Ar 2010

Charter International plc Annual Report 2010
Performance critical solutions for growth industries
Contents
A global group of engineering companies with market-leading positions based on customer service, brands and technology.
2010 review 01 Financial highlights 02 Charter at a glance 04 Chairmans statement 05 Chief Executives statement Divisional and financial review 12 ESAB 18 Howden 24 Financial review 28 Risks 30 Corporate responsibility report Directors and corporate governance 36 Board of Directors 38 Key management 39 Corporate governance 44 Audit Committee report 46 Remuneration report 54 Directors report Financial statements Consolidated financial statements 58 Financial statements contents 59 Audit opinion Group nancial statements 60 Consolidated income statement 61 Consolidated statement of comprehensive income 62 Consolidated statement of changes in equity 63 Consolidated balance sheet 64 Consolidated cash ow statement 64 Reconciliation of net cash ow to movement in net cash 65 Notes to the consolidated nancial statements 106 Principal interests in Group undertakings 107 Five-year record Parent Company financial statements 108 Audit opinion parent Company nancial statements 109 Company prot and loss account 109 Company balance sheet 110 Notes to the nancial statements of the Company Other information 115 Shareholder information
Financial highlights
2010 review 01 35
Revenue
Adjusted operating prot1
1,719.6m
2009 1,659.2m
145.9m
2009 125.6m
+3.6%
+16.2%
Adjusted prot before tax2
Total equity shareholders funds
Charters results for 2010 were an improvement over 2009, with revenue, adjusted operating prot and adjusted earnings per share all increasing. These results were achieved against an economic backdrop that was better than that experienced in 2009, but which remained varied with some regions and end-user segments continuing to be weak. Despite the continuing economic uncertainties in Europe, we expect further progress in 2011 as a result of the ongoing investment and improvements made in both businesses, with a faster pace in emerging markets. Michael Foster Chief Executive 17 February 2011
Directors and corporate governance 36 57
148.2m
2009 126.0m
635.7m
2009 549.9m
+17.6%
+15.6%
Adjusted earnings per share2
Dividend per share (total for the year)
Financial statements 58 114
66.1p
2009 55.0p
23.0p
+20.2%
2009 21.5p
+7.0%
1 Before amortisation and impairment of acquired intangibles and goodwill, acquisition costs and exceptional items 2 Before amortisation and impairment of acquired intangibles and goodwill, acquisition costs, exceptional items, net nancing charge on retirement benet obligations and gains/(losses) on retranslation of intercompany loan balances
Other information 115 116
01
Charter at a glance
Charters businesses are focused on welding, cutting and automation (ESAB), and on air and gas handling (Howden).
Business and nancial strengths Charters businesses are established world leaders, supplying performance critical components to end-users in many different regions and industries around the world. As such, Charter is well placed to deliver sustained long-term growth.
International diversity Approximately one-half of revenue arises in developed markets and one-half in emerging markets, with strong market positions in the BRIC economies Market leading technology Charters businesses have world leading technology, supported by continuing investment in research and development Favourable long-term dynamics in key end-user segments Most of the largest end-users are related to the energy industry Flexible and modern manufacturing Predominantly located in low cost areas with increased use of outsourcing Continued investment Capital expenditure remained well in excess of depreciation Dividend Increased dividend of 23.0 pence per share, 2.9 times covered by adjusted earnings Balance sheet strength Total equity shareholders funds of 635.7m with net cash
Revenue (2009: 1,659.2m)
Adjusted operating prot* (2009: 137.5m)
Employee numbers (2009: 12,451)
1,719.6m
ESAB 67.3% Howden 32.7%
157.1m
ESAB 56.8% Howden 43.2%
12,313
ESAB 8,479 Howden 3,783 Corporate functions 51
*Before central operations of 11.2m (2009: 11.9m)
International 02 CharterReport 2010 plc Annual
2010 review 01 35
A global presence spread across developed and emerging markets
Revenue by region in 2010
Europe
North America
575.0m
2009: 595.7m
347.4m
2009: 367.6m
-3.5%
Asia
-5.5%
314.6m
2009: 306.9m
+2.5%
South America
Rest of the world
281.6m
2009: 203.6m
201.0m
2009: 185.4m
+38.3%
+8.4%
Key nancials
2010 2009 2008 2007 2006
Revenue Adjusted operating prot Adjusted operating margin Adjusted earnings per share Shareholders funds
1,719.6m 145.9m 8.5% 66.1p 635.7m
1,659.2m 125.6m 7.6% 55.0p 549.9m
1,887.0m 211.2m 11.1% 99.2p 578.3m
1,451.1m 173.8m 11.9% 84.7p 426.4m
1,257.9m 144.6m 11.5% 68.1p 246.1m
03
Chairmans statement
The total dividend in respect of 2010 is 23 pence per share, an increase of 7 per cent.
Lars Emilson
ESAB and Howden as a means of generating long-term value for shareholders. The Board recognises that an important component of shareholder value is the dividend paid to the Companys shareholders. In recognition of the Companys improved performance in 2010, the Board has declared an increased second interim dividend of 15.5 pence per share (2009: 14.5 pence per share), making a total dividend in respect of 2010 of 23 pence per share (2009: 21.5 pence per share), an increase of 7 per cent. It is anticipated that the dividend will be paid on 6 May 2011 to holders of ordinary shares registered on 15 April 2011. Going forward, the Board intends to continue to grow the dividend in a way that reects the overall performance of the Company and the general economic and nancial conditions in the principal markets in which the Company and its subsidiaries operate. Corporate governance We assessed the performance and effectiveness of the Board and its Committees during the year and action was taken to address the key points coming out of the review. Corporate governance is monitored by the Board on an ongoing basis to ensure the policies and procedures we have in place continue to be effective and appropriate and that key risks are kept under review. In 2010 we updated our policies on anti-bribery and corruption and whistleblowing and reissued our Code of Conduct and equal opportunity policy. I am very pleased to note that we have seen further good progress in our health and safety performance. On the environmental side, the benets from the projects we have undertaken to improve environmental efciency are now being seen in the business. Employees On behalf of the Board and shareholders I would like to thank all Charters employees for their hard work and the contribution they made to the Company in the year. I continue to be impressed with the quality and dedication of the people we have in our businesses around the world. Concluding comments By focusing on prot and cash generation, and through maintaining a strong balance sheet, the Board believes that the Company has the opportunity to make further progress in 2011 in what is likely to continue to be an uncertain economic and nancial environment. Lars Emilson Chairman 17 February 2011
Dear Shareholder
I am pleased to report that in 2010 Charter achieved improved results with revenue, adjusted operating prot and adjusted earnings per share all well ahead of 2009. A particular feature of the year was the divergence in the performance of different regions and industries. Despite the success that Charter has had in growing its businesses globally, Europe remains the region where most prot is generated. Here, conditions were mixed and while some countries and industries performed well, others remained in recession which undoubtedly impacted Charters overall performance in the year. It is by no means certain how quickly there will be a more general return to economic growth across all the regions in which Charter operates, and we are very aware that the economies and nancial systems in Europe and across the world remain vulnerable to further shocks. The Board believes that the continuation of the measures taken by the Company in recent years to strengthen and improve its businesses are crucial to its ability to grow protability in the future. Key parts of this are to invest in efcient plants and systems, to continue a strong research and product development programme and to make selective acquisitions where there are opportunities to do so. For these reasons, the Board believes that Charter should seek to maintain the balance sheet strength which has been successfully built up in recent years and which continued in 2010, so that at the end of the year, shareholders funds stood at 636 million, an increase of 86 million during the year. The Board pays close attention to the Companys funding position. At 31 December 2010, net cash stood at 2 million. The net cash outow for the year of 49 million reects the re-absorption of cash into working capital as ESABs business recovered, as well as capital expenditure and the payment of dividends to shareholders. It is a strategic objective to tighten ESABs working capital whilst continuing to grow its revenue and prot. Shareholder value and dividend The Boards review of the Companys strategy conrmed that Charter will continue to focus on the development of both
Chief Executives statement
2010 review 01 35
Charter beneted from its global presence, including its strong positions in the BRIC economies and emerging markets.
Michael Foster
support future growth. ESAB made substantial improvements to its distribution network in Europe, completed the restructuring of its cutting business and more than restored the capacity closed during the recession. It also introduced new lines of consumables and equipment. Howden increased its presence in the important Indian power market, through entering into a joint venture with one of Indias leading boiler-makers, and also made an acquisition in Australia.
Charters strategy
Charters results for 2010 were an improvement over 2009, with revenue, adjusted operating prot and adjusted earnings per share all increasing. These results were achieved against an economic backdrop that was better than that experienced in 2009, but which remained varied with some regions and end-user segments continuing to be weak. ESAB saw much improved revenue, adjusted operating prot and adjusted operating margin, although its overall performance was held back as the welding segment recorded lower margins in the second half of the year and, as anticipated, the cutting & automation segment made an operating loss for the year as a whole and only returned to prot in the second half. Howdens performance was ahead of our previous expectations, with excellent contract execution and continued growth in its aftermarket business. It achieved an adjusted operating margin of 12.1 per cent, compared with 11.4 per cent in 2009. A key part of Charters strategy is to build upon the market leading positions both ESAB and Howden have achieved, which are based on brand, technology and customer service. ESAB and Howden are focused on serving their customers requirements, with emphasis being placed on continuing product development, increasing operational efciency, improving customer service and maintaining effective cost management. Geographical coverage will continue to expand as strength is built in high growth regions. A crucial part of this will be to build upon our existing presence in the BRIC economies, and our approach will recognise the diverging requirements of different regions.
Acquisitions are an important means of achieving our objectives, especially where they bring a presence in a region or technology that would take time and expense to build organically and provided they generate sufcient risk-weighted return. Capital expenditure will be maintained at levels in excess of depreciation In 2010, revenue was 1,719.6 million (2009: 1,659.2 million), an and investment in research and development and in development increase of 3.6 per cent and adjusted operating prot was 145.9 of our employees will continue. A strong balance sheet will help to ensure that the necessary nancial resources are available to million (2009: 125.6 million), an increase of 16.2 per cent. achieve these goals. The Board considers that the best measure of the extent to For divisional strategies > See p16 and p22 which Charter is generating shareholder value is adjusted earnings per share, which excludes exceptional and other items considered by the Board to not directly relate to underlying Review of 2010 performance. Adjusted earnings per share in the year were Economic and nancial conditions generally improved in 2010, 66.1 pence (2009: 55.0 pence), an increase of 20.2 per cent. as the global economy recovered from the depths of recession, although the recovery was uneven. The Board is also focused on the cash generated from operations which during the year amounted to 85.5 million The BRIC economies and emerging markets showed higher (2009: 171.5 million), a reduction of 50.1 per cent, which levels of growth and in some cases achieved record levels of reects, in particular, the absorption of cash into ESABs output. However, across developed economies, conditions working capital as volumes recovered. It is a strategic objective were patchy and more subdued. In Western Europe and North to tighten ESABs working capital whilst continuing to grow its America, after a slow start to the year due to severe weather, revenue and prot. During a period when Howdens order book economic conditions showed strong improvement in the rst reduced in size, cash ow from operations, at approximately half of the year, although the second half proved tougher. In 80 per cent of operating prot, continued to be excellent. Southern Europe, some countries continued to decline. During 2010, Charter maintained investment in improving the effectiveness of its plants and systems. Capital expenditure was once again well ahead of depreciation, with the major project completed during the year being Howdens new factory in Brazil. Investment in research and development continues to Within this economic environment, Charter beneted from its global presence including its strong positions in the BRIC economies and emerging markets, which partly offset softer conditions in its markets in the developed world.
05
Chief Executives statement (continued)
The impact of the global recovery was more immediately seen in ESAB, which recorded higher volumes in its welding business despite some end-user segments such as construction, being at or declining. With its later cycle, Howden experienced lower sales of new equipment, but, partly assisted by continuing growth in its aftermarket business, was able to improve margins. ESAB ESABs results were up on 2009, as the business beneted from an improved trading environment and the recent restructuring. Revenue for the year was 1,157.6 million (2009: 1,031.4 million), an increase of 12.2 per cent, and adjusted operating prot was 89.3 million (2009: 66.0 million), an increase of 35.3 per cent. ESABs adjusted operating margin for the year increased to 7.7 per cent (2009: 6.4 per cent), which reected higher volumes. The improvement in operating margin in the rst half of the year was not maintained in the second half, due to usual seasonal factors, adverse changes in mix and, in certain instances mainly in Europe, increases in steel prices not being fully recovered through higher selling prices. The total volumes of welding consumables sold during the year were 465k-tonnes (2009: 405k-tonnes), an increase of 15 per cent. Within this, volumes of solid welding wire increased by 30 per cent as ESAB increased its market share in the recovering vehicle segment. By comparison, the volume of electrodes, which are a higher margin product, only grew by 7 per cent. This was as a Summary of results and performance
consequence of certain important users of electrodes, such as the general industrial and construction sectors, being less strong. In most European markets, electrode volumes were static or showed only modest growth. Those regions in which electrodes did show higher growth were generally emerging markets where selling prices and, in some cases margins, are lower. ESAB was able to deliver higher volumes of welding wire by re-commissioning certain equipment capacity that had been taken out of service during the recession, and by making selective additions to capacity where necessary to alleviate potential shortages. ESAB also out-sourced the production of certain types of welding wire. Revenue from sales of standard equipment increased by 28 per cent as volumes beneted from higher levels of steel consumption, and also from a new range of equipment introduced during the year. There was a particularly strong performance in South America, with other regions, including Europe and North America, starting to show improvement as the year progressed. ESABs overall protability was also constrained by the cutting & automation segment, which suffered from low new equipment sales during the year, as traditional customers, such as shipbuilding, remained depressed and as the wind energy industry, which had been an important customer of the automation business in 2009, faced increased uncertainty. Having recorded a loss in the rst half of the year the segments nancial performance improved during the second half, as the
2010
2009
Change
Revenue (m) ESAB Howden Charter Adjusted operating prot (m) ESAB Howden Central operations Charter Adjusted operating margin ESAB Howden Charter Adjusted profit before tax (m) Adjusted earnings per share (pence) Cash flow from operations (m)
1,157.6 562.0 1,719.6 89.3 67.8 (11.2) 145.9 7.7% 12.1% 148.2 66.1 85.5
1,031.4 627.8 1,659.2 66.0 71.5 (11.9) 125.6 6.4% 11.4% 126.0 55.0 171.5
12.2% (10.5%) 3.6% 35.3% (5.2%) 5.9% 16.2% 1.3% points 0.7% points 17.6% 20.2% (50.1%)
2010 review 01 35
restructuring measures completed during the year delivered cost savings and as aftermarket revenues increased. As anticipated, by the year-end the segment had returned to protability and higher levels of enquiries and order intake suggest that this improvement will be sustained into 2011. Howden As anticipated, Howden recorded reduced revenue and prot as the impact of lower orders placed during 2009 came through. In 2010, revenue was 562.0 million (2009: 627.8 million) and adjusted operating prot was 67.8 million (2009: 71.5 million), representing decreases of 10.5 and 5.2 per cent respectively. Howdens adjusted operating margin was 12.1 per cent (2009: 11.4 per cent), an increase of 0.7 percentage points, as a result of increased higher-margin aftermarket revenues and strong contract execution. Revenue from the sale of new equipment was 358.0 million (2009: 438.6 million), a reduction of 18.4 per cent, which reected lower sales of new equipment into the coal-red power generation industry of 137 million, which represented 24 per cent of Howdens revenue for the year. This proportion is much reduced from previous years, also reecting Howdens strategic success in diversifying its business. Slightly over half of sales of new equipment into the coal-red power generation industry arose in China and other emerging markets. Howdens aftermarket revenues continued to grow as planned and increased by 8 per cent to 204 million, representing 36 per cent of Howdens total revenues, with a particularly strong performance in China. The aftermarket business accounted for nearly one-half of the total gross prot generated by Howden. Howdens compressor business continued to make progress, and accounted for around 15 per cent of Howdens total revenue, a proportion which has risen steadily in recent years. A signicant order was won to supply compressors to the coal-bed methane industry in Australia, and Howden is aiming to establish itself as the leader in this high-potential market. Also during the year, Howden continued its expansion in emerging and resource rich markets. A joint venture was formed with Larsen & Toubro, the major Indian engineering group with a view to taking about 30 per cent of the market in supplying fans and heaters to the rapidly growing coal-red power industry in India. Howden also commissioned its new manufacturing facility in Brazil during the year and acquired AustCold, a compressor packaging company located in Australia. Order intake during the year was 533 million (2009: 503 million), an increase of 6.0 per cent. Particular features were the recovery in orders from customers in the power industry in China and the much higher level of orders from India, reecting Howdens enhanced market presence. As anticipated, order
In 2010, ESABs revenue and operating prot were up on 2009, and the adjusted operating margin increased to 7.7 per cent. We expect higher consumables volumes in 2011 with strong growth in emerging markets.
Directors and corporate governance 36 57 Financial statements 58 114 Other information 115 116
World Trade Center

ESAB has been chosen to supply the welding consumables for Tower 1 (107 stories) and Tower 4 (65 stories) at the World Trade Center complex, which is under construction in New York. A wide range of ESABs welding consumables are being used including ESABs Seismic Certified products which were specifically developed for the construction of this type of building.
07
intake from the power industry in Europe and North America remained at relatively subdued levels. During 2010, the order book again proved to be robust, with minimal order cancellations. The level of order intake increased towards the end of the year, positioning Howden well for 2011. At 31 December 2010, Howdens order book was 424 million, of which 331 million is scheduled for delivery in 2011 and 93 million thereafter. Customers in emerging markets account for 60 per cent of Howdens order book. Balance sheet and cash ow As at 31 December 2010, shareholders funds were 635.7 million (2009: 549.9 million), an increase of 15.6 per cent. At that date, Charter had net cash balances of 1.8 million (2009: 50.9 million), representing a net outow of 49.1 million during the year. Cash inow from operations was 85.5 million (2009: 171.5 million), a reduction of 50 per cent, primarily reecting the absorption of cash into ESABs working capital as turnover increased. Other major outows of cash were capital expenditure and capitalised development costs (62.1 million, representing 173 per cent of associated depreciation and amortisation), taxation (36.5 million) and dividends (36.7 million). The Company will seek to maintain its strong nancial position as it continues to invest in both businesses and looks to grow through acquisitions.
In 2010, Howdens performance was ahead of previous expectations with excellent contract execution and continued aftermarket growth. We expect to see progressive improvement in 2011 and onwards.
2011 outlook
Looking forwards into 2011, further recovery in the macroeconomic environment is expected, although, as in 2010, this is unlikely to be smooth or uniform across regions and end-user industries. For Europe, which remains Charters most important region in terms of prot generation, economic growth is expected to average no more than 1 per cent across the region, with Germany and Central Europe performing above average but Southern Europe stagnating or declining further. The BRIC economies and emerging markets will generate stronger growth. Commodity price ination and government decits are amongst the principal threats to economic recovery and nancial stability. ESAB Early indications suggest that the general trends seen in the second half of 2010 have continued into early 2011. For the year as a whole, we expect higher consumables volumes compared to 2010, with strong growth in emerging markets but with a subdued performance in ESABs important European markets where growth is likely to be lower than it was in 2010. Growth will be stronger in solid welding wire as the vehicle segment remains strong. Construction and infrastructure markets in Europe will be slower to recover
Coal bed methane

Howden has been awarded a contract to supply 72 of its largest rotary twin screw compressors for a major coal bed methane project in Queensland, Australia. The compressors will be used to gather and compress coal bed methane which will then be converted to LNG and exported. Howden believes that there will be significant further opportunities for it to supply its compressors into other coal bed methane projects in Australia and elsewhere.
2010 review 01 35
against the background of government austerity measures leading to reduced infrastructure investment. Overall, we expect markets to continue to strengthen but in a two-speed world with higher growth rates in BRIC and emerging markets and slower growth in developed markets, particularly Europe. Assuming the world economy continues to strengthen, market growth should be stronger in the second half of the year. Against this background, ESAB will benet from the continuing measures undertaken to improve its business, including new ranges of welding consumables and standard equipment, a much improved distribution network in Europe and a rationalised manufacturing footprint. The continued expansion into new geographies will enhance ESABs presence in emerging markets. The cutting & automation segment returned to prot in the second half of 2010 and we are looking forward to an improved result in 2011. Cutting has started the year with a positive trend in orders. In automation, the prospects are very strong and it is expected that customers will start placing orders by mid-year.
have agreed in principle to enter into a joint venture with a leading supplier of equipment to the Russian power industry. Whilst we expect little new build in developed economies, the prospects for further installations of emission control equipment in the USA are improving. Howden has successfully grown its compressor business and is expected to continue to do so in 2011, as the high oil price encourages more capital expenditure in the energy industry, and as Howden continues to develop further applications for its compressors, with coal-bed methane being the outstanding example. Aftermarket growth of around 10 per cent continues to be expected, beneting in particular from the Howden equipment installed in China in recent years. The aftermarket business is expected to continue to contribute around one-half of Howdens gross prot in the next few years. Howdens pursuit of these opportunities will be supported by it maintaining its commitment to technological leadership and engineering excellence. Product development programmes are actively focused to enable the available market, particularly in compressors, to increase signicantly.
As importantly, ESAB will continue to re-position itself to be more customer focused, with a number of projects underway throughout the business aimed at simplifying the ways in which ESAB deals with its customers. ESAB has established business Concluding comments teams focused on particular regions, industries or processes. In 2010, there was a recovery from the effects of the global ESABs LEAN initiatives form a crucial part of the process to recession. Whilst a number of regions and segments rebounded deliver consistent operational excellence and best in class cost. quickly, others, including some which are important to ESAB or Howden, remained at levels of activity well below those seen Investment will continue in ESABs future development, with capital expenditure expected to remain in excess of depreciation. before the on-set of the recession. Against this background, we believe that both ESAB and Howden performed well. Additions to capacity will be selective and will support clear market opportunities. New products and leading edge product Despite the continuing economic uncertainties in Europe, service offering will continue to be brought to market. further progress in 2011 is expected as a result of the on-going investment and improvements made in both businesses, with Howden a faster pace in emerging markets. Overall, the year should improve progressively, with stronger economic activity in the second half particularly in the BRIC For the longer term, our condence in Charters ability to economies. We believe that Howdens trading bottomed out generate additional shareholder value is high. ESAB and during 2010 and that, in 2011 and onwards, we will start to see Howden both have established strong market positions, spread progressive improvement. In January 2011, Howden booked across developed and emerging economies, which will benet orders in excess of 70 million, taking the order book at the from the rising demand for energy and increasing steel usage end of the month to over 470 million. foreseen over the coming years. Howden is now a genuinely global company, with over half its Michael Foster revenues in emerging markets. The proportion derived from Chief Executive emerging markets is expected to progressively increase. 17 February 2011 The coal-red power industry remains Howdens largest customer, although as Howden continues its diversication, its relative importance will continue to reduce. Signicant new build programmes are expected to continue well into the future in China, India and South Africa, where Howden is well positioned. Russia will develop in the next few years and we
09
We use a variety of nancial and non-nancial measures to assess the performance of our business.
During the year under review, the Company focused on the adjusted operating margin of both ESAB and Howden rather than on revenue as a key nancial measure as it believes that this measure provides greater visibility of the Companys overall performance.
Adjusted operating prot Adjusted operating prot measures the success we are having at increasing revenues net of increases in the cost of employees, goods and other services which we are incurring. We adjust operating prot to exclude the impact of unusual or non-recurring items, such as restructuring costs, which we believe is appropriate to give a truer picture of underlying performance.
Performance In 2010, adjusted operating prot increased compared with 2009, as ESAB recovered well from the generally difcult trading conditions which it encountered in 2009, whilst Howdens prot fell slightly.
Adjusted operating prot (m)
2010 2009 2008 2007 2006
145.9 125.6 211.2 173.8 144.6
Adjusted operating margin ESAB Adjusted operating margin measures the rate at whichrevenue changed relative to the rate atwhich adjusted operating prot changed. Movements in ESABs margins reect the cyclical nature of its business, longer term trends and also action taken to eliminate costs in 2009 as volumes and revenue fell.
Performance In 2010, ESABs adjusted operating margin was 7.7 per cent, which compares with 6.4 per cent in 2009 and a recent high of 13.1 percent in 2007. We believe that, through the business cycle, ESAB is capable of generating an adjusted operating margin in excess of 10 per cent.
Adjusted operating margin ESAB (%)

2010 2009 2008 2007 2006 6.4 11.9 13.1 12.3 7.7
Adjusted operating margin Howden In recent years, Howdens margins have beencomparatively stable, reecting the lesscyclical nature of its business and Howdens success at diversifying its business.
Performance In 2010, Howdens adjusted operating margin was 12.1 per cent. We envisage Howdens adjusted operating margin being between 11 and 12 per cent for the foreseeable future.
Adjusted operating margin Howden (%)

2010 2009 2008 2007 2006 12.1 11.4 11.7 12.0 11.7
Howden order book Howdens order book gives good visibility of new equipment sales and also gross margin for the following 12 to 18 months. Movements in the order book can be used as a leading indicator of Howdens performance relative to the market, and also to manage changes in capacity levels.
Performance At 31 December 2010, Howdens order book stood at 424 million, compared with 441 million at 31 December 2009. The impact of this modest fall on the outlook for Howdens business in 2011 is reduced by the expectation of further growth in aftermarket revenues.
Howden order book (m)
2010 2009 2008 2007 2006
423.8 441.1 499.3 416.7 361.0
Cash ow from operations We monitor cash ow from operations, but in doing so, we set targets which recognise that, as businesses grow, they tend to absorb cash into working capital. Our measure of cash ow from operations takes into account certain non-recurring items including expenditure on restructuring.
Performance During 2010, the amount of cash generated from operations fell as the recovery in ESABs business led to absorption of cash into working capital. It is a strategic objective to tighten ESABs working capital whilst continuing to grow its revenue and prot. Howdens cash generation was in line with its adjusted operating prot.
Cash ow from operations (m)
2010 2009 2008 2007 2006
85.5 171.5 159.5 149.1 106.8
2010 review 01 35
Adjusted earnings per share Adjusted earnings per share shows the net prot generated for shareholders in an accounting period, after taking into account nancing and tax. The measure is dened so as to exclude exceptional charges or income and other items considered by the Board to be not directly related to the underlying performance of our businesses.
Performance In 2010, adjusted earnings per share were 66.1 pence, an increase of 20 per cent compared with 2009. Adjusted earnings per share increased strongly between 2006 and 2008 but fell in 2009.
Adjusted earnings per share (p)
2010 2009 2008 2007 2006 55.0
66.1
99.2 84.7 68.1
Equity shareholders funds Equity shareholders funds reect the value of net assets available to shareholders, and an increase in this measure means that Charters balance sheet and nancial position are strengthening.
Performance As at 31 December 2010, equity shareholders funds stood at 635.7 million. Charters balance sheet has strengthened considerably over the last ve years, with equity shareholders funds having more than doubled without any signicant issues of new shares.
Equity shareholders funds (m)
2010 2009 2008 2007 2006 246.1 426.4 549.9
635.7
578.3
Capital expenditure The absolute level of capital expenditure and its relationship to the depreciation charge are indications of the extent to which Charter is maintaining and increasing in the productive capacity of its businesses.
Performance Capital expenditure in 2010 was 62.5 million, representing 174 per cent of associated depreciation. It is estimated that capital expenditure needs to be at least 110 per cent of depreciation in order to maintain a steady state. Capital expenditure has been higher in ESAB than in Howden, reecting in part their respective business models and relative sizes.
Capital expenditure (m)*

*including capitalised development costs
2010 2009 2008 2007 2006 27.6 52.1
62.5 64.7 70.1
Research and development expenditure Charter recognises that its technology is an important factor in maintaining the leadership of its products in the competitive markets in which it operates. Research and development expenditure is written off as incurred, except that certain development expenditure is capitalised as required by IAS 38.
Performance Research and development expenditure has increased throughout the period. The majority of this expenditure has been in ESAB. Howden engineers bespoke solutions for particular customers air and gas handling requirements but this expenditure is generally not classied as research and development.
Research and development expenditure (m)

2010 2009 2008 2007 2006 9.2 9.1 13.2 17.1 20.5
Lost time injury frequency rate Charter recognises that nancial performance is not a sufcient measure on its own. We operate in heavy engineering environments where there is considerable inherent risk and the safety of our employees is a key priority. We use a variety of measures, including Lost Time Injury Frequency Rate (LTIFR), to assess the effectiveness of our health and safety performance.
Performance LTIFR fell by over one-half during the period from 2007 to 2010 in which data has been systematically collected and veried, underlining Charters commitment to employee welfare. Further information on our health and safety performance is set out in the Corporate responsibility report on pages 30 to 35.
Lost time injury frequency rate (per 200,000 hours worked)
2010 2009 2008 2007
0.81 1.17 1.53 2.31

11
Page heading (continued) review Divisional and nancial
ESAB
ESAB is a world-leading international welding and cutting company. It formulates, develops, manufactures and supplies consumable products and equipment for use in the cutting and joining of steels, aluminium and metal alloys.
Global sales Revenue by destination
North America
Europe Asia
222.3m
2009: 218.6m South America
444.6m
2009: 424.6m
177.6m
2009: 157.4m
Rest of the world
242.3m
2009: 171.9m Total
70.8m
2009: 58.9m
1,157.6m
2009: 1,031.4m
2010 review 01 35
1. Manual plasma cutting using the latest ESAB Powercut 900, a machine capable of cutting conductive materials of up to 25mm in thickness. 2. ESABs new compact and portable Caddy Mig C160i, with a built in wire feeder ideal for repair and maintenance and general welding assembly applications. 3. The new ESAB Aristo 300/400/500s are inverter based Mig Mag and MMA welding machines designed for high productivity welding applications.
1.
2.
3.
ESABs principal products

Q Q
Welding consumables and standard equipment Bespoke welding and cutting equipment
Key business strengths and competitive advantages

Q
Market leadership based on technology, customer service and brand strength Approximately one-half of revenue generated in developed European markets and North America Strong focus on emerging markets, with leading positions in Brazil, Russia and India; and developing positions in China, elsewhere in Asia and Africa Largest end-user segment is energy, including oil and gas, nuclear and renewable Extensive research and development function maintains technical leadership and market responsiveness Manufacturing predominantly located in low cost areas
Markets
ESABs products are used wherever steel and other metals are being cut and joined together. Its principal end-user segments are:
Q Q Q Q Q
Energy Vehicles Infrastructure and other construction General industrial
Q Q
ESAB is showing a strong recovery from the economic downturn, with signicantly improved volumes and margins Strong environmental credentials
2010
2009
Change
Highlights of 2010
Q
Much improved performance, weighted towards the first half of the year Adjusted operating profit of 89.3 million (2009: 66.0 million), an increase of 35.3 per cent Adjusted operating margin of 7.7 per cent (2009: 6.4 percent), an increase of 1.3 percentage points Recovery led by welding consumables, with volumes up by 15 per cent, and standard equipment Cutting & automation benefits from restructuring measures Continued capital expenditure and investment in research and development
Revenue (m) Welding Cutting & automation
1,015.4 142.2 1,157.6
846.7 184.7 1,031.4
+19.9% -23.0% +12.2%
Adjusted operating prot/(loss) (m) Welding Cutting & automation
89.7 (0.4) 89.3
55.6 10.4 66.0
+61.3% +35.3%
Q Q
Adjusted operating margin
7.7%
6.4%
+1.3% points
13
Divisional and nancial review ESAB (continued)

Welding industry by region 2010: $13.6 billion globally
By region Europe 19% North America 15% China 23% Japan 8% Russia and CIS 8% Other Asia 6% South America 6% India 5% All others 10%
Source: Frost & Sullivan
ESAB the welding authority

ESAB is a world-leading international welding and cutting company, with a heritage in welding dating back to the invention of the welding process. ESAB is the worlds premier welding brand, with its brand values emphasising integrity, innovation, experience and partnership. ESAB is the clear market leader in Europe, South America and India, and is amongst the top four welding companies in North America. It is the largest international welding company in Russia and is developing its market positions in Africa, the Middle East, China and elsewhere in Asia. ESABs sales are split broadly evenly between the developed economies of Western Europe and North America, and emerging markets. ESABs comprehensive range of welding consumables includes electrodes, cored and solid wires, and uxes. ESABs welding and cutting equipment ranges from standard equipment to large bespoke plant used in industrial applications. In 2010, ESAB derived over 80 per cent of its sales from welding consumables and standard welding equipment. The energy sector, including oil and gas, nuclear and renewables, is the largest user of ESAB products and is estimated to account for around one-quarter of revenue. ESABs leadership of the worldwide welding industry is conrmed by independent research which has shown that the ESAB brand is almost universally recognised, and is the one which customers are most likely to recommend. ESABs position is supported by continued investment in research and product development which is highly focused on specic customer requirements. During 2010, there were important new products and processes introduced for users in the vehicle industry and in the off-shore and wind-tower segments of the energy industry. In addition, ESABs worldleading technical expertise enabled it to establish strong positions in more recently established markets, for example the supply of specialist consumables for the construction of LNG facilities and nuclear power stations in China, as well as reinforcing its traditional areas of strength. ESABs manufacturing facilities are located predominantly in low cost locations, in particular in Central Europe, South America and Asia. During 2010, capacity was progressively restored as levels of demand recovered, most notably in its consumables business.
Market size and end-user segments

In 2010, the global welding and cutting industry had total revenue estimated at $13.6 billion; this compares with $12.8 billion in 2009, reecting recovery from the economic downturn in developed economies and continuing economic growth in emerging markets. The market is divided approximately equally between welding consumables and welding and cutting equipment. The major global end-user segments are as follows:
Q
the energy sector, which includes the oil and gas industries and electricity generation (from conventional, nuclear and renewable sources) and transmission (estimated to account for 26 per cent of industry revenue); vehicles, which includes cars, commercial vehicles, off road vehicles and railway rolling stock (15 per cent); and construction, in particular relating to infrastructure (24 per cent).
General industrial users are estimated to account for 26 per cent of the industrys revenues and shipbuilding for the remaining 9 per cent. During 2010, the outstanding end-user segment was vehicles, with strong growth being seen in the production of cars in all regions. Commercial vehicles also showed strong recovery from 2009 levels. This led to signicant increases in the volume of welding wire sold, with ESAB gaining market share in the key European market, assisted by innovations in solid wire process and further enhancements to its agship AristoRod product. Demand from the energy industry was generally solid. However, there was relative weakness in the wind-tower and off-shore segments, both of which are important users of ESABs higher value-added consumables and automation equipment, reecting general economic uncertainty and nancing constraints which led to postponing of projects, although the long-term prospects of both segments remain strong. Shipbuilding was generally weak, although there were pockets of strength. Construction deteriorated in many European countries. The mixed performance of these industries meant that demand for electrodes lagged the growth seen in solid wire.
2010 review 01 35
ESABs business model

ESAB supplies product to customers in every economic region around the world which give it a unique knowledge and understanding of customers requirements. Other key components of ESABs business model, which is illustrated below,are its brand, its manufacturing facilities, its technology and its distribution network, as well as the support provided to customers through ESAB process centres.
Product development and positioning

Technology Over 100 years of accumulated knowledge Global facilities centred in Gothenburg, Sweden Market knowledge and understanding Based on global presence across all end-user segments Product development is customer focused Brand The worlds leading welding brand
Manufacture and procurement
ESAB factories 26 facilities worldwide Generally well-invested facilities, situated in low cost countries Principal raw material is steel
Outsourced manufacture Increasing network of sub-contractors Supply specialist products (such as PPE)
Distribution 40% direct sales 60% through independent distributors
End user segments
Energy Oil and gas Power Petrochemicals Pipeline and pipe mills
Vehicles Cars Buses and lorries Off-road Railcars
Construction Infrastructure Commercial Other
General industrial Consumer durables Shipbuilding
ESAB process centres Global network helps customers develop optimal welding solutions
15
Divisional and nancial review ESAB (continued)

