible asset during its development. The intangible asset is amortized over its probable useful life. 3. Financial risk management Financial risk policies in the first half of 2007 were based on the principles described in the 2006 Annual Report. 4. Use of accounting estimates and assumptions The preparation of financial statements under IFRS requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. 4.1 Critical accounting estimates and assumptions The critical accounting estimates and assumptions that could result in a material adjustment to the carrying amount of assets and liabilities during subsequent periods are analyzed below. (a) Impairment of goodwill Goodwill is tested for impairment on an annual basis as described in Note 2.6. to the 2006 consolidated financial statements. The recoverable amounts of cash-generating units were determined at December 31, 2006 based on calculations of value in use, which require the use of estimates (see Note 7). Impairment tests may be carried out at June 30 if any unfavorable events occur between two annual tests. The performance of the individual businesses in the first half of 2007 can be summed up as follows:

10 9 Fashion: Sales for the period were around 10% below budget and the same applied to operating profit. However, this unfavorable trend was offset by the immediate success of the new Kliméo product among customers. The agreement with Holfipar, Morocco, signed in early July, has significantly improved the business s medium-term outlook (see Notes 5 and 30) and the Group therefore considered that it will not be necessary to record any impairment loss on Fashion goodwill at December 31, Interlining: sales for the period were slightly below budget, while operating profit was significantly above budget. The notes to the 2006 consolidated financial statements state that if a 9.2% discount rate had applied to calculate discounted future cash flows for Interlining, rather than the 8.2% rate used by management, an impairment loss would have been recorded at December 31, In view of the trend in long-term interest rates during the first half, the discount rate at June 30 is around 8.6%. Based on changes in business plan projections, there was no justification to write-down Interlining goodwill at June 30, Films: Results for the period were fully in line with the budget. (b) Income tax The 21.3 million income tax asset carried in the balance sheet at December 31, 2006, which arose from tax loss carryforwards and temporary differences, was based on forecast taxable profit for the next five years, totaling 64 million (see Note 4 to the 2006 consolidated financial statements). If these forecasts were to be adjusted during this period, additional valuation allowances could have to be recorded or existing valuation allowances could be reversed, as follows: (in millions) Actual profit/ forecast profit variance Additional impairment (valuation allowance) Reversal of valuation allowances - 10% % % % 6.6 As of June 30, 2007, no information had come to light that would lead to a revision of the estimated period of recovery of deferred tax assets, as determined as of December 31, Critical judgments The following comment was included in the notes to the 2006 consolidated financial statements: For several years, the Group has sold receivables under no-recourse agreements. Under French GAAP, the amounts concerned were disclosed in the notes to the consolidated financial statements. The method of accounting for these sales was changed as a result of the first-time adoption of IFRS, as explained below. French GAAP Receivables sold under no-recourse agreements are derecognized. As there are no specific accounting standards under French GAAP dealing with this type of transaction, the accounting treatment used in the parent company accounts (which are still prepared in accordance with French GAAP) is based on the legal form of the transactions and the assets are derecognized when title is transferred. This approach was also applied in the consolidated financial statements prior to the transition to IFRS, as routine commercial transactions carried out in accordance with normal business or industry practice such as the sale of receivables under no-recourse agreements were excluded from the scope of application of the joint recommendation issued on November 15, 2002 by the Commission des Opérations de Bourse

11 10 and the Commission Bancaire on special purpose entities and asset derecognition (which set down a general principle based on the transfer of the significant risks of ownership of assets). IFRS Under IFRS, transfer of title is not the only criterion to be applied. IAS 39 Financial Instruments: Recognition and Measurement, which deals with the derecognition of financial assets, including trade receivables, requires entities to base their analysis on the following three criteria: Whether the entity has transferred the contractual rights to receive the cash flows of the financial asset. Whether the entity has transferred substantially all the risks and rewards of ownership of the financial asset. Whether the entity has retained control of the financial asset. teams analyzed the contracts for the sale of the receivables based on these three criteria. In view of the fact that this issue was still being discussed by experts, and no final official position had been taken, it was deemed prudent to keep these receivables on balance sheet and record a corresponding liability for the amount of the cash proceeds received. In 2006, the accounting authorities issued guidance on the circumstances in which sold receivables may be derecognized. will perform a detailed analysis of all of its contracts in 2007, to determine how they will be treated. This analysis, launched during the first half of 2007, showed that a substantial proportion of the sold receivables will fulfill the criteria allowing their continued recognition off-balance sheet. As the analysis had not been finally completed as of June 30, 2007, the presentation applied in the 2005 and 2006 annual financial statements was used. 5. Acquisitions - Disposals No companies were acquired in the first half of Filana Asset Management, owner of certain properties in Lithuania, was sold during the period. Major negotiations concerning Fashion were completed in early July (Note 30).

