Cosalt plc Annual report & financial statements 2008

Business review
Principal risks
We now explain the principal risks we
may face in delivering our strategy.
Key markets
The Cosalt businesses are well positioned to benefi t from
potential growth in their market sectors. However, a substantial
downturn in one or more of these key markets could have a
material adverse impact on the Group. The Marine markets
are subject to local and global infl uences and the Offshore
businesses are affected by the international oil price.
Fluctuations in foreign currency
Many of the Cosalt businesses import a substantial amount
of their products or raw material and hence have an exposure
to foreign currency fl uctuations, most notably the US Dollar
and the Euro. In addition, particularly with the acquisition of
businesses in Mainland Europe and Norway, there are
increasing revenues in foreign currency. Whilst the Group seeks
to mitigate the impact of these on the net cash fl ow, adverse
movements in foreign currencies relative to Sterling may lead
to signifi cant adverse movements in profi tability and the Group
balance sheet.
Competition
There are competing products and service providers in most of
the Group’s activities. Changing commercial circumstances or
new entrants to the markets the Group operates in may have an
adverse effect on the Group.
Legislative changes
A signifi cant and growing proportion of the Group’s activities
are in regulation driven markets. Whilst the tendency has been
for regulation to increase, thereby increasing the requirement
for goods and services the Group supply, any reduction in
regulations could have a negative effect.
Principal risks
Fluctuations in revenue and expenses
The Group is subject to a number of external factors beyond
its control such as general economic conditions, adverse
movements in interest rates, seasonal and cyclical changes
in revenue and legislative changes, which could result in
signifi cant variations in the operating results from period to
period. In addition, the strategic changes taking place in the
Group may result in acquisitions and disposals of businesses,
which would signifi cantly alter the Group’s revenue and
operating position.
Final Salary Pension Plan
The Group has an obligation to fund Final Salary Pension
Plans and this creates an exposure to interest rates, infl ation,
investment returns and the longevity of the Plan members.
The Group has eliminated these risks for future service by the
closure of the Plan to future accrual from 31 December 2006;
however, the funding of the past service liabilities remains and
can create a signifi cant variance in operating profi ts, cash fl ow
and the balance sheet.
Whilst the risks noted above have been identifi ed from the
risk reviews undertaken throughout the Group, they do not
comprise all the risks associated with the Group and there
may be additional risks which have either been identifi ed as
not material or which are presently unknown which may have
an adverse effect on the Group’s businesses.
Cosalt plc Annual report & fi nancial statements 2008
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