Worldwide steel consumption (mmt and percentage change over previous year)
2011 (f) 2010 (e) 2009 0 250 500 (f) = forecast 750 +5.3% +13.1% -6.6% 1000 1250
The World Steel Association (WSA) estimates that worldwide consumption of steel in 2010 was 1,272 mmt (2009: 1,125 mmt), an increase of 13.1 per cent. For 2011, the WSA forecasts that global steel consumption will be 1,340 mmt, an increase of 5.3 per cent. Consumption in EU (27) and the USA is expected to increase by 6 per cent and 9 per cent respectively compared to 2010 but will remain well below 2008 levels. The growth of steel consumption in China is forecast to slow to 4 per cent.
(e) = estimated
Demand outlook
Demand for welding and cutting products is predominantly determined by the consumption of steel. Information on historic and future levels of steel consumption is set out above. Against this background, ESAB expects that growth in the demand for its welding consumables and standard equipment will also slow compared with 2010. Demand for its cutting and automated welding equipment is seen as later-cycle, and the improving prospects seen during the second half of 2010 should be reected in higher revenues in 2011. ESABs demand environment will vary from region to region. In the EU, economic growth is generally expected to be around 1per cent in 2011, but certain economies, such as Germany and Poland, are expected to grow appreciably faster, whilst others, mainly in Southern Europe, are expected to see little if any growth. The USA is expected to see growth running around its trend rate of 2.5 per cent. Developing economies, including Brazil, India and Russia where ESAB is well represented, are expected to grow more quickly.
ESAB is also impacted by the relative performance of the different end-user segments which its supplies. In 2011, ESAB expects to see continued growth in the vehicle segment, although not necessarily at the rates seen in 2010, whilst there are as yet no clear signs that segments such as off-shore and wind-towers, which are important users of higher value welding consumables but which were relatively subdued in 2010, will show a sustained recovery.
Competitive environment
Globally, ESAB is the leading supplier of welding consumables. It is the only worldwide, full-service welding and cutting company, with leading market positions in many regions. ESAB operates in a competitive environment, consisting of a relatively small number of companies that operate on a multinational basis and a much larger number of smaller companies which operate in regional or product niches. ESAB estimates that it has a 12 per cent share, by value, of the available global welding and cutting market. This share reects
Strategy
ESABs strategic objective is to generate signicant growth in revenue and prot over the next ve years through building upon its position as the worlds leading company in welding consumables and its strong global positions in welding and cutting equipment. In pursuit of this strategic objective, ESAB has formulated specic objectives as set out below. Objective
Q
What weve achieved

Q
To enhance market leadership by leveraging its broad product range in all its markets globally as well as by further investment in brand recognition and customer service. To use its research and development facilities to develop highly customer-focused products to enhance its leading position in welding technology. To build upon its leading position in Europe and other developed markets to achieve growth at above market rates. ESAB will continue to build upon its positions in developing markets around the world.
ESAB continues to be recognised as the welding authority with, according to independent research, almost universal brand recognition in the welding industry. ESAB has developed new welding materials processes and equipment with particular examples for use in the automotive and energy industries. ESAB increased its market share in solid wire by 4 percentage points and continued to invest in its supply infrastructure. ESAB remains the clear market leader in South America and India. It continues to grow in Russia where it is the leading international welding company, and to develop its presence in China and other markets in Asia, and elsewhere, such as Africa. ESAB has built up specialist teams to service customers in industries such as nuclear, wind energy, off-shore and vehicles. ESAB will continue to target acquisitions which enable it to strengthen market positions, enter new markets and improve its technology base.
ESAB will target specifically welding-intensive end-user segments which are seen as offering particular growth opportunities. ESAB will look to act as a consolidator in the global welding industry.
2010 review 01 35
particularly strong positions throughout Europe, and in South America and India, and ESAB is well-represented in North America, the Middle East and parts of Asia. ESAB has an under-weight position in China, where the market is intensely price competitive and a small number of producers account for over one-half of total industry sales of welding consumables. ESAB aims to maintain and progressively strengthen its global market share, despite the threat of low cost manufacturers looking to increase their shares of markets in which ESAB has an established position, through continued investment in and attention to:
Q Q Q
Overview of 2010 performance

During 2010, ESAB achieved revenue and adjusted operating profit of 1,157.6 million and 89.3 million (2009: 1,031.4 million and 66.0 million), representing increases of 12.2 and 35.3 per cent respectively. The adjusted operating margin was 7.7 per cent (2009 6.4 per cent). During 2010, the increase in ESABs revenues was driven by the welding division in which revenue increased by 19.9 per cent, but this was partly offset by the cutting & automation segment. The increase in revenue in the welding division was primarily attributable to higher volumes of consumbles which rose 15 per cent during the year, with price movements leading to a small positive variance.
Revenue bridge
its brand; its industry-leading technology; its extensive product portfolio covering consumables and equipment; the governmental and other certications it possesses for many different specialist and demanding applications; its manufacturing facilities which are generally well-invested and located in low cost areas; its well-established and wide-ranging distribution network and supply chain; and the nancial strength of Charter.
1200 1000 800 600 400 200 0
2009
2010
ESAB aims to be a consolidator in the relatively fragmented worldwide welding industry and will look to make acquisitions which build its geographic strength, increase its presence in markets where it is currently under-represented or give access to new technologies, provided that the terms of the acquisition are expected to be value accretive for Charter shareholders.
Welding Cutting & automation Exchange A full analysis and review of ESABs performance is set out in the Chief Executives report.
Brand values
Integrity Straight talking: We say what we mean and we mean what we say. Its about being honest, direct, collaborative, reliable and standing up for what we believe in. Experience Great people/smart thinking: We aim to have a highly focused team of effective people working within a performance culture. People who can make things better, simpler, easier and more cost-effective. Innovation Outcome focused: Success is all about getting things done. At ESAB we create products and solutions that serve our customers. Partnership Action orientated/value driven: ESAB people do things that matter, that have an impact and that make a difference. Working together we create value for our customers, suppliers, our people, shareholders and communities.
17
Divisional and nancial review
Howden
Howden is a world-leading international applications engineer. It designs, manufactures, installs and maintains various types of air and gas handling equipment for use in the power, oil and gas, petrochemical and other industries.
Global sales Revenue by destination
North America
Europe Asia
125.1m
2009: 149.0m South America
130.4m
2009: 171.1m
137.0m
2009: 149.5m
Rest of the world
39.3m
2009: 31.7m Total
130.2m
2009: 126.5m
562.0m
2009: 627.8m
2010 review 01 35
1. Axial cooling fan these fans are incorporated into cooling towers that are used in many industries. 2. Diaphragm compressor specialist compressors for handling difficult and toxic gases without leakage or contamination. 3. Variax fan high technology, variable pitch axial fans that adjust to varying loads during operation; mainly installed in power stations. 1. 2. 3.
Howdens principal products and services

Q Q Q
Key business strengths and competitive advantages

Q
Fans and heat exchangers Compressors After-sale provision of spares, service, enhancements and retrots
Market leadership based on technology, customer service and brand strength Approximately one-half of revenue generated in Europe and North America One-half of revenue derived from emerging markets, through leading positions in China and South Africa, and developing positions in India and South America Largest end-user segment is energy, comprising principally power generation and oil and gas Engineering expertise and extensive design resource help maintain Howdens technical leadership Manufacturing of high technology and performance critical components is retained in-house Aftermarket accounts for over one third of revenue, with growth opportunities especially in China Strong environmental credentials
Markets
Howdens products are used to move air and gas through large scale industrial plant and, to a lesser extent, to provide ventilation. Its principal end-user segments are:
Q Q Q Q Q Q
Electricity generation (coal-fired) Oil, gas and petrochemical Mining Iron and steel Tunnel ventilation
Q Q
2010
2009
Change
Highlights of 2010
Q
Robust performance with revenue of 562.0 million and adjusted operating profit of 67.8 million Aftermarket revenues of 204.0 million, representing 36 per cent of total revenue and up 8 per cent Adjusted operating margin of 12.1 per cent (2009: 11.4 per cent), reflecting strong contract execution and improving revenue mix Year end order book of 424 million, in line with expectations Much enhanced presence in Indian power market through joint venture with Larsen & Toubro Commissioned new facility in South America Significant compressor orders for coal bed methane extraction and waste-water treatment
Revenue (m) New build Aftermarket
358.0 204.0 562.0
438.6 189.2 627.8
-18.4% +7.8% -10.5%
Adjusted operating prot (m) Adjusted operating margin Order book (m)
67.8
71.5
-5.2%
Q Q
12.1% 423.8
11.4% 441.1
+0.7% points -3.9%
Q Q
19
Divisional and nancial review Howden (continued)
Howden a world leading applications engineer

Howdens engineering heritage stretches back over 150 years since it was founded in Glasgow, Scotland. Howden became a member of the Charter group of companies in 1997. Howdens principal products are fans, heat exchangers and compressors. The fans and heat exchangers are used mainly in the generation of electricity by coal-red power stations, both in combustion and the control of emissions, and other large scale industrial plant. Howden compressors are mainly used by the oil, gas and petrochemical industries. Overall, the energy sector is estimated to account for some two-thirds of Howdens revenues. Other applications for Howden products are in the mining, iron and steel, tunnel ventilation and waste water industries. As illustrated on page 22, Howden has made considerable progress in diversifying its business away from its traditional markets. The supply of new equipment to the coal-red power industry represented 24 per cent of Howdens revenue in 2010, compared to 42 per cent in 2005. The supply of other new equipment, including fans for use in other industries and compressors, has increased in both absolute terms and as a proportion of Howdens revenue. Howden now has signicant market positions in Europe, North America, China, South Africa and Australia. During 2010, Howden signicantly increased its presence in India, and also In May 2010, Howden signed a joint venture agreement with Larsen & Toubro, a major Indian engineering and construction company, that will give it greater access to the rapidly growing power generation market in India. Under the agreement, Howden and L&T will collaborate in the supply of fans and heat exchangers to customers in India engaged in the construction of coal-fired power stations. A new manufacturing facility is being constructed in Hazira, Gujarat and this is expected to start production by the end of the year.
opened a much enhanced factory in Brazil. Overall, around one-half of Howdens sales are made in emerging markets and this proportion is expected to progressively increase over time. Howden has also successfully grown its aftermarket business, which, in 2010, accounted for 36 per cent of revenue and, because of the higher margin which it generates, nearly one-half of gross prot. The aftermarket is seen as one aspect of Howdens business which can grow consistently through the economic cycle.
Industry overview
Fans and heat exchangers Demand for new Howden equipment is strongly inuenced by the construction of new coal-red power stations and environmental legislation which impacts demand for emission control equipment for coal-red power stations and other heavy industrial plant. The International Energy Agency (IEA) expects, under its current policies model, that worldwide construction of new coal-red generating plant will average 56 GW per annum over the next 20 years, of which more than half will be built in China. India is also expected to add signicantly to its coal-red generating capacity. Howden has established leading positions in both China and India and is therefore well placed to supply signicant amounts of new-build equipment over this period. For Europe and North America, the IEA expects little change in the aggregate eet of coal-red generating capacity for the foreseeable future. On this basis, Howden expects most work in these regions to be retrots, upgrades and maintenance. There is some expectation of signicant new build activity in Russia, although not in the immediate future. Governments generally recognise the need to limit the environmental impact of generating plant. If there were to be concerted international action to restrict the emission of carbon dioxide, this would reduce the rate at which new coal-red power plant is constructed. It could also require increased adoption of carbon capture and storage, which is an emerging technology which represents a new opportunity for Howden. In relation to other emissions, uncertainty over the policies to be adopted and the nature and timing of legislation somewhat slowed the market for Howdens emission control equipment during 2010. In the USA, new regulations governing the emission of polluting gases are expected and, when they come into force, are likely to lead to increased demand for Howden fans and heat exchangers as utility companies install additional exhaust gas scrubbers. In the EU, the previous deadline of 2016 for NOx reduction from large power plants has been relaxed, meaning that utilities will be able to defer the placing of orders for this equipment.
2010 review 01 35
Howdens business model

Howdens business model emphasises its brand, design and manufacture of performance critical and high-technology components and aftermarket services. Howdens global resources include 600 engineers who are able to access Howdens many years of accumulated expertise. The aftermarket is seen as being the single biggest opportunity for growth, to make the most of which Howden has allocated increased resources to pursue aftermarket opportunities globally.
Design The Howden brand stands for over 150 years of accumulated knowledge 300 employees globally engaged in design Proprietary design software
Performance critical components

In-house manufacturing 16 centres of engineering excellence globally
Other components
Manufacture by sub-contractors Global networks Mainly located in low cost countries
Raw materials (e.g. steel) Bought-in components
Installation
End user segments
Power Coal-red electricity generation
Oil, gas and petrochemical
Mining Ventilation fans for deep mines
Other industries Iron and steel Tunnel ventilation Waste-water treatment Cement
Aftermarket services
21
Divisional and nancial review Howden (continued)

Revenue diversication (%)
Aftermarket 36% New equipment power 24% New equipment compressors 13% Other new equipment 27%
Over the last ve years, Howden has successfully diversied away from coal-red power into other businesses. In 2010, 24 per cent of revenue came from the sale of new equipment to the coal-red power industry, of which slightly over half was to customers in China and other emerging markets, whereas in 2005 this gure was 42 per cent. In 2010, the sale of new compressors generated 13 per cent of revenue, and the aftermarket accounted for 36 per cent of revenue and approximately one-half of gross prot.
Other large scale industrial plant which uses Howden fans and heaters includes reneries, steel mills and cement factories. Construction of this plant is expected to be concentrated in emerging markets. In addition, Howden fans are used to ventilate sub-surface mines and tunnels, and also for specialised cooling applications, such as the traction motors of high-speed trains. Compressors The compressor industry is large and covers many different applications. Howden has developed various niches for its range of compressors. Howden compressors are mainly sold into the oil and gas, petrochemical and refrigeration industries. Howdens order
bookings and sales stand to benet from higher levels of capital expenditure forecast in other industries. Howden has also successfully penetrated other growing markets for its products, most particularly, the coal-bed methane industry in Australia. These also include waste-water treatment, where Howden has recently won a major order to supply compressors for what will be Turkeys largest facility, and the manufacture of solar panels. Howden compressors are supplied to customers worldwide, with notable sales having been made to customers in Europe, China, the Middle East and South America.
Strategy
Howdens strategic objective is to generate signicant growth in revenue and prot over the next ve years through building upon its current world-leading position as an applications engineer which designs, manufactures, installs and maintains performance-critical equipment for air and gas handling. Objective
Q
What weve achieved

Q
Howden will maintain and enhance its position in all those regions where there is expected to be significant amounts of coal-fired generating capacity and related emission control equipment being used or installed. As part of its objective of reducing its dependence on coal-fired power, Howden will develop further its position in the oil and gas and petrochemicals industries. Howden will also develop new products and services to enter growth industries where its technology and expertise can be used to its advantage. Howden will continue to develop its aftermarket business, in particular in China.
Howden already has strong market positions in Europe, China, North America and South Africa, and during 2010 it significantly increased its market position in India. Howden has continued to enhance its position in the compressor industry and has won notable new orders, for example to supply compressors to the coal-bed methane market in Australia. Howden has increased its presence in bio-fuels, solar energy and waste-water treatment industries. In 2010, Howdens aftermarket revenues were 204.0 million, an increase of 8 per cent, representing 36 per cent of Howdens total revenues. The aftermarket business in China continued to grow and achieved its objectives for the year. During 2010, Howden acquired Austcold, a screw compressor packager, which increases its presence in the compressor industry in Australia and South-East Asia. Howden continues to review other acquisition opportunities. Howden has increased plant utilisation, undertaken capital expenditure on plant expansion and IT, continued initiatives to ensure that it has access to sufficient trained engineers, and extended use of LEAN techniques across all aspects of its business. Howden is continuing to develop a global network of sub-contractors.
Where appropriate, Howden will grow its business through acquisitions that strengthen its market position and improve its technology base. Howden will continue to develop its supply chain to accommodate higher levels of activity in both new equipment and aftermarket.
2010 review 01 35
Howden order book (m)

Europe North America South America Asia Rest of world
As at 31 December 2010, the order book stood at 424 million (31 December 2009: 441 million), a decrease of 4 per cent. Customers in emerging markets accounted for 60 per cent of total orders. The order book at 31 December 2010 included some 331 million for delivery in 2011 and 93 million for delivery in 2012 or beyond. Net orders booked in the year were 533 million (2009: 503 million), an increase of 6 per cent, and in excess of 70 million of orders were booked in January 2011.
2010 2009 0 100 200 300 400 500
Aftermarket Each delivery of Howden equipment creates a potential aftermarket revenue stream over the operating life of the equipment which is typically 30 to 40 years for fans. Generally, a piece of equipment starts to generate meaningful aftermarket revenues some four to six years after its installation. The prospects for Howdens aftermarket business in China, where signicant amounts of new equipment have been installed in recent years, are seen as being particularly strong. Aftermarket services are provided by Howden to the equipment operator (usually an electricity utility in the case of the power industry). Whilst there is generally no contractual obligation on the operator to employ Howden to provide aftermarket services on equipment which it originally supplied, Howden believes that it is able to optimise the long-term performance of equipment which it continues to service. Howden also provides aftermarket services on equipment supplied by other manufacturers. Competitive environment Howden is the worlds leading supplier of engineered fans to the power and other specialised markets that it serves. It is the only truly global company in the industry, with its competitors tending to be regionally based. The strength of its market position is based on the accumulated technical expertise which it has built up over many years, which is reected in the strength of its brand, and also the cost-effectiveness of its product offering and its customer service. In addition to its strong global position, Howden is one of three market leaders in China, where it has been established for many years. Howdens participation in the compressor industry is built around strong positions in a number of specialised niches, including being one of the ve leading worldwide suppliers of process gas screw compressors for use in the oil and gas industry. Howdens share of the aftermarket varies between regions. In some locations, such as the United Kingdom and Southern Africa, where Howden supplied a high proportion of the original equipment, and Australia, where recent new build activity has been low, its share is relatively high. In China, Howden is aiming to capture a signicant proportion of aftermarket business on the equipment it has installed in recent years.
Overview of 2010 performance

During 2010, Howden achieved revenue and adjusted operating profit of 562.0 million and 67.8 million (2009: 627.8 million and 71.5 million), representing decreases of 10.5 and 5.2 per cent respectively. The adjusted operating margin was 12.1 per cent (2009: 11.4 per cent), an increase of 0.7 percentage points. During 2010, the decline in Howdens revenue was due to lower sales of new equipment, which fell by 18 per cent to 358 million, reflecting the lower order book at the start of the year. Aftermarket revenues increased by 8 per cent to 204 million, and as such represented 36 per cent of Howdens total revenue. There was a small impact on revenue from currency factors.
Revenue bridge
700 600 500 400 300 200 100 0
2009
New equipment Aftermarket Exchange
2010
A full analysis and review of Howdens performance is set out in the Chief Executives report.
23
Divisional and nancial review Financial review

Summary of results
Revenue 1 Adjusted operating prot Exceptional items Amortisation and impairment of acquired intangibles and goodwill Acquisition costs Operating prot Net nancing charge before retranslation of intercompany loan balances Net gains on retranslation of intercompany loan balances Net nancing credit/(charge) Share of post-tax prots of associates and joint ventures Prot before tax Prot before tax Add/(deduct): Exceptional items Amortisation and impairment of acquired intangibles and goodwill Acquisition costs Net nance charge retirement benet obligations Net gains on retranslation of intercompany loan balances Adjusted prot before tax Taxation on adjusted prot Taxation on exceptional items and acquisition costs Taxation on amortisation and impairment of acquired intangibles Taxation on net nancing charge retirement benet obligations Taxation on retranslation of intercompany loan balances Taxation Prot after tax Attributable to: Equity shareholders Non-controlling interests
2010 m 2009 m
1,719.6 145.9 (1.5) (5.8) (0.2) 138.4 (5.6) 7.5 1.9 3.8 144.1 144.1 1.5 5.8 0.2 4.1 (7.5) 148.2 (25.3) (1.5) 1.2 0.9 (0.5) (25.2) 118.9 106.6 12.3 118.9 Pence
1,659.2 125.6 (26.8) (2.5) (0.3) 96.0 (10.8) 4.0 (6.8) 3.5 92.7 92.7 26.8 2.5 0.3 7.7 (4.0) 126.0 (22.7) 4.2 0.7 1.1 (1.2) (17.9) 74.8 63.5 11.3 74.8 Pence 38.1 55.0 21.5
Earnings per share Basic Adjusted2 Dividend per share
63.9 66.1 23.0
1 Before exceptional items, acquisition costs and amortisation and impairment of acquired intangibles and goodwill 2 Before exceptional items, acquisition costs, amortisation and impairment of acquired intangibles and goodwill, net nancing charge on retirement benet obligations and net gains/(losses) on retranslation of intercompany loan balances
Trading results A detailed review of the trading results for the year is set out in the Chief Executives statement. Basic and adjusted earnings per share Basic earnings per share were 63.9 pence (2009: 38.1 pence). Adjusted earnings per share were 66.1 pence (2009: 55.0 pence). A reconciliation between basic and adjusted earnings per share is set out in note 9 to the consolidated nancial statements on page 79. Adjusted earnings per share, which exclude items not relating to underlying business performance, are considered to provide a better indication of Charters underlying performance. The items excluded are exceptional items, amortisation and impairment of acquired intangibles and goodwill, acquisition costs, the non-cash net nancing costs attributable to retirement benet obligations and exchange gains and losses on retranslation of intercompany loans, including in each case attributable tax and non-controlling interests. Net exceptional costs in the year were 1.5 million, comprising restructuring costs of 9.9 million, of which 8.3 million relates to ESAB and 1.6 million relates to Howden, and a curtailment gain on cessation of certain US post employment medical benets in ESAB of 8.4 million. In 2011, it is anticipated that there will be a further charge in respect of the restructuring of ESAB. Amortisation and impairment of acquired goodwill and intangibles in the year was 5.8 million and includes an impairment charge of 3.2 million against the balance sheet carrying value of the Romar brand due to increasing sales by Romar under the ESAB brand. Amortisation of acquired goodwill and intangibles was 2.6 million in the year, of which 1.4 million relates to ESAB and 1.2 million relates to Howden.
2010 review 01 35
Taxation The tax on adjusted prot was 25.3 million (2009: 22.7 million). As set out below, the adjusted effective tax rate for the year was 17.5 per cent (2009: 18.5 per cent) and continues to reect that a signicant part of total prot is generated in low tax areas.
2010 m 2009 m
Prot before tax Add/(deduct): Exceptional items Acquisition costs Amortisation and impairment of acquired intangibles and goodwill Net nancing charge retirement benet obligations Retranslation of intercompany loan balances Share of post tax prots of associates and joint ventures Adjusted prot before tax (excluding share of post tax prots of associates and joint ventures) Tax charge before taxation on adjustments above Adjusted effective tax rate
144.1 1.5 0.2 5.8 4.1 (7.5) (3.8) 144.4 25.3 17.5%
92.7 26.8 0.3 2.5 7.7 (4.0) (3.5) 122.5 22.7 18.5%
The adjusted effective tax rate is expected to remain at a similar level in the medium term. The total tax charge in the year of 25.2 million compares with tax paid of 36.5 million. The tax charge is lower than the actual tax paid in the year primarily due to the net recognition of additional deferred tax assets in the year and the settlement of prior year tax liabilities. Currency Charters results are sensitive to movements in exchange rates. The translation impact of exchange rate movements on segmental sales and adjusted operating prot in 2010 is set out below:
Underlying movement at constant exchange rates m 2009 translated at 2010 exchange rates m
2010 m
Currency uctuations m
2009 m
Revenue ESAB Howden Total Adjusted operating prot ESAB Howden Central operations Total
1,157.6 562.0 1,719.6 89.3 67.8 (11.2) 145.9
95.0 (82.4) 12.6 18.4 (6.3) 0.7 12.8
1,062.6 644.4 1,707.0 70.9 74.1 (11.9) 133.1
31.2 16.6 47.8 4.9 2.6 7.5
1,031.4 627.8 1,659.2 66.0 71.5 (11.9) 125.6
If the average rates of exchange in 2010 had prevailed in 2009, revenue and adjusted operating prot for 2009 would have been higher by 47.8 million (2.9 per cent) and 7.5 million (6.0 per cent), respectively. However, this is only the translation impact of currency movements. It excludes the impact of currency movements on transactions when products are manufactured in one currency zone and sold in another. The transaction impact of currency movements is not believed to have had a signicant impact on the results for the year.
Trading results and cash ows of overseas operations have been converted into sterling at average rates of exchange whereas the balance sheets were converted at period-end rates. The most signicant rates used were as follows:
Year ended 31 December 2010 Rates of exchange to 1 Closing Average for year Year ended 31 December 2009 Closing Average for year
US Dollar Euro Chinese Renminbi Brazilian Real Czech Koruna Polish Zloty South African Rand
1.57 1.17 10.32 2.60 29.28 4.63 10.36
1.55 1.16 10.48 2.72 29.46 4.65 11.27
1.61 1.13 11.02 2.82 29.72 4.62 11.89
1.56 1.12 10.65 3.12 29.70 4.84 13.00
25
Divisional and nancial review Financial review (continued)

Shareholders funds During the year, equity shareholders funds increased by 85.8 million to 635.7 million (31 December 2009: 549.9 million).
2010 m 2009 m
Brought forward Prot attributable to equity shareholders Exchange translation gains/(losses) Net after tax (losses)/gains on cash ow and net investment hedges Net after tax losses on retirement benet obligations Dividends paid to equity shareholders Other At 31 December
549.9 106.6 18.1 (0.1) (3.1) (36.7) 1.0 635.7
578.3 63.5 (33.8) 13.7 (37.0) (35.0) 0.2 549.9
Retirement benet obligations As set out in the table below, the net liability in respect of pensions and other post-retirement benets reduced by 23.5 million in the year to 138.7 million (31 December 2009: 162.2 million).
2010 m 2009 m
Fair value of plan assets Present value of funded and unfunded dened benet obligations Unrecognised past service costs Surplus not recoverable Net liability recognised on the balance sheet
594.2 (732.5) (138.3) (0.1) (0.3) (138.7)
549.4 (709.6) (160.2) 0.1 (2.1) (162.2)
The decrease in the net liability was due to curtailment gains of 9.7 million, contributions paid into the schemes of 21.3 million and a net actuarial gain of 1.0 million (principally arising from higher than expected asset returns, offset by lower discount rates and mortality improvements), reduced by net exchange losses of 3.0 million and other income statement charges of 5.5 million. Further details are set out in note 20 to the consolidated nancial statements on page 92. Cash ow During the year, net cash reduced by 49.1 million to 1.8 million at 31 December 2010 (2009: 50.9 million). A summary of net cash ows is set out below:
2010 m 2009 m
Adjusted operating prot Exceptional items, acquisition costs and amortisation and impairment of acquired intangibles and goodwill Operating prot Depreciation, amortisation and impairment (Increase)/decrease in inventories (Increase)/decrease in receivables Increase/(decrease) in payables Movement in working capital Movement in net retirement benet obligations Movement in other provisions Other operating items Cash ow from operations Capital expenditure and capitalised development costs Acquisitions Business and xed asset disposals Tax paid Net interest Dividends paid to equity shareholders Dividends paid to non-controlling interests Dividends from, net of investments in, associates and joint ventures Cash settlement of net investment hedges Foreign exchange adjustments Share issues, purchase of treasury shares and new nance leases Net cash ow Opening net cash Closing net cash
145.9 (7.5) 138.4 41.5 (44.9) (6.6) 2.7 (48.8) (29.6) (16.4) 0.4 85.5 (62.1) (0.8) (62.9) 1.8 (61.1) (36.5) (0.9) (36.7) (6.6) 2.5 3.7 1.0 (49.1) 50.9 1.8
125.6 (29.6) 96.0 37.3 37.7 132.1 (119.1) 50.7 (17.9) 4.0 1.4 171.5 (65.7) (2.6) (68.3) 2.2 (66.1) (46.0) (0.5) (35.0) (6.9) 2.4 (13.7) (5.4) (1.2) (0.9) 51.8 50.9
2010 review 01 35
Cash ow from operations during the year generated 85.5 million (2009: 171.5 million), representing cash conversion of 61.8 per cent (2009: 178.6 per cent) of operating prot. Cash, borrowings and facilities The net cash balance at 31 December 2010 of 1.8 million comprised cash balances of 83.3 million (31 December 2009: 75.6 million), and gross borrowings of 81.5 million (31 December 2009: 24.7 million). Certain amounts of cash were held in various overseas jurisdictions for local working capital purposes or pending dividend payments and the remainder was held with a range of banks in the United Kingdom. The credit status of institutions where cash is held is kept under review with credit limits being set and monitored accordingly. At 31 December 2010, in addition to net cash balances of 1.8 million, Charter had undrawn centrally-held committed borrowing facilities of 116.0 million. These facilities, which total 170.0 million, are due to expire (unless otherwise extended or renewed) between 2011 and 2013. Two of these facilities have been renewed since the year-end such that the total amount of facilities has increased to 185.0 million. One facility for 25.0 million is due to expire in 2011. The remaining facilities of 160.0 million have maturity dates that range between 2012 and 2015. All these facilities are unsecured. Whilst these facilities have certain nancial and other covenants, the nancial strength of Charter means that the covenants attaching to these facilities are not expected to prevent the full utilisation of the facilities if required. In addition, various other subsidiary undertakings have uncommitted and committed bank facilities in place, some of which are secured, to meet local funding requirements. At 31 December 2010, Charter had 282.7 million of uncommitted bonding facilities, of which 141.1 million were provided by its principal bankers. Bonds and guarantees totalling 120.7 million had been issued under these facilities. Going concern After making enquiries, the Directors have a reasonable expectation that the Company and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing both the consolidated nancial statements and the nancial statements of the Company. In reaching this conclusion, the Directors have considered carefully the risks to Charters trading performance and cash ows as a result of the current global economic and nancial environment. The Directors have also had regard to Charters operating plan and budget for 2011 and have considered the principal risks and uncertainities to which Charter is exposed.
The Directors monitor the expected outturn for the full year on an ongoing basis both in terms of prot and cash and appropriate mitigating action would be taken if it became apparent that there was a risk that Charter might miss its previous forecasts. Signicant accounting policies The nancial statements have been prepared in accordance with IFRS and the accounting policies set out in note 1 to the consolidated nancial statements on page 65. Applying accounting policies requires the use of certain judgements, assumptions and estimates. The following accounting policies have been identied as being the most signicant and where there is most risk of material adjustment to the carrying value of Charters assets and liabilities within the next nancial year:
Q
goodwill impairment; construction contracts; deferred tax; warranty and legal liabilities; and retirement benets.
27
Divisional and nancial review Risks
Risks and uncertainties Charter, both directly and through ESAB and Howden, is exposed to a wide variety of markets and geographies and seeks to manage the risks and uncertainties that arise from this. Charter manages these risks on a continuous basis via processes of identication, evaluation, reporting and monitoring. Risk reporting is carried out quarterly across the businesses at a regional level and the Board reviews the principal risks that have been identied by the businesses every six months. In certain instances, and where it is cost-effective to do so, exposures are transferred to third parties, for example through insurance or currency hedging. The table below identies the principal risks and uncertainties faced by Charter, and the management response taken to minimise the adverse effects against the Company. It is possible, given the nature of risk, that other risks may arise, or risks not considered currently as principal risks may become so in the future. Principal risks Economic uncertainty Changes in the global economic environment could have a negative impact on nancial performance and strategic growth. Management response Increasingly exible business model with a global manufacturing base, mainly in low cost countries, supplying a wide range of industrial end-users, with expanding geographical coverage and being responsive to diverging requirements of different regions. Restructuring initiatives to reduce costs and improve efciencies including: supply chain rationalisation in both ESAB and Howden, R&D consolidation in ESABs equipment business and the creation of a shared service centre for ESAB Europe.
Actions of competitors Exposure to aggressive pricing behaviour of competitors seeking to enter new markets, maintain sales or increase sales in weakening markets.
Maintaining and growing market-leading positions based on brand, technology leadership and customer service. Continual review of competition and market trends. ESAB has an extensive product portfolio in both consumables and equipment; R&D is directed towards maintaining a technological lead; consumable product certication for different specialist and demanding applications; generally modern facilities in low cost areas with teams following established LEAN techniques; well established and wide-ranging distributor network. Howdens in-house manufacturing is undertaken at centres of excellence with signicant use of sub-contractors generally located in low cost areas; increasing resources to pursue aftermarket opportunities globally; reducing dependency on new coal-red power generation by growing compressor business.
Raw material prices Products manufactured by ESAB and Howden contain steel or other metals whose prices are generally determined on world markets, which uctuate unpredictably and with regional differences. Changing technology Customers transfer to automated welding processes faster than anticipated with consequent change in mix and price from higher margin stick electrodes to lower margin solid wires.
Strengthening procurement structure and supply chain management. ESAB aims to optimise its purchasing and selling prices in a market where prices generally follow steel costs. Howden make use of forward purchase contracts to lock in margins on orders from customers.
Developing an efcient, consistent, best practice supply chain. Continuing with LEAN manufacturing programmes and focused capital expenditure to reduce manufacturing cost of solid wires. Increase supply of higher margin stainless steel wires.
2010 review 01 35 Directors and corporate governance 36 57
Capital structure and nancing Excessive gearing or lack of sufcient nance on acceptable terms could hinder the funding of future growth and investment.
Maintaining a strong balance sheet by ensuring that the ratio of net debt to underlying EBITDA remains within a maximum of 1.0 when considering business projections and acquisition opportunities. Committed credit facilities are maintained on acceptable terms to provide sufcient headroom on top of medium-term projections of business requirements. Facilities are negotiated on a bilateral basis with overlapping maturities to mitigate the risk of short-term unfavourable market conditions.
Human resources Failure to attract, motivate, develop and retain key employees could restrict Charters achievement of strategic goals.
Charter offers competitive benets packages within the regions that it operates. Annual succession planning and performance management for key executives is reviewed by the Board. Howden operates the Howden Academy, a partnership with Glasgow Caledonian University, to attract new engineers to its operations. ESAB operates the ESAB University which focuses on developing leadership and technical abilities.
Legal and regulatory Charter is subject to the laws and regulations of many jurisdictions including regulations relating to anti-bribery and corruption, competition law, tax and export controls. Non-compliance with laws, regulations and restrictions could expose the Company to nes, penalties, suspension or debarment, which could have a material adverse effect on its reputational and nancial position. In addition, Charter, ESAB and Howden are subject to litigation and other forms of legal actions in the ordinary course of their business. Product quality Failure to maintain high standards of quality could affect ESAB and Howdens ability to maintain their reputation and could lead to potential liabilities for defects in products or warranty claims.
Charter has a code of conduct applicable to all employees across its companies, which is supported by additional policies including a whistleblowing policy. Charters legal and company secretarial functions, together with advisers as appropriate, monitor legal and regulatory requirements across the jurisdictions in which the Company operates to ensure that appropriate procedures are in place. A Charter Compliance Ofcer was appointed during the year and a number of initiatives have been implemented to respond to new or updated laws and regulations including the UK Bribery Act 2010 anticipated to come into force during 2011.
Maintaining existing product certications from a range of different authorities, in particular for products used in high risk areas such as the nuclear market sector. Extending local product quality management systems to a full ESAB Group certicate. Continuing a dialogue with key customers to ensure that products meet their requirements and complaints are dealt with expeditiously. Maintaining product liability insurance (including cover for reworking welds) as well as appropriate protection from contractual terms.
Pension funding Signicant increases in the funding obligation in respect of post-retirement benet schemes in place across Charter, ESAB and Howden.
The majority of nal salary schemes are closed to new entrants, future accrual and salary increases, limiting the potential liability. Maintain strong covenant of the employing company. The assets that are held by the various schemes are invested by the Trustees primarily in equities and bonds to spread the risk. Periodic negotiations between the pension trustees and the relevant subsidiaries to determine cash contribution levels.
29
Divisional and nancial review Corporate responsibility report