12 11 NOTES TO THE BALANCE SHEET 6. Property, plant and equipment Changes in the carrying amount of property, plant and equipment can be analyzed as follows: (in millions) Land Buildings Plant and equipment Fixtures and fittings Assets under construction Total December 31, Additions Disposals (0.4) (0.2) (0.6) Business divestments (0.6) (2.7) (3.3) Depreciation (1.9) (4.6) (1.1) (7.6) Impairment (0.2) (0.5) (0.7) Other (4.0) (0.1) Translation adjustment (0.1) (0.3) (0.4) (0.8) June 30, (in millions) Land Buildings Plant and equipment Fixtures and fittings Assets under construction Total December 31, Additions Disposals (1.1) (4.2) (0.7) (0.1) (6.1) Business divestments 0.0 Depreciation (1.9) (3.7) (0.9) (6.5) Impairment (0.3) (0.1) (0.4) Other (3.5) 2.2 Translation adjustment (0.1) (1.1) (1.2) (0.2) (0.3) (2.9) June 30,

13 12 7. Goodwill and other intangible assets Goodwill arising on the acquisition of subsidiaries can be analyzed as follows: (in millions) Gross Accumulated impairment losses Net December 31, (25.4) 69.8 Translation adjustment (3.3) (3.3) June 30, (25.4) 66.5 December 31, (25.4) 64.4 Translation adjustment (0.9) (0.9) June 30, (25.4) 63.4 Goodwill has been allocated to the following cash-generating units, representing the Group s four business segments. (in millions) June 30, 2007 December 31, 2006 Wool - - Fashion Interlining Protective Films Goodwill impairment tests No impairment losses were recognized on goodwill at June 30, Protective Films goodwill is measured in US dollars and the decline in first-half 2007 was entirely due to the dollar s fall against the euro. Research and development costs Development costs of 0.3 million were recognized in intangible assets in the first half of 2007.

14 13 8. Finance leases The carrying amount of finance leases included in property, plant and equipment is as follows: (in millions) June 30, 2007 December 31, 2006 Land Buildings Plant and equipment Fixtures and fittings Gross Accumulated depreciation (28.5) (26.7) Net Future minimum lease payments under finance leases and the carrying amount of the corresponding liabilities can be analyzed as follows: (in millions) June 30, 2007 December 31, 2006 Future minimum lease payments under finance leases Finance lease liabilities Future finance cost Future lease payments can be analyzed by maturity as follows: (in millions) Minimum lease payments Finance lease liabilities Due in less than one year Due in one to five years Due in more than five years Total at June 30, Due in less than one year Due in one to five years Due in more than five years Total at December 31, The main finance leases correspond to sale-and-leaseback transactions on real estate, for which financing is generally obtained for periods ranging from seven to fifteen years.

15 14 9. Long-term loans and receivables The 9.8 million total for this item breaks down as follows: Long-term loans in an amount of 2.8 million; Long-term deposits in an amount of 7 million. The fair value of these assets is close to their book value. 10. Deferred taxes a) Analysis by probable recovery/settlement date, before netting asset and liability positions for the same taxable entity (in millions) June 30, 2007 December 31, 2006 Net deferred tax assets - Recoverable beyond 12 months Recoverable within 12 months Deferred tax liabilities - Settlement beyond 12 months (12.4) (10.3) - Settlement within 12 months (2.3) (1.7) Total b) Analysis by source, before netting asset and liability positions for the same taxable entity (in millions) June 30, 2007 December 31, 2006 Net deferred tax assets: - Temporary differences Tax loss carryforwards and tax credits Deferred tax liabilities: - Temporary differences (14.7) (11.9) Total Deferred tax assets are recognized for tax loss carryforwards only when their future recovery is considered probable based on projected taxable profits for the next five years. Note 4 analyzes the income statement impact of any variances between actual and projected profits. A significant portion of the Group s evergreen losses have been written down in full. Deferred tax assets net of deferred tax liabilities increased by 0.3 million in the first half of Other non-current assets The 9.8 million total for this item includes foreign tax credits representing 3.9 million.