Michigan OSHA awarded AlcoTec Wire Corporation (a subsidiary of ESAB) a Platinum Award, the highest award a company can receive for achieving outstanding safety and health performance and implementing an effective safety and health management system.
1. Approach and governance

The Board considers social, environmental and ethical matters in the context of the overall business environment. Charter is committed to understanding and managing responsibly signicant risks to the environment and the communities in which it has a presence and where it has operational control or signicant inuence. They are managed as part of the overall corporate governance and risk management framework. Charters policies and management approach can be seen in the Corporate Responsibility (CR) section of the Charter website www.charter.ie. The operational heads of all Charter businesses have responsibility for implementing the policies and are accountable for CR performance. CR is being integrated within risk management practices. The Head of Risk Management has an overall coordinating role in areas of CR to improve the sharing of best practice, collection of data and consistency of reporting. The Board and the senior management receive a monthly performance report on environmental, health and safety (EHS) performance and formal reviews of major risks are undertaken by the senior management (quarterly) and by the Board (every six months). These include consideration of the signicance of environmental, social and governance matters to the business. In 2010 Charter re-organised its public reporting on corporate responsibility to bring it in line with the management structure of ESAB and Howden. The Charter website (www.charter.ie) therefore presents the top-level approach, policies and performance review, whilst the Howden and ESAB websites will in future be presenting more detail on specic aspects relating to their businesses. Charters Code of Conduct was re-communicated in 2010, along with its policies on Anti Bribery and Corruption, and Equal Opportunities.
Charter has also established a core set of EHS Key Performance Indicators (KPIs) for safety, energy, greenhouse gas emissions and waste. The Board and the senior management receive a monthly summary of EHS performance worldwide, presenting KPI data, including lost time injury cases, any signicant unplanned environmental releases or infringements, results of incident analyses and corrective actions taken. It also reports the number of near misses, progress on key activities and plans for the next quarter, enabling issues most relevant to the business to be prioritised and resources to be focused. b. Compliance and incidents During 2010 no major on-site environmental incidents were reported. ESAB North Americas Hanover facility received a penalty totalling $7.35k (4.6k) following an OSHA (Occupational Safety and Health Administration) inspection in April. The seven citations have all been complied with. Following a visit by the Ohio EPA (Environmental Protection Agency) to Howden North Americas New Philadelphia facility, discussions ensued with regard to what permits were required for the paint spraying operations. A penalty of $110k (59k) was paid as a result of the historic failure to maintain all requisite permits and operations altered to restrict future paint usage to ensure full compliance. No other nes or penalties relating to environmental or health and safety matters were reported by any Charter companies during the year. c. Regulatory issues Charter Limited is registered as a full participant in the UKs Carbon Reduction Commitment (CRC) Energy Efciency Scheme. d. Safety performance During 2010 ESAB regrets that one of its employees was killed in a road accident in Mexico, whilst travelling from his home ofce to the Monterrey facility on 19 July. There were no on-site fatalities during the year. Charter set targets in 2009 for improvements in safety performance. The table on the next page summarises the targets and how Charter performed and the Company is very pleased to have exceeded all the targets set.
2. Environmental, health and safety

a. Management approach Responsibility for environmental, health and safety performance rests with the management of Howden and ESAB. Charter requires compliance with its EHS Policy, which was re-issued in 2009, as well as implementation of EHS management systems that are externally certied. In 2010, ESAB maintained its group-wide ISO 14001 and OHSAS 18001 certication, and ensured that Terni, a consumables factory in Italy that was acquired in 2009, also complied with these. Howden extended ISO 14001 and OHSAS 18001 certication to all its manufacturing locations with the exception of a new factory in Brazil, which became operational in October 2010. Certication is expected at this factory in the rst half of 2011.
2010 review 01 35
Lost time injuries and frequency rate
Days lost and severity rate
Number of LTIs
Number of days lost
0 2007 2008 2009 2010 0.00
50
100
150
200
250
0 2007 2008 2009 2010
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0.50
1.00
1.50
2.00
2.50
10.00
20.00
30.00
40.00
50.00
60.00
70.00
Frequency rate per 200,000 hours worked
Severity rate per 200,000 hours worked
Since 2007 the total number of lost time injuries (any injury that results in an employee being unable to return to work the following shift/day) has fallen from 232 to 99 in 2010, a 53.3 per cent decrease. The hours worked have increased during the same period resulting in the frequency rate, which is calculated per 200,000 hours worked, falling from 2.31 to 0.79, a 65.9 per cent decrease. In order to continue to maintain this downward trend, work has been gathering pace on developing a safety culture aimed at achieving zero lost time injuries. Charters aim is to embed consistent, visible leadership and commitment from all employees, such that they are mindful of EHS matters, including responsibility for their own personal safety as well as protecting their co-workers and others who could be affected by our operations. Charter continues to invest in employee training and is planning to extend leadership training and safety observation programmes beyond North America where they have been piloted. These programmes have become an important factor in improving performance. Since 2008, Charter has been encouraging sites to report all rst aid injuries, near misses and unsafe conditions to enable actions to be taken before more serious injuries occur. In 2010 10,195 such incidents were reported, more than doubling the 2009 gure. The safety data above refers to employees only. Charter also records and investigates lost time injuries to contractors, of which there were six reported in 2010. e. Health and safety awards and recognitions Howdens UK Construction and Maintenance Division retained its British Safety Council 5-star rating for its safety practices on customers sites.
Since 2007 the total number of days lost as a result of injuries has fallen from 5,718 to 3,153 in 2010, a 49.5 per cent decrease. Weekends and holidays are included within this total. The severity rate, calculated per 200,000 hours worked has fallen from 57.1 to 25.3, a decrease of 55.7 per cent. However, during 2010 the rate of improvement has decreased for various reasons. A key contributing factor to the decreasing rate of improvement in the severity rate is the long absence from work associated with musculoskeletal injuries, an issue which has not, so far, been tackled as successfully as others. There are also wide variations in the way injured workers are treated in the various countries where Charter has operations, which can affect the ease of rehabilitation. Where Charter can inuence severity performance, action is being taken. For example, Charter has already completed a 1million capital expenditure project on a semi-automated packaging line for 50lb cans of electrodes in ESAB Hanover USA. Further ergonomic programmes are planned for 2011. Health and safety performance data
2009 Actual Lost time injuries per 200,000 hours worked Lost days per 200,000 hours worked Reporting of near misses and unsafe conditions 1.17 29.5 3,400 2010 Target <1.00 < 26.5 Increase by 20% in 2010, to over 4,000 2010 Actual 0.79 25.3 10,195 2011 Target <0.62 <20.0 >12,500
Financial statements 58 114 Other information 115 116
31
Divisional and nancial review Corporate responsibility report (continued)

ESAB Middle Easts business moved to new purpose-built premises in Dubai. This is a contender for Best Green Building in the Middle East. The 6,500m2 facilitys design, construction and sourcing of raw materials adhered strictly with the United States Green Building Councils requirement under its Leadership in Energy and Environmental Design (LEED) programme, achieving the platinum standard.
Energy performance data

Indicator 2007 2008* 2009 Performance target (2008-09)
GJ consumed % change GJ per million sales % change
1,527,706 1,053
2,019,121 +32.2% 1,070 +1.6%
1,636,878 -18.9% 987 -7.8% -5%
f. Environmental performance To measure the impact of its operations on the environment, Charter uses as KPIs energy consumption and greenhouse gas (GHG) emissions, for both direct and indirect energy usage, and waste sent to landll. To provide an indication of changes in the environmental efciency of our operations the KPIs are normalised by turnover. ESAB also has the volume of water used in its operations as a KPI and report their performance on their website. Since Howden do not use water in production processes, it is not set as a KPI for them and so it is not consolidated by Charter. As a result of the timetable for production of this Annual Report, the latest full year for which environmental data is available is 2009, and this is summarised below. More up to date and comprehensive information for ESAB and Howden is available on their respective websites. The tables opposite show substantial reductions in 2009 in all KPI measures of environmental impact energy consumption, greenhouse gas emissions and waste sent to landll. These reect partly lower levels of operational activity. However, even when normalised by turnover, the target of a 5 per cent reduction was exceeded in all three KPIs. This demonstrates the success of initiatives to reduce environmental impacts, including some of the projects that arise out of the roll-out of LEAN manufacturing processes. Such processes involve a systematic approach to identifying and eliminating waste through the continuous improvement of the manufacturing process. Charter expects to see further environmental efciency gains in 2010 and 2011 as the impact of numerous projects started in the second half of 2009 are seen. g. Quality & product integrity ESAB products are used in a wide variety of engineering structures across the world, requiring the highest levels of technology and manufacturing precision to provide assurance of weld integrity. In addition to ESABs internal quality management, many of its products are certied by external laboratories to provide the highest possible level of condence. ESAB is committed to objective disclosure of the quality and safety of our products, including real or perceived hazards relating to substances in the product, the product itself, or product use. During 2010 safety data sheets have been updated to include national occupational exposure limits and packaging and labelling reviewed to ensure they meet the requirements of the UNs initiative for global harmonisation of the classication and labelling of chemicals.
Greenhouse gases performance data

Indicator 2007 2008* 2009 Performance target (2008-09)
Tonnes of CO2 equivalent (eq.) % change Tonnes of CO2 eq. per million of sales % change
299,289
365,572 +22.1%
276,246 -24.4% 166 -14.1% -5%
206
194 -6.1%
*2008 Energy and GHG data have been corrected from previous disclosure in the 2009 Annual Report following identication of errors in the ESAB dataset. The reason for these errors was a miscalculation of the energy content of the coal used in the steam generating boilers at Vamberk in the Czech Republic. There were also some inconsistencies in how ESAB accounted for the energy used in generating steam that is sold (this error is isolated to Vamberk since that is the only location where ESAB generates and sells energy).
Waste performance data

Indicator 2007 2008 2009 Performance target (2008-09)
Tonnes to Landll % change Tonnes to landll per million of sales % change
9,206
10,145 +10.2%
8,077 -20.4% 4.9 -9.5% -5%
6.3
5.4 -15.3%
The ESAB energy and GHG performance data takes account of corrections to the 2008 dataset, as presented in the 2009 Annual Report. The table below summarises the corrections that have been made.
Corrections to ESAB environmental data presented in the 2009 Annual Report

ESAB 2008 data reported in 2009 Annual Report Energy (GJ) GHG (tonnes CO2e) 1,516,299 306,587 Corrected ESAB 2008 data 1,886,046 346,339 % error
24% 13%
2010 review 01 35
In 2010 ESABs quality management team was strengthened with the appointment of a group quality director who is implementing global standards to ensure that its products continue to meet the high specications demanded by its markets. ESAB hopes to achieve a Group ISO 9000 standard in the next 18 months.
With one exception no reports have been received of any breaches of anti-discrimination laws in all relevant jurisdictions concerning matters of gender, ethnic origin, age, religion, sexual orientation, or disability. There is one alleged breach of gender-discrimination law, which arose in Scotland and is currently in the process of being investigated internally. d. Training & development Charter businesses invest in employee skills and capabilities through a variety of programmes, including training and succession planning. Charter continues to invest in developing skills across both ESAB and Howden. The rationale for continued investment in training and development of its people remains a priority for ESAB as the need to drive business excellence and performance continues. ESAB has three talent groups:
Q
3. Our people
a. Human resources management The human resources (HR) agenda through 2010 has been to develop management capability. In 2009 Charter designed a comprehensive HR plan, which it has continued to implement across the organisation. It has been positively received by employees and managers across the world. Managers are showing greater condence in their abilities in performance management, LEAN production, policy deployment, nancial and business judgment, communication and engagement, coaching and development, employee relations, planning and budgeting. Signicant investment in Charters future was made in 2010 through training and development, both to improve productivity and to maintain the respect and trust of retained employees. Charters people development programmes were seen as key retention tools during a very challenging year. As signs of recovery appeared, managers were equipped with employee engagement skills to motivate and drive performance. b. Employee numbers The average number of persons employed by Charter in 2010 was 12,313 (2009: 12,451) and was 12,407 at the year end (2009: 11,982). c. Non-discrimination Charter and its subsidiaries recognise and value diversity in the workforce and are equal opportunities employers. All recruitment, selection, reward, deployment, development and promotion decisions are made solely on the basis of individual qualications, skills, experience and merit, regardless of gender, race, colour, nationality, ethnic or racial origins, marital status, sexual orientation, age, religion or disability. Charters Equal Opportunities policy was re-communicated in 2010. The Company and its subsidiaries give full and fair consideration to applications for employment made by disabled people, having regard to their aptitudes and abilities. Should employees become disabled during employment, they would be considered for any necessary retraining and available work within their capabilities. For the purposes of training, career development and promotion, disabled employees are treated in the same way as other employees.
Leadership talent senior people believed to have the capability, ambition and performance to lead a signicant part of the business in the future (~100 people). Developing talent managers with the capability, ambition and performance to move to more senior roles in future (~170 people). Technical talent individuals who have considerable skill and knowledge in welding, cutting, process and systems (~160 people).
ESABs talent management process put nearly 100 executives through its key developmental programmes including: 21st Century Leadership Development; Developing Excellence and the Technical Talent Expo. Since September 2009:
Q
60 executives have been through 21st Century Leadership programmes 32 managers have been through developing talent programmes 24 individuals attended ESABs rst technical talent Expo four post-course projects have been completed, with two presented to the CEO 12 Brunel University assignment briefs from ESABs Developing Talent Programme have been published over 75 individual development plans are being worked on and over 100 mentoring sessions have taken place, using senior ESAB executives as mentors. online training continued, with 1,731 hours delivered to nearly 800 users.
Q Q
33
Divisional and nancial review Corporate responsibility report (continued)

Howdens business has replaced the cooling fans at Connahs Quay Power Station in the UK to improve reliability, availability and efciency whilst also bringing enhanced environmental protection. The power station is close to local residential areas and noise attenuation equipment limited the thermal efciency of the cooling tower. By using Howdens ultra low noise fans water/air ratios can be improved and the incidence of low level plumes dropped from around 142 days a year to around 23 days. Improvements in turbine efciency as a result will lead to less gas being consumed and a reduction in 7,500 tonnes CO2 per year for the same level of power generation. There have been two signicant business outcomes from the talent processes so far. Firstly there has been a tangible improvement in individual engagement and commitment to ESAB. Secondly, succession and senior appointments are now better informed. ESABs LEAN manufacturing programme has continued with Bootcamps in Mor (Hungary), Chennai (India) and Monterrey (Mexico), involving 64 people. One non-manufacturing LEAN Bootcamp took place with 23 attendees. Howden has run three LEAN Leadership Courses during 2010 with 54 attendees and a LEAN Bootcamp was held in Weihai, China, which trained 21 attendees. These continue the drive to implement LEAN principles throughout Charter. The Howden Academy has continued as a three-week induction course for new engineers. Two additional Howden Academies were run this year, attended by 68 engineers. The Howden Management Development programme, which was piloted in 2009, was rolled out in 2010 to South Africa, China, Germany, France and Spain, with 60 managers attending. This is an eight-day programme which aims to equip managers with key skills and tools to develop themselves and their teams. Howdens Talent Management Programme has continued and following 100 per cent completion rate for Senior Management appraisals, over 110 managers were identied as either core, key or developing talent within the business. All key and developing talent have been assessed and a development plan linked to succession planning is currently being nalised. The Engineering Career ladder was piloted in South Africa, aiming to identify skills, behaviours and competencies and deliver development plans for engineers. This will be rolled out in China next and then globally throughout Howden over the coming three years. During 2010, Howden North America implemented a Management Mastery Program (MMP), which is designed to include basic management skills with an expectation that all Howden North America managers and supervisors will participate, regardless of background or experience. The pilot cohort was held in May, followed by the senior management cohort in June/July. Howden will complete three additional cohorts by the end of Q1 2011. e. Employee communications and relations The Companys policy is to encourage effective communication and consultation between employees and management. ESAB has continued with its Monthly Cascade, an internal newsletter, which is now widely established as the primary vehicle for global employee communication. Throughout the year, regional business reviews have conrmed its use as a brieng tool in every operation visited. Managers developed a much deeper understanding of the importance of communication and major change projects have incorporated greater communications content than ever before. Howden continues to use the Team Brief newsletter, which is issued every two months, in addition to the important activities of works councils to ensure a two-way ow of information. This augments local newsletters and communications/team meetings. Further, in order to assess effectiveness and identify improvement opportunities, Howden will begin a thorough review of its internal communications in Q1 2011 with recommendations and an action plan being developed in Q2 2011.
4. Sub-contractors and suppliers

The Company wants to work with product suppliers that meet its own standards of safety, environmental and quality management. ESAB has a Code of Ethics for purchasing and has in place a self-assessment procedure through which about 1,900 suppliers have been surveyed since 1997. The selfassessment questionnaire, which includes a list of banned and hazardous substances, must be signed by suppliers, as well as a declaration of legal compliance. Non-compliance is addressed by the ESAB local business units. During 2010, the self-assessment programme has been strengthened with the introduction of on-site environmental, health, safety and quality audits for nished goods suppliers. Four audits were completed in 2010 and further audits planned for 2011. As part of shaping its business in a sustainable and competitive way, Howden is continuing with its strategy to build constructive relationships with sub-contractors in low cost countries, particularly in India and Russia. In so doing, Howden aims to ensure that high ethical standards are observed, taking into account guidance issued by relevant trade associations and other organisations. In line with this commitment, standard procedures for vendor audit of suppliers and sub-contractors have now been rolled out to all Howden Business Units and appropriate training for its supply chain staff is being provided to enable effective policy implementation. A procedure for supplier performance and assessment, which includes aspects of EHS, is in the development stage and is being piloted in Howden UK and North America.
2010 review 01 35
As a reection of ESAB Brazils concern for the education of children and adolescents, in 2010 it adopted the Professora Ligia Magalhes Municipal School, a public institution serving an underprivileged community in Contagem, Minas Gerais. To educate and raise awareness the company carried out various activities with students and teachers. An interactive educational activity trained 35 teachers (78 per cent) to help achieve sustainability in the community. The course dealt with topics such as environmental education, sustainable communities and consumer awareness. Three of the projects submitted by the teachers were sponsored by ESAB for introduction at the school.
5. Code of conduct
The Charter Code of Conduct was re-communicated across the businesses during 2010. Charter has appointed a Compliance Ofcer with global responsibilities to ensure that Charter businesses not only comply with relevant legislation but also implement fully the requirements of our Code of Conduct. Charter reviewed and revised its Anti-Bribery and Corruption (ABC) policy which was communicated to all Charter, ESAB and Howden employees. This is now being followed by a multi-stage training programme to ensure ongoing compliance. Senior Charter, ESAB and Howden Directors, as well as senior managers in countries considered to have the highest potential exposure, received face-to-face training during 2010. Following on from the success of the e-learning program for Competition Law, which was launched in 2009, an e-learning module has been developed on ABC in ten languages. This is being rolled out initially to all ofce-based individuals as a priority in 2011. It will reach 35 per cent and 54 per cent of ESAB and Howden employees respectively. Risk assessments have been undertaken and used as the basis of prioritising further face-to-face training for those working in higher risk territories and/or job functions. All new employees will go through the training as part of their induction process. A whistleblowing process, which involved the implementation of a new third-party reporting mechanism called MySafeWorkPlace was approved at the end of 2010 and launched in January 2011. This is a condential and anonymous telephone hotline and web-enabled reporting service that makes it easy to report nancial irregularities, harassment, theft, substance abuse, unsafe conditions, or any other violation of the Code of Conduct. It provides a convenient mechanism and protected environment for letting the right people within the organisation know about concerns so that action can be taken where appropriate. 19 events involving allegations of fraud, theft or other possible breaches of the Code of Conduct were investigated in 2010, of which nine were reported via our whistleblowing system. Of these, 11 resulted in dismissal, resignation or formal warnings, seven required no further action, and one is still under investigation.
6. Communities
Many Charter businesses support local charities through fundraising or other forms of assistance. In addition, local voluntary initiatives and community investment serve to build stakeholder relations and enhance our reputation as an employer of choice and a good corporate citizen. Details of charitable donations are reported on page 55.
35
Board of Directors
The Board believes that its structure provides the correct balance of skills and experience for the business
1: Lars Emilson Chairman (69) N, R

Lars Emilson was appointed Chairman of Charter International plc on 28 August 2008, having been Chairman of Charter plc since 1 November 2007. Lars began his career with PLM AB, a Swedish pan-European packaging group, and was appointed Chief Executive after its acquisition by Rexam plc. He joined the board of Rexam plc in 2000, with responsibility for the worldwide beverage can business and became Chief Executive from 2004 until his retirement in 2007. He is a Non-Executive Director of Filtrona plc, Luvata Espoo Oy and East Capital Explorer AB.
3: Robert Careless Finance Director (57) D

Robert Careless was appointed Finance Director of Charter International plc on 27 August 2008, having been Finance Director of Charter plc since 22 April 2004. Robert qualied as a chartered accountant with KPMG and was formerly Finance Director and Company Secretary of Semara Holdings Plc. He has a degree in Physics from Oxford University.
4: James Deeley Commercial Director (47) D

James Deeley was appointed Commercial Director of Charter International plc on 26 March 2009, having been Legal Director of Charter plc since 10 July 2006. James qualied as a solicitor with Slaughter and May and subsequently held positions as Director of Legal Services at Regus plc, Head of Group Legal at DS Smith plc and Corporate Services Director and Company Secretary of Numerica Group plc. He is also Deputy Chairman of the Council of Trustees of SeeAbility, a non-prot organisation in the care sector.
2: Michael Foster Chief Executive (58) N, D

Michael Foster was appointed Chief Executive of Charter International plc on 27 August 2008, having been Chief Executive of Charter plc since 1 July 2006. Michael joined Charter plc as a Non-Executive Director in December 2001 and became Commercial Director on 1 January 2005. He was formerly Executive Director responsible for the UK, USA and Ireland at RMC Group plc. Michael has a degree in Engineering and Electrical Sciences from Cambridge University, is a Fellow of the Association of Corporate Treasurers and is a qualied solicitor.
2010 review 01 35
Key to committee membership: A Audit Committee R Remuneration Committee N Nominations Committee D Disclosure Committee
5: John Biles Independent Non-Executive Director (63) A, R, N

John Biles was appointed as a Non-Executive Director of Charter International plc on 27 August 2008, having been a Non-Executive Director of Charter plc since 1 April 2005. John is a chartered accountant and was previously Finance Director of international engineering group FKI plc for six years until 2004. He currently serves as a Non-Executive Director and Chairman of the Audit Committees of Northern Ireland Electricity plc, Bodycote plc, Hermes Fund Managers Limited, and Sutton and East Surrey Water plc.
7: John Neill CBE Non-Executive Director (63)

John Neill was appointed as a Non-Executive Director of Charter International plc on 27 August 2008, having been a Non-Executive Director of Charter plc since 1994. He is currently Group Chief Executive of the Unipart Group of Companies Limited. John is a Non-Executive Director of Rolls-Royce Group plc and was formerly a Director of the Bank of England and a Non-Executive Director of Royal Mail Group plc.
6: Grey Denham Senior Independent Non-Executive Director (62) A, R, N

Grey Denham was appointed as a Non-Executive Director of Charter International plc on 27 August 2008, having been a Non-Executive Director of Charter plc since 8 February 2005. Grey was appointed to the Council of the UK Competition Commission in September 2009 and is a Non-Executive Director of the charity Young Enterprise UK. He retired as Company Secretary and Group Director Legal and Compliance of GKN plc in May 2009 and is a former Chairman of both the Primary Markets Group of the London Stock Exchange and of the CBI in the West Midlands. He is a qualied barrister.
8: Andrew Osborne Independent Non-Executive Director (44) A, R, N

Andrew Osborne was appointed as a Non-Executive Director of Charter International plc on 27 August 2008, having been a Non-Executive Director of Charter plc since 8 February 2005. He is a chartered accountant and is currently Deputy Chairman of Geoffrey Osborne Limited. Andrew was recently appointed as a Trustee of WellChild.
9: Manfred Wennemer Independent Non-Executive Director (63) A, R, N

Manfred Wennemer was appointed as a Non-Executive Director of Charter International plc on 26 March 2009. He was formerly Chief Executive of Continental AG and prior to this, he worked for a number of years for companies within the Continental group as Chief Executive of Benecke-Kaliko AG and ContiTech AG. Before his tenure with Continental he worked for the Freudenberg Group for 14 years, latterly as Chief Executive of the Spunbond Nonwovens Group. Mr Wennemer is also a Director of Bekaert and Knorr-Bremse AG.
Other information Other information th nf rmati n f 115 116 15 1 1 115 116
37
Key management
Ian Muir Bob Cleland
Chief Executive Howden (64)

Bob Cleland was appointed as Chief Operating Ofcer of Howden Global in 1998 and as Chief Executive Ofcer in 1999. Bob was formerly Group Operations Director of Triplex Lloyd plc. He has a degree in Mathematics and Physics from Glasgow University and a Masters degree in Operations Research from Lancaster University. He is a Chartered Engineer, an alumnus of INSEAD and holds an honorary Doctor of Technology degree from Glasgow Caledonian University.
Human Resources Director ESAB (52)

Ian Muir was appointed as Charter HR Director and Global HR Director of ESAB on 18 August 2008. Previously, Ian was a director of Cable & Wireless International Group Limited. He has a degree in Social Sciences from the University of Bath, is an alumnus of INSEAD and is a Fellow of the Chartered Institute of Personnel and Development.
Michael Hampson
Brendan Colgan
Company Secretary and General Counsel (52)

Michael Hampson was appointed as Company Secretary and General Counsel on 21 October 2009. Michael previously held positions as Director of Corporate Development at Anglian Water Group plc, Director of Corporate Affairs at RMC Group plc and Company Secretary and General Counsel at Whitbread plc. He is a Non-Executive Director of the charity the Royal Society for the Prevention of Accidents, and is a barrister and a Chartered Secretary.
Managing Director Strategy & Development ESAB (36)

Brendan Colgan was appointed in 2010 as Managing Director of Strategy & Development for ESAB Global with executive responsibility for China, North & South East Asia, Sub-Saharan Africa, the Middle East and North America. Previously Brendan was CEO of ESAB North America, CFO Anderson Group Inc., CFO Howden North America and CFO Howden Australia. He has a degree in accounting from the University of Ulster, is a Harvard AMP Graduate and a Fellow of The Chartered Institute of Management Accountants.
Peter Dodd
Ian Brander
Managing Director ESAB Europe (63)

Peter Dodd was appointed as Managing Director of ESAB Europe on 1 July 2008, having been Sales and Marketing Director since 2003. Peter joined ESAB in October 1975. He has held a number of sales and commercial positions, becoming Managing Director of ESAB Group (UK) Limited in 1994. He has a degree in Biochemistry, a diploma in Business Studies and an MBA, all from Liverpool University.
Operations Director Howden (49)

Ian Brander was appointed Technology Director of Howden Global in 2006 and Operations Director of Howden Global in 2008. Ian joined Howden in 1983 and has held a number of technical, project, commercial and general management positions in Howden associated with a wide range of products. He has a degree in Mechanical Engineering from the University of Strathclyde.
Corporate governance
2010 review 01 35
The Company monitors its compliance with the requirements of the Combined Code on Corporate Governance (the Combined Code) on a continuous basis. The Combined Code was revised during the year under review and the revisions became effective from 1 January 2011, after which it was called the UK Corporate Governance Code. The Board is of the opinion that in respect of the period from 1 January 2010 to 31 December 2010 the Company has been in compliance with the provisions of the Combined Code with only one exception. The service contracts of Michael Foster and Robert Careless contain liquidated damages clauses, which are in contrast to requirement B.1.5 of the Combined Code for outgoing directors to mitigate their loss. The Board feels that these arrangements are not excessive and serve to balance the interests of shareholders with the need to ensure the retention of these individuals. The policy has been revised with regard to the service contracts of new Executive Directors and hence the service contract of James Deeley contains no such provision.
Attendance at Board and Committee meetings 2010

Committee Board Meetings attended: Lars Emilson Michael Foster Robert Careless James Deeley John Biles Grey Denham John Neill Andrew Osborne Manfred Wennemer 9/9 9/9 9/9 9/9 9/9 8/9 7/9 7/9 8/9 n/a n/a n/a n/a 5/5 5/5 n/a 5/5 4/5 2/2 2/2 n/a n/a 2/2 2/2 n/a 2/2 2/2 4/4 n/a n/a n/a 4/4 4/4 Audit Nominations Remuneration
n/a 4/4 3/4
1 Directors
The graph below illustrates how the Board spent its time at Board meetings in 2010.
(a) The Board How the Board spends its time The Board conducts itself in such a way as to provide leadership to the Company and its subsidiaries and their respective employees. It is committed to the highest standards Environmental health & safety, risk 11% of corporate governance and to the delivery of enhanced Legal and corporate governance 17% shareholder value in a manner consistent with sound business Operations/strategy 25% Finance 21% practices and proper standards of the Companys Corporate Other 26% Responsibility Report (CR). In providing such leadership, the Board focuses on integrity and personal responsibility with the overriding objective of creating shareholder value. The Board operates in accordance with a Management and Governance Framework (the Framework). This has been approved and adopted by the Board, and consolidates those policies which govern the management and governance of the Company and its subsidiaries. The Framework contains details of: (a) the The powers and authorities retained by the Board include: specic powers that the Board has retained (b) the authority Q the approval of annual and half year results, interim that has been delegated to the Board Committees and their management statements and associated announcements; terms of reference and (c) the role of the Board, the Chairman and the Chief Executive. The Framework is kept under regular review and modied as and when new situations, requirements Q the membership, authority and terms of reference of Board committees; or developments in best practice arise. The Board ensures that the membership of its committees is refreshed so that undue Q corporate strategy; reliance is not placed on individual Directors. The Board meets regularly and there are seven scheduled meetings for 2011. Q signicant nancing arrangements; The Board holds an annual strategy conference at which it considers and determines the strategic plans for the Companys Q matters relating to share capital (including employee share schemes and share options); businesses. No individuals other than the Committee chairman and the members are entitled to be present at meetings of the Q contracts or expenditures in excess of certain Audit, Nominations and Remuneration Committees, although monetary thresholds; others including the Executive Directors and the external Auditors may attend at the prior invitation of the relevant Q adoption of annual budgets; and committee chairman. Q approval of appointments of Directors to the Board and the appointment and removal of the Company Secretary. Subject to these retained powers and authorities, the day-to-day management of the Companys subsidiaries resides with the boards of those subsidiaries. Any concerns that the Non-Executive Directors may have regarding either the administration of the Company and its subsidiaries, or any proposed actions, are recorded in the minutes of the Company where an alternative resolution cannot be found. The Company has provided its Directors with appropriate insurance cover in respect of legal proceedings and other claims against them.
39
Corporate governance (continued)
(c) Chairman and Chief Executive Lars Emilson is Chairman and Michael Foster is Chief Executive of the Company. The Board believes that there is a dened division of responsibilities between both roles. The Chairman Role: The Committee is responsible for taking necessary has primary responsibility for leading the Board, for ensuring its steps that are ancillary to and required in order to progress effectiveness, and for ensuring that good communications are transactions that have been approved in principle by the maintained with shareholders, while the Chief Executive has Board and which relate to the Company, to review and make responsibility for running the Companys businesses. Lars recommendations to the Board in respect of the Policies and Emilson has no signicant commitments that require disclosure Procedures Manual and determine the remuneration and other in relation to his Chairmanship. The Chairman periodically terms and conditions of appointment of the Non-Executive meets with the Non-Executive Directors without the other Directors of the Company. Executive Directors present as well as maintaining contact should they wish to raise any issues with him outside the formal (ii) Nominations Committee setting of the Board meetings. At least once a year the Senior Composition: Lars Emilson (Chairman), Michael Foster, John Biles, Grey Denham, Andrew Osborne and Manfred Wennemer. Non-Executive Director chairs a meeting of the Non-Executive All of the members of the Committee, excluding Michael Foster, Directors without the Chairman present. are considered independent Non-Executive Directors pursuant (d) Board balance and independence to the Combined Code and accordingly a majority of the The Board believes that its current structure provides the members are independent. correct balance of skills and experience for the business (b) Board Committees (i) Standing Committee Composition: Any two Directors of the Company. Role: The Committee is responsible for making recommendations to the Board concerning appointments to the Board, including evaluating the skills, knowledge and experience required and setting a job description for specic appointments. In fullling its role in respect of new appointments, the Committee generally seeks advice and assistance from external search consultants to identify, benchmark and select appropriate candidates. The Board of Charter International plc reviewed plans for orderly management succession in relation to both Board and senior management appointments at its annual strategy conference in September 2010. The Board believes that this provided the necessary reassurance that appropriate plans have been adopted to ensure that the correct balance of skills and experience are maintained on the Board and within the senior management of the Company and its subsidiaries. (iii) Remuneration Committee Details regarding the membership, role, responsibilities and work of the Committee during the year under review can be found in the Remuneration Committee report on page 46. (iv) Disclosure Committee Composition: The Committee comprises the three Executive Directors. Role: The Committee is primarily responsible for the creation and maintenance of appropriate procedures, systems and controls to ensure compliance by the Company with its obligations under the Disclosure and Transparency Rules (DTR) and the Listing Rules of the Financial Services Authority. In particular, it has responsibility for the determination, on a timely basis, of the disclosure treatment of material information and designing, implementing and evaluating disclosure controls and procedures that operate within the Company and its subsidiaries. The Committee also has responsibility for identifying inside information, for the purpose of maintaining the Companys insider lists as required by the DTRs. (v) Audit Committee Details regarding the membership, role, responsibilities and work of the Committee during the year under review can be found in the Audit Committee report on page 44. and would allow for any changes to the Boards composition to be managed without undue disruption, whilst ensuring that the presence of six Non-Executive Directors prevents a concentration of power and inuence in a small number of individuals. The Board has determined that, with the exception of John Neill who is no longer considered to be independent by virtue of his combined length of service on the Boards of the Company and Charter plc and his relationship with the Unipart Group of Companies, all of the Non-Executive Directors including the Chairman are regarded as independent. The Board does not consider that there exist any relationships or circumstances likely to affect the judgement of any NonExecutive Director. The Board greatly values the contribution and experience of John Neill and recommends his re-election at the forthcoming Annual General Meeting (AGM) as a Non-Executive Director. No Executive Director currently holds a non-executive directorship of a FTSE 100 company. (e) Information and professional development The Company Secretary, under the guidance of the Chairman, is responsible for ensuring good information ows within the Board and its committees. All Directors of the Company have access to the advice and services of the Company Secretary and may take independent professional advice on any matter relating to the Company at the Companys expense. In advance of Board and committee meetings, Directors and relevant committee members receive detailed papers on the matters to be considered, enabling them to request further clarication or additional information and to participate fully in discussions. The Company Secretary is responsible for advising the Board, through the Chairman, on all governance matters and best practice. The Company has a comprehensive induction process for all Directors when they join the Board. This includes a detailed information pack, which combines publicly available information, such as the Annual Report and product information, with condential brieng notes on the Companys nancing arrangements, corporate structures, management accounts, advisers and other relevant information. In addition brieng meetings are organised with key members of the Board and senior management and visits are arranged to the Companys businesses. Where appropriate, Directors meet with major shareholders in the Company as part of the induction process. Directors are also provided with details of relevant external courses, which they can attend on an ongoing basis.
2010 review 01 35
(f) Performance evaluation Evaluation of the Board and its principal committees is conducted by gathering feedback from the relevant Board members. This feedback is gathered from two sources: a) a condential questionnaire eliciting both measurable data and free-format responses and b) individual interviews. The process is run by the Charter HR Director who collates the results and presents them to the Chairman and the Board. The individual interviews are between the Chairman and Board members who give their feedback on Board performance against a structured agenda. Board members also give more general comment on the performance of the Board and its committees. The Chairman is responsible for conducting the Chief Executives performance review. The Non-Executive Directors, led by the Senior Independent Director, are responsible for evaluating the performance of the Chairman. In doing so, they also take account of the views of the Executive Directors. The Chief Executive conducts individual evaluations of the Executive Directors as part of the Companys formal performance management process. Performance is assessed against written objectives. The results of the 2010 questionnaire and the individual meetings were summarised in a paper submitted to the Board by the Charter HR Director on 2 December 2010. This considered the areas that the Directors identied for improvement and set out the way in which they will be addressed. In addition, careful attention was given to those areas that recorded different ratings since the similar exercise in 2009. The Board was unanimous in its agreement with the assessment that the Board, its committees and individuals continued to be effective and that there had been an overall improvement in effectiveness in 2010. The Board valued the continuity of approach and the total condentiality of the questionnaire.
2 Accountability and Audit