16 Inventories and work-in-progress Inventories and work-in-progress can be analyzed as follows: (in millions) Gross June 30, 2007 December 31, 2006 Raw materials and supplies Finished and semi-finished goods and work-inprogress Total gross Provisions for impairment (13.1) (12.9) Net Increase in provisions (3.8) (4.8) Reversals of provisions used Reversals of surplus provisions Trade receivables (in millions) June 30, 2007 December 31, 2006 Trade receivables Gross Provisions (12.8) (12.8) Net As these receivables are all short term and are not interest bearing, changes in interest rates do not generate any material interest rate risk Given their short maturities, the fair value of these receivables may be considered to be close to their carrying amount. Factored receivables At June 30, 2007, certain receivables had been sold under no-recourse agreements with factoring companies. The amounts paid by the factoring companies for the receivables totaled million at June 30, 2007 ( 87.2 million at December 31, 2006). These receivables are shown on balance sheet even though they have been sold and despite the fact that title has been transferred to the factoring company (see Note 4).

17 Derivative instruments The carrying amount of derivatives can be analyzed as follows: (in millions) June 30, 2007 December 31, 2006 Assets net of liabilities Fair value Notional Fair value Notional Fair value hedges Currency hedges (a) Cash flow hedges Currency hedges (a) 0.0 (8.1) Interest rate hedges 1.2 (30.0) 0.9 (30.0) Hedges of net investments in foreign operations Currency hedges (a) 0.3 (22.3) 0.1 (22.8) Derivatives not qualifying for hedge accounting Currency instruments (a) (6.2) Interest rate instruments 0.0 (32.3) (32.3) Derivative instruments net asset/(liability) (a) Notional amounts shown in parentheses correspond to net seller positions Fair value hedges (notional amount: 7.6 million) correspond to hedges of assets and liabilities and firm commitments by subsidiaries. Cash flow hedges on a notional amount of 8.1 million correspond to hedges of the Group s exposure to changes in the exchange rate for the Korean won ( 2.4 million net seller position) and the Chinese yuan ( 5.7 million net seller position). Hedges of net investments in foreign operations correspond to a position on a notional amount of USD 15 million relating to net assets held in the dollar zone (including the assets of the Group s Uruguayan and Argentine subsidiaries which have the US dollar as their functional currency, and excluding Protective Films); and a further position on a notional amount of USD 15 million relating to a portion of Protective Films net assets in the USA. Interest rate instruments on a notional amount of 62.3 million (net borrower position) correspond to: - Partial conversion to fixed rate of 50 million in credit lines obtained by Protective Films, through interest rate swaps. The fixed-rate portion represents 30 million, or 60% of the nominal amount of the credit line. In addition, a swap cancellation option has been purchased on a notional amount of 24 million. - Conversion to fixed rate of a medium-term loan taken out by a subsidiary, for 4.8 million. In addition, a swap cancellation option has been purchased on a notional amount of 3.5 million.

18 17 Net notional amounts of currency derivatives by currency (negative notional amount = seller position) (in millions) June 30, 2007 December 31, 2006 Australian dollar US dollar (28.4) (47.9) Euro (3.6) (5.1) Pound sterling 0.4 (0.4) Canadian dollar (0.5) Australian dollar 5.5 New Zealand dollar 2.1 South African rand 1.9 Korean won (3.8) Chinese yuan (5.7) Total (19.7) (21.5) Net notional amounts of interest rate derivatives by currency (negative = borrower position) (in millions) June 30, 2007 December 31, 2006 Euro (62.3) (62.3) US Dollar - Maturities of derivatives at fair value (in millions) June 30, 2007 December 31, 2006 Within 6 months In 6 to 12 months In 12 to 18 months In more than 18 months Other receivables and prepaid expenses (in millions) June 30, 2007 December 31, 2006 Short-term tax receivables Other receivables and accruals Provision for impairment (4.9) (7.5) Net The fair value of these assets is close to their carrying amount.

19 Cash and cash equivalents Cash and cash equivalents analyzed in the cash flow statement break down as follows: (in millions) June 30, 2007 December 31, 2006 Cash equivalents Marketable securities Term deposits Sub-total Cash at bank Total Equity All shares have been called and are fully paid-up. Changes in the number of shares outstanding since December 31, 2005 are as follows. Shares outstanding at December 31, ,131,747 Issuance of shares on exercise of employee stock options 161,450 Shares outstanding at December 31, ,293,197 Cancellation of shares held in treasury - Issuance of shares on exercise of employee stock options - Shares outstanding at June 30, ,293,197 Based on a par value of 16 per share, shares outstanding represented issued capital of 164,691,152 at June 30, 2007 ( 164,691,152 at December 31, 2006). All of the shares are of the same class, with the same rights to dividends and returns of capital. Shares held in treasury can be analyzed as follows: shares held: June 30, 2007 December 31, 2006 Number Cost in euros Number Cost in euros - By 13, ,852 56,517 1,023,687 - In connection with the liquidity contract 11, ,682 - Total 24, ,534 56,517 1,023,687 At June 30, 2007, no shares were held for allocation to employees (December 31, 2006: 29,400 shares). Other reserves at June 30, 2007 included cumulative net gains on cash flow hedges for 1.2 million (December 31, 2006: 0.9 million).

20 Pension and other post-employment benefit obligations Pension and other post-employment benefit obligations were unchanged at June 30, 2007 compared with December 31, 2006, at 13 million. This stability is explained by the fact that the average number of employees covered by the plans was 3,460 persons in first-half 2007 compared with 3,464 in Provisions Provisions can be analyzed as follows: (in millions) June 30, 2007 December 31, 2006 Provisions for other non-current liabilities Provisions for other current liabilities (a) Total (a) Included in other payables. Provisions include the following: Industrial restructuring costs (1) Other contingencies (2) Total (1) Industrial restructuring costs include the costs of redundancy plans announced to the employees concerned prior to June 30, 2007, rental payments on vacant and semi-vacant premises where the related operations have been or are in the process of being discontinued, and compulsory costs payable on sales of facilities in accordance with the applicable regulations or sales contracts. The related cash outflows are expected to occur in 2007 and (2) Including provisions of 1.7 million for which the related cash outflows will occur in the next twelve months. Additions to long- and short-term provisions amounted to 0.7 million in the first half of 2007 (2006: 0). Prior-year provisions used in the first half of 2007 came to 2.6 million (2006: 5.2 million), while 0.7 million in unused prior-year provisions were reversed during the period (2006: 1.9 million). The translation adjustment was 0 in the first half of 2007 (2006: negative adjustment of 0.4 million). 20. Borrowings Financial liabilities are classified as Other financial liabilities. Borrowings are measured using the amortized cost method. Maturities of long-term debt can be analyzed as follows:

21 20 (in millions) June 30, 2007 December 31, 2006 Due in less than 1 year Due in 1 to 2 years Due in 2 to 3 years Due in 3 to 4 years Due in 4 to 5 years Due in more than 5 years Total Borrowings by type of lender (in millions) Notional amount June 30, 2007 Notional amount December 31, 2006 Effective interest rate June 30, 2007 Loans from financial institutions % Short-term bank loans and overdrafts Borrowings before interest rate hedges, by interest reset date for variable-rate borrowings and repayment date for fixed-rate borrowings 2007/ / / / / and beyond Fixed-rate borrowings Variable-rate borrowings 93.2 Borrowings after interest rate hedges, by interest reset date for variable-rate borrowings and repayment date for fixed-rate borrowings 2007/ / / / / and beyond Fixed-rate borrowings Variable-rate borrowings 63.2

22 21 At June 30, 2007, the average interest rate on long-term debt was 4.82% (December 31, 2006: 3.95%) before the impact of swaps and 4.37% (December 31, 2006: 3.77%) after swaps. The average fixed-rate portion of these borrowings after hedging was 34.31%% in the first half of 2007 (2006: 41.33%). Long-term debt was denominated in the following currencies at June 30, 2007: (in millions) June 30, 2007 December 31, 2006 Euro US Dollar Other Total The carrying amount of variable-rate borrowings is close to their fair value in view of the interest rates applied. At June 30, 2007, the carrying amount of borrowings originally contracted at fixed rates was 32.2 million. In September 2005, Protective Films took out a 50 million loan with two banks. The related agreements include the following banking covenants: Debt/equity < 115% < 95% Debt/EBITDA < 2.5 < 2.0 Interest cover (EBITDA/finance costs) > 6.0 > 6.0 These ratios are calculated based on the business segment s consolidated accounts. 21. Other payables and factoring liabilities Other payables include short-term provisions in an amount of 2.9 million (see Note 19). Receivables sold under no recourse agreements are shown in the balance sheet for million (see Note 13), with the corresponding liability recorded under Factoring liabilities.