(a) Financial reporting & Directors responsibilities The following paragraphs set out the responsibilities of the Directors in relation to the consolidated nancial statements for the Group and the nancial statements for the Company. The reports of the external Auditors, shown on page 59, set out their responsibilities in relation to those nancial statements. Under the Companies (Jersey) Law 1991 (as amended) (the Jersey Companies Law), the Directors are responsible for preparing nancial statements for the Company in respect of each of its nancial periods. The Companys nancial statements are required to show a true and fair view of, or be presented fairly in all material respects, so as to show: (i) the prot or loss of the Company for the nancial period covered by such nancial statements; and (ii) the state of affairs of the Company at the end of such nancial period. The Companys nancial statements for each of its nancial periods are required to be prepared in accordance with the generally accepted accounting principles adopted by the Company and to specify such generally accepted accounting principles. The Companys nancial statements are prepared in accordance with UK generally accepted accounting principles (UK GAAP). Although the Company is not required to prepare consolidated nancial statements for the Group under the Jersey Companies Law, it is required to prepare them under the Listing Rules of the Financial Services Authority. The consolidated nancial statements for the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. In preparing both the consolidated nancial statements for the Group and the nancial statements for the Company, the Directors were required to:
Directors and corporate governance 36 57 Financial statements 58 114
The Board has noted the recommendation of the UK Corporate (1) select appropriate accounting policies and apply Governance Code that the evaluation of the Board of FTSE 350 them consistently; companies should be externally facilitated at least every three years and it will undertake further consideration of this position (2) make judgments and estimates that are reasonable in 2011. and prudent; (g) Re-election In accordance with provision B.7.1 of the UK Corporate Governance code, the Board has resolved that all Directors should stand for re-election annually at each AGM. Accordingly, all of the Directors will stand for re-election at the forthcoming AGM. (h) Directors conicts of interest The Company has procedures in place to deal with Directors conicts of interest and these procedures have operated effectively. (3) state whether applicable accounting standards have been followed, subject to any material departures being disclosed and explained; and (4) prepare those nancial statements on the going concern basis, unless they consider them to be inappropriate.
41
Corporate governance (continued)
The Directors are responsible under the Jersey Companies Law for ensuring that the Company keeps accounting records which are sufcient to show and explain its transactions and that are such as to disclose with reasonable accuracy, at any time, the nancial position of the Company and to enable the Directors to ensure that the Companys nancial statements comply with the Jersey Companies Law. The Directors are required to have the Companys nancial statements for each of the Companys nancial periods audited, and for this purpose, to provide the Auditors with a right of access to the Companys records and to provide them with such information and explanations as they think necessary for the performance of their duties as auditors. The Directors are also responsible for taking reasonable steps to safeguard the assets of the Company and its subsidiaries and, in that context, to have proper regard to the establishment of appropriate systems of internal control with a view to the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the Companys website. The requirements of Jersey Companies Law and UK legislation which govern the preparation and dissemination of nancial statements may differ from the requirements of applicable legislation in other jurisdictions. The Directors consider that they have taken the actions necessary to meet their responsibilities as set out in the paragraphs above. Going concern After making enquiries, the Directors have a reasonable expectation that the Company and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing both the consolidated nancial statements for the Group and the nancial statements for the Company. (b) Internal control The Board has overall responsibility for the maintenance of a system of internal control. The Audit Committee has been formally delegated responsibility for reviewing the effectiveness of the system of internal control. The processes to manage the key risks to the success of the Company and its businesses are reviewed and improved as necessary. There is an organisational structure with clearly dened lines of responsibility and delegation of authority and there are also established policies and procedures for monitoring each business. While the operational control is largely de-centralised and responsibility is delegated, the businesses are subject to the overall internal control framework. This, by its nature, can provide reasonable but not absolute assurance against material misstatement or loss. Detailed policies and procedures have been established by the Board dealing with numerous issues including internal controls. Examples of internal control procedures are summarised as follows:
(i) Assessment of business risk A system of risk identication, assessment and evaluation of controls is embedded within the Companys management processes. Strategic risks and opportunities arising from changes in the business environment are regularly reviewed by the senior management and formally discussed by the Board. Risks relating to key activities within the operating businesses and at the Companys head ofce are assessed on a continuous basis and reported to the Board as appropriate. (ii) Control environment Under the Framework described on page 39, the Board sets overall policy and approves the core policies and procedures to be adopted by all of its subsidiaries. A well-dened organisational structure with clear operating procedures and lines of responsibility and delegated authority has been established. There are procedures for appraisal, review and authorisation of matters of signicance, including investments, capital expenditure, borrowings, guarantees, indemnities and material contracts. (iii) Information and communication The Companys operating procedures include a comprehensive system for reporting nancial and non-nancial information to the Board, including:
Q
the preparation and review of annual budgets and monthly results and forecasts; a review of the businesses at each Board meeting, focusing on any new risks arising (for example, those relating to proposed major investments and key changes in the markets); and meetings between various Executive Directors and operational management.
(iv) Control procedures Detailed operational procedures are developed for each key business activity embodying appropriate controls. The implications of changes in law and regulations, including those for nancial reporting, are taken into account within these procedures. Procedures are established to safeguard the assets of the Company and its subsidiaries and to ensure that all nancial transactions are properly recorded. Consolidated data, reconciled to the underlying nancial systems, is reviewed to ensure that the true position and results of the Group are reected in the consolidated nancial statements. Accounting policies and practices are widely disseminated throughout the Companys subsidiaries and its afliates. Control processes are dynamic. Continuous improvements are made to adapt them to the changing risk prole of operations and whenever a weakness in the internal control system is identied appropriate remedial action is taken. The Company is committed to the highest ethical standards. The Company has an established code of business conduct and a number of supporting policies that require that all of its businesses and employees act with integrity at all times and that there is strict compliance with applicable laws. Employees have also been provided with a whistleblowing hotline known as MySafeWorkPlace allowing them to raise concerns anonymously. All occurrences of whistleblowing are investigated and reported to the Audit Committee.
2010 review 01 35
During the year under review a Compliance Ofcer was appointed with responsibility for monitoring compliance with the Companys Anti-Bribery and Corruption Policy and Competition Policy and investigating any potential breaches of the policies. Work is currently in hand to ensure that the Company has adequate procedures in place to comply with the Bribery Act 2010, when it comes into force. This includes a detailed review of agents and intermediaries used by Howden and ESAB and the existing controls in place.
3 Relations with shareholders

The Company has a policy of maintaining an active dialogue with institutional shareholders through individual meetings. Communications with private shareholders are conducted through the Annual Report, Company announcements, the AGM and the Companys website which, includes descriptions of the Companys business operations. The Board receives regular updates on all meetings and communications with major shareholders and major shareholders are offered the opportunity to meet with the Non-Executive Directors from time to time.
(v) Monitoring process There are clear procedures for monitoring the system of internal controls. The signicant components of these are: The Senior Independent Non-Executive Director is available to shareholders if they have concerns that cannot be addressed Q the Chief Executive Ofcer and Chief Financial Ofcer of each through regular channels such as the Chairman, Chief operating company are required to review internal controls Executive or Finance Director. and to return a self-certied internal control questionnaire conrming the effectiveness of internal control systems; The share capital structure can be found on page 55, in the Directors Report. Q each operating company deploys a variety of risk identication and assessment processes and develops By order of the Board mitigating actions. Major, high or medium risks are escalated and progress on action plans is reviewed at least quarterly as Michael Hampson Company Secretary and General Counsel part of management meetings. The Board reviews every six 17 February 2011 months the major and high risks and monitors progress against action plans;
Q
as part of its audit visits to operating companies, the internal audit function evaluates the effectiveness of internal controls. The Audit Committee reviews the ndings of the internal audit process;
the Audit Committee has specic responsibility for reviewing the effectiveness of internal controls and monitors the process of assessing the internal controls on behalf of the Board; and the Audit Committee reviews the process by which risks are identied and assessed by operating units, operational management and the Board. The Board conrms it has carried out a review of the effectiveness of the system of internal controls described above for the nancial year ended 31 December 2010 and up to the date of this Report in accordance with the guidance set out in Internal Control: Revised Guidance for Directors on the Combined Code (the Turnbull Guidance). The review encompassed operational, nancial and compliance controls as well as risk management.
The system used included the following elements: (i) as part of their ongoing reviews of the business, the Executive Directors and Key Management reviewed the effectiveness of strategic, operational and compliance internal controls and risk management. This involved considering reports on key risk areas (concentrating on signicant changes in the risk prole) and in the light of such reviews making appropriate amendments to policies and procedures to control risks; and (ii) the Board considered reports from the Audit Committee and the Executive Directors on these areas during the year and, at the time of approving the Annual Report, considered a summary of the assessments of the effectiveness of the controls on the key risks identied.
43
Audit Committee report
I am pleased to present the Companys Audit Committee report for the year ended 31 December 2010, which has been prepared in accordance with the Combined Code and the rules of the UKLA. The Committee
Chairman Committee members John Biles Grey Denham Andrew Osborne Manfred Wennemer
reviews and monitors the external Auditors independence and objectivity and the effectiveness of the audit process; is responsible for developing and implementing a policy on the engagement of the external Auditors to supply non-audit services; and reviews reports from the Compliance Ofcer and monitors the Groups whistleblowing policies and procedures.
Management attendees Chairman Chief Executive Finance Director Commercial Director Financial Controller Company Secretary and General Counsel
Lars Emilson Michael Foster Robert Careless James Deeley John Avery Michael Hampson
In the performance of its duties, the Committee has independent access to the internal audit function and to the external Auditors; and may obtain outside professional advice as necessary. Both the Head of Internal Audit and the external Auditors have direct access to the Chairman of the Committee outside formal Committee meetings. The Committee has written terms of reference that outline its authority and responsibilities and the terms of reference are available for download at www.charter.ie. These are considered annually by the Committee and any proposed changes are referred to the Board for approval.
The members of the Audit Committee (the Committee) are considered independent Non-Executive Directors pursuant to the Combined Code. Their biographical details are set out on pages 36 to 37 and their remuneration on pages 46 to 53. The Company Secretary acts as secretary to the Committee. The Board has satised itself that both John Biles and Andrew Osborne have recent and relevant nancial experience, as required by the Combined Code. In addition to the abovementioned management attendees, senior representatives of the external Auditors, the Head of Internal Audit and senior nancial executives from head ofce and the businesses attend meetings by invitation as required.
Report on the Committees activities in 2010

Meetings and attendance Meetings of the Committee are timed to coincide with the nancial and reporting cycles of the Company. The Committee met on ve occasions in 2010 and attendance by Committee members is set out in the table on page 39. In addition, the members of the Committee met separately with the external Auditors and the Head of Internal Audit to discuss matters without the Executive Directors being present. The Chairman of the Committee reports to the subsequent meeting of the Board on the key issues covered by the Committee and the Board also receives copies of the minutes of each meeting. During the year the Chairman of the Committee has had additional meetings with the Companys senior nancial managers to review a range of nancial matters, and has also met with the external and internal Auditors prior to Committee meetings. Financial reporting During 2010 the Committee reviewed a wide range of nancial reporting and related matters including the half yearly and annual nancial statements prior to their submission to the Board and the assessment of going concern and liquidity risk. The Committee focused in particular on key accounting policies and practices adopted by the Company and its subsidiaries and signicant areas of judgment that impacted reported results including litigation and taxation matters. In respect of the 2010 year-end review, the Committee has taken into account the key questions posed by the Financial Reporting Council in their paper Challenges for Audit Committees arising from current economic conditions and satised itself that the Company has taken the appropriate actions and has adequate resources and systems in place to deal with current trading conditions.
Role of the Committee

The Committee is a sub-committee of the Board, to whom it reports its ndings. Its primary role is to ensure the integrity of the nancial reporting and audit processes, and the maintenance of a sound internal control and risk management system. In pursuing these objectives, the Committee:
Q
monitors the integrity of the nancial statements of the Company and any formal announcements relating to the Companys nancial performance; makes recommendations to the Board regarding the adoption of annual and half yearly nancial reports and the approval of any other formal announcements relating to the Companys nancial performance; reviews the Companys internal nancial controls and internal control and risk management systems; monitors and reviews the effectiveness of the Companys internal audit function; makes recommendations to the Board regarding the external Auditors and their terms of appointment;
2010 review 01 35
External Auditors The Committee annually performs a review of the effectiveness of the Companys external Auditors, and has recommended to the Board that PricewaterhouseCoopers LLP, who have been the Companys auditors for a number of years, be re-appointed as the external Auditors of the Company. The Committee remains satised as to the independence of the external Auditors following a review at its meeting on 2 December 2010 and has received written conrmation from the external Auditors to this effect. The external Auditors are required to rotate the Group audit partner every ve years and other key partners every seven years. There are no contractual obligations restricting the Companys choice of external auditor. In accordance with its remit, the Committee reviewed and adopted the external Auditors plans for the audit of the Companys 2010 nancial statements. In approving the terms of engagement for the audit, the Committee considered the proposed audit fee and associated expenses. The Committee is responsible for the development, implementation and monitoring of the Companys policies on external audit and the provision of some other appropriate services by the external Auditors. The Committee has reviewed those non-audit services provided by the external Auditors throughout the year in accordance with the Companys policy on the provision of other services by the external Auditors. This policy notes that such services are likely to fall within the following types:
Q Q Q Q Q
Internal audit and monitoring of internal control issues The Committee has reviewed the results of the audits undertaken by the internal audit function and considered the adequacy of managements response to the matters raised, including the implementation of recommendations made by the function. It also reviewed and approved the internal audit plan for the coming year and the level of resources allocated to the internal audit function. During 2010 internal audit tracked the status of work done throughout the Group in response to external Auditors management letter recommendations. The annual review of the effectiveness of the internal audit function was conducted in 2010 and was based primarily on guidelines issued by the Institute of Chartered Accountants in England and Wales. The Committee reviewed the reports from the internal audit function and the external Auditors on the Companys systems of internal control and reported to the Board on the results of these reviews. During the year, internal audit carried out audits at companies accounting for 36 per cent of turnover and 81 per cent of prot. Fewer signicant and important points have been identied which demonstrates an improving trend of internal control. Further details of the Companys system of internal control and its policies and procedures can be found in the Corporate Governance report on pages 39 to 43. Whistleblowing The Companys whistleblowing policy was monitored by the Committee at its meetings throughout the year. All issues raised through the Companys whistleblowing procedures during the year were considered and follow-up actions were taken as and when required. Most whistleblowing issues were subject to independent follow-up by internal audit, the exceptions mainly being human resources-related issues. At the end of 2010 a new whistleblowing mechanism, MySafeWorkPlace, was approved and has subsequently been launched, allowing employees to anonymously report any suspected workplace incidents. On behalf of the Committee John Biles Chairman of the Audit Committee 17 February 2011
nancial statements and external reports; acquisitions; disposals; taxation; and other services.
It identies three categories of non-audit services: permitted engagements that require no specic approval; permitted engagements requiring the approval of the Committee Chairman; and engagements that are not permitted. The Companys policy does not permit the engagement of the external Auditors for work on commercial due diligence in connection with acquisitions. The total fees paid to the external Auditors were 3.9million of which 3.0million related to the statutory audits of the parent Company, consolidated accounts, subsidiary undertakings and other assurance-related services. The non-audit fees of 0.9million represent 23percent of the total fees paid to the external Auditor. Further details of the fees paid to the external Auditors of the Company can be found in note 4 to the nancial statements on page 75.
45
Remuneration report
I am pleased to present the Companys Remuneration report for the year ended 31 December 2010, which has been prepared in accordance with the Combined Code (the Combined Code) and the rules of the UKLA. The key activities of the Remuneration Committee (the Committee) in 2010 included: a review of Remuneration policy for 2011 following the introduction of the revised UK Corporate Governance Code, published in May 2010 (the UK Corporate Governance Code) and consideration and approval of salary reviews, bonuses and long-term incentives awarded to the Executive Directors and key and senior management. The Committee also consulted with major shareholders regarding the amendments to the rules of the Companys Long-Term Incentive Plan that were put to the 2010 AGM and associated changes to remuneration policy. I would like to thank those shareholders who participated in the consultation process. In 2011, the main change to the policy is that, in response to the principle set out in the UK Corporate Governance Code, a clawback provision has been added to the Companys performance-related incentive plans. The operation of this is set out in further detail below. The Committee remains committed to setting a fair and competitive remuneration policy, which provides a positive link between reward and strategy and alignment of interest between senior executives and shareholders. The Committee
Chairman Committee members Grey Denham John Biles Lars Emilson Andrew Osborne Manfred Wennemer Michael Foster Ian Muir Michael Hampson
The Company also consulted Mercer and Lane Clark & Peacock during the year in relation to its subsidiaries pension schemes. Governance and the role of the Committee The Board has delegated to the Committee responsibility for the following:
Q Q
Formulation of the remuneration policy for senior executives; Determining the remuneration and other terms and conditions of the Executive Directors, the Chairman and the Company Secretary; Reviewing the remuneration and other terms and conditions of those individuals identied as key and senior managers; Setting stretching but achievable performance targets for incentive plans; Approving share incentives for the Executive Directors, the Company Secretary and key and senior management and the operation of share plans throughout the Company; Reviewing remuneration trends across the Company, its major businesses and the market as a whole; and Determining the relevant pay benchmarking comparator group for the Company.
The Committee conducts its duties within its terms of reference, a copy of which is available on the Companys website at www.charter.ie, and has regard to the Combined Code, the UK Corporate Governance Code and any other relevant governance publications such as the ABI guidelines and RREV policies on remuneration. Key activities of the Committee in 2010 During the year under review the Committee undertook the following key activities: Shareholder consultation Consultation with the Companys major shareholders regarding the proposal to amend the rules of the Charter International plc Long-Term Incentive Plan (CI LTIP) at the 2010 AGM to increase the maximum market value of shares over which awards may be made in any nancial year from 100 per cent to 150 per cent of annual salary. The consultation also included the consideration of the introduction of an Earnings Per Share (EPS) element for the performance criteria for future LTIP awards. Previously the performance criteria had been based on Total Shareholder Return (TSR). Following the consultation, the Committee recommended that the TSR and EPS elements be split 60:40.
2009 Remuneration report Approved the 2009 Remuneration report contained in the Annual Report and the elements of the Shareholder circular that related to remuneration. Assessed the performance of the Executive Directors Reviewed the performance of the Executive Directors compared with the individual objectives set for each Director in 2009 and the performance targets set. Approval of bonuses and potential bonuses Considered and approved the proposed bonuses and deferred bonuses for 2009 and the potential awards available in respect of 2010 including the performance conditions applying to those awards. Review of Remuneration advisers Conducted a competitive tender process for the provision of independent advice to the Committee, following which the Committee concluded that it was appropriate to reappoint HNBS.
Management attendees Chief Executive HR Director Company Secretary and General Counsel
The Committee members and management attendees did not participate in any discussions directly relating to their own remuneration or performance during the year. The Committee held four meetings during the year and a summary of each members attendance at those meetings can be found on page 39 of the Corporate Governance report. External advisers During the year Hewitt New Bridge Street (HNBS) were reappointed to provide independent advice to the Committee on a wide range of issues, including benchmarking, implementation of reward policy for 2010 and a review of remuneration policy for 2011, in line with the UK Corporate Governance Code. The Company consulted Aon Hewitt, an afliated company of HNBS, on actuarial advice in relation to its subsidiaries pension schemes and the insurance brokerage division of Aon Corporation in the USA. These services were agreed prior to the merger of Aon Corporation and Hewitt Associates during 2010 and the services provided by the two businesses are considered to be entirely independent.
2010 review 01 35
Vesting of CI LTIP awards Approved the vesting of the CI LTIP awards granted in 2007 in line with the performance conditions. Terms of Reference Reviewed and approved amended terms of reference to reect the adoption of the UK Corporate Governance Code with effect from 1 January 2011. Review of policy and introduction of clawback in line with UK Corporate Governance Code Reviewed the remuneration policy for 2011 and approved amendments to ensure that risk is taken into account when setting personal objectives and performance targets and when determining the level of awards under variable reward schemes for the Executive Directors. The policy was also amended to reect the introduction of clawback provisions into the Companys existing bonus and long-term incentive plans in the event of nancial misstatement or misconduct.
The charts below illustrate the proportionate breakdown of the various elements of the Executive Directors remuneration packages at target performance, which assumes bonus and LTIP awards pay out at a 50 per cent level and stretch performance, which assumes full payout of both bonus and LTIP. Composition of pay: Chief Executive
Base salary Bonus paid in cash Bonus paid in deferred shares Long-term incentives
Outcome at stretch Outcome at target
25
50
75
100
Remuneration policy and packages Remuneration policy The Company seeks to attract, motivate and retain exceptional executives who have experience of operating in geographically complex, international engineering and manufacturing companies; in order to achieve these aims the Committee keeps the remuneration packages of Executive Directors under regular review. The policy for the remuneration of Executive Directors is designed to ensure that their total reward is competitive and linked both to individual and business performance. Risk is taken into account when setting personal objectives, performance targets and when determining the level of awards under variable reward schemes; this is done by ensuring that targets, whilst stretching, are realistic, attainable and for the long-term benet of the Company and that they are achievable without taking inappropriate business risks. The salaries paid to Executive Directors are dependent on the experience and capabilities of the individual and are determined after having regard to the salaries paid by similar complex or geographically diverse businesses. The Committee considers that a substantial portion of remuneration should be linked to performance. When setting remuneration levels for the Executive Directors, the Committee has regard to general pay and employment policies across the Company as a whole as well as the wider market, in order to ensure that a coherent policy applies across the Group. With effect from 1 January 2011, all bonus and long-term incentive payments will be subject to a clawback provision in the event of any nancial misstatement or misconduct for up to two years after payment. Executive Directors remuneration The key components of the Executive Directors remuneration packages are:
Q Q
Percentage of remuneration package
Composition of pay: Finance Director and Commercial Director

Base salary Bonus paid in cash Bonus paid in deferred shares Long-term incentives
Outcome at stretch Outcome at target
25
50
75
100
Percentage of remuneration package
Fixed elements 1. Base salary The Executive Directors salaries are reviewed annually and following any exceptional one-off events where the responsibilities of individual Executive Directors have changed signicantly. Salaries are benchmarked against those paid to directors in companies in comparable sectors which are of a similar size and international complexity. The base salaries of the Executive Directors were reviewed with effect from 1 January 2011 and increases awarded are as follows:
Annual salary 000 Fees 000 Total 000 % increase
Michael Foster Robert Careless James Deeley
490 255 245
60 60 60
550 315 305
3.8 2.3 5.2
The increase in the salaries of Michael Foster and Robert Careless are less than the weighted average increase for the overall workforce across the Group. The increase in James Deeleys salary, which was slightly higher than the weighted average increase for the overall workforce, reects the additional management responsibilities assumed in 2010. 2. Pensions All of the Executive Directors are members of the Charter HM Revenue & Customs-approved pension scheme. Michael Fosters accrual rate is one-thirtieth of base salary, and Messrs Careless and Deeleys accrual rates are one forty-fth of base salary, for each year of service as an Executive Director. They are all subject to a cap on pensionable earnings of 105,600 per annum and are entitled to receive, in lieu of pension over the cap, an allowance to the value of 25 per cent of the excess of base salary over the cap.
Base salary and benets; Annual cash bonus with 25 per cent compulsory deferment in shares; and Long-term incentives.
47
Remuneration report (continued)
These payments are included in their emoluments shown on page 51. James Deeley has elected that, from this amount, 9 per cent of his base salary in excess of the cap is paid to the Companys dened contribution stakeholder pension scheme. Details of pension entitlements can be found in the table on page 51. To the extent Executive Directors are impacted by the annual or lifetime allowance, a salary supplement in lieu of pension provision will be offered. 3. Other benefits The Executive Directors remuneration packages also comprise tax-assessable benets arising from employment and include car and petrol allowances, medical insurance for the Executive Directors and their immediate dependants and life assurance. Variable elements 4. Bonus The maximum potential bonus available in 2010 was 125 per cent of salary for Michael Foster and 100 per cent of salary for Robert Careless and James Deeley. The bonuses payable to Executive Directors are not pensionable. For 2011, these caps will remain unchanged. The Committee believes that bonuses (i.e. short-term incentives) should reward high performance and deliver higher reward on the achievement of signicant performance above expectation. Annual bonus targets include separate elements for performance against both nancial criteria (ordinarily calculated at constant currency rates) and personal objectives. The targets set aim to address the issues facing the business over the coming year. It is the Committees view that the bonus plan design should remain exible and, where appropriate, be adjusted to reect economic conditions. The Committee retains its discretion to adjust the amount of bonus paid if it believes the amount payable to be inappropriate in the light of underlying nancial performance or economic circumstances. However, the Committee will consult the Companys major shareholders in future if it contemplates making bonus awards at above 125 per cent of salary. Actual bonus payouts in respect of 2010 were dependent on the achievement of a number of corporate and individual targets as set out below. In order to align the interests of Directors with those of the Companys shareholders, it is the Companys policy that bonuses are only payable for the achievement of stretching performance targets, the majority of which are linked to the Companys nancial performance. For the year ended 31December 2010, these targets were as follows:
Performance target Level of payment Maximum percentage of bonus payable Percentage out-turn in 2010
Following a review of the Executive Directors performance and the nancial performance of the Company during the year ended 31December 2010, the Committee determined that the threshold EPS target had been achieved, which resulted in a payment of 64 per cent of the maximum bonus. The threshold cash ow target was not achieved and accordingly, no payment was made in respect of this element of the bonus. In recognition of individual performances in respect of objectives set to strengthen and rationalise the Company, payments were made at 15 per cent of the maximum bonus in respect of the personal performance element. Details of the bonuses paid to the Executive Directors in respect of the year ended 31 December 2010 are set out on page 51. In respect of the year ending 31 December 2011, bonuses payable to the Executive Directors will be measured against the same performance categories and on the same basis as those used in 2010. The Committee believes that EPS and cash remain the Companys most important nancial metrics for 2011. The maximum bonus will only become payable for a performance that is substantially in excess of budget and the threshold above which a percentage of the bonus rst becomes payable (zero is payable at threshold) has been set at an EPS level above that achieved by the Company in 2010. The Committee has agreed that performance under the EPS element of the bonus will be measured on a constant currency basis. The Committee believes that this approach is a better reection of managements underlying performance since exchange rates are not within managements control. 5. Share incentives Deferred Bonus Plan (DBP) One quarter of any bonus paid to the Executive Directors will be paid in shares acquired in the market and compulsorily deferred for three years under the DBP. If Executive Directors leave voluntarily or for cause during this deferral period, their awards will normally lapse. Charter International plc Long-Term Incentive Plan (CI LTIP) Under the CI LTIP, Executive Directors and selected other members of key management are eligible to receive awards of shares which vest three years after grant, subject to the satisfaction of certain performance conditions. Currently, an individual may not receive awards in any nancial year over shares having a market value in excess of 150 per cent of salary, except in exceptional circumstances, such as recruitment or retention, where an individual may receive an award over shares worth up to 200 per cent of their annual salary.
50% of maximum payable for meeting budget Cash ow relative 50% of maximum to budget payable for meeting budget Personal performance
EPS relative to budget
64%
16%
In 2010 awards were granted to the Executive Directors worth the equivalent of 125 per cent of annual salary. The Committee will 64% consult major shareholders in future if it contemplates making awards at above 125 per cent of salary. Vesting is currently based on the following performance criteria, measured over a three-year 0% period:
TSR relative to the companies comprising the FTSE 250 (excluding investment trusts) 60% of overall award
20%
15%
EPS 40% of overall award
Percentage of award vesting
The maximum bonus would only become payable for a performance that was substantially in excess of budget and personal objectives set at the start of the year. The Committee has reserved the overriding discretion to review aggregate bonus levels payable to Executive Directors based on the above criteria to ensure that they are appropriate taking into account the underlying nancial performance of the Company and other factors.
Less than RPI + 6% per annum Median RPI + 6% per annum Upper quartile or RPI + 12% per annum above or above Between median and Between RPI + 6% and 12% per annum upper quartile
Below median
0% 25% 100% 25% to 100% pro rata
2010 review 01 35
In addition, for the TSR condition, awards may only vest if the Committee is satised with the Companys underlying nancial performance over the performance period. Awards normally only vest on or after the third anniversary of the date of grant provided that the individual remains an employee of the Company and the performance conditions have been satised. The Committee recognises that relative TSR aligns management reward with returns to investors, but considers that the introduction of an EPS-related element provides a good balance and a clear connection between nancial performance and rewards. Overall, the two measures provide a good balance between incentivising executives to improve nancial performance and deliver above median stock market returns. The Committee considers the EPS range for every award and the range for 2010 was set following consultation with the Companys major shareholders and independent advice received from the Companys brokers. The range of targets for the 2010 awards was set at RPI plus an average of 6 per cent p.a. to RPI plus an average of 12 per cent p.a., which the Committee considers to be a demanding range. The Committee intends to consult the Companys major shareholders in future if it considers it appropriate to alter the current 60:40 mix of the TSR and EPS elements of the performance condition. The Committee has considered the EPS growth range to apply to the awards granted in 2011 and has concluded that the same RPI plus 6 per cent to 12 per cent p.a. range should apply. In making this decision the Committee recognised that the 2010 EPS, from which the growth would be measured, was signicantly ahead of the 2009 EPS gure. TSR calculations are carried out independently by HNBS by monitoring the percentage change in the Companys share price plus dividends reinvested over a period of time. The chart below shows the performance of the Company relative to the FTSE 250 Index (excluding investment trusts) index over the past ve years. The Company was a member of the FTSE 250 during the year. Total shareholder return
Source: Thomson Reuters (Datastream)
200 Financial statements 58 114
160
120
80
40
0 31/12/05 31/12/06 31/12/07 31/12/08 31/12/09 31/12/10
Charter FTSE 250 (ex Investment Trusts) Other information 115 116
The graph shows the value by 31 December 2010, of 100 invested in Charter plc on 31 December 2005 and re-invested in Charter International plc on 22 October 2008 as compared with 100 invested in the FTSE 250 Index (excluding investment trusts) on the same date. In the opinion of the Directors, the FTSE 250 Index (excluding investment trusts) is the most appropriate index against which the TSR of Charter should be measured because it is an index of similar-sized companies. Share ownership guidelines The Executive Directors are encouraged to build and maintain a holding of 100 per cent worth of salary in shares in the Company via the retention of at least 50 per cent of the net gain on vested awards under the Companys share incentive schemes until the guideline has been achieved.
49
Service contracts The Executive Directors each have a service agreement with Charter Central Services Limited (CCSL), a subsidiary of the Company.
Executive Director Company notice period Individual notice period
12 months 12 months 12 months
9 months 6 months 6 months
If the service agreement of either Michael Foster or Robert Careless is terminated by CCSL except with notice, on retirement or for cause, then CCSL shall pay as liquidated damages an amount equal to the value of each Executive Directors annual salary, including both pension allowance and the value of the Executive Directors lost pension benets. In respect of the service agreement of James Deeley, and for Directors appointed in the future, the Committee will look to apply the principles of mitigation following termination. The normal retirement age of all the Executive Directors is 65. CCSL has agreed tax equalisation arrangements with each Executive Director under which, if the amount of any remuneration paid by CCSL or any Associated Company to that Director is taxed in a jurisdiction other than the United Kingdom, CCSL or the Director will make a balancing payment so that the amount received by the Director after tax in respect of that remuneration is the same as it would have been had he only been subject to United Kingdom tax in respect of it. The Executive Directors entered into letters of appointment in respect of their duties as Directors of the Company on 22 October 2008. Each appointment is subject to termination by either party giving the other party not less than one months notice in writing and automatically ceases if that Executive Director ceases to be an employee of CCSL. An Executive Director may not accept an appointment as a director or ofcer of another company (including a charitable organisation or trade or professional association) without the prior approval of the Board. No Executive Directors currently hold any external directorships of listed companies. Dilution In the period to 31 December 2010 the Company has remained within the headroom limits set out in the ABI Guidelines Executive Remuneration Policies and Practices, for the Companys existing share plans as set out below:
Total issued share capital at 31 December 2010 Total utilised share capital all schemes (10% in any rolling 10-year period) Remaining headroom under all schemes Total utilised share capital discretionary schemes (5% in any rolling 10-year period) Remaining headroom under discretionary schemes 167,021,060 2,008,361 14,693,745 2,008,361 6,342,692
The Committee has the exibility to satisfy awards pursuant to the CI LTIP by either a market purchase or new issue of the Companys shares. To date the Company has not bought shares to hedge the exposure to the Companys share price; however, the Committee keeps its hedging policy under review. Awards granted under the DBP will be satised by shares purchased on the market. Non-Executive Directors fees Responsibility for determining the fees payable to the Non-Executive Directors, the Chairmen of the Audit and Remuneration Committees and the Senior Independent Director has been delegated to the Standing Committee by the Board. The responsibility for determining the fees payable to the Non-Executive Chairman has been delegated to the Committee but the Chairman does not participate in any discussions relating to his own remuneration. Non-Executive Directors are not eligible to participate in any of the Companys bonus, pension or share incentive schemes. They do not have service contracts but their terms of engagement are regulated by letters of appointment that comply with the recommendations of the Combined Code, details of which are set out below:
Name Effective date of appointment letter Notice period Term Unexpired term
Lars Emilson John Biles Grey Denham John Neill Andrew Osborne Manfred Wennemer
22 October 2008 22 October 2008 22 October 2008 22 October 2008 22 October 2008 26 March 2009
1 month (Company) 1 month (Director) 1 month (Company) 1 month (Director) 1 month (Company) 1 month (Director) 1 month (Company) 1 month (Director) 1 month (Company) 1 month (Director) 1 month (Company) 1 month (Director)
3 years 3 years 3 years 3 years 3 years 3 years
8 months 8 months 8 months 8 months 8 months 13 months
2010 review 01 35
The fees payable to the Non-Executive Directors during 2010 were as follows:
Position Fees ()
Non-Executive Chairman Non-Executive Director fee (not Chair of committee) Additional fee for Chair of Audit Committee Additional fee for Chair of Remuneration Committee
202,750 60,250 6,000 4,000
The additional fees payable to the Chairmen of the Audit and Remuneration Committees reect the increased duties attributable to fullling those roles. It is standard practice for the Committee to consider the fees payable to the Chairman on an annual basis but the fees are not necessarily revised annually. Similarly the Standing Committee considers the fees of the Non-Executive Directors on an annual basis. The Remuneration Committee has considered the fee level payable to the Chairman and has concluded that this should be increased from 202,750 to 215,000 with effect from 1 March 2011. This increase takes account of the increased scope and complexity of the role since the date of his fee being last reviewed in 2008. The Chairman did not participate in the decisionmaking process of this review. Tax equalisation arrangements have been in place for the Chairman and the Non-Executive Directors since the time of the Corporate Head Ofce move to Ireland, with the exception of Manfred Wennemer, who is a German resident and was not previously on the board of the former Charter plc. The Non-Executive Directors appointment letters are available for inspection at the Companys registered ofce and copies will be made available at the AGM. Audited information on remuneration and Directors interests (a) Remuneration (i) Directors emoluments
Bonuses paid in cash 000 Bonuses paid in shares 000 Payment in lieu of pension/ pension contributions 000 Total 2010 000 Total 2009 000
Directors
Salary 000
Fees 000
Benets 000
Executive Directors Michael Foster Robert Careless James Deeley Executive Directors total Non-Executive Directors Lars Emilson1 John Biles Grey Denham John Neill Andrew Osborne Manfred Wennemer Non-Executive Directors total Total 1.
470 248 230 948 948
60 60 60 180 203 66 64 60 60 60 513 693
392 182 172 746 746
131 61 57 249 249
17 15 18 50 50
106 51 46 203 203
1,176 617 583 2,376 203 66 64 60 60 60 513 2,889
767 432 379 1,578 203 64 60 58 58 44 487 2,065
In respect of his position as Chairman of the Company, Lars Emilson received a fee of 202,750 for the year ended 31 December 2010. Pursuant to the tax equalisation arrangements in place, an additional payment of 45,269 (2009: 6,288) was paid during 2010 in respect of the 2009/10 tax year. The purpose of this payment was to put Lars Emilson in the same position as he would have been if he had performed his duties in the UK for a UK resident company. The tax equalisation payment received in 2009 for the 2008/09 tax year was in respect of the period from 27 August 2008 to 5 April 2009.
(ii) Pensions and payments in lieu of pensions and life assurance