23 22 NOTES TO THE INCOME STATEMENT 22. Other operating income and expense Other operating income and expense include the following: (in millions) First-half 2007 First-half 2006 Research and development costs (5.5) (5.5) Exchange gains and losses (0.8) (0.3) Discretionary profit sharing (0.9) (0.7) Gains/(losses) on disposal of non-current assets Restructuring costs (0.4) (1.0) Other (5.9) 0.0 (6.5) 23. Employees The average number of employees of fully consolidated subsidiaries was as follows in first-half 2007: June 30, 2007 December 31, 2006 Employees in France 1,060 1,035 Employees outside France 2,400 2,429 Total employees 3,460 3, Finance costs and other financial income and expense (in millions) First-half 2007 First-half 2006 Finance costs (7.0) (5.7) Interest income on loans and investments Fair value adjustments to: - Investments in non-consolidated companies Financial instruments Exchange gains and losses on transactions in foreign currencies Other 0.1 (0.4) Finance costs and other financial income and expense, net (5.3) (3.6)

24 Income tax expense Income tax expense reported in the income statement is analyzed in the table below. (in millions) First-half 2007 First-half 2006 Current taxes (3.4) (2.8) Deferred taxes 0.5 (1.1) Total (2.9) (3.9) The following table reconciles the Group s actual tax charge to the theoretical tax charge which would apply based on the weighted average tax rate of the consolidated companies (which is similar to the French tax rate): (in millions) First-half 2007 First-half 2006 Income tax expense for the period (2.9) (3.9) Standard French income tax rate 33.33% 33.33% Tax at the standard rate (3.5) (3.1) Difference between income tax expense for the period and tax at the standard rate 0.6 (0.8) Effect of differences in foreign tax rates Effect of permanent differences between book profit and taxable profit (0.7) 0.7 Utilizations of tax losses recognized in prior periods and tax losses recognized during the current period 2.2 Effect of unrelieved tax losses (0.8) (1.4) Other (0.3) (0.2) 26. Earnings per share Basic earnings per share are calculated by dividing profit attributable to equity holders of the parent company by the weighted average number of shares outstanding for the period. In the first half of 2007, basic earnings per share amounted to 0.8. As there are no significant dilutive instruments outstanding, diluted earnings per share are the same as basic earnings per share.

25 Cash flows from operating activities (in millions) First-half 2007 First-half 2006 Cash flows from operating activities Pre-tax profit of consolidated companies Elimination of non-cash items: Depreciation and amortization Provisions for liabilities and employee benefit obligations (2.5) (3.2). Impairment of non-current assets Fair value adjustments (0.8) (0.3). Impact of discounting Unrealized gains on cash flow hedges reallocated or used during the period (before tax and minority interests) Gains on sales of investments in non-consolidated companies and other non-current assets Income tax paid (2.2) (3.9) Cash flow Commitments and contingencies 28.1 Commercial commitments At June 30, 2007, and its subsidiaries were committed to purchasing plant and equipment for a total of 0.3 million (2006: 0.6 million) Guarantees At June 30, 2007, and its subsidiaries had given guarantees for a total of 0.5 million. On the sale of Fabrics, Fashion undertook to indemnify the buyers if outsourced production volumes for the three years following the sale are below the contractually defined level Collateral The Group s bank borrowings include two loans obtained in 2005 for a total of 4.5 million. These loans are guaranteed by mortgages on the real estate assets of the subsidiaries concerned Commitments under non-cancelable medium-term operating leases Future minimum payments under non-cancelable medium-term operating leases break down as follows by maturity: (in millions) June 30, 2007 December 31, 2006 Due in less than 1 year Due in 1 to 5 years Due in more than 5 years Total