Total accrued pension at the year end Increase in accrued pension during year (excluding inationary increases) Increase in accrued pension during the year (including inationary increases) Transfer value of benets accrued during the year (excluding inationary increases) Transfer value of benets accrued during the year (including inationary increases) Transfer value of benets at the year end Transfer value of benets at the start of the year Increase in transfer value during the year
21,100 3,500 3,500 76,900 76,900 461,200 408,900 52,300
19,600 2,400 2,400 49,300 49,300 410,600 403,800 6,800
10,400 2,400 2,400 31,000 31,000 136,800 111,700 25,100
51
Notes to (a)(ii) 1. The accrued entitlement includes that earned by Robert Careless as an employee, prior to becoming a Director, as well as that earned for qualifying services after becoming a Director. 2. The pension entitlement shown in the rst row is the aggregate amount which would be paid annually on normal retirement based on service to the end of 2010 under the approved scheme. The transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. The transfer value of the accrued entitlement represents the value of assets that the pension schemes would need to transfer to another pension provider on transferring the schemes liabilities in respect of the Directors pension benets. It does not represent sums payable to the individual Directors and, therefore, cannot be added meaningfully to annual remuneration. The transfer value of the increases in accrued benets, required by the Listing Rules, discloses the current value of the increase in accrued benets that the Director has earned in the period, whereas the change in its transfer value, required by the Companies Act, discloses the absolute increase or decrease in its transfer value and includes the change in value of the accrued benets that results from market volatility affecting the transfer value at the beginning of the period, as well as additional value earned in the year.
3. 4.
5.
(b) Directors interests (i) Shareholdings The benecial interests of the Directors and their connected persons in the share capital of the Company as at 31 December 2010 were as follows:
Directors 31 December 2010 31 December 2009
Executive Directors Michael Foster Robert Careless James Deeley Non-Executive Directors Lars Emilson John Biles Grey Denham John Neill Andrew Osborne Manfred Wennemer
108,206 52,240 8,733 10,000 8,461 1,000 87,278 1,000
94,739 43,824 2,000 10,000 8,461 1,000 87,278 1,000
There has been no change in the benecial interests of the Directors in the share capital of the Company between 1 January 2011 and the date of this Remuneration report. (ii) Long-Term Incentive Plan and Deferred Bonus Plan awards Awards of shares under Charter International plc incentive plans
Grant Date Number at 1 January 2010 Granted in year Granted in lieu of dividend4 Exercised in year Lapsed in year Number at 31 December 2010 Earliest exercise date Value at 31 December 20101
M Foster LTIP LTIP LTIP LTIP DBP DBP DBP Total
22.03.075 25.03.08 09.03.09 30.04.102 25.03.08 09.03.09 07.04.103
46,673 64,800 125,763 14,008 21,422 272,666
80,990 4,373 85,363
1,160 1,568 54 2,782
27,303 27,303
19,370 19,370
Nil 64,800 125,763 80,990 15,168 22,990 4,427 314,138
22.03.10 25.03.11 09.03.12 30.04.13 25.03.11 09.03.12 07.04.13
Nil 547,236 1,062,069 683,961 128,094 194,151 37,386 2,652,897
2010 review 01 35
Grant Date
Number at 1 January 2010
Granted in year
Granted in lieu of dividend4
Exercised in year
Lapsed in year
Number at 31 December 2010
Earliest exercise date
Value at 31 December 20101
R Careless LTIP LTIP LTIP LTIP DBP DBP DBP Total J Deeley LTIP LTIP LTIP LTIP DBP DBP DBP Total
22.03.075 25.03.08 09.03.09 30.04.102 25.03.08 09.03.09 07.04.103
29,170 36,936 71,684 8,606 11,340 157,736 23,336 32,400 62,881 7,004 11,474 137,095
47,066 2,492 49,558 44,315 2,268 46,583
713 830 31 1,574 580 839 28 1,447
17,064 17,064 13,651 13,651
12,106 12,106 9,685 9,685
Nil 36,936 71,684 47,066 9,319 12,170 2,523 179,698 Nil 32,400 62,881 44,315 7,584 12,313 2,296 161,789
22.03.10 25.03.11 09.03.12 30.04.13 25.03.11 09.03.12 07.04.13
Nil 311,925 605,371 397,472 78,699 102,776 21,307 1,517,550 Directors and corporate governance 36 57 Nil 273,618 531,030 374,240 64,047 103,983 19,390 1,366,308
22.03.075 25.03.08 09.03.09 30.04.102 25.03.08 09.03.09 07.04.103
22.03.10 25.03.11 09.03.12 30.04.13 25.03.11 09.03.12 07.04.13
Notes to (b)(ii) 1. The value of the awards under the LTIP shows the number of the awards held multiplied by the market price of the Companys shares at 31 December 2010. The assumption is that the maximum number of awards vested in accordance with the performance conditions described on pages 48 to 49. It should be noted that the actual value may be less than the maximum, including zero if performance conditions are not met. 2. The number of shares granted on 30 April 2010 is the share equivalent of 125 per cent of the base salary based on a share price of 818.0 pence. The mid-market closing value of the Companys shares on 29 April 2010, being the last dealing day before the grant date. These awards under the DBP represent 25 per cent of the bonus payable to the Executive Directors, in respect of the year ended 31 December 2009. The awards were calculated by reference to the average share price of the Company over the ve dealing days ending on 6 April 2010, being 759.5 pence. Shares granted in lieu of dividend reects the dividend equivalents granted on the DBP awards made in 2008, 2009 and 2010. The number of dividend equivalent shares awarded is calculated based on the gross dividend rate (inclusive of tax credit) and the mid-market share price on the dividend payment date. The share price on the dividend payment date of 7 May 2010 was 717.0 pence per share and the price on the dividend payment date of 10 September 2010 was 671.5 pence per share. On 5 May 2010 Messrs Foster, Careless and Deeley exercised their awards under the LTIP granted on 22 March 2007. The assessment of the TSR performance condition produced a vesting of 58.5 per cent of the original award. Michael Foster sold 13,836 shares to meet the tax and NI liabilities and retained 13,467 shares. Robert Careless sold 8,648 shares to meet the tax and NI liabilities and retained 8,416 shares. James Deeley sold 6,918 shares to meet the tax and NI liabilities and retained 6,733 shares. The market price on the date of exercise was 752.25 pence. During the year, the range of share prices was 567.0 pence to 848.5 pence, with the price on 31 December 2010 being 844.5 pence.
3.
4.
5.
6. 7.
The performance conditions applying to any of the above awards are as described on pages 48 to 49 except for the awards granted in 2008 and 2009 which are based exclusively on the TSR performance condition. The accrued cost of Directors long-term incentive awards outstanding at 31 December 2010, calculated in accordance with IFRS 2 share-based payment was 1.7 million (2009: 1.4 million).
8.
By order of the Board Grey Denham Chairman of the Remuneration Committee 17 February 2011
53
Directors report
Principal activities and review of operations

Charter International plc (the Company) is the ultimate owner of two international engineering businesses, being ESAB a world leading welding and cutting business and Howden a leading applications engineer. The Company is registered in Jersey and has its headquarters and tax residence in the Republic of Ireland. It is listed on the London Stock Exchange. A review of the activities and operations of the Company and its subsidiaries is given in the Chief Executives statement and the Divisional and nancial review on pages 12 to 35. These sections, together with the other sections of the annual report referred to in the Directors report are incorporated, by reference, into and form part of the Directors report.
Directors
The names and brief biographical details of the Directors and key management of the Company appear on pages 36 to 38. There were no changes to the Board of Directors during the year. At the Companys forthcoming Annual General Meeting (AGM) all of the Directors will offer themselves for re-election in accordance with provision B.7.1 of the UK Corporate Governance Code, which is applicable to the Company from 1 January 2011.
Powers of Directors
The Board of Directors is responsible for the management of the business, and may exercise all the powers of the Company, subject to the Companys Memorandum and Articles of Association, the Jersey Companies Law and any directions given by a special resolution of the Company passed at a general meeting. In particular, the Board may exercise all the powers of the Company to borrow money, to guarantee, to indemnify, to mortgage or charge any of its undertaking, property, assets (present and future) and uncalled capital and, subject to the Jersey Companies Law, issue debentures and other securities and give security for any debt, liability or obligation of the Company or of any third party.
Divisional and nancial review

The Divisional and nancial review is a review of the development, the operational and nancial performance of, and key trends and factors within, the business during the year ended 31 December 2010 and contains a description of the principal risks and uncertainties facing the business.
Prots
The prot after tax for the year ended 31 December 2010 was 118.9 million (2009: 74.8 million).
Appointment and replacement of Directors Dividends

On 17 February 2011 the Directors declared a second interim dividend of 15.5 pence per ordinary share (2009: 14.5 pence per ordinary share) to be paid on 6 May 2011 to holders of ordinary shares registered on 15 April 2011. An interim dividend of 7.5 pence per ordinary share was paid on 10 September 2010 in respect of the six months ended 30 June 2010 (2009: 7 pence). Directors may be appointed by the Company by ordinary resolution or by the Board and unless otherwise determined by ordinary resolution, the number of Directors shall not be less than two. A Director appointed by the Board holds ofce until the next following AGM of the Company and is then eligible for re-election. The Board or any committee authorised by the Board may from time to time appoint one or more Directors to hold any employment or executive ofce for such period and on such terms as they may determine and may also revoke or terminate any such appointment. The Company may by ordinary resolution remove any Director before the expiration of his period of ofce. The ofce of a Director shall be vacated if: (i) he resigns or offers to resign and the Board resolves to accept such offer; (ii) his resignation is requested by all of the other Directors and all of the other Directors are not less than three in number; (iii) he is or has been suffering from mental or physical ill health and the Board resolves that his ofce be vacated; (iv) he is absent without the permission of the Board from meetings of the Board (whether or not an alternate director appointed by him attends) for six consecutive months and the Board resolves that his ofce is vacated; (v) he becomes bankrupt or compounds with his creditors generally; (vi) he is prohibited by law from being a Director; (vii) he ceases to be a Director by virtue of the provisions of Jersey Companies Law; or (viii) he is removed from ofce pursuant to the Companys Articles.
Payment of dividends
Subject to the provisions of Jersey Companies Law, the Company may by ordinary resolution declare dividends up to the amount recommended by the Directors and the Board may authorise the payment of dividends of such amount and on such dates as it thinks justied by the nancial position of the Company. The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares (excluding treasury shares) the right to elect to receive a dividend in the form of fully-paid ordinary shares. The Company operates Income Access Share Arrangements (IAS) that enable shareholders to elect to receive either their dividends direct from the Company, which is tax resident in the Republic of Ireland, or from a subsidiary company which is resident for tax purposes in the UK. A general summary of the tax implications of receiving dividends from an Irish source or receiving them from a UK source under the IAS, together with a copy of the IAS election form, is available on the Companys website at www.charter.ie. If a shareholder who holds at least 0.25 per cent in nominal value of the ordinary shares is in default of an Article 15 notice, then the Directors may also withhold the payment of any dividend to and restrict the transfer of shares held by that shareholder.
2010 review 01 35
Directors indemnities
Each of the Directors has been granted an indemnity by the Company, to the extent permitted by applicable law, in respect of certain liabilities that may arise as a result of the Director acting as a Director or employee of the Company or an associated company. Under the terms of each indemnity, the relevant Director is indemnied against liability to third parties excluding the liability to pay criminal nes and regulatory penalties and certain other liabilities. In relation to any third-party claim, the Company may loan funds to a Director to allow him to fund his legal costs. Any such loan must be repaid by the Director if the Director is convicted of an offence, judgment is given against the Director or the Directors application for relief is refused by the court.
Charitable and political contributions

During the year the Company donated 161,000 (2009: 113,000) to charities of which 18,000 (2009: 9,000) was to charities in the UK. Within the UK, donations were made in the year to support charities working in medical research/support 15,000 (2009: 6,000) and community support 2,000 (2009: 3,000). There were no political donations made during the year (2009: nil).
Research and development

The Company continues to place strong emphasis on research and development to meet the changing needs of the markets they serve, further details of which can be found in the Divisional and nancial review on pages 12 to 35. Research and development expenditure, which excludes engineering and production support costs, totalled 20.5 million (2009: 17.1 million) for the year of which 14.7 million (2009: 11.4 million) has been charged to the income statement for the year and 5.8 million (2009: 5.7 million) has been capitalised as intangible assets.
Related party transactions

ESAB Holdings Limited, Howden Group Limited and The ESAB Group Inc., subsidiaries of the Company, are party to arms length consultancy agreements with Unipart Logistics Limited (Unipart Logistics) for the provision of LEAN manufacturing and other consultancy services to ESAB, Howden and Anderson Group Inc. respectively. John Neill, a Non-Executive Director of the Company, is currently Group Chief Executive of the Unipart Group of Companies. The total charges paid to Unipart Logistics during the year amounted to 1.5 million (2009: 2.3 million). The amount payable to Unipart Logistics as at 31 December 2010 was 0.2 million (2009: 0.2 million).
Share capital structure

As at 17 February 2011, the Company had 167,021,060 fully paid ordinary shares of 0.02 each in issue which are listed on the London Stock Exchange. The Company has a single class of shares. The Directors have the power to issue, buy back, grant options over or otherwise dispose of unissued shares in the Company, to such persons, at such times and on such terms as deemed appropriate. Powers for the Company issuing and buying back its own shares At the AGM shareholders will be asked to grant a further authority to allot shares in the Company and to grant rights to subscribe for or convert any security into shares in the Company (i) up to a nominal amount of 1,113,473 and (ii) comprising equity securities (as dened in the Articles) up to a nominal amount of 2,226,947 (after deducting from such limit any allotments or grants made under (i)) in connection with an offer by way of a rights issue (the allotment authority), such allotment authority to apply until the end of next years AGM (or, if earlier, until 30 June 2012). This resolution will also provide a further authority to allot shares in the Company (up to a maximum nominal amount of 2,226,947) pursuant to the exercise of a right to subscribe for, or convert any security into, shares in the Company in circumstances where the Company had the requisite authority to grant such right at the time it was granted. This authority is required due to provisions contained in the Companys Articles as a result of it being incorporated in Jersey and provides the Directors with the same authority they would be entitled to under section 549(3) Companies Act 2006 if the Company were incorporated in the United Kingdom. A special resolution will also be proposed to renew the Directors power to make non-pre-emptive issues for cash in connection with rights issues and otherwise up to a nominal amount of 167,021. Again, this resolution will also provide a further authority to make non-pre-emptive issues pursuant to the exercise of a right to subscribe for, or convert any security into, ordinary shares in the Company in circumstances where the Company had the requisite
Corporate governance
A review of the Companys application of the principles and provisions of the Combined Code can be found on pages 39 to 43. The Combined Code can be viewed online at www.frc.org.uk/corporate/ukcgcode.cfm
Financial instruments
The nancial risk management objectives and policies of the Company including interest rate, currency and credit risk can be found in note 21 to the Companys consolidated nancial statements on pages 97 to 100.
Employees
The Companys policy is to encourage effective communication and consultation between employees and management. Subsidiaries develop their own consultation and communication procedures as part of their employment practices. Further details on the Companys employment policies, including details of the considerations given to disabled employees, can be found in the Corporate responsibility report on pages 33 to 34 of the Divisional and nancial review.
Creditor payment policy

Due to the global spread of the Companys operations, Group companies are responsible for establishing terms and conditions with their suppliers. The Companys creditor payment policy is to settle amounts due to creditors in accordance with agreed terms. The policy provides that local practice must be observed in the countries in which they operate and that standard payment terms in each country may be varied by negotiation with individual suppliers. The Company had no trade creditors at the year-end.
55
Directors report (continued)
authority to grant such right at the time it was granted. This authority is required due to provisions contained in the Companys Articles as a result of it being incorporated in Jersey and provides the Directors with the same authority they would be entitled to under section 561(3) Companies Act 2006 if the Company were incorporated in the United Kingdom. No market purchases were made by the Company during the year ended 31 December 2010.
lodged at such place as they may determine and, where appropriate, is accompanied by any relevant share certicates and such other evidence as they may reasonably require to show the right of the transferor to make the transfer. The Directors may also suspend transfers where a shareholder has failed to comply with an Article 15 notice, in the manner noted above.
Certain restrictions on transfers of shares may from time to time be imposed by laws and regulations (for example, insider A special resolution will also be proposed to renew the trading laws) and pursuant to the Listing Rules of the Financial Directors authority to repurchase the Companys ordinary Services Authority whereby certain employees of the Company shares in the market. The authority will be limited to a maximum require the approval of the Company to deal in the Companys of 16,702,106 ordinary shares and sets the minimum and ordinary shares. The Company is not aware of any agreements maximum prices which may be paid. between holders of securities that may result in restrictions on the transfer of securities. Rights and obligations attaching to shares The rights and obligations attaching to the Companys shares Securities carrying special rights are contained in the Articles of Association, a copy of which No shares have been issued that carry any special rights with is available on the Companys website www.charter.ie. The regard to the control of the Company. Articles may only be changed by a special resolution passed at a general meeting of the Company. Holders of ordinary shares Variation of rights are entitled to receive notice of, attend, speak and vote at any Subject to the provisions of the Jersey Companies Law and to general meeting of the Company, except as described below. any rights attached to existing shares (and except in the case where there is only one holder of the issued shares of a class Voting by way of a poll of shares, in which case any and all of the rights attached to In line with growing market practice, voting at the 2011 AGM that class of shares may be varied only with the consent in will be conducted by way of a poll. Shareholders will be entitled writing of that holder), rights attached to any class of shares to one vote for each ordinary share of 0.02 held. This reects may be varied with the written consent of the holders of not best practice and allows those shareholders who are not able less than two-thirds in nominal value of the issued shares of to attend the AGM to have their votes fully recognised. Any that class (calculated excluding any shares held as treasury Directors appointed as proxies will cast their votes as directed shares), or with the sanction of a special resolution passed at by shareholders. a separate general meeting of the holders of those shares. At every such separate general meeting (except an adjourned Holders of ordinary shares have the right to appoint a proxy or proxies (who need not be members of the Company) or, where meeting) the quorum shall be two persons holding or representing by proxy not less than one-third in nominal value appropriate, a corporate representative, to attend and vote on of the issued shares of the class (calculated excluding any their behalf. Further details about the right to appoint a proxy shares held as treasury shares). or a corporate representative are set out in the Notice. The Directors may make calls on shareholders in respect of monies unpaid on their shares. If any call is not complied with, the Directors may serve a notice requiring payment with interest and expenses. Failure to comply with this may result in forfeiture of any share the subject of the notice. The Company has a lien on any share which is not fully paid. Voting restrictions No member shall, unless the Directors otherwise determine, be entitled to vote at a general meeting either personally or by proxy, or to exercise any other right conferred by membership in relation to meetings of the Company, if any call or other sum presently payable by him to the Company in respect of such shares remains unpaid. Further, a shareholder is not, unless the Directors otherwise determine, entitled to attend or vote at any general meeting if the shareholder has failed to comply with a notice under the Articles (an Article 15 notice) to investigate interests in the Companys shares within 14 days. The Company is not aware of any agreements between holders of securities that may result in restrictions on voting rights of securities. Transfer restrictions The Directors may refuse to register any transfer of any certicated share which is not fully paid and refuse to register any transfer in favour of more than four persons jointly. The Directors may also refuse to recognise any instrument of transfer unless it is in respect of any one class of share, is
Major shareholders As at 17 February 2011, the Company had received the following notications pursuant to DTR 5 of the Disclosure and Transparency Rules of the FSA (the DTR).
Date of notification Shareholder 08.02.2011 Legal & General Group plc 03.02.2011 BlackRock Inc 11.01.2011 25.10.2010 FRM LCC Lloyds Banking Group plc Direct/ Indirect interest Direct Indirect Indirect Indirect Direct Total 19.03.2010 Ignis Investment Services Limited Indirect No. of shares/ voting rights 6,225,405 8,351,058 8,429,306 11,917,047 939,963 12,857,010 5,088,564 % of issued share capital/ voting rights 3.72% 5.00% 5.04% 7.12% 0.56% 7.68% 3.05%
2010 review 01 35
Signicant agreements The Company acts as guarantor in respect of ve multicurrency revolving facility agreements entered into by Charter Central Finance Limited, a subsidiary of the Company, with Bank of China (UK), Barclays Bank plc, HSBC Bank plc, Lloyds TSB Bank plc and Skandinaviska Enskilda Banken AB. Each of these agreements contain a change of control provision which, if triggered, could restrict further utilisations and/or require the repayment of all outstanding utilisations. In such circumstances, HSBC Bank plc and Lloyds TSB Bank plc may also call for cash collateral for outstanding utilisations under separate documentary credit facilities that are provided to subsidiaries of the Company. The Companys Long-Term Incentive Plan contains provisions that allow outstanding awards to vest in certain circumstances upon a change of control of the Company. Conditional awards made pursuant to the Charter International plc Deferred Bonus Plan will automatically vest on a change of control of the Company. Further details concerning the above can be found in the Remuneration Report on pages 46 to 53.
Auditors A resolution to re-appoint PricewaterhouseCoopers LLP as Auditors to the Company and a further resolution to authorise the Board to x the Auditors remuneration will be proposed at the AGM. Annual General Meeting The Companys AGM will take place at 2.00 pm on 20 April 2011 at 27 Northwood House, Northwood Park, Santry, Dublin 9, Ireland. The notice of AGM (the Notice) can be found in a separate circular to shareholders. The Notice sets out details of the resolutions that will be proposed at the AGM as well as explanatory notes giving the background and reasons for such resolutions. By order of the Board Michael Hampson Company Secretary and General Counsel 17 February 2011
Registered ofce: 22 Grenville Street St Helier Rights under the employee share schemes Under the rules of the Charter International Long-Term Incentive Jersey JE4 8PX Plan and the Charter International Deferred Bonus Plan eligible Registered in Jersey Number 100249 employees are awarded shares in the Company. As at 17 February 2011, Appleby Trust (Jersey) Limited as trustee of the Charter Employee Trust holds 0.053 per cent of the issued share capital of the Company on trust for the benet of the Executive Directors, senior executives and managers of the Group. The voting rights in relation to these shares have been waived by the Trustee. Corporate responsibility (CR) The Companys report on CR, including its approach to health and safety, human resources, social, environmental and other related environmental issues, can be found on pages 30 to 35. Directors statement pursuant to the Disclosure and Transparency Rules The Directors (whose names and functions are set out on pages 36 and 37) conrm that, to the best of their knowledge, the nancial statements are prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, nancial position and prot or loss of the Company and the Group taken as a whole; and the Directors report includes a fair review of the development and performance of the business and the position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face. Statement of disclosure of information to Auditors So far as the Directors each are aware, there is no relevant audit information (that is, information needed by the Companys Auditors in connection with preparing their report) of which the Companys Auditors are unaware, and each Director has taken all reasonable steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Companys Auditors are aware of that information.
57
Financial statements Contents

Consolidated nancial statements 59 60 61 62 63 64 64 65 72 75 75 76 76 77 78 79 80 82 83 84 84 85 86 86 88 89 90 92 97 101 101 102 102 102 102 103 104 105 105 106 107 Audit opinion Group nancial statements Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of changes in equity Consolidated balance sheet Consolidated cash ow statement Reconciliation of net cash ow to movement in net cash Notes to the consolidated nancial statements Basis of preparation and accounting policies 1 Segment analysis 2 Analysis of revenue by category 3 Operating prot 4 Exceptional items 5 Net nancing credit/(charge) 6 Taxation 7 Employees and Directors 8 Earnings per share 9 Intangible assets 10 Property, plant and equipment 11(a) Assets held for sale 11(b) Investments in associates and joint ventures 12 Inventories 13 Trade and other receivables 14 Cash and cash deposits 15 Borrowings 16 Trade and other payables 17 Provisions for other liabilities and charges 18 Deferred income tax 19 Retirement benet obligations 20 Financial instruments and risk management 21 Share capital and share premium 22 Share-based payments 23 Other reserves 24 Operating lease commitments minimum lease payments 25 Capital commitments 26 Contingent liabilities 27 Cash generated from operations 28 Acquisitions and disposals 29 Related party transactions 30 Dividends 31 Principal interests in Group undertakings Five-year record Parent Company nancial statements 108 Audit opinion parent Company nancial statements 109 Company prot and loss account 109 Company balance sheet Notes to the nancial statements of the Company 110 Basis of preparation 1 110 Principal accounting policies 2 111 Operating loss 3 111 Net interest and nancing (charge)/credit 4 111 Taxation 5 112 Tangible xed assets 6 112 Investment in subsidiary undertakings 7 112 Debtors amounts falling due within one year 8 112 Creditors amounts falling due within one year 9 113 Called-up share capital 10 113 Reserves 11 114 Share-based payments 12 114 Guarantees 13 114 Commitments operating lease 14 114 Dividends 15
58
Audit opinion Group nancial statements
2010 review 01 35
Independent Auditors report to the members of Charter International plc We have audited the Group nancial statements of Charter International plc for the year ended 31 December 2010 which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet and consolidated cash ow statement and the related notes. The nancial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards.
Opinion on other matters In our opinion the information given in the Directors report for the nancial year for which the nancial statements are prepared is consistent with the nancial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
Q
proper accounting records have not been kept; or
Q the nancial statements are not in agreement with the Respective responsibilities of directors and auditors accounting records; or As explained more fully in the Directors Responsibilities Statement, the Directors are responsible for the preparation of Q we have not received all the information and explanations the nancial statements and for being satised that they give a we require for our audit. true and fair view. Our responsibility is to audit and express an opinion on the nancial statements in accordance with Under the Listing Rules we are required to review: applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Q the Directors statement, set out on page 42, in relation to going concern; Practices Boards Ethical Standards for Auditors. Q the part of the Corporate Governance Statement relating to This report, including the opinions, has been prepared for and only the companys compliance with the nine provisions of the for the Companys members as a body in accordance with Article 2008 Combined Code specied for our review. 113A of the Companies (Jersey) Law 1991 and for no other Other matter purpose. We do not, in giving these opinions, accept or assume We have reported separately on the parent Company nancial responsibility for any other purpose or to any other person to statements of Charter International plc for the year ended whom this report is shown or into whose hands it may come 31 December 2010. save where expressly agreed by our prior consent in writing.
Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the nancial statements sufcient to give reasonable assurance that the nancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Groups circumstances and have been consistently applied and adequately disclosed; the reasonableness of signicant accounting estimates made by the Directors; and the overall presentation of the nancial statements. Opinion on financial statements In our opinion the nancial statements:
Q
Graham McGregor For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants London 17 February 2011 Notes: (a) The maintenance and integrity of the Charter International plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the nancial statements since they were initially presented on the website. (b) Legislation in Jersey governing the preparation and dissemination of nancial statements may differ from legislation in other jurisdictions.
give a true and fair view of the state of the Groups affairs as at 31 December 2010 and of the Groups prot and cash ows for the year then ended; have been properly prepared in accordance with International Financial Reporting Standards; and
have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
59
Consolidated income statement

For the year ended 31 December 2010
Note
2010 m
2009 m
Continuing operations Revenue Cost of sales Gross prot Selling and distribution costs Administrative expenses Operating prot Analysed as: Adjusted operating prot Acquisition costs Amortisation and impairment of acquired intangibles and goodwill Exceptional items restructuring loss on disposal of business post retirement benets curtailment gain
2&3
1,719.6 (1,188.5) 531.1 (206.3) (186.4)
1,659.2 (1,206.5) 452.7 (191.6) (165.1) 96.0 125.6 (0.3) (2.5) (26.3) (0.5) 96.0 (7.7) (7.6) 4.5 4.0 (6.8) 3.5 92.7 (22.7) 4.2 0.7 1.1 (1.2) (17.9) 74.8
2&4
138.4 145.9 (0.2) (5.8) (9.9) 8.4 138.4 (4.1) (5.0) 3.5 7.5 1.9 3.8 144.1 (25.3) (1.5) 1.2 0.9 (0.5) (25.2) 118.9
5 5 5
Net nancing charge retirement benet obligations Other nancing charge before losses on retranslation of intercompany loan balances Other nancing income before gains on retranslation of intercompany loan balances Net gains on retranslation of intercompany loan balances Net nancing credit/(charge) Share of post-tax prots of associates and joint ventures Prot before tax Taxation charge on underlying prots Taxation on exceptional items and acquisition costs Taxation on amortisation and impairment of acquired intangibles and goodwill Taxation on net nancing charge retirement benet obligations Taxation on net gains on retranslation of intercompany loan balances Taxation charge Prot for the year Attributable to: Equity shareholders Non-controlling interests
6 6 6 6 6 2 & 12
7 7 7 7 7 7
106.6 12.3 118.9

9
63.5 11.3 74.8
Earnings per share Basic Diluted
63.9p 63.7p
38.1p 37.9p
60
Consolidated statement of comprehensive income

2010 review 01 35
2010 m
2009 m
Prot for the year Other comprehensive income and expenditure Exchange translation Exchange translation transfer to income statement on disposal Actuarial gains/(losses) on retirement benet obligations (note 20) Tax on actuarial gains/(losses) on retirement benet obligations Change in fair value of oustanding cash ow hedges Net transfer to income statement hedges Net investment hedges Net deferred income tax movement for the year hedges Total other comprehensive income and expenditure Total comprehensive income and expenditure for the year Total comprehensive income and expenditure attributable to: Equity shareholders of the Company Non-controlling interests
118.9 22.9 1.0 (3.3) 0.1 (0.2) 20.5 139.4 121.5 17.9 139.4
74.8 (36.8) (0.9) (42.2) 5.2 2.7 7.9 5.7 (2.6) (61.0) 13.8 5.5 8.3 13.8
61
Consolidated statement of changes in equity

Attributable to owners of the Company Share capital m Share premium m Retained earnings m Other reserves m Total m Noncontrolling interests m Total equity m
At 1 January 2009 Comprehensive income Prot for the year Other comprehensive income and expenditure Exchange translation Exchange translation transfer to income statement on disposal Actuarial losses on retirement benet obligations Tax on actuarial losses on retirement benet obligations Change in fair value of outstanding cash ow hedges Net transfer to income statement hedges Net investment hedges Net deferred income tax movement for the year hedges Total other comprehensive income and expenditure Total comprehensive income and expenditure for the year Purchase of treasury shares (note 22) Share-based payments charge for year shares issued Dividends paid At 31 December 2009 At 1 January 2010 Comprehensive income Prot for the year Other comprehensive income and expenditure Exchange translation Actuarial gains on retirement benet obligations Tax on actuarial gains on retirement benet obligations Change in fair value of outstanding cash ow hedges Net transfer to income statement hedges Net deferred income tax movement for the year hedges Total other comprehensive income and expenditure Total comprehensive income and expenditure for the year Purchase of treasury shares (note 22) Share-based payments charge for year shares issued Shares issued to non-controlling interests Dividends paid At 31 December 2010
3.3 3.3 3.3 3.3
0.8 0.8 0.8 0.4 1.2
1,014.9 63.5 (42.2) 5.2 (37.0) 26.5 (0.2) 1.0 (0.5) (35.0) 1,006.7 1,006.7 106.6 (0.1) (3.0) (3.1) 103.5 (0.1) 1.1 (0.4) (36.7) 1,074.1
(439.9) (33.8) (0.9) 2.7 7.9 5.7 (2.6) (21.0) (21.0) (460.9) (460.9) 18.1 0.1 (0.2) 18.0 18.0 (442.9)
578.3 63.5 (33.8) (0.9) (42.2) 5.2 2.7 7.9 5.7 (2.6) (58.0) 5.5 (0.2) 1.0 0.3 (35.0) 549.9 549.9 106.6 18.1 (0.1) (3.0) 0.1 (0.2) 14.9 121.5 (0.1) 1.1 (36.7) 635.7
40.0 11.3 (3.0) (3.0) 8.3 (6.9) 41.4 41.4 12.3 4.8 1.1 (0.3) 5.6 17.9 1.5 (6.6) 54.2
618.3 74.8 (36.8) (0.9) (42.2) 5.2 2.7 7.9 5.7 (2.6) (61.0) 13.8 (0.2) 1.0 0.3 (41.9) 591.3 591.3 118.9 22.9 1.0 (3.3) 0.1 (0.2) 20.5 139.4 (0.1) 1.1 1.5 (43.3) 689.9
62
Consolidated balance sheet

At 31 December 2010
2010 review 01 35
Note
2010 m
2009 m
Non-current assets Intangible assets Property, plant and equipment Investments in associates and joint ventures Retirement benet assets Deferred income tax assets Trade and other receivables Derivative nancial instruments Current assets Inventories Trade and other receivables Derivative nancial instruments Current income tax receivables Cash and cash deposits Assets held for sale Total assets Current liabilities Borrowings Trade and other payables Derivative nancial instruments Current income tax liabilities Provisions for other liabilities and charges
10 11 12 20 19 14 21
149.2 306.0 18.6 31.4 96.2 16.0 0.1 617.5
139.1 280.2 18.0 15.9 88.5 21.3 0.1 563.1 Directors and corporate governance 36 57 238.5 426.5 1.7 10.0 75.6 752.3 1,315.4
13 14 21
15 11
295.1 456.5 2.1 6.8 83.3 6.1 849.9 1,467.4
16 17 21
18
(48.6) (396.3) (2.4) (22.4) (41.4) (511.1)
(19.8) (378.8) (2.0) (33.4) (52.3) (486.3)
Non-current liabilities Borrowings Deferred income tax liabilities Retirement benet obligations Provisions for other liabilities and charges Derivative nancial instruments Other payables Total liabilities Net assets Equity Ordinary share capital Share premium Retained earnings Other reserves Total equity shareholders funds Non-controlling interests Total equity The nancial statements on pages 60 to 105 were approved by the Board of Directors on 17 February 2011 and signed on its behalf by: M.G. Foster Director R. A. Careless Director
16 19 20 18 21 17
(32.9) (38.4) (170.1) (19.2) (0.2) (5.6) (266.4) (777.5) 689.9
(4.9) (29.7) (178.1) (21.6) (0.5) (3.0) (237.8) (724.1) 591.3
22 22
24
3.3 1.2 1,074.1 (442.9) 635.7 54.2 689.9
3.3 0.8 1,006.7 (460.9) 549.9 41.4 591.3
63
Consolidated cash ow statement