26 Related party transactions Wool Eurasia, a wholly-owned subsidiary of, owns 50% of the capital of a company with which the Group conducts business. In the first half of 2007, the company concerned decided to reduce its capital by a total of 4 million, leading to a 2 million reduction in Wool Eurasia s interest. 30. Information by business segment Profits and losses by business segment were as follows for the first half of 2007: First-half 2007 (in millions) Wool Fashion Interlining Protective Films Nonoperating Consolidated Revenue Operating profit (3.5) 15.8 Finance costs (5.3) Share of profit of associates 0.7 Pre-tax profit for the period 11.2 Income tax expense (2.9) Profit for the period 8.3

27 26 Profits and losses by business segment were as follows for the first half of 2006: First-half 2006 (in millions) Wool Fashion Interlining Protective Films Nonoperating Consolidated Revenue Operating profit (2.1) 12.9 Finance costs (3.6) Share of profit/(loss) of associates (0.1) Pre-tax profit for the period 9.2 Income tax expense (3.9) Profit for the period 5.3 Additional information concerning the first half of 2007: Wool Fashion Interlining Protective Films Nonoperating Consolidated Depreciation (2.2) (0.7) (3.3) (1.5) (7.7) Impairment losses: On goodwill 0.0 On property, plant and equipment (0.2) (0.4) (0.6) On inventories (0.3) (1.2) (1.4) (0.9) (3.8) On trade receivables 0.1 (0.1) 0.0

28 27 Additional information concerning the first half of 2006: Wool Fashion Interlining Protective Films Nonoperating Consolidated Depreciation (0.9) (0.7) (3.4) (1.4) (0.1) (6.5) Impairment losses: On goodwill 0.0 On property, plant and equipment (0.3) (0.1) (0.4) On inventories (0.6) (1.3) (0.7) (0.5) (3.1) On trade receivables (0.1) (0.6) (0.7) Restructuring costs (1) (0.7) (0.9) (1.6) (1) Aggregate restructuring costs recorded under various account headings. Segment assets and liabilities at June 30, 2007 Wool Fashion Interlining Protective Non- Films operating Total Assets (a) Liabilities (b) Capital employed Purchases of assets (a) Excluding cash and cash equivalents (b) Excluding equity and bank borrowings net of cash and cash equivalents. Segment assets and liabilities at December 31, 2006 Wool Fashion Interlining Protective Films Non-operating Total Assets (a) Liabilities (b) Capital employed Purchases of assets (a) Excluding cash and cash equivalents. (b) Excluding equity and bank borrowings net of cash and cash equivalents

29 Subsequent events In early July, signed an agreement with Holfipar, Morocco to join forces within Fashion. The press release announcing the partnership is reproduced below: and Holfipar Join Forces Within Fashion Fashion, the apparel fabric business of, has signed a partnership agreement with Holfipar, the Morocco-based holding company of the Tazi family, through Holfipar subsidiary Sefita. Also involved in apparel fabric, Sefita has worked with since Under the agreement, the two partners will hold equal equity interests in Fashion. In an increasingly globalized marketplace, the combined entity will have the capabilities to offer fashionable products and innovative fabrics manufactured in the Euro-Mediterranean region. This alliance confirms Fashion s position as one of Europe s leading providers of apparel fabric. The competitiveness of the new entity and its enhanced, internationally recognized know-how and creativity will drive a strategy of expansion and accelerated growth. The 50% interest in Fashion will be sold to Holfipar during the second half of the year; the transaction is not expected to give rise to any material gain or loss. Following the transaction, Fashion will be accounted for by the equity method in accordance with IAS Seasonal fluctuations in business Revenues are traditionally higher in the first half than in the last six months of the year, for reasons specific to each business and also because the summer vacation period for European companies falls in the second half. In 2007, following developments involving several companies, the second half is expected to be roughly as strong as the first half.