Note
2010 m
2009 m
Cash ow from operating activities Cash generated from operations Interest received Interest paid Taxation paid Net cash ow from operating activities Cash ow from investing activities Purchase of subsidiary undertakings, net of cash acquired Investment in associates and joint ventures Disposal of subsidiary undertaking Expenditure on development costs Purchase of property, plant and equipment and computer software Sale of property, plant and equipment and computer software Dividends received from associates and joint ventures Net cash ow from investing activities Cash ow from nancing activities Increase in short-term borrowings (other than those repayable on demand) Decrease in short-term borrowings (other than those repayable on demand) Increase in long-term borrowings Decrease in long-term borrowings Repayment of capital element of nance leases Cash inow/(outow) from debt and lease nancing Decrease/(increase) in cash on deposit Cash settlement of net investment hedges Dividends paid to equity shareholders of the Company Dividends paid to non-controlling interests Issue of ordinary share capital equity shareholders of the Company Issue of share capital non-controlling interests Purchase of treasury shares Net cash ow from nancing activities Net increase/(decrease) in cash, cash equivalents and bank overdrafts Cash, cash equivalents and bank overdrafts at beginning of the year Currency variations on cash, cash equivalents and bank overdrafts Cash, cash equivalents and bank overdrafts at end of the year
28
85.5 3.4 (4.3) (36.5) 48.1 (0.8) (0.7) (5.7) (56.4) 1.8 3.2 (58.6) 38.3 (11.3) 29.0 (1.5) (0.6) 53.9 2.3 (36.7) (6.6) 1.5 (0.1) 14.3 3.8 53.1 3.9 60.8
171.5 4.3 (4.8) (46.0) 125.0 (2.6) (1.9) 1.3 (5.7) (60.0) 0.9 4.3 (63.7) (2.4) (1.3) (0.7) (4.4) (4.0) (13.7) (35.0) (6.9) 0.3 (0.2) (63.9) (2.6) 61.4 (5.7) 53.1
29
29
31
15
Reconciliation of net cash ow to movement in net cash

2010 m 2009 m
Net movement in cash, cash equivalents and bank overdrafts Cash (inow)/outow from debt and lease nancing (Decrease)/increase in cash on deposit Change in net cash resulting from cash ows New nance leases Currency variations on borrowings and cash deposits Movement in net cash in the year Opening net cash Closing net cash Gross borrowings Cash at bank and in hand (including cash on deposit) Closing net cash
7.7 (53.9) (2.3) (48.5) (0.4) (0.2) (49.1) 50.9 1.8 (81.5) 83.3 1.8
(8.3) 4.4 4.0 0.1 (1.3) 0.3 (0.9) 51.8 50.9 (24.7) 75.6 50.9
64
Notes to the consolidated nancial statements

2010 review 01 35
1 Basis of preparation and accounting policies (i) Corporate information Charter International plc ( the Company), which is the ultimate parent company of the Charter Group, is incorporated and registered in Jersey under the Jersey Companies Law as a public company limited by shares. The Company is tax resident in the Republic of Ireland and its shares are listed on the London Stock Exchanges market for listed securities (the London Stock Exchange).The consolidated nancial statements for the Group were approved by the Board on 17 February 2011. (ii) Accounting policies The consolidated nancial statements for the Group have been prepared on the basis of accounting policies set out below in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as endorsed by the European Union and implemented in the United Kingdom (UK) and in compliance with the Companies (Jersey) Law 1991. Although Charter International plc is incorporated and registered in Jersey under the Jersey Companies Law, the consolidated nancial statements include disclosures sufcient to comply with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS. The consolidated nancial statements have been prepared under the historical cost convention, as modied by the revaluation of nancial assets and nancial liabilities (including derivative nancial instruments) at fair value. In compliance with the requirements for companies whose shares are listed on the London Stock Exchange, the nancial statements of Charter International plc are included within the Group Annual Report. These are presented in sterling as that is the functional currency of that company. The Company has elected to prepare its nancial statements under UK accounting standards. Use of adjusted measures In order to help provide a better indication of the Groups underlying business performance the following adjusted measures have been presented. Adjusted operating prot is after excluding acquisition costs, amortisation and impairment of acquired intangibles and goodwill and exceptional items from operating prot. Items which are both material and non-recurring are presented as exceptional items. Adjusted earnings per share are calculated after excluding acquisition costs, amortisation and impairment of acquired intangibles and goodwill, exceptional items and exchange gains and losses on retranslation of intercompany loans and non-cash net nancing costs attributable to retirement benet obligations, including attributable tax and minority interests, from basic earnings per share. Principal accounting policies The principal accounting policies set out below have been consistently applied to all the periods presented, unless otherwise stated, in respect of the Company, its subsidiaries and associated undertakings. Critical accounting estimates and judgements The preparation of nancial statements in accordance with generally accepted accounting principles under IFRS requires the Group to make estimates, judgements and assumptions that may affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the nancial statements. On an ongoing basis, estimates are evaluated using historical experience, consultation with experts and other methods that are considered reasonable in the particular circumstances to ensure compliance with IFRS. Actual results may differ signicantly from these estimates, the effect of which is recognised in the period in which the facts that give rise to the revision become known. Should circumstances change, such that different assumptions, estimates and judgements are considered to be more appropriate, this may give rise to material adjustments to the carrying value of assets and liabilities in the next nancial year particularly in respect of the key estimates, judgements and assumptions outlined below. Construction contracts Revenue and prot on construction contracts are usually recognised according to the stage of completion of the contract calculated by reference to estimates of contract revenue and expected costs including provisions for warranty and product liability. At 31 December 2010, amounts receivable/payable under construction contracts were 42.5 million (2009: 41.9 million) and 57.7 million (2009: 45.5 million) respectively. Contract retentions held by customers at 31 December 2010 in respect of construction contracts amounted to 28.1 million (2009: 32.4 million). Warranty and product liability provisions at 31 December 2010 of 28.5 million (2009: 30.5 million) mainly relate to construction contracts. Employee benets Provisions for dened benet post-employment obligations are calculated by independent actuaries. The principal actuarial assumptions and estimates used are based on independent actuarial advice and include the discount rate and estimates of life expectancy. Other key assumptions for dened benet post-employment obligations are based in part on market conditions at the balance sheet date. Further information is disclosed in note 20. At 31 December 2010, the net retirement benet obligation was 138.7 million (2009: 162.2 million). Goodwill impairment testing Capitalised goodwill is tested annually for impairment. Should the carrying value of the goodwill exceed its recoverable amount an impairment loss is recognised. The recoverable amounts are calculated based on the estimated value in use of cash-generating units. These calculations require estimates of cash ows, growth rates and discount rates based on the Groups weighted average cost of capital, adjusted for specic risks associated with particular cash-generating units. Further information regarding these assumptions is set out in note 10. At 31 December 2010, the carrying amount of capitalised goodwill was 99.6 million (2009: 92.7 million).
65
Notes to the consolidated nancial statements (continued)
1 Basis of preparation and accounting policies (continued) Provisions Provision is made for liabilities that are uncertain in timing or amount of settlement. These include provisions for legal and environmental claims. Calculations of these provisions are based on cash ows relating to these costs estimated by management supported by the use of external consultants, discounted at an appropriate rate where the impact of discounting is material. At 31 December 2010, these provisions amounted to 21.9 million (2009: 30.6 million). Tax estimates The Groups tax charge is based on the prot for the year and tax rates in effect. The determination of appropriate provisions for current and deferred income taxation requires the Group to take into account anticipated decisions of tax authorities and estimate the Groups ability to utilise tax benets through future earnings, based on approved budgets and forecasts, and tax planning. These estimates and assumptions may differ from future events. At 31 December 2010, net income tax liabilities provided were 15.6 million (2009: 23.4 million) and net deferred income tax assets recognised amounted to 57.8 million (2009: 58.8 million). Changes to accounting policies Revised standards mandatory for the rst time for the nancial year beginning 1 January 2010 adopted by the Group: IFRS 3 (revised) Business combinations. The revised standard continues to apply the acquisition method to business combinations, with some signicant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent consideration measured at fair value at the acquisition date and subsequently remeasured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interests proportionate share of the acquirees net assets. All acquisitionrelated costs are required to be expensed. The Group has applied IFRS 3 (revised) prospectively to transactions from 1 January 2010. Acquisition costs of 0.2 million that would have previously been included as part of the consideration have been expensed in the period in accordance with the revised standard. IAS 27 (revised) Consolidated and separate nancial statements. The revised standard requires the effects of all transactions with non-controlling (termed minority under the previous standard) interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also species the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognised in prot or loss. The Group has applied IAS 27 (revised) prospectively to transactions with non-controlling interests from 1 January 2010. There has been no impact of IAS27 (revised) on the current period. New standards, amendments and interpretations issued but not effective for the nancial year beginning 1 January 2010 and not early adopted.
Q
IFRS 9 Financial instruments IAS 24 (revised) Related party disclosures Amendment to IFRIC 14 IAS 19 The limit on a dened benet asset, minimum funding requirements and their interaction
These changes are currently being assessed but are unlikely to have a signicant impact on the nancial statements. (iii) Basis of consolidation (a) Subsidiaries Subsidiaries are entities over which the Group has the power to govern the nancial and operating policies of the entity. A shareholding of more than one-half of the voting rights will normally be the basis of such control. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed. Acquisition-related costs are expensed as incurred. On an acquisition-by-acquisition basis, the Group recognises any noncontrolling interest in the acquiree either at fair value or at the non-controlling interests proportionate share of the acquirees net assets. The excess of the cost of acquisition, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Groups share of the identiable net assets acquired, including all separately identiable intangible assets, is recorded as goodwill and capitalised as an intangible asset (see (ix) (a) Goodwill below). As noted above with effect from 1 January 2010 acquisition-related costs are expensed. Intercompany balances and transactions, and any unrealised gains and losses arising from intercompany transactions, are eliminated in preparing the consolidated nancial statements.
66
2010 review 01 35
1 Basis of preparation and accounting policies (continued) (b) Transactions and non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or signicant inuence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in prot or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or nancial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassied to prot or loss. If the ownership interest in an associate is reduced but signicant inuence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassied to prot or loss where appropriate.
(c) Associates and joint ventures Associates and joint ventures are entities over which the Group has signicant inuence but not control, normally on the basis of a shareholding of between 20 per cent and 50 per cent of the voting rights. Investments in associates and joint ventures are accounted for by the equity method of accounting and are initially recorded at cost. The Groups share of its associates and joint ventures post-acquisition prots or losses, net of interest and tax, is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Groups interest in the associates and joint ventures. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. (iv) Segmental reporting Segment information is presented on the same basis as that used for internal purposes by the Chief Operating Decision Maker. Revenue by geographic segment is allocated based on the country in which the customer is located. Non-current assets and capital expenditure by geographic segment are allocated based on where the assets are located. (v) Foreign currencies Items included in the nancial statements for each of the Groups entities are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The consolidated nancial statements are presented in sterling, the functional currency and presentation currency of Charter International plc. Foreign currency transactions are translated into the functional currency of Group entities using the exchange rate at the date of transaction. Foreign exchange gains and losses arising from the settlement of transactions and from the translation at year-end exchange rates of monetary assets and liabilities are recognised in the income statement except where deferred in equity as qualifying cash ow hedges. The results and net assets of all Group companies that have non-sterling functional currency are included in the consolidated nancial statements as follows: (a) assets and liabilities are translated at the closing exchange rate at the balance sheet date; (b) income and expenses are translated at average exchange rates for the relevant period; and (c) all resulting exchange differences arising since 1 January 2004 are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to shareholders equity. When a foreign operation is sold, such exchange differences arising since 1 January 2004 are recognised in the income statement as part of the gain or loss on sale. (vi) Financial assets The classication of nancial assets depends on the purpose for which the assets were acquired. Management determines the classication of an asset at initial recognition and re-evaluates its designation at each reporting date. Assets are classied as: loans and receivables; held-to-maturity investments; available-for-sale nancial assets; or nancial assets where changes in fair value are charged (or credited) to the income statement. Available-for-sale nancial assets include non-derivatives not classied in any of the other categories. The subsequent measurement of nancial assets depends on their classication. On initial recognition loans and receivables and held-to-maturity investments are measured at amortised cost using the effective interest method. Available-for-sale nancial assets and nancial assets where changes in fair value are charged (or credited) to the income statement are subsequently measured at fair value.
67

1 Basis of preparation and accounting policies (continued) (vi) Financial assets (continued) Realised and unrealised gains and losses arising from changes in the fair value of the nancial assets at fair value through prot and loss category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classied as available for sale are recognised in equity. When securities classied as available for sale are sold or impaired, the accumulated fair value adjustments previously taken to reserves are included in the income statement. Financial assets are derecognised when the right to receive cash ows from the assets has expired or has been transferred, and the Company has transferred substantially all of the risks and rewards of ownership. Financial assets classied as loans and receivables comprise Trade and other receivables and Cash and cash equivalents. They are classied as current if they are expected to be realised within 12 months of the balance sheet date. (vii) Financial instruments Derivative nancial instruments, principally forward foreign exchange contracts and foreign currency swaps, that are used as hedges in the nancing and nancial risk management of the Group are categorised as hedges. Derivative nancial instruments categorised as hedges are initially measured at fair value on the date a derivative contract is entered into and subsequently remeasured at their fair value at each balance sheet date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. When derivatives are designated as hedging instruments these are classied as either: (1) hedges of the fair value of recognised assets or liabilities (fair value hedge); (2) hedges of highly probable forecast transactions (cash ow hedge); or (3) hedges of net investments in foreign operations (net investment hedge). For cash ow hedges and net investment hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in shareholders equity, with any ineffective portion recognised in the income statement generally as part of nancing. When hedged cash ows result in the recognition of a non-nancial asset or liability, the associated gains or losses previously recognised in shareholders equity are included in the initial measurement of the asset or liability. For all other cash ow hedges, the gains or losses that are recognised in shareholders equity are transferred to the income statement in the same period in which the hedged cash ows affect the income statement. For net investment hedges gains and losses accumulated in shareholders equity are included in the income statement when the foreign operation is disposed of. The designation of hedging instruments, and their relationship to hedged items, is documented as appropriate at the time of designation. Assessments of whether designated hedging instruments are highly effective in offsetting changes in fair values or cash ows of hedged items are documented at designation and periodically thereafter. Any gains or losses arising from changes in fair value of other derivative nancial instruments, including fair value hedges, are recognised in the income statement. (viii) Property, plant and equipment The Groups policy is to carry property, plant and equipment at historic cost less accumulated depreciation and impairment losses except that certain properties were revalued on transition to IFRS at 1 January 2004. These revaluations are treated as deemed cost as at 1 January 2004 as allowed by IFRS 1. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Borrowing costs associated with expenditure on property, plant and equipment that rst commenced after 1 January 2009 are capitalised (see (xvi) Borrowings below). Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benets associated with the item will ow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the nancial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method spreading the difference between cost and residual value over the estimated useful life as follows: Buildings Plant, machinery and equipment Vehicles IT equipment 30-50 years 8-14 years 5 years 3-5 years
Asset lives and residual values are re-assessed at least annually. An assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its recoverable amount (see (x) Impairment of assets below). Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.
68
2010 review 01 35
1 Basis of preparation and accounting policies (continued) (ix) Intangible assets (a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Groups share of the net identiable assets of the subsidiary or associate acquired. Goodwill, represented by the carrying value at 1 January 2004 under the Groups previous accounting policy together with additional amounts arising since that date, is no longer amortised and is carried at cost less accumulated impairment losses. Goodwill is included in intangible assets in relation to subsidiaries and in investments in associates and joint ventures in relation to associates and joint ventures. In respect of acquisitions prior to 1 January 2004, the classication and accounting treatment of business combinations has not been restated on transition to IFRS, as permitted by IFRS 1. Goodwill arising prior to 1 January 1998 was written off directly to reserves. Goodwill arising in the period 1 January 1998 to 31 December 2003 was capitalised as an intangible asset in relation to subsidiaries and amortised on a straight-line basis over its estimated useful life, a period not exceeding 20 years, or included as part of the carrying value of associates and joint ventures. Goodwill acquired in business combinations and carried in the balance sheet is allocated to the cash-generating units (CGUs) that are expected to benet from the business combination. (b) Research and development Research expenditure is charged to income in the year in which it is incurred. Internal development expenditure is charged to income in the year in which it is incurred, unless it meets the recognition criteria of IAS 38 Intangible assets, in which case such costs are capitalised and amortised on a straight-line basis over the estimated useful life of the asset created, usually between 3 and 10 years. (c) Computer software Acquired computer software licences are capitalised on the basis of the costs incurred and amortised on a straight-line basis over the estimated useful life of the licence, usually between 3 and 7 years. Internal expenditure associated with developing or maintaining computer software programmes is charged to income in the year in which it is incurred, except for such costs that are directly associated with the production of identiable and unique software products controlled by the Group that are likely to generate benets exceeding costs beyond 1 year which are capitalised and amortised on a straight-line basis over the estimated useful life of the software product, usually less than 7 years. (d) Intangibles arising on acquisitions In establishing the fair value of assets and liabilities arising on acquisitions the Group identies the fair values attributable to intangible assets. The intangible assets recognised include the value in respect of brands and trademarks, intellectual property rights, customer contracts and relationships and proprietary technology rights and know-how. All intangibles recognised on business combinations are amortised over the expected useful economic lives, usually between 3 and 10 years.
(x) Impairment of assets Assets that have an indenite useful life, including goodwill, are not subject to amortisation and are tested annually for impairment and whenever there is an indication that the intangible asset may be impaired. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiable cash ows (cash-generating units). (xi) Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined using the rst-in rst-out (FIFO) basis or the average cost basis. Cost includes expenditure which is incurred in the normal course of business in bringing the product to its present location and condition. Net realisable value is the estimated selling price less all disposal costs to be incurred. (xii) Assets held for sale Assets are classied as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is met only when the asset is available for immediate sale in its present condition and the sale is highly probable within one year from the date of classication. Assets classied as held for sale are measured at the lower of carrying amount and fair value less costs to sell and cease to be depreciated from the date of classication.
69

1 Basis of preparation and accounting policies (continued) (xiii) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less any provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of the provision is recognised in the income statement. Trade receivables are discounted when the time value of money is considered material. Amounts due after more than 12 months from the balance sheet date are classied in the balance sheet as non-current. (xiv) Cash, cash equivalents and bank overdrafts For the purposes of the cash ow statement, cash, cash equivalents and bank overdrafts includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 3 months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. (xv) Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. (xvi) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently stated at amortised cost. Where borrowings are used to hedge the Groups interest in the net assets of foreign operations, the portion of the foreign exchange gain or loss on the borrowings that are determined to be an effective hedge is recognised in shareholders equity. Gains and losses accumulated in shareholders equity are included in the income statement when the foreign operation is disposed of. Borrowing costs directly attributable to expenditure that rst commenced after 1 January 2009 on a qualifying asset (one that takes a substantial period of time to get ready for use or sale) is included in the cost of that asset. Capitalisation ceases when the qualifying asset is substantially complete. Borrowing costs in relation to inventories and construction contracts that are manufactured in large quantities on a repetitive basis are not capitalised. Borrowings are classied as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (xvii) Taxation Taxation is that chargeable on the prots for the period, together with deferred income taxation. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, including actuarial gains and losses on retirement benet obligations (see (xviii) Employee benets below) and share-based payments (see (xix) Share-based payments below), in which case it is recognised in equity. The tax currently payable is based on taxable prot for the year. Taxable prot differs from net prot as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Groups liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred income taxation liabilities are provided in full, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the consolidated balance sheet. Deferred income tax assets are recognised to the extent that it is probable that future taxable prots will be available against which the temporary differences can be utilised. Deferred income taxation is not provided on the unremitted earnings of subsidiaries where the timing of the reversal of the resulting temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future or where the remittance would not give rise to incremental tax liabilities or is otherwise not taxable. (xviii) Employee benets The Group accounts for pensions and similar post-retirement benets (principally healthcare) under IAS 19 Employee benets. In respect of dened benet pension plans, where the amount of pension benet that an employee will receive on retirement is dened by the plan, the liability recorded in the balance sheet is the present value of the dened obligation at that date less the fair value of the plan assets, together with an adjustment for any unrecognised past service costs. The dened benet obligation is calculated annually by independent actuaries using the projected unit credit method. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in full in the period in which they occur directly in equity, in the statement of comprehensive income. Taxation attributable to actuarial gains and losses is taken to equity. Past service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specied period, in which case the past service costs are spread over that period. For dened benet schemes, the amount charged to operating prot in the income statement comprises the current service cost, past service cost and the impact of any settlements or curtailments. Interest on plan liabilities and the expected return on plan assets is included within nancing in the income statement. For dened contribution plans, where the Group pays a xed contribution into a separate entity and has no legal or constructive obligations to pay further contributions irrespective of whether
70
2010 review 01 35
1 Basis of preparation and accounting policies (continued) (xviii) Employee benets (continued) or not the fund has sufcient assets to pay all employees the benets relating to service in the current and prior periods, the contributions are recognised as an expense when they are due. For other dened benet post-employment obligations, principally post-employment medical arrangements in the US, a similar accounting methodology to that for dened benet pension plans is used. Where the actuarial valuation of a scheme demonstrates that the scheme is in surplus, the recognised asset is limited to the extent that the Group can benet in future, for example by refunds or a reduction in contributions. Movements in the amount of any irrecoverable surplus are recognised directly in equity, in the statement of comprehensive income. (xix) Share-based payments The Group operates both equity-settled and cash-settled share-based compensation plans.
The fair value of the employee services received in exchange for participation in the plan is recognised as an expense in the income statement. In the case of equity-settled plans the fair value of the employee service is based on the fair value of the equity instruments granted. This expense is spread over the vesting period of the instrument. The corresponding entry is credited to equity. Taxation attributable to the excess of the fair value over the charge to the income statement is taken to equity. The liability for social security costs arising in relation to the awards is remeasured at each reporting date based on the share price as at the reporting date and the elapsed portion of the relevant vesting periods to the extent it is considered probable that a liability will arise. Cash-settled plans are measured on a similar basis except that the fair value of the liability is remeasured at each reporting date, with changes recognised in the income statement. For cash-settled plans the corresponding entry is included as a liability. (xx) Government grants Grants receivable from governments or similar bodies are credited to the balance sheet in the period in which the conditions relating to the grant are met. Where they relate to specic assets they are amortised on a straight-line basis over the same period as the asset is depreciated. Where they relate to revenue expenditure and/or non-asset criteria they are taken to the income statement to match the period in which the expenditure is incurred and criteria met.
(xxi) Provisions for other liabilities Provisions for disposal and restructuring costs, warranty and product liability, and legal and environmental liability are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outow of resources will be required to settle the obligation and the amount can be reliably estimated. If all these conditions are not met then no provision is recognised. Incurred but not reported (IBNR) amounts are included in provisions. Provisions are not recognised for future operating losses. If the effect of discounting is material, provisions are determined by discounting the expected value of future cash ows at a pre-tax discount rate that reects current market assessments of the time value of money and, where appropriate, the risks specic to the liability. (xxii) Share capital Ordinary shares are classied as equity. Share issue costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company purchases the Companys equity share capital (treasury shares), the consideration paid is deducted from Group equity until the shares are cancelled or reissued. (xxiii) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for goods and services and the value of work executed during the year in respect of construction contracts. Revenue, which is recorded net of value-added tax, rebates and discounts, and after eliminating intra-group sales, is recognised as follows: (a) Sales of goods and services The majority of the Groups revenues relate to the sale of goods and services which are recognised when a Group entity has fullled its contractual obligations to a customer and has obtained the right to receive consideration. In respect of the sale of goods this is usually on despatch but is dependent upon the contractual terms that have been agreed with a customer. Construction contracts Revenue is recognised by a Group entity in accordance with the stage of completion of its contractual obligations to the customer. The stage of completion is usually based on the proportion of costs incurred compared to the total expected costs to complete the contract, where this also represents a right to receive consideration, and provided the outcome of the contract can be assessed with reasonable certainty. Losses on contracts are recognised in the period in which the loss rst becomes foreseeable. Contract losses are determined to be the amount by which estimated direct and indirect costs of the contract exceed the estimated total revenues that will be generated by the contract.
(b)
71

1 Basis of preparation and accounting policies (continued) (xxiv) Leases Costs in respect of operating leases are charged on a straight-line basis over the lease term. Leasing agreements which transfer to the Group substantially all the benets and risks of ownership of an asset are treated as if the asset had been purchased outright. The assets are included in property, plant and equipment and the capital element of the leasing commitments is shown as an obligation under nance leases. The lease rentals are treated as consisting of capital and interest repayment elements. The capital element is applied to reduce the outstanding obligations and the interest element charged to income so as to give a constant periodic rate of charge on the remaining balance outstanding at each accounting period. Assets held under nance leases are depreciated over the shorter of the lease terms and the useful lives of equivalent owned assets. (xxv) Dividend distribution Dividend distributions to the Companys shareholders are recognised in the accounts in the period when paid. 2 Segment analysis The Group is organised into two principal businesses: ESAB (welding, cutting and automation) and Howden (air and gas handling). For the purposes of IFRS 8 Operating segments, ESAB is split into two segments: (i) welding; and (ii) cutting and automation. Inter-segmental revenue is not signicant. Amounts included under the heading Other comprises central operations. The following is an analysis of the revenue, results, assets and liabilities for the year analysed by segment.
Cutting and automation m Welding, cutting and automation m Air and gas handling m
Welding m
Other m
Total m
Year ended 31 December 2010 Total revenue Adjusted operating prot Acquisition costs Amortisation and impairment of acquired intangibles and goodwill Exceptional items restructuring post retirement benets curtailment gain Operating prot Share of post-tax prots of associates and joint ventures Net nancing credit Prot before tax Tax Prot for the year Non-controlling interests Prot attributable to equity shareholders Investments in associates and joint ventures Other segment assets Segment assets Unallocated assets current income tax receivables deferred income tax assets Total assets Segment liabilities Unallocated liabilities current income tax liabilities deferred income tax liabilities borrowings (excluding bank overdrafts) Total liabilities Other segment items Capital expenditure on property, plant, equipment, computer software and development costs (notes 10 & 11) Depreciation (note 11) Amortisation of intangible assets (note 10)
1,015.4 89.7 (0.9) (5.9) 6.8 89.7 4.0 93.7
142.2 (0.4) (3.7) (2.4) 1.6 (4.9) (4.9)
1,157.6 89.3 (4.6) (8.3) 8.4 84.8 4.0 88.8
562.0 67.8 (0.2) (1.2) (1.6) 64.8 (0.2) 64.6
(11.2) (11.2) (11.2)
1,719.6 145.9 (0.2) (5.8) (9.9) 8.4 138.4 3.8 142.2 1.9 144.1 (25.2) 118.9 (12.3) 106.6 18.6 1,345.8 1,364.4 6.8 96.2 1,467.4
17.2 759.2 776.4
130.3 130.3
17.2 889.5 906.7
1.2 419.5 420.7
0.2 36.8 37.0
(269.1)
(59.7)
(328.8)
(297.4)
(23.6)
(649.8) (22.4) (38.4) (66.9) (777.5)
39.0 20.3 4.8
5.4 2.0 1.4
44.4 22.3 6.2
18.0 6.6 2.8
0.1 0.2 0.5
62.5 29.1 9.5
72
2010 review 01 35
2 Segment analysis (continued) Primary reporting format business segments (continued)

Welding m Cutting and automation m Welding, cutting and automation m Air and gas handling m Other m Total m
Year ended 31 December 2009 Total revenue Adjusted operating prot Acquisition costs Amortisation and impairment of acquired intangibles and goodwill Exceptional items restructuring loss on disposal of business Operating prot Share of post-tax prots of associates and joint ventures Net nancing charge Prot before tax Tax Prot for the year Non-controlling interests Prot attributable to equity shareholders Investments in associates and joint ventures Other segment assets Segment assets Unallocated assets current income tax receivables deferred income tax assets Total assets Segment liabilities Unallocated liabilities current income tax liabilities deferred income tax liabilities borrowings (excluding bank overdrafts) Total liabilities Other segment items Capital expenditure on property, plant, equipment, computer software and development costs (notes 10 & 11) Depreciation (note 11) Amortisation of intangible assets (note 10)
846.7 55.6 (0.9) (18.0) 36.7 3.5 40.2
184.7 10.4 (0.6) (6.3) (0.5) 3.0 3.0
1,031.4 66.0 (1.5) (24.3) (0.5) 39.7 3.5 43.2
627.8 71.5 (1.0) (2.0) 68.5 68.5
(11.9) (0.3) (12.2) (12.2)
1,659.2 125.6 (0.3) (2.5) (26.3) (0.5) 96.0 3.5 99.5 (6.8) 92.7 (17.9) 74.8 (11.3) 63.5
17.0 629.3 646.3
124.2 124.2
17.0 753.5 770.5
0.8 421.9 422.7
0.2 23.5 23.7
18.0 1,198.9 1,216.9 10.0 88.5 1,315.4 (649.3) (33.4) (29.7) (11.7) (724.1) Financial statements 58 114
(241.6)
(59.8)
(301.4)
(327.2)
(20.7)
39.5 18.1 4.2
5.8 2.0 1.7
45.3 20.1 5.9
18.7 5.9 2.0
0.7 0.2 0.3
64.7 26.2 8.2
73

2 Segment analysis (continued) Geographical information

Revenue (by location of customer) 2010 m 2009 m
Ireland UK Other Europe Europe USA Other North America North America Brazil Other South America South America China Other Asia Asia Rest of world Total
2.1 58.8 514.1 575.0 270.4 77.0 347.4 217.2 64.4 281.6 141.0 173.6 314.6 201.0 1,719.6
2010 m
2.3 67.8 525.6 595.7 297.0 70.6 367.6 159.1 44.5 203.6 150.2 156.7 306.9 185.4 1,659.2
2009 m
Non-current assets(i)
Ireland UK Other Europe Europe USA Other North America North America Brazil Other South America South America India China Rest of world Total
0.2 40.0 112.5 152.7 63.0 8.6 71.6 77.5 13.8 91.3 50.6 49.5 39.5 455.2
2010 m
0.2 33.4 111.2 144.8 63.0 8.4 71.4 63.7 13.8 77.5 46.1 43.3 36.2 419.3
2009 m
Capital expenditure(ii)
Ireland UK Czech Republic Sweden Other Europe Europe USA Other North America North America Brazil Other South America South America China India Rest of world Total (i) (ii)
8.4 6.4 8.1 7.7 30.6 6.1 0.6 6.7 13.0 1.4 14.4 4.8 3.1 2.9 62.5
0.2 8.9 2.3 5.5 8.6 25.5 20.6 0.9 21.5 5.2 1.4 6.6 2.4 3.1 5.6 64.7
Non-current assets included above comprise intangible assets and property, plant and equipment. Capital expenditure included above comprises property, plant, equipment, computer software and development costs.
74
2010 review 01 35
3 Analysis of revenue by category

2010 m 2009 m
Sales of goods (including spare parts) Revenue from construction contracts Revenue from services
1,361.3 294.2 64.1 1,719.6
1,220.8 385.0 53.4 1,659.2
4 Operating prot
2010 m 2009 m
The following amounts have been charged/(credited) in arriving at operating prot: Staff costs (note 8) Depreciation of property, plant and equipment (note 11) Owned assets Finance leases Impairment of property, plant and equipment (note 11) Amortisation of intangible assets (note 10) Impairment of intangible assets (note 10) Prot on disposal of property, plant and equipment Operating lease rentals payable Repairs and maintenance expenditure on property, plant and equipment Research and development expenditure Inventories recognised as expense (note 13) Trade and other receivables impairment (note 14) Amortisation of government grants Net exchange losses Restructuring costs (excluding impairment) (note 5)
Associated pension schemes 2010 m
398.3 28.5 0.6 (0.2) 9.5 3.7 (0.7) 17.2 16.5 14.7 1,036.1 6.4 (0.6) 2.7 9.3
375.6 25.6 0.6 2.1 8.2 1.4 (0.1) 18.1 16.6 11.4 998.1 5.4 (0.6) 2.6 17.1
Associated pension schemes 2009 m
Group 2010 m
Group 2009 m
Services provided by the Companys Auditor and network rms Audit services Fees payable to the Companys Auditor for the audit of the parent Company and consolidated nancial statements Non-audit services Fees payable to the Companys Auditor and its associates for other services: Auditing of the Companys subsidiaries pursuant to legislation Other services pursuant to legislation Other services relating to taxation All other services 0.5 0.7
2.3 0.2 0.5 0.4 3.9
0.1 0.1
2.3 0.2 0.5 0.1 3.8
0.1 0.1
75

5 Exceptional items To help provide a better indication of the Groups underlying business performance, items which are both material and nonrecurring are presented as exceptional items. The following items have been classied as exceptional:
2010 m 2009 m
Restructuring costs Headcount reductions Impairment of intangibles and property, plant and equipment Impairment of inventory Impairment of receivables Other restructuring costs
3.9 0.3 0.3 5.4 9.9
13.8 3.5 4.8 0.9 3.3 26.3
Curtailment gain on cessation of certain post employment medical benets in the United States Loss on disposal of business (note 29) Loss on disposal before exchange gains transferred from reserves Exchange gains transferred from reserves
(8.4)
1.5
1.4 (0.9) 0.5 26.8
A tax charge of 1.5 million (2009: credit 4.2 million) is attributable to the exceptional items. There is no non-controlling interest attributable to the exceptional items in any of the periods presented. 6 Net nancing credit/(charge)
2010 m 2009 m
Net nancing charge retirement benet obligations (note 20): Interest on schemes liabilities Expected return on schemes assets Interest payable on bank borrowings Interest payable on bank borrowings fees Interest payable on other loans Interest payable on nance leases Fair value losses on derivative nancial instruments Exchange losses on cash and borrowings Other Unwinding of discount on provisions (note 18) Other nancing charge before exchange losses on retranslation of intercompany loan balances Interest income on bank accounts and deposits Interest income on nancial assets not held at fair value Fair value gains on derivative nancial instruments Other Other nancing income before exchange gains on retranslation of intercompany loan balances Net nancing charge before exchange gains/(losses) on intercompany loan balances Net exchange gains on retranslation of intercompany loan balances Net nancing credit/(charge)
(38.9) 34.8 (4.1) (2.2) (0.6) (2.8) (0.1) (0.3) (1.4) (0.4) (5.0) 1.4 0.2 0.8 1.1 3.5 (5.6) 7.5 1.9
(37.8) 30.1 (7.7) (1.8) (0.7) (2.5) (0.1) (0.1) (1.5) (1.1) (2.0) (0.3) (7.6) 1.9 0.2 0.1 2.3 4.5 (10.8) 4.0 (6.8)
76
2010 review 01 35
7 Taxation
2010 m 2009 m
Tax charge on underlying prots Taxation on exceptional items and acquisition costs Taxation on amortisation and impairment of acquired intangibles and goodwill Taxation on net nancing charge retirement benet obligations Taxation on retranslation of intercompany loan balances Taxation charge
25.3 1.5 (1.2) (0.9) 0.5 25.2