30 FIRST HALF 2007 Strong Earnings Growth The Board of Directors of met on August 29 under the chairmanship of Eduardo Malone to approve the consolidated financial statements for the six months ended June 30, Revenue for the period rose by 3.5% to 410 million, reflecting sustained demand in the Protective Films business and the impact of higher raw wool prices on Wool s revenue. First-half operating income reached 16 million, up by more than 20% over the year-earlier period. Net income totaled 8 million, representing a period-on-period increase of 60%. 1 - CONSOLIDATED RESULTS First Half (in millions) Revenue Operating income Net income 8 5

31 2 ANALYSIS BY BUSINESS SEGMENT CHARGEURS WOOL First Half (in millions) Revenue Operating income 3 1 Wool s revenue grew by 12%, mainly because of higher raw wool prices. The increase in operating income stems from cost savings generated primarily by the restructuring measures in Europe. As part of its industrial expansion plan, Wool opened the ownership of its combing mill in Argentina to local wool partner Ituzaingo, at a price consistent with capital employed. Under the terms of the agreement, Wool and Ituzaingo will hold equal equity interests in the Trelew plant in Patagonia. CHARGEURS FASHION First Half (in millions) Revenue Operating income 1 1 Fashion s revenue declined by 8% to 46 million in first-half Operating result for the period was positive. In July 2007, and Holfipar, the Morocco-based holding company of the Tazi family, signed an agreement giving them joint control of Fashion on a 50/50 basis. The alliance will give the combined entity the know-how, competitiveness and creative skills it needs to drive a strategy of accelerated growth. The value of 12 million used for the transaction is equal to Fashion s equity. CHARGEURS INTERLINING First Half (in millions) Revenue Operating income 6 4 Revenue for Interlining was stable at 124 million. Operating income rose 50%, benefiting from the progressive relocation of production capacities.

32 CHARGEURS PROTECTIVE FILMS First Half (in millions) Revenue Operating income 10 9 Revenue increased by 4.6%, in line with the Protective Films business s growth dynamic. Operating income for the period grew at a similar rate, thanks to a more favorable product mix, despite the 2 million adverse impact of exchange rates and of higher polyethylene prices. 3 OUTLOOK Based on the following previously announced and recently revised assumptions: - A euro/dollar exchange rate of $1.30, revised to $ A risk-free interest rate (10-year OAT rate) of 3.7%, revised to 4.4%, and a 5% equity premium - Crude oil at $60 a barrel, revised to $65 a barrel - Achievement of 2007 sales forecasts - No restructuring costs and/or asset write-downs stemming from new market-driven competitiveness demands, expects to achieve revenue of 815 million over the full year, operating income of 33 million and net income of 18 million. August 30, 2007 Corporate Communications Phone: +33 (0) Phone as of September 3, 2007: +33 (0)

33 STATEMENT BY THE PERSON RESPONSIBLE FOR THE 2007 INTERIM FINANCIAL REPORT I declare that, to the best of my knowledge, (i) the financial statements included in the interim financial report have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets and liabilities, financial position and results of the consolidated companies, and (ii) the interim management report includes a fair review of significant events of the past six months, their impact on the interim financial statements and the main related party transactions for the period. Disclosure of the main related party transactions is required only for issuers of shares, as is a description of the main risks and uncertainties in the second half of the year. Paris, August 29, 2007 Eduardo Malone Chairman and Chief Executive Officer

34 STATUTORY AUDITORS' REVIEW REPORT ON THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Six months ended June 30, 2007) This is a free translation into English of the Auditors review report issued in the French language and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. To the shareholders, In our capacity as Statutory Auditors of the Company and as required by Article L of the French Commercial Code (Code de commerce), we have performed a limited review of the accompanying condensed interim consolidated financial statements of for the period from January 1 to June 30, 2007, and of the information contained in the management report. These condensed interim consolidated financial statements are the responsibility of the Board of Directors. Our responsibility, based on our limited review, is to report our conclusions concerning these interim consolidated financial statements. We conducted our limited review in accordance with the professional standards applied in France. A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical procedures and any other procedures that may be deemed necessary. A limited review is substantially less in scope than an audit conducted in accordance with auditing standards applicable in France and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our limited review, nothing has come to our attention that causes us to believe that the accompanying condensed interim consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34, the International Financial Reporting Standard adopted in the European Union for Interim Financial Reporting. In accordance with professional standards applied in France, we have also reviewed the information given in the management report accompanying the condensed interim consolidated financial statements that were the subject of our limited review. We have no comments to make as to its fair presentation and its conformity with the condensed interim consolidated financial statements. Neuilly-sur-Seine and Paris, August 30, 2007 The Statutory Auditors PricewaterhouseCoopers Audit Catherine Sabouret S&W Associés Vincent Young