2010 m
22.7 (4.2) (0.7) (1.1) 1.2 17.9

2009 m
Current taxation Current year Adjustments in respect of previous years Total current tax charge Deferred income taxation Current year Adjustments in respect of previous years Total deferred income tax credit (note 19) Taxation charge
41.9 (4.0) 37.9 (10.7) (2.0) (12.7) 25.2
37.9 10.5 48.4 (13.4) (17.1) (30.5) 17.9
Factors affecting the tax charge for the year The Company is tax-resident in Ireland. The tax assessed for the year is lower (2009: lower) than the standard rate of corporation tax for investment companies in the Republic of Ireland of 25 per cent (2009: 25 per cent). The differences are explained below:
2010 m 2009 m
Prot before tax Prot multiplied by rate of corporation tax in the Republic of Ireland of 25 per cent (2009: 25 per cent) Effects of: Adjustment to tax in respect of prior year(i) Benet of lower foreign tax rates Other taxes (primarily US state taxes) Tax incentives Non-deductible expenses and tax-effective items not in income statement Movement on deferred income tax assets not recognised Difference between book prot and chargeable gains Share of associates post-tax prots not taxable Non-taxable exchange on retranslation of intercompany loan balances Taxation charge
144.1 36.0 (6.1) (2.2) 2.6 (0.2) (2.5) 2.4 (1.0) (3.8) 25.2
92.7 23.2 (6.5) (1.2) 1.6 (0.2) (0.8) 1.9 0.2 (0.9) 0.6 17.9
(i)
The adjustment attributable to previous years tax in both the current and prior year principally reects the net release of provisions following the nal settlement of an uncertain tax position in respect of a previously ongoing tax audit.
77

8 Employees and Directors

2010 m 2009 m
(i) Aggregate amounts payable Wages and salaries Long-term incentive plan costs Social security costs Post-retirement (credit)/costs Dened benet schemes and overseas medical costs (note 20) Dened contribution schemes
338.1 1.4 59.0 (8.3) 8.1 398.3

2010 number
309.1 1.9 55.1 2.1 7.4 375.6

2009 number
(ii) Average number of persons employed by the Group Welding Cutting and automation Welding, cutting and automation Air and gas handling Corporate Total average headcount
7,445 1,034 8,479 3,783 51 12,313
7,256 1,325 8,581 3,819 51 12,451
At the year-end the number of employees was 12,407 (2009: 11,982). (iii) Directors remuneration Information covering Directors remuneration, interests in shares and interests in share options, which forms part of these nancial statements, is included in the Remuneration report on pages 46 to 53.
2010 m 2009 m
(iv) Key management compensation Salaries and short-term employee benets Termination benets Post-retirement benets Share-based payments
4.5 0.4 1.1 6.0
3.3 0.3 0.3 1.0 4.9
The amounts disclosed above for key management include the Directors of the Company and the key management listed on page 38. The Managing Director of ESAB Strategy and Development became a key manager on 1 September 2010. The Human Resources Director and the Managing Director of ESAB Europe became key management on 29 April 2009, and the Charter Company Secretary and General Counsel was appointed on 21 October 2009. The former Chief Executive of ESAB Global and the President, Chairman and General Counsel of Anderson Group Inc. ceased to be key management on 29 April 2009 and 25 February 2009 respectively.
78
2010 review 01 35
9 Earnings per share Basic headline earnings per share are calculated on an average of 166.9 million shares (2009: 166.8 million shares) representing the average number of shares in issue after excluding 0.1 million (2009: 0.1 million) shares held by the Charter Employee Trust. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of 0.4 million (2009: 0.7 million) dilutive potential ordinary shares. The Group has two classes of dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Companys ordinary shares during the year and the potentially issuable shares under the Groups long-term incentive plans. Adjusted earnings per share are calculated after certain adjustments to basic earnings per share so as to help provide a better indication of the Groups underlying business performance as set out in the table below. It should be noted that the term adjusted is not dened under IFRS and may not therefore be comparable with similarly titled prot measures reported by other companies. It is not intended to be a substitute for, or be superior to, IFRS measures of prot.
Per share 2010 pence 2009 pence Total earnings 2010 m 2009 m
Basic earnings per share Prot attributable to equity shareholders of the Company Items not relating to underlying business performance Exceptional items Amortisation and impairment of acquired intangibles and goodwill Acquisition costs Net nancing charge retirement benet obligations Retranslation of intercompany loan balances Taxation on items not relating to underlying business performance Non-controlling interests share of items not relating to underlying business performance Adjusted earnings attributable to equity shareholders of the Company 63.9 0.9 3.5 0.1 2.5 (4.6) (0.1) (0.1) 66.1 38.1 16.0 1.5 0.2 4.6 (2.4) (2.9) (0.1) 55.0 106.6 1.5 5.8 0.2 4.1 (7.5) (0.1) (0.2) 110.4 63.5 26.8 2.5 0.3 7.7 (4.0) (4.8)
(0.2) 91.8
Per share 2010 pence 2009 pence
Total earnings 2010 m 2009 m
Fully diluted earnings per share Prot attributable to equity shareholders of the Company Items not relating to underlying business performance Exceptional items Amortisation and impairment of acquired intangibles and goodwill Acquisition costs Net nancing charge retirement benet obligations Retranslation of intercompany loan balances Taxation on items not relating to underlying business performance Non-controlling interests share of items not relating to underlying business performance Adjusted earnings attributable to equity shareholders of the Company 63.7 0.9 3.5 0.1 2.5 (4.5) (0.1) (0.1) 66.0 37.9 16.0 1.5 0.2 4.6 (2.4) (2.9) (0.1) 54.8 106.6 1.5 5.8 0.2 4.1 (7.5) (0.1) (0.2) 110.4 63.5 26.8 2.5 0.3 7.7 (4.0) Other information 115 116 (4.8) (0.2) 91.8
79

10 Intangible assets
Computer software Goodwill m Internally generated m Other m Development costs m Acquired intangibles m Total m
Cost At 1 January 2010 Exchange adjustments Additions Acquisition of business (note 29) Disposals Internally generated At 31 December 2010 Accumulated amortisation At 1 January 2010 Exchange adjustments Charge for the year Impairment charge for the year (v) Disposals At 31 December 2010 Net book amount At 1 January 2010 At 31 December 2010
98.4 5.8 1.1 105.3 5.7 5.7 92.7 99.6
10.9 5.3 16.2 1.7 1.4 3.1 9.2 13.1
18.0 0.6 2.7 (0.2) 21.1 11.5 0.5 2.6 (0.2) 14.4 6.5 6.7
21.8 1.4 (0.8) 5.8 28.2 7.9 0.5 2.9 0.5 (0.7) 11.1 13.9 17.1
21.7 1.7 0.5 23.9 4.9 0.5 2.6 3.2 11.2 16.8 12.7
170.8 9.5 2.7 1.6 (1.0) 11.1 194.7 31.7 1.5 9.5 3.7 (0.9) 45.5 139.1 149.2
Computer software Goodwill m Internally generated m Other m Development costs m Acquired intangibles m Total m
Cost At 1 January 2009 Exchange adjustments Additions Disposals Internally generated At 31 December 2009 Accumulated amortisation At 1 January 2009 Exchange adjustments Charge for the year Impairment charge for the year (v) Disposals At 31 December 2009 Net book amount At 1 January 2009 At 31 December 2009
97.7 0.7 98.4 5.7 5.7 92.0 92.7
5.8 5.1 10.9 0.5 1.2 1.7 5.3 9.2
16.9 (0.2) 1.8 (0.5) 18.0 9.1 2.0 0.5 (0.1) 11.5 7.8 6.5
17.9 (0.5) (1.3) 5.7 21.8 5.9 (0.1) 2.5 0.9 (1.3) 7.9 12.0 13.9
21.7 0.5 (0.5) 21.7 2.8 0.1 2.5 (0.5) 4.9 18.9 16.8
160.0 0.5 1.8 (2.3) 10.8 170.8 24.0 8.2 1.4 (1.9) 31.7 136.0 139.1
80
2010 review 01 35
10 Intangible assets (continued) (i) Goodwill acquired in business combinations and carried in the balance sheet is allocated to the cash-generating units (CGUs) that are expected to benet from that business combination. The carrying amounts of goodwill have been allocated as follows:
2010 m 2009 m
Welding Alcotec (single CGU) ESAB Sp. z o.o. (single CGU) Eutectic (single CGU) ESAB South America (several CGUs) ESAB India (single CGU) ESAB Atas (single CGU) Electrodi AD (single CGU) Romar (several CGUs) Air and gas handling Howden South Africa (several CGUs) Howden Compressors (several CGUs) Howden Aeolus (single CGU) AustCold (single CGU)
10.4 5.8 0.9 22.5 15.3 1.2 1.0 19.6 76.7 3.1 7.8 10.8 1.2 22.9 99.6
10.4 5.8 0.9 21.2 14.3 1.2 1.1 17.3 72.2 2.8 7.8 9.9 20.5 92.7 Directors and corporate governance 36 57
(ii) The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the value-inuse calculations are those regarding discount rates, growth rates, expected sales prices and direct costs during the period. Management estimates discount rates that reect current market assessments of the time value of money and the risks specic to the CGUs. The growth rates are based on industry growth forecasts and internal forecasts. Selling prices and direct costs are based on past experience and expectations of future changes in the market. The Group prepares cash ow forecasts derived from the most recent nancial budgets approved by management for the next year and extrapolates cash ows for the following years based on estimated growth rates detailed in the table below. These do not exceed the average long-term growth rate for the relevant markets. The pre-tax rates used to discount the forecast cash ows are detailed in the table below.
Growth rates 2010 % 2009 % Discount rates 2010 % 2009 %
ESAB South America ESAB India Romar Other cash-generating units
4.0 to 4.1 8.4 4.6 Up to 3.7
1.5 to 3.5 6.4 4.1 up to 3.5
13.0 to 16.9 13.4 7.8 7.9 to 16.0
18.7 to 20.3 14.8 10.0 10.1 to 20.3 Other information 115 116
(iii) Development costs are internally generated. Development costs are amortised once the asset is brought into use. The Group tests development costs for assets not yet brought into use at least annually for impairment.
81

10 Intangible assets (continued) (iv) Other intangible assets have nite lives, over which the assets are amortised. The amortisation periods are set out in the accounting policies on page 69. Intangibles, other than goodwill which is not amortised, with a carrying value as at 31 December 2010 of 49.6 million (2009: 46.4 million) had a remaining amortisation period of up to 10 years as at 31 December 2010 and 31 December 2009. Amortisation has been included in the income statement as follows:
Computer software 2010 m 2009 m Development costs 2010 m 2009 m Acquired intangibles 2010 m 2009 m Total 2010 m 2009 m
Cost of sales Selling and distribution costs Administrative expenses Total
0.4 0.2 3.5 4.1
0.3 0.4 2.5 3.2
2.9 2.9
2.5 2.5
0.2 0.8 1.5 2.5
0.2 1.1 1.2 2.5
3.5 1.0 5.0 9.5
3.0 1.5 3.7 8.2
(v) Impairment has been included in the income statement as follows:

Computer software 2010 m 2009 m Development costs 2010 m 2009 m Acquired intangibles 2010 m 2009 m Total 2010 m 2009 m
0.5 0.5
0.5 0.5
0.6 0.1 0.2 0.9
3.2 3.2
0.5 3.2 3.7
0.6 0.1 0.7 1.4
Of the impairment charge of 3.7 million in 2010 (2009: 1.4 million), 0.2 million (2009: 0.5 million) relates to the welding segment and 3.5 million (2009: 0.9 million) relates to the cutting and automation segment. The impairment charge of 3.2 million for acquired intangibles relates to the Romar brand and is due to increasing sales by Romar under the ESAB brand. 11(a) Property, plant and equipment
Land and buildings m Plant and machinery m Vehicles and ofce equipment m Total m
Cost At 1 January 2010 Exchange adjustments Additions Acquisition of business (note 29) Reclassied as asset held for sale Disposals At 31 December 2010 Accumulated depreciation At 1 January 2010 Exchange adjustments Charge for the year Impairment credit for the year(i) Reclassied as asset held for sale Disposals At 31 December 2010 Net book amount At 1 January 2010 At 31 December 2010 Net book amount includes the following in respect of assets held under nance leases At 1 January 2010 At 31 December 2010
150.7 5.9 9.5 (9.2) (0.6) 156.3 19.3 1.6 4.7 (3.1) (0.2) 22.3 131.4 134.0
263.3 11.6 34.0 0.4 (10.2) 299.1 128.3 4.3 19.6 (0.2) (9.9) 142.1 135.0 157.0
41.7 2.2 5.2 (3.4) 45.7 27.9 1.0 4.8 (3.0) 30.7 13.8 15.0
455.7 19.7 48.7 0.4 (9.2) (14.2) 501.1 175.5 6.9 29.1 (0.2) (3.1) (13.1) 195.1 280.2 306.0
1.3 1.0
1.3 1.0
82
2010 review 01 35
11(a) Property, plant and equipment (continued)

Land and buildings m Plant and machinery m Vehicles and ofce equipment m Total m
Cost At 1 January 2009 Exchange adjustments Additions Disposals Disposal of business (note 29) At 31 December 2009 Accumulated depreciation At 1 January 2009 Exchange adjustments Charge for the year Impairment charge for the year(i) Disposals Disposal of business (note 29) At 31 December 2009 Net book amount At 1 January 2009 At 31 December 2009 Net book amount includes the following in respect of assets held under nance leases At 1 January 2009 At 31 December 2009
137.0 (7.5) 22.3 (0.6) (0.5) 150.7 16.2 (0.3) 4.1 (0.5) (0.2) 19.3 120.8 131.4
262.0 (14.8) 24.5 (7.9) (0.5) 263.3 121.9 (5.3) 17.3 2.0 (7.2) (0.4) 128.3 140.1 135.0
40.3 (2.1) 5.3 (1.2) (0.6) 41.7 26.2 (1.5) 4.8 0.1 (1.2) (0.5) 27.9 14.1 13.8
439.3 (24.4) 52.1 (9.7) (1.6) 455.7 Directors and corporate governance 36 57 164.3 (7.1) 26.2 2.1 (8.9) (1.1) 175.5 275.0 280.2
0.7 1.3
0.7 1.3
(i) The impairment charge of 2.1 million in 2009 relates to exceptional restructuring costs (note 5) in the welding segment of 1.6 million and 0.5 million in the cutting and automation segment. Of this amount 0.3 million, 1.5 million and 0.3 million has been charged to cost of sales, selling and distribution costs and administration expenses respectively. (ii) The Group tests for impairment of property, plant and equipment when there are indications that such assets might be impaired. In view of the trading performance, start-up costs and challenging economic environment in China, the Directors have conducted an impairment review in respect of the property, plant and equipment of ESAB China and, as a result, continue to believe that the fair value of these tangible assets is in excess of carrying value. When determining the fair value of property, plant and equipment, independent third party advice was obtained. Where no such evidence existed, a value-in-use calculation was performed. The key assumptions for the value-in-use calculations are those regarding discount rates, growth rates, expected sales values and direct costs during the period. Management estimates discount rates that reect current market assessments of the time value of money and the risks specic to the CGUs. The growth rates are based on industry growth forecasts and internal forecasts. The Group prepares cash ow forecasts from the most recent budgets approved by management for the next year and extrapolates cash ows for the following years based on estimated growth rates. These rates do not exceed the average long-term growth rate for the relevant markets. In respect of ESAB China, the forecast cash ows cover a period of ten years (being the remaining estimated useful life of the property, plant and equipment at 31 December 2010), have been based on growth rates of 8 per cent (2009: 10 per cent) per annum and have been discounted at a rate of 11 per cent (2009: 11 per cent) per annum. Selling prices and direct costs are based on past experience and expectations of future changes in the market. (iii) Assets in the course of construction as at 31 December 2010 were 19.1 million (2009: 20.2 million). 11(b) Assets held for sale As at 31 December 2010 a property within the welding, cutting and automation business with a carrying value of 6.1 million was reclassied from property, plant and equipment to assets held for sale. The estimated net sale proceeds are in excess of the carrying value.
83

12 Investments in associates and joint ventures

2010 m 2009 m
At 1 January Exchange adjustments Additions Share of net prots/(losses) retained At 31 December
18.0 (0.7) 0.7 0.6 18.6
17.7 (0.8) 1.9 (0.8) 18.0
There is no goodwill included in the share of net assets of associates and joint ventures in either 2010 or 2009. The Groups share of the net assets of associates and joint ventures:
2010 m 2009 m
Non-current assets Current assets Current liabilities Non-current liabilities Share of net assets
8.4 20.0 (9.2) (0.6) 18.6
9.0 18.6 (8.9) (0.7) 18.0
The Groups share of revenue, prot and dividends of associates and joint ventures:
2010 m 2009 m
Revenue Operating prot Interest Prot before tax Tax Share of post-tax prots Dividends received from associates and joint ventures
51.5 4.8 0.2 5.0 (1.2) 3.8 (3.2) 0.6
45.4 4.6 0.1 4.7 (1.2) 3.5 (4.3) (0.8)
The Groups share of capital commitments and operating lease commitments of associates and joint ventures was nil (2009: nil) and nil (2009: nil) respectively. There are currently no restrictions in place that might impact the Groups associates and joint ventures ability to remit funds. 13 Inventories
2010 m 2009 m
Raw materials, components and consumables Work in progress Finished goods Inventories carried at net realisable value Carrying amount of inventories pledged as security for liabilities
98.8 39.9 156.4 295.1 7.4
80.5 40.2 117.8 238.5 13.8
The cost of inventories recognised as an expense and included in cost of sales amounted to 1,036.1 million (2009: 998.1 million). 8.2 million (2009: 11.6 million) was recognised as an expense in the year for the write-down of inventories to net realisable value. 3.7 million (2009: 3.2 million) of amounts recognised as an expense in earlier periods for the write-down of inventories to net realisable value was reversed in the period.
84
2010 review 01 35
14 Trade and other receivables

2010 m 2009 m
Trade receivables net Other receivables net (including statutory assets (mainly indirect taxation) of 13.3 million (2009: 10.4 million)) Amounts receivable under construction contracts Prepayments Less: non-current portion: Trade receivables net Other receivables net Prepayments Current portion(ii)
(i)
349.6 56.2 405.8 42.5 24.2 472.5 (9.7) (6.2) (0.1) (16.0) 456.5
331.6 49.0 380.6 41.9 25.3 447.8 (13.9) (7.2) (0.2) (21.3) 426.5
(i) Other debtors include 14.7 million (2009: 7.5 million) of bank acceptance notes received from customers that have been endorsed by a bank. (ii) There is no signicant difference between the net book amount and the fair value of current trade and other receivables due to their short-term nature. The fair values of non-current receivables are as follows:
2010 m 2009 m
Trade receivables net Other receivables net Prepayments
9.7 6.2 0.1 16.0
13.9 7.2 0.2 21.3 Financial statements 58 114
The effective interest rates on non-current receivables were as follows:

2010 % 2009 %
Trade receivables net Other receivables net
4.2 0.6
4.3 1.7
The creation and release of the provision for impaired receivables has been included in the income statement as follows:
2010 m 2009 m
6.2 0.2 6.4
0.6 2.3 2.5 5.4
There is no particular concentration of credit risks to trade receivables, as the Group has a large number of internationally dispersed customers.
28.1 million (2009: 32.4 million) is included within amounts receivable in relation to contract retentions held by customers in respect of construction contracts. Trade and other receivables are disclosed net of provisions for impaired receivables, an analysis of which is as follows:
2010 m 2009 m
At 1 January Exchange adjustments Income statement charge Written off as uncollectable Acquisitions and disposals At 31 December
22.9 0.8 6.4 (0.8) 0.8 30.1
21.9 (0.5) 5.4 (3.8) (0.1) 22.9
85

14 Trade and other receivables (continued) Trade and other receivables that have not been received within the payment terms agreed are classied as overdue. The age of overdue amounts at 31 December was as follows:
2010 Impaired Not impaired m m 2009 Impaired Not impaired m m
Past due not more than three months Past due more than three months and not more than six months Past due more than six months
11.1 2.4 20.2 33.7
57.8 9.2 13.4 80.4
1.3 1.8 19.7 22.8
52.6 11.3 7.0 70.9
15 Cash and cash deposits

2010 m 2009 m
Cash at bank and in hand Short-term bank deposits Bank deposits with original maturity of more than three months and balances held as cash collateral Cash and cash deposits in the balance sheet Less: Bank deposits with original maturity of more than three months and balances held as cash collateral Bank overdrafts (note 16) Cash, cash equivalents and bank overdrafts in the statement of cash ows
65.1 10.3 7.9 83.3 (7.9) (14.6) 60.8
65.5 0.6 9.5 75.6 (9.5) (13.0) 53.1
For the purposes of the cash ow statement, cash, cash equivalents and bank overdrafts includes overdrafts repayable on demand and excludes bank deposits with an agreed maturity of more than three months. The bank overdrafts are excluded from the denitions of cash and cash equivalents disclosed in the balance sheet. The effective interest rate on bank deposits was 4.1 per cent (2009: 5.2 per cent). These deposits have an average maturity from inception of 94 days (2009: 228 days). The carrying amounts of cash and cash equivalents approximate to their fair values. Cash and cash deposits in the balance sheet of 83.3 million (2009: 75.6 million) includes balances of 5.1 million (2009: 3.2 million) held as cash collateral in connection with certain local trading practices or banking facilities. At 31 December 2010 cash at bank and in hand is distributed over a large number of banks located in the countries where the Group operates. The credit status of institutions where cash is held is kept under review with credit limits being set and monitored accordingly. 16 Borrowings
2010 m 2009 m
Non-current Bank loans secured Bank loans unsecured Other loans unsecured Finance lease obligations Current Other bank loans secured Other bank loans unsecured Bank overdrafts secured Bank overdrafts unsecured Finance lease obligations Total borrowings 33.4 0.2 14.4 0.6 48.6 81.5 0.9 5.0 0.2 12.8 0.9 19.8 24.7 3.4 29.0 0.2 0.3 32.9 4.2 0.4 0.3 4.9
Secured bank loans at 31 December 2010 are in respect of facilities made available to Howden Africa (Pty) Ltd secured on amounts due from trade debtors and bank account balances of Howden Africa (Pty) Ltd and certain of its subsidiary companies. Secured bank overdrafts at 31 December 2010 of 0.2 million (2009: 0.2 million) principally relate to an overdraft secured on receivables.
86
2010 review 01 35
16 Borrowings (continued) The currency risk prole of the Groups borrowings as at 31 December 2010 was:
2010 m 2009 m
Currencies
Euro US dollar Chinese renminbi South African rand Other Total currency Sterling Total 3.6 1.3 8.3 3.4 4.1 20.7 60.8 81.5 1.4 3.5 5.0 4.3 4.2 18.4 Directors and corporate governance 36 57 6.3 24.7
The effective interest rate on total borrowings was 2.9 per cent (2009: 4.2 per cent). No borrowing costs were capitalised. The Groups borrowings at 31 December 2010 and 31 December 2009 were all subject to interest at oating rates. The maturity of non-current borrowings is as follows:
Bank loans Finance leases 2010 2010 m m Other loans 2010 m Total 2010 m
Between one and two years Between two and ve years Over ve years
32.4 32.4
0.2 0.1 0.3
0.2 0.2
0.4 32.5 32.9
The maturity of non-current borrowings in the prior year was as follows:

Bank loans Finance leases 2009 2009 m m Other loans 2009 m Total 2009 m
Between one and two years Between two and ve years Over ve years
1.7 2.5 4.2
0.2 0.1 0.3
0.4 0.4
0.2 2.2 2.5 4.9
The minimum lease payments under nance leases are as follows:

2010 m 2009 m
Within one year In the second to fth years inclusive Less: Future nance charges Present value of lease obligations
0.6 0.3 0.9 0.9
0.9 0.4 1.3 (0.1) 1.2
The Group has the following undrawn committed borrowing facilities:

2010 m 2009 m
Expiring within one year Expiring beyond one year
45.0 71.0 116.0
170.0 170.0
Further details of the Groups borrowing facilities are set out in note 21 (i) (d).
87

17 Trade and other payables

2010 m 2009 m
Trade payables Construction contracts

(i)
139.2 57.7 60.0 24.1 1.2 119.7 401.9 (4.0) (0.2) (0.6) (0.8) (5.6) 396.3
149.4 45.5 63.0 23.2 1.8 98.9 381.8 (0.2) (1.2) (1.6) (3.0) 378.8
Other payables(ii) Other taxation and social security Government grants Accruals Less: non-current portion: Construction contracts(i) Other payables(ii) Government grants Accruals Current portion
(i) Construction contracts includes advances received for contract work of 9.9 million (2009 : 7.8 million). (ii) Other payables includes deferred consideration payable of 0.3 million (2009: 2.1 million) of which nil (2009: nil) is non-current. (iii) There is no signicant difference between the net book amount and the fair value of trade and other payables due to their short-term nature.
88
2010 review 01 35
18 Provisions for other liabilities and charges

Disposal and restructuring m Warranty and product liability m Legal and environmental m Other m Total m
At 1 January 2010 Exchange adjustments Acquisitions (note 29) Amounts provided Amounts released Utilised in the year Unwinding of discount (note 6) At 31 December 2010
7.9 (0.1) 9.9 (0.2) (12.9) 4.6
30.5 0.8 0.8 15.2 (7.3) (11.5) 28.5
30.6 0.7 1.3 (3.4) (7.7) 0.4 21.9
4.9 0.3 0.2 2.0 (1.8) 5.6
73.9 1.7 1.0 28.4 (10.9) (33.9) 0.4 60.6 Directors and corporate governance 36 57
Provisions have been analysed between current and non-current as follows:

2010 m 2009 m
Current Non-current
41.4 19.2 60.6
52.3 21.6 73.9
(i) Disposal and restructuring costs include 3.5 million (2009: 7.3 million) in respect of employee severance costs, of which 2.7 million (2009: 6.6 million) is in the welding, cutting and automation business and 0.8 million (2009: 0.7 million) is in the air and gas handling business, 0.7 million (2009: nil) in respect of property costs in the welding, cutting and automation business and 0.4 million in respect of other closure costs in the air and gas handling business (2009: 0.6 million in the welding, cutting and automation business). This is expected to result in cash expenditure in the next one to two years. The effect of discounting these provisions is not material. (ii) Warranty and product liability provisions relate to continuing businesses and are expected to be utilised over a period of one to two years dependent on the warranty period provided but will also be replaced by comparable amounts as they are utilised. The effect of discounting these provisions is not material.
(iii) Provision has been made for the probable exposure arising from legal and environmental claims and disputes, both existing and threatened, in some cases arising from warranties given on disposal of businesses. Provisions have been made representing the best estimate of the outcome of the claims including costs before taking account of insurance recoveries. Where the outcome of a claim is uncertain the legal costs of defence have been provided for to the extent that they are reliably measurable. Where appropriate, insurance recoveries are recognised in receivables. At 31 December 2010, these receivables amounted to 5.6 million (2009: 7.9 million). If the effect of discounting is material, provisions are determined by discounting the expected value of future cash ows at a pre-tax discount rate that reects current market assessments of the time value of money and, where appropriate, the risks specic to the liability. Due to their nature, it is not possible to predict precisely when these provisions will be utilised, though most are expected to be utilised over the short to medium term with utilisation in the next year expected to be in the region of 9 million (2009: 12 million) before taking account of insurance recoveries. (iv) Other provisions include various amounts which are not individually material. Due to their nature it is not possible to predict precisely when these provisions will be utilised but utilisation in the next year is expected to be in the region of 2 million (2009: 2 million).
89

19 Deferred income tax The movement on the net deferred income tax asset is set out below:
2010 m 2009 m
At 1 January Exchange adjustments Income statement credit (note 7) Reclassication to income tax liabilities Acquisitions (note 29) Taken to equity attributable to hedging reserve attributable to actuarial gains/(losses) on retirement benet obligations At 31 December
58.8 0.7 12.7 (11.7) 0.6 (3.3) 57.8
34.6 (4.0) 30.5 (4.9) (2.6) 5.2 58.8
Deferred income tax assets are recognised for tax losses carried forward to the extent to which the realisation of the related tax benet through future taxable prots is probable. The Group did not recognise deferred income tax assets of 24.8 million (2009: 19.0 million) in respect of taxable losses of 100 million (2009: 84.2 million) that can be carried forward against taxable prots. Unrecognised tax losses of 57.4 million (2009: 49.2 million) have no expiry date and 42.6 million (2009: 35.0 million) in respect of China, Italy and the Netherlands expire as follows:
Date of expiry 2010 m
31 December 2011 31 December 2012 31 December 2013 31 December 2014 31 December 2015
11.8 3.1 6.5 17.2 4.0 42.6
In addition the Group has an unrecognised deferred income tax asset in respect of its provision for post-retirement benets under IAS 19 of 19.5 million (2009: 20.7 million). No deferred income tax is provided on the unremitted earnings of overseas subsidiary undertakings as the Group is able to control the remittance of such earnings and has no intention of making any such remittance. A deferred income tax liability of 1.5 million (2009: 1.4 million) is provided in respect of the tax that would be payable on the remittance of the retained earnings of associates and joint ventures. The movements in deferred income tax assets and liabilities during the year are shown below: Deferred income tax assets
Provisions m Tax losses m Post retirement benets m Other m Total m
At 1 January 2010 Exchange adjustments Income statement credit/(charge) Reclassication to income tax liabilities Taken to equity attributable to actuarial losses on retirement benet obligations Acquisitions (note 29) At 31 December 2010 Deferred income tax asset to be recovered within twelve months Deferred income tax asset to be recovered after more than twelve months
27.2 0.7 19.1 3.5 0.6 51.1
28.1 0.8 4.1 (14.6) 18.4
18.5 0.5 (7.2) 0.6 12.4
14.7 0.4 (0.8) 14.3
88.5 2.4 15.2 (11.1) 0.6 0.6 96.2 27.8 68.4 96.2
Of the deferred income tax asset recognised during the year 4.1 million (2009: 3.1 million) was recognised in relation to tax losses that arose in businesses that generated taxable losses in 2010. At 31 December 2010 an asset for tax losses of 9.2 million (2009: 7.0 million) was recognised in relation to businesses that generated taxable losses in either the current or preceding year. These losses are expected to be recovered from taxable prots arising from improved trading and new contractual arrangements that were entered into in November 2009. The majority of the tax losses recognised as at 31 December 2010 and 2009 are expected to be recovered within ve years.
90
2010 review 01 35
19 Deferred income tax (continued) Deferred income tax liabilities

Accelerated capital allowances m Held over capital gain m Post retirement benets m Other m Total m
At 1 January 2010 Exchange adjustments Income statement (charge)/credit Reclassication to income tax liabilities Taken to equity attributable to actuarial gains on retirement benet obligations At 31 December 2010 Deferred income tax liabilities to be settled within twelve months Deferred income tax liabilities to be settled after more than twelve months Net deferred income tax assets At 31 December 2010 At 31 December 2009
(12.0) (0.8) (8.5) (0.6) (21.9)
(4.0) (0.3) 2.2 (2.1)
(4.4) 0.1 (3.9) (8.2)
(9.3) (0.7) 3.8 (6.2)
(29.7) (1.7) (2.5) (0.6) (3.9) (38.4) (7.4) (31.0) (38.4) 57.8 58.8
The movements in deferred income tax assets and liabilities during the prior year are shown below: Deferred income tax assets
Provisions m Tax losses m Post retirement benets m Other m Total m
At 1 January 2009 Exchange adjustments Income statement credit Reclassication to income tax liabilities Taken to equity attributable to hedging reserve At 31 December 2009 Deferred income tax asset to be recovered within twelve months Deferred income tax asset to be recovered after more than twelve months
20.3 (1.0) 7.9 27.2
18.0 (1.0) 16.0 (4.9) 28.1
17.3 (0.9) 2.1 18.5
14.1 (0.7) 3.4 (2.1) 14.7
69.7 (3.6) 29.4 (4.9) (2.1) 88.5 27.2 61.3 88.5
Deferred income tax liabilities

Accelerated capital allowances m Held over capital gain m Post retirement benets m Other m Total m
At 1 January 2009 Exchange adjustments Income statement credit Taken to equity attributable to actuarial gains on retirement benet obligations attributable to hedging reserve At 31 December 2009 Deferred income tax liabilities to be settled within twelve months Deferred income tax liabilities to be settled after more than twelve months Net deferred income tax assets At 31 December 2009 At 31 December 2008
(12.3) (0.2) 0.5 (12.0)
(4.1) 0.1 (4.0)
(9.6) 5.2 (4.4)
(9.1) (0.2) 0.5 (0.5) (9.3)
(35.1) (0.4) 1.1 5.2 (0.5) (29.7) (1.2) (28.5) (29.7) 58.8 34.6
91

20 Retirement benet obligations The major pension schemes operated by the Group are in the United Kingdom and are of the dened benet type, the assets of which are held in trustee-administered funds. The Group also provides post-employment medical benets in the United States. The valuation of United Kingdom and overseas dened benet pension schemes and the liability for United States postemployment medical benets are assessed by professionally qualied independent actuaries using the projected unit credit method. The principal actuarial assumptions used were as follows:
2010 UK % Overseas % 2009 UK % Overseas %
Discount rate Ination rate Expected return on plan assets equities bonds property other total Future salary increases Future pension increases Medical costs ination (ultimate rate)
5.40 3.60 7.75 4.60 7.25 3.70 6.00 4.60 3.55
5.25 2.70 9.10 5.20 5.20 7.10 5.00 2.30 4.50
5.70 3.60 8.00 4.90 7.50 4.25 6.20 4.60 3.55
5.60 2.80 9.10 5.30 5.60 7.20 4.00 2.30 5.00
The UK government announced in July 2010 that it will in future use the Consumer Price Index rather than the Retail Prices Index for the purposes of determining statutory minimum pension increases for private sector occupational pension schemes. Most of the Groups UK dened benet pension scheme rules specify that pensions in deferment and certain guaranteed minimum pensions in payment will increase in accordance with the annual statutory orders published by the UK government. The scheme rules also specify that the majority of increases to pensions in payment are linked to the Retail Prices Index and are therefore unaffected by the change. The Trustees of these schemes have not yet notied the affected members of this change. Accordingly the ination assumption used to determine the pension liability as at 31 December 2010 has been based on the Retail Prices Index. It is estimated that had the ination assumption been based on the Consumer Prices Index, where applicable, scheme liabilities would have been reduced by approximately 8 million as at 31 December 2010. The mortality assumptions for the UK schemes are based on either the PA92, PA00 or SN1A standard mortality tables after retirement with allowance for future mortality improvements or on scheme-specic factors. Based on the rates used, a member currently aged 45 who retires at age 60 will live on average for a further 29 years (2009: 27 years) after retirement if they are male and for a further 31 years (2009: 30 years) after retirement if they are female. A retired member currently aged 60 is assumed to live on average for a further 27 years (2009: 26 years) if they are male and for a further 29 years (2009: 29 years) if they are female. The overseas schemes are principally in the United States. The mortality assumptions for the United States schemes have been derived from the RP-2000 table with allowance for future mortality improvements. Based on the rates used, a member currently aged 45 who retires at age 60 will live on average for a further 25 years (2009: 24 years) after retirement if they are male and for a further 26 years (2009: 26 years) after retirement if they are female. A retired member currently aged 60 is assumed to live on average for a further 23 years (2009: 23 years) if they are male and for a further 25 years (2009: 25 years) if they are female. Mortality assumptions for schemes in Sweden and Germany have been derived from the FFFS 2007 tables and the Heubeck 2005 G tables respectively. The expected return on plan assets is a blended average of projected long-term results for the various asset classes. Equity returns are developed based on the selection of the equity risk premium above the risk-free rate which is measured in accordance with the yield on government bonds. Bond returns are selected by reference to the yields on government and corporate debt as appropriate to the schemes holdings of these instruments. Other class asset returns are determined by reference to current experience. The estimated impact on the liability for dened benet pensions and post-employment medical benets as at 31 December 2010 resulting from changes to key assumptions is set out below:
Estimated increase in liability 2010 m 2009 m
Discount rate 0.25 per cent decrease Mortality one year increase in life expectancy after retirement
24 22
23 19
A 1 per cent increase in the ination assumption on medical costs would increase the total service cost and interest cost by 0.1 million (2009: 0.1 million) and the liability by 0.8 million (2009: 1.9 million). A 1 per cent decrease in the ination assumption on medical costs would reduce the total service cost and interest cost by 0.1 million (2009: 0.1 million) and the liability by 0.8 million (2009: 1.8 million).
92
2010 review 01 35
20 Retirement benet obligations (continued) The movement on the net retirement benet asset/(obligation) is summarised below:
2010 Pension obligation net liability recognised in the balance sheet m 2009 Pension obligation net liability recognised in the balance sheet m
Pension obligation dened benet schemes m
Unrecognised past service costs and surplus not recoverable m
Postemployment medical benets m
Total m
Pension obligation dened benet schemes m
Unrecognised past service costs and surplus not recoverable m
Postemployment medical benets m
Total m
At 1 January Exchange adjustments Income statement (charge)/credit operating prot nancing charge
(140.7) (2.1)
(2.0) (0.2)
(142.7) (2.3)
(19.5) (0.7)
(162.2) (3.0)
(117.5) 6.8
(0.3) (0.1)
(117.8) 6.7
(21.5) 2.4
(139.3) 9.1 Directors and corporate governance 36 57
(0.1) (3.1)
(0.2)
(0.3) (3.1) 1.2 19.8 (127.4)
8.6 (1.0) (0.2) 1.5 (11.3)
8.3 (4.1) 1.0 21.3 (138.7) 31.4 (170.1) (138.7)
(1.0) (6.5) (41.1) 18.6 (140.7)
(0.1) (1.5) (2.0)
(1.1) (6.5) (42.6) 18.6 (142.7)
(1.0) (1.2) 0.4 1.4 (19.5)
(2.1) (7.7) (42.2) 20.0 (162.2) 15.9 (178.1) (162.2)
Taken to equity actuarial (losses)/gains (0.8) 2.0 Contributions paid 19.8 At 31 December (127.0) (0.4) Included in the balance sheet as follows: Non-current assets Non-current liabilities
Pension benefits defined benefit schemes The amounts recognised in the income statement are as follows:
2010 UK schemes m Overseas schemes m Total m UK schemes m 2009
Overseas schemes m
Total m
Current service cost Interest cost Expected return on plan assets Past service cost Gains/(losses) on settlement and curtailment Total
(0.2) (27.0) 26.7 1.1 0.6
(1.2) (10.9) 8.1 (0.2) 0.2 (4.0)
(1.4) (37.9) 34.8 (0.2) 1.3 (3.4)
(0.3) (25.9) 22.5 0.8 (2.9)
(1.3) (10.7) 7.6 (0.1) (0.2) (4.7)
(1.6) (36.6) 30.1 (0.1) 0.6 (7.6)
Included in the income statement as follows:

2010 UK schemes m Overseas schemes m Total m UK schemes m 2009 Overseas schemes m Total m
Cost of sales Selling and distribution costs Administrative expenses Financing charge Total
0.9 (0.3) 0.6
(0.2) (0.3) (0.7) (2.8) (4.0)
(0.2) (0.3) 0.2 (3.1) (3.4)
(0.1) 0.6 (3.4) (2.9)
(0.3) (0.4) (0.9) (3.1) (4.7)
(0.4) (0.4) (0.3) (6.5) (7.6)
93

20 Retirement benet obligations (continued) The amounts recognised in the statement of comprehensive income are as follows:
Actual return on plan assets Expected return on plan assets Experience adjustments arising on plan assets Experience adjustments arising on plan liabilities Changes in assumptions underlying present value of plan liabilities Total actuarial gains/(losses) Changes in amount of surplus not recoverable Total gains/(losses)
46.3 (26.7) 19.6 5.6 (23.2) 2.0 2.0
13.1 (8.1) 5.0 0.4 (8.2) (2.8) 2.0 (0.8)
59.4 (34.8) 24.6 6.0 (31.4) (0.8) 2.0 1.2
51.3 (22.5) 28.8 (5.0) (67.0) (43.2) (43.2)
9.9 (7.6) 2.3 1.3 (1.5) 2.1 (1.5) 0.6
61.2 (30.1) 31.1 (3.7) (68.5) (41.1) (1.5) (42.6)
The amounts recognised in the balance sheet are as follows:

Present value of funded obligations Fair value of plan assets Present value of unfunded obligations Unrecognised past service (credit)/costs Surplus not recoverable Net liability recognised in the balance sheet Included in the balance sheet as follows: Non-current assets Non-current liabilities
(512.5) 469.5 (43.0) (43.0) 26.6 (69.6) (43.0)
(159.7) 124.7 (35.0) (49.0) (0.1) (0.3) (84.4) 4.8 (89.2) (84.4)
(672.2) 594.2 (78.0) (49.0) (0.1) (0.3) (127.4) 31.4 (158.8) (127.4)
(495.5) 436.9 (58.6) (58.6) 15.3 (73.9) (58.6)
(147.8) 112.5 (35.3) (46.8) 0.1 (2.1) (84.1) 0.6 (84.7) (84.1)
(643.3) 549.4 (93.9) (46.8) 0.1 (2.1) (142.7) 15.9 (158.6) (142.7)
(i) The contribution expected to be paid by the Group during 2011 to UK schemes is 14.0 million and to overseas schemes is 8.5 million. (ii) The contribution paid in 2010 by the Group was 19.8 million (2009: 18.6 million). The movement in the present value of the plans obligations (funded and unfunded) during the year was as follows:
At 1 January Exchange adjustments Current service cost Interest cost Contributions by plan participants Net actuarial losses Benets and expenses paid Curtailment gains/(losses) Settlements At 31 December
(495.5) (0.2) (27.0) (17.6) 26.7 1.1 (512.5)
(194.6) (8.1) (1.2) (10.9) (0.2) (7.8) 12.3 0.3 1.5 (208.7)
(690.1) (8.1) (1.4) (37.9) (0.2) (25.4) 39.0 1.4 1.5 (721.2)
(424.6) (0.3) (25.9) (0.1) (72.0) 26.6 0.8 (495.5)
(210.5) 14.5 (1.3) (10.7) (0.1) (0.2) 13.0 (0.2) 0.9 (194.6)
(635.1) 14.5 (1.6) (36.6) (0.2) (72.2) 39.6 0.6 0.9 (690.1)
94
2010 review 01 35
20 Retirement benet obligations (continued) The movement in the fair value of plan assets during the year was as follows:
At 1 January Exchange adjustments Expected return on plan assets Net actuarial gains Contributions by employer Contributions by plan participants Benets and expenses paid Settlements At 31 December
436.9 26.7 19.6 13.0 (26.7) 469.5
112.5 6.0 8.1 5.0 6.8 0.2 (12.3) (1.6) 124.7
549.4 6.0 34.8 24.6 19.8 0.2 (39.0) (1.6) 594.2
399.5 22.5 28.8 12.6 0.1 (26.6) 436.9
118.1 (7.7) 7.6 2.3 6.0 0.1 (13.0) (0.9) 112.5
517.6 (7.7) 30.1 31.1 18.6 0.2 (39.6) (0.9) 549.4
The fair value of assets in the plans was:

Equities Bonds Property Other Total
198.9 252.2 10.7 7.7 469.5
60.2 49.1 0.2 15.2 124.7
259.1 301.3 10.9 22.9 594.2
185.8 230.7 7.0 13.4 436.9
56.4 41.0 15.1 112.5
242.2 271.7 7.0 28.5 549.4
There are no interests in the Groups nancial instruments, nor any property or other assets used by the Group included in the fair value of assets in the plans. In accordance with the transitional rules in IFRS 1 all cumulative surpluses and decits were recognised in the balance sheet at 1 January 2004. The cumulative amount of actuarial losses recognised in the statement of comprehensive income since 1 January 2004 is a loss of 82.8 million (2009: loss of 84.0 million). History of experience gains and losses
2010 m 2009 m 2008 m 2007 m 2006 m
Present value of obligations Fair value of plan assets Experience adjustments arising on plan assets: Gain/(loss) m Percentage of plan assets Experience adjustments arising on plan liabilities: Gain/(loss) m Percentage of plan liabilities
(721.2) 594.2 (127.0) 24.6 4.1% 6.0 0.8%
(690.1) 549.4 (140.7) 31.1 5.7% (3.7) 0.5%
(635.1) 517.6 (117.5) (93.3) 18.0% 0.6 0.1%
(623.7) 565.6 (58.1) (15.2) 2.7% 0.6 0.1%
(643.9) 557.5 (86.4) 6.3 1.1% (0.3) %
Post-employment medical benefits (United States) The amounts recognised in the income statement were as follows:
2010 m 2009 m
Current service cost Interest cost Past service credit Net gains/(losses) on settlement and curtailment Total
(0.2) (1.0) 0.4 8.4 7.6
(0.3) (1.2) (0.7) (2.2)
95

20 Retirement benet obligations (continued) The amounts recognised in the statement of comprehensive income are as follows:
2010 m 2009 m
Experience adjustments arising on plan liabilities Changes in assumptions underlying present value of plan liabilities Total
0.3 (0.5) (0.2)
1.0 (0.6) 0.4
The amounts recognised in the balance sheet as non-current liabilities were as follows:
2010 m 2009 m
Present value of unfunded obligations
(11.3)
(19.5)
The contribution expected to be paid by the Group during 2011 is 1.0 million. The contribution paid by the Group in 2010 was 1.5 million (2009: 1.4 million). The movement in the present value of the plans unfunded obligations during the year was as follows:
2010 m 2009 m
At 1 January Exchange adjustments Current service cost Interest cost Past service credit Actuarial (losses)/gains Benets and expenses paid by employer Curtailment gains/(losses) Termination benets At 31 December
(19.5) (0.7) (0.2) (1.0) 0.4 (0.2) 1.5 8.4 (11.3)
(21.5) 2.4 (0.3) (1.2) 0.4 1.4 (0.2) (0.5) (19.5)
History of experience gains and losses

2010 m 2009 m 2008 m 2007 m 2006 m
Present value of obligations
(11.3)
(19.5)
(21.5)
(15.6)
(19.3)
Experience adjustments arising on plan liabilities:

Gain m Percentage of plan liabilities 0.3 2.7% 1.0 5.1% 0.5 2.3% % % 0.5 2.6%
In accordance with the transitional rules in IFRS 1 all cumulative surpluses and decits were recognised in the balance sheet at 1 January 2004. The cumulative amount of actuarial losses recognised in the statement of comprehensive income since 1 January 2004 is 0.4 million (2009: 0.2 million).
96
2010 review 01 35
21 Financial instruments and risk management (i) Financial risk management The international prole of Charters operations exposes it to nancial risks including the effects of changes in foreign exchange rates, interest rates, credit risks and liquidity risks. The Board sets policies to address these risks and there is a specic treasury policy setting out guidelines to manage foreign exchange risk, interest rate risk, credit risk and the use of nancial instruments. Charters central treasury department is responsible for ensuring there are appropriate funding arrangements to meet the ongoing requirements of the Group and for managing effectively liquid funds held in the Group. Regular cash ow forecasts are prepared by subsidiaries and reviewed by management. In addition, it is responsible for managing the interest rate risks and balance sheet foreign currency translation risks of the Group within guidelines agreed by the Board. Foreign currency transaction risks are generally managed directly by operating subsidiaries in accordance with guidelines and controls dened in the treasury policy. (a) Interest rate risk The Group nances its operations mainly from its own cash resources. It is the Groups objective to minimise the cost of borrowings and maximise the value from cash resources, whilst retaining the exibility of funding opportunities. If considered appropriate, the Group would use interest rate swaps, interest rate caps and collars and forward rate agreements to generate the desired interest prole and to manage the Groups exposure to interest rate uctuations. (b) Currency risk The Group has signicant investments in overseas operations, particularly in Europe and America, and recurring exposures to exchange rate uctuations in respect of foreign currency transactions. As a result, movements in exchange rates can affect the Groups balance sheet and income statement. The Group seeks to comply with the requirements of hedge accounting where considered appropriate. Subject to Board approval, balance sheet translation exposures may be mitigated through the use of currency borrowings, forward foreign exchange contracts or other derivatives. Foreign currency transaction exposures result from sales or purchases by subsidiaries in a currency other than their functional currency. Forward foreign exchange contracts may be used to hedge the net cash ows resulting from these transactions to the extent these are certain or highly probable. (c) Financial credit risk The principal credit risks relate to the failure of dealing counterparties for foreign currency transactions and nancial institutions with whom surplus funds are deposited in the short term. Charters central treasury department monitors regularly the credit status of such counterparties and nancial institutions, as well as the location of surplus cash worldwide with credit limits being set and subject to regular review. (d) Liquidity risk The Groups objective is to maintain committed facilities to ensure that, together with cash ows generated from operations, there are sufcient funds for current operations and their future requirements. At 31 December 2010, the Groups centrally held committed facilities totalled 170 million with maturity dates between 2011 and 2013. Two of these facilities have since been renewed such that the total has increased to 185 million with maturity dates that range between 2011 and 2015. One facility for 25 million is due to expire in 2011. The remaining facilities of 160 million have maturity dates that range between 2012 and 2015. These facilities are unsecured. Whilst these facilities have certain nancial and other covenants, the nancial strength of the Charter Group means that the covenants attaching to these facilities have not been breached and are not expected to prevent the full utilisation of the facilities if required in the future. Charters central treasury department is responsible for monitoring current and future requirements. It reviews annual strategy plans, budgets and forecasts, as well as weekly cash balances held worldwide to ensure that optimal use is made of liquid funds within the Group and to avoid unnecessary borrowing.
Other information 115 116 Financial statements 58 114
(e) Capital management The Group aims to manage its capital structure in order to safeguard the going concern of the Group and to provide returns for shareholders and benets for other stakeholders. The Group may maintain or adjust its capital structure by adjusting the amount of dividends paid to shareholders, returning capital to shareholders, issuing new shares or selling assets. Capital is monitored primarily by reference to the ratio of net debt to underlying EBITDA, which also assists in ensuring the Group maintains the current strength of its consolidated balance sheet as represented by the level of net debt to equity shareholders funds. Although net cash is reported at year end, it is considered appropriate that the Group would operate up to a maximum ratio of net debt to underlying EBITDA of 1.0. This maximum takes into account the prole of gross cash and gross debt across the Groups worldwide operations, the ongoing level of net retirement benet obligations (2010: 138.7 million, 2009: 162.2 million), and the bonds and guarantees issued on behalf of the Company and its subsidiares in the normal course of business.
97

21 Financial instruments and risk management (continued) (ii) Financial instruments by category
2010 Derivative nancial instruments At fair value Used for through prot hedging and loss m m Loans and receivables m 2009 Derivative nancial instruments Used for hedging m At fair value through prot and loss m Loans and receivables m
Total m
Total m
Assets Derivative nancial instruments Trade and other receivables (excluding construction contracts, prepayments and statutory assets) Cash
1.6
0.6
2.2
1.4
0.4
1.8
1.6
0.6
2010
392.5 83.3 475.8
392.5 83.3 478.0
1.4
0.4
2009
370.2 75.6 445.8
370.2 75.6 447.6
Derivative nancial instruments Used for hedging m At fair value through prot and loss m Other nancial liabilities m
Derivative nancial instruments Used for hedging m At fair value through prot and loss m Other nancial liabilities m
Total m
Total m
Liabilities Borrowings Derivative nancial instruments Trade and other payables (note 17) Trade payables Other payables Accruals
1.8 1.8
0.8 0.8
81.5 139.2 60.0 119.7 400.4
81.5 2.6 139.2 60.0 119.7 403.0
2.1 2.1
0.4 0.4
24.7 149.4 63.0 98.9 336.0
24.7 2.5 149.4 63.0 98.9 338.5
Assets and liabilities included in the balance sheet at fair value At 31 December 2010 and 2009 only derivative nancial assets and liabilities were included in the balance sheet at fair value. The fair values were derived from observable market data and are considered to be level 2 in the fair value measurement hierarchy. (iii) Market price risk (a) Interest rate risk On the basis of the Groups analysis, it is estimated that a rise/fall of one percentage point in the principal interest rates to which the Groups cash balances are exposed would increase/decrease prot before tax by approximately 0.5 million (2009: 0.4 million). On the basis of the Groups analysis, it is estimated that a rise/fall of one percentage point in the principal interest rates to which the Groups borrowings are exposed would decrease/increase prot before tax by approximately 0.8 million (2009: 0.2 million). The following nancial assets and liabilities are not directly exposed to interest rate risk:
2010 m 2009 m
Non-current trade and other receivables Current trade and other receivables Non-current other payables Current trade and other payables
15.9 376.6 (1.0) (317.9) 73.6
20.8 349.1 (1.6) (309.6) 58.7
Financial assets included above comprise trade and other receivables as shown in note 14 excluding construction contracts, prepayments and statutory assets. Financial liabilities included above comprise trade and other payables as shown in note 17 excluding construction contracts, other taxation and social security and government grants.
98
2010 review 01 35
21 Financial instruments and risk management (continued) (b) Currency risk Financial instruments within individual Group companies that are not denominated in the functional currency of the company concerned as at 31 December 2010 were as follows:
Net foreign currency monetary assets/(liabilities) Sterling 2010 m 2009 m Euro 2010 m 2009 m US Dollar 2010 m 2009 m Other 2010 m 2009 m Total 2010 m 2009 m
Functional currency of Group operation Sterling Euro US dollar Other Total
(0.1) 0.2 0.1
(0.3) (0.3)
9.7 (22.6) (12.9)
7.7 0.2 7.9
9.6 (0.1) 18.8 28.3
3.5 (0.1) 18.2 21.6
3.7 (1.1) 0.3 1.6 4.5
1.5 0.6 0.4 2.5
23.0 (1.3) 0.3 (2.0) 20.0
12.7 0.5 0.4 18.1 31.7
It is estimated that the impact of every 10 per cent strengthening/weakening of the exchange rates of the principal currencies to which the Groups receivables are exposed would increase/decrease prot before tax by approximately 2.8 million (2009: 3.2 million). It is estimated that the impact of every 10 per cent strengthening/weakening of the exchange rates of the principal currencies to which the Groups payables are exposed would decrease/increase prot before tax by approximately 4.2 million (2009: 2.5 million). (iv) Credit risk The Groups maximum exposure to credit risk in relation to nancial assets is represented by the amount of cash and cash equivalents, trade and other receivables and derivative nancial instruments. Details of the credit risk relating to nancial assets are given in note 14 and note 15 in relation to trade and other receivables and cash and cash equivalents respectively. (v) Liquidity risk Financial liabilities included within trade and other payables (note 17) have a contractual maturity date within twelve months of the balance sheet date as at 31 December 2010 and 2009 except for other payables of 0.2 million (2009 : nil) and accruals of 0.8 million (2009: 1.6 million) which are mainly payable between one and three years (2009: one and three years). The table below analyses the maturity prole of the Groups borrowings. The maturity prole of the Groups derivative nancial instruments is given in note (vi) below. The amounts disclosed below are the contractual undiscounted cash ows:
2010 Borrowings (note 16) m Contractual interest payments m Total contractual cash ows m Borrowings (note 16) m 2009 Contractual interest payments m Total contractual cash ows m
Less than one year Between one and two years Between two and ve years Over ve years
48.6 0.4 32.5 81.5
0.6 2.1 2.7
49.2 0.4 34.6 84.2
19.8 0.2 2.2 2.5 24.7
0.5 1.3 1.6 3.4
20.3 0.2 3.5 4.1 28.1 Other information 115 116
99

21 Financial instruments and risk management (continued) (vi) Derivative nancial instruments (a) Net fair values of cash ow and fair value hedges that qualify for hedge accounting
Assets 2010 m 2009 m Liabilities 2010 m 2009 m
Forward foreign currency contracts Less non-current portion Current portion
1.6 (0.1) 1.5
1.4 (0.1) 1.3
(1.8) 0.2 (1.6)
(2.1) 0.5 (1.6)
At 31 December 2010, the Group has outstanding foreign currency contracts designated as cash ow and fair value hedges with a gross outow amount of 87.5 million (2009: 101.8 million). The table below analyses the Groups derivative nancial instruments which will be settled on a gross basis. The amounts disclosed below are the contractual undiscounted gross cash ows:
2010 Less than 1 year m Between 1 and 3 years m Between 3 and 5 years m Less than 1 year m 2009 Between 1 and 3 years m Between 3 and 5 years m
Forward foreign exchange contracts: Outow Inow (70.2) 70.3 0.1 (17.3) 17.4 0.1 (81.8) 81.6 (0.2) (17.3) 17.1 (0.2) (2.7) 2.7
The net fair value (losses)/gains on open forward foreign exchange contracts in relation to cash ow and fair value hedges are expected to be transferred from the hedging reserve to the income statement as follows:
2010 m 2009 m
Losses already recognised in the year Gains expected to be recognised in the next year Losses expected to be recognised in subsequent years
(0.1) 0.1 (0.3) (0.3)
(0.4) 0.2 (0.2) (0.4)
(b)
Net fair values of derivative nancial instruments that do not qualify for hedge accounting
Current assets 2010 m 2009 m Current liabilities 2010 m 2009 m
Embedded derivatives within contracts Forward foreign currency contracts not designated as hedges(i)
0.1 0.5 0.6
0.2 0.2 0.4
(0.2) (0.6) (0.8)
(0.1) (0.3) (0.4)
(i) The contractual undiscounted gross cash ows to be settled within one year are an outow of 19.0 million (2009: 8.6 million) and an inow of 19.1 million (2009: 8.4 million). (vii) Fair values of nancial liabilities
Book value 2010 m 2009 m Fair value 2010 m 2009 m
Primary nancial instruments held or issued to nance the Groups operations: Short-term borrowings and current portion of long-term borrowings Long-term borrowings
(48.6) (32.9)
(19.8) (4.9)
(48.6) (32.9)
(19.8) (4.9)
The fair values of short-term deposits and borrowings approximate to the carrying amount because of the short maturity of these instruments. The fair values of long-term borrowings approximate to the carrying amount because these loans bear interest at oating rates and can be repaid at any time without penalty.
100
2010 review 01 35
22 Share capital and share premium

2010 Number of ordinary shares of 2 pence each 2009 Number of ordinary shares 2010 of 2 pence each 2009
Authorised: Issued: Fully-paid shares
300,000,000 167,021,060
6,000,000 300,000,000 3,340,421 166,955,167
6,000,000 3,339,103
In 2010, 65,893 (2009: 54,497) ordinary shares were issued for nil consideration on the vesting of awards under the CI LTIP. In 2009, 149,089 ordinary shares were issued for consideration of 324,999 on the vesting of awards under the MF Plan. As a result a total of 0.4 million (2009: 0.8 million) share premium arose. At 31 December 2010 and 2009, one participant held options over a total of 66,413 ordinary shares of the Company. These options were granted under an employee share option scheme and are exercisable up to 29 March 2011 at a price of 139.9 pence. Details of awards of contingent rights to the allotment of ordinary shares in the Company under long-term incentive plans are given in the Remuneration report on pages 46 to 53. The cost of the purchase of 14,670 (2009: 44,502) ordinary shares of the Company with an aggregate nominal value of 293.40 (2009: 890.04) through purchases on the London Stock Exchange by the Charter Employee Trust in connection with the Deferred Bonus Plan has been deducted from retained earnings. The consideration paid was 0.1 million (2009: 0.2 million). At 31 December 2010 the Charter Employee Trust held 88,790 (2009: 74,120) ordinary shares with a market value of 0.7 million (2009: 0.5 million). The dividends receivable on these shares have been waived. 23 Share-based payments Share-based compensation arrangements established since 7 November 2002 for the Executive Directors and selected other senior executives are set out in the Remuneration report on pages 46 to 53. 2010 and 2009 awards The awards granted under the CI LTIP were valued using the Stochastic (Monte Carlo) model as follows:
Grant date
30 April 2010
9 March 2009
Number of shares Fair value pence per share Expected volatility % Risk-free interest rate % Dividend yield %
245,380 1,679,800 684.6 64.9 1.7
396,537 1,174,700 296.2 58.7 1.8
Expected volatility is calculated based on historical volatility for the Company. The total shareholder return performance condition of the awards has been incorporated into the measurement of fair value. Participants are entitled to a dividend equivalent at the end of the vesting period therefore a dividend yield is not included in the valuation. Deferred bonus plan On 7 April 2010 awards over 9,133 shares were made under the Deferred Bonus Plan at a fair value of 777.5 pence per share based on the share price at the date of grant.
On 9 March 2009 awards over 44,236 shares were made under the Deferred Bonus Plan at a fair value of 387.5 pence per share based on the share price at the date of grant.
101

24 Other reserves
Translation reserve m Hedging reserve m Surplus on revaluation m
Total m
At 1 January 2009 Exchange translation Exchange translation transfer to income statement on disposal Change in fair value of outstanding cash ow hedges Net transfer to income statement hedges Net investment hedges Net deferred income tax movement for the year hedges At 31 December 2009 At 1 January 2010 Exchange translation Change in fair value of outstanding cash ow hedges Net transfer to income statement hedges At 31 December 2010
116.0 (33.8) (0.9) 5.7 87.0 87.0 18.1 105.1
(8.1) 2.7 7.9 (2.6) (0.1) (0.1) 0.1 (0.2) (0.2)
(547.8) (547.8) (547.8) (547.8)
(439.9) (33.8) (0.9) 2.7 7.9 5.7 (2.6) (460.9) (460.9) 18.1 0.1 (0.2) (442.9)
25 Operating lease commitments minimum lease payments

2010 Land and buildings m Other m 2009 Land and buildings m Other m
Amounts payable under non-cancellable operating leases: Within one year Between two and ve years After ve years
9.9 16.9 10.3 37.1
4.4 4.8 9.2
9.2 17.4 11.1 37.7
4.1 4.3 8.4
26 Capital commitments
2010 m 2009 m
Committed capital expenditure not provided in the nancial statements Property, plant and equipment Intangible assets
4.4 0.1 4.5
11.0 0.1 11.1
27 Contingent liabilities (i) Central operations Since about 1985, certain subsidiaries of Charter have been named as defendants (the defendants) in asbestos-related actions in the United States. These lawsuits have alleged that the defendants were liable for the acts of Cape PLC, a former partly-owned subsidiary of Charter Limited. Between 1985 and 1987, the issue was tried in several matters, each of which was resolved in the defendants favour either at trial or on appeal. In subsequent years, the defendants have continued to be named in asbestos-related lawsuits. The defendants have contested these actions and, in most cases, have obtained dismissals. The defendants have settled some of the cases brought in Mississippi. Currently, the only pending cases against the defendants in which they have received service of process are in Mississippi, which cases are dormant and are not actively being pursued by plaintiffs. The Directors have received legal advice that the defendants and their wholly-owned subsidiaries should be able to continue to defend successfully the actions brought against them, but that uncertainty must exist as to the eventual outcome of the trial of any particular action. It is not practicable to estimate in any particular case the amount of damages which might ensue if liability were imposed on any of the defendants. The defence costs and other expenses charged against Charters operating prots in 2010 were negligible. The litigation is reviewed each year and, based on that review and legal advice, the Directors believe that the aggregate of any such liability is unlikely to have a material effect on Charters nancial position. In these circumstances, the Directors have concluded that it is not appropriate to make provision for any liability in respect of such actions. (ii) Welding The ESAB Group Inc. (EGI), an indirect subsidiary of Charter, has been named as a defendant in a number of lawsuits in state and federal courts in the United States alleging personal injuries from exposure to manganese in the fumes of welding consumables. Other current and former manufacturers of welding consumables have also been named as defendants as well as various other defendants such as distributors, trade associations and others. The claimants seek compensatory and, in some cases, punitive damages for unspecied amounts.
102
2010 review 01 35
27 Contingent liabilities (continued) There are three manganese fume trials scheduled for the balance of 2011. Additional trials could also be scheduled. During 2010 EGI was not a defendant in any trials that were tried to verdict. For more than 20 years, the Welding Industry Defense group, which was established to represent a number of the welding company defendants, including EGI, in this and other litigation, has succeeded in obtaining defence verdicts in the vast majority of cases in which one or more of its members have been named as a defendant. Whilst litigation is notoriously uncertain and the risk of an adverse jury verdict in any trial exists, having considered the advice of EGIs counsel in the United States, the Directors believe that EGI has meritorious defences to these claims, most of which should be covered in whole or in part by insurance. EGI, in conjunction with other current and former US manufacturers of welding consumables, is defending these claims vigorously. EGIs defence costs, in relation to the manganese fume cases, net of insurance recoveries, are estimated to be of the order of US$8.6 million, which is reected in EGIs balance sheet at 31 December 2010. In view of the foregoing and, in particular, the legal advice received in the United States, the Directors do not consider that such claims will have a material adverse effect on Charters nancial position. EGI has also been named as a defendant in a small number of lawsuits in Massachusetts and Pennsylvania in which claimants allege asbestos-induced personal injuries. The claimants seek compensatory and, in some cases, punitive damages for unspecied amounts from EGI, other welding consumable manufacturers and other defendants who manufactured a variety of asbestos products. EGI has two asbestos cases listed for trial in 2011 although it is not anticipated that they will proceed to trial as scheduled. EGI has been dismissed prior to trial in the previous cases in which it was named as a defendant. Upon the advice of counsel, the Directors believe that EGI has meritorious defences to these claims and EGI intends vigorously to defend these lawsuits, which should be covered in whole or in part by insurance. In addition, the majority of defence costs are being borne by EGIs insurers. (iii) Air and gas handling Howden North America Inc. (formerly Howden Buffalo Inc.), an indirect subsidiary of Charter, has been named as a defendant in a number of asbestos-related actions in the United States. On the advice of counsel, Howden North America is vigorously defending all the cases that have been led against it. Over the past few years, Howden North America has sought and received dismissals in 11,493 cases and has, on the advice of counsel, settled 455 cases. These cases were typically settled for nuisance value amounts, much less than the cost of defending the cases at trial. Howden North America has received legal advice indicating that it should be able to continue to defend successfully the actions that are brought. At this time, it is not practical to estimate the amount of any potential damages or to provide details of the current stage of proceedings in particular cases, as the majority of cases do not specify the amount of damages sought and the cases are at varying stages in the litigation process. However, legal fees associated with the defence of these claims and the cost of the settlements have been covered, in substantial part, by applicable insurance. The Directors believe, based on legal advice, that the majority of asbestos-related lawsuits against Howden North America, including those resulting from the historical operations of a predecessor of Howden North America known as Buffalo Forge Company, will continue to be covered, in substantial part, by applicable insurance. The situation is reviewed regularly and based on the most recent review and legal advice obtained by Howden North America, the Directors believe that the aggregate of any potential liability is unlikely to have a material effect on Charters nancial position. (iv) Other In addition there are contingent liabilities arising in the normal course of business from which no liability is expected to crystallise. Various of the Companys subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings, actions and claims, either individually or in aggregate, will have a material adverse effect upon the Companys nancial position. 28 Cash generated from operations
2010 m 2009 m
Operating prot Depreciation and impairment of property, plant and equipment Amortisation and impairment of intangible assets Amortisation of government grants Charge for share-based payments Loss on disposal of business Prot on sale of property, plant and equipment (Increase)/decrease in inventories (Increase)/decrease in receivables Increase/(decrease) in payables Movements in provisions Movements in net retirement benet obligations
138.4 28.9 13.2 (0.6) 1.1 (0.7) (44.9) (6.6) 2.7 (16.4) (29.6) 85.5
96.0 28.3 9.6 (0.6) 1.0 0.5 (0.1) 37.7 132.1 (119.1) 4.0 (17.9) 171.5
103

29 Acquisitions and disposals Current year In March 2010, Charter acquired 100 per cent of the issued share capital of AustCold Refrigeration Pty Ltd (AustCold), a compressor company based in Sydney, Australia with net assets of 2.2 million for a cash consideration of 3.3 million (A$5.6 million) resulting in goodwill of 1.1 million. Acquisition costs of 0.2 million have been expensed. The cash outow of 0.8 million, included in the cash ow statement, comprises the net cash consideration of 3.3 million less amounts to be paid in future periods of 0.3 million and cash acquired of 2.2 million. The value attributed to the assets acquired as shown in the table below represents the Directors current estimate of the fair value of the net assets acquired. In accordance with IFRS 3, the values attributable to the acquisition of AustCold are provisional and may be revised as further information becomes available. During the year ended 31 December 2010, no adjustments have been made to the estimated fair value of the net assets acquired in prior years.
AustCold Carrying amount before fair value adjustment m
Fair value adjustment m
Provisional fair value m
Intangible assets Property, plant and equipment Inventories Trade and other receivables Cash and cash equivalents Trade and other payables Income tax liabilities Provisions Deferred income tax assets/(liabilities) Net assets Goodwill on acquisition
0.1 0.1 1.3 2.2 (1.0) (0.9) (1.0) 0.8 1.6
0.5 0.3 (0.2) 0.6
0.5 0.4 0.1 1.3 2.2 (1.0) (0.9) (1.0) 0.6 2.2 1.1 3.3
Satised by: Net cash consideration paid Consideration to be paid in subsequent years 3.0 0.3 3.3
Intangible assets acquired principally represent customer relationships and brands.The goodwill arising principally reects the anticipated protability of the new markets to which the Group has gained access and to additional protability and operating efciencies in respect of existing markets. None of the goodwill recognised is expected to be deductible for income tax purposes. The revenue and loss after tax of AustCold for the year ended 31 December 2010 were 2.8 million and 0.6 million respectively of which 1.5 million and 0.1 million respectively were for the period prior to acquisition. Prior year During the year ended 31 December 2009, the Group made no acquisitions of subsidiaries. Costs of 0.3 million in relation to a potential acquisition have been charged to the income statement. During the year ended 31 December 2009, no adjustments have been made to the estimated fair value of the net assets of the other businesses acquired in 2008. On 13 May 2009, ESAB completed the disposal of HD Engineering Limited, a manufacturer of drilling equipment, consumables and accessories with net assets of 3.1 million for a cash consideration of 1.7 million, net of disposal costs, resulting in a loss of 1.4 million. Cumulative exchange translation gains previously taken directly to equity of 0.9 million have been recycled through the income statement following this disposal. The cash inow of 1.3 million in 2009, included in the cash ow statement, comprises the net cash consideration of 1.7 million less cash disposed of 0.4 million.
104
2010 review 01 35
29 Acquisitions and disposals (continued) The net assets disposed of were as follows:
2009 m
Property, plant and equipment Inventories Trade and other receivables Cash and cash equivalents Trade and other payables Income tax liabilities Net assets disposed Currency translation gain transferred from equity Total Net cash consideration received (including costs and excluding cash disposed) Loss on disposal (note 5)
0.5 1.7 1.5 0.4 (0.9) (0.1) 3.1 (0.9) 2.2 1.7 (0.5) Directors and corporate governance 36 57
30 Related party transactions Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Key management compensation is disclosed in note 8. Details of transactions between the Group and other related parties are disclosed below. Trading transactions During the year, Group entities entered into the following trading transactions with related parties that are not members of the Group.
Sales of goods 2010 m 2009 m Purchases of goods 2010 m 2009 m Amounts owed by related parties 2010 m 2009 m Amounts owed to related parties 2010 m 2009 m
Associates and joint ventures
5.1
2.7
7.6
4.9
1.0
0.8
1.0
0.6 Financial statements 58 114
Other related party transactions ESAB Holdings Limited, Howden Group Limited and The ESAB Group Inc., subsidiaries of the Company, are party to arms length consultancy agreements with Unipart Logistics Limited (Unipart Logistics) for the provision of lean manufacturing and other consultancy services to ESAB, Howden and Anderson Group Inc. respectively. John Neill, a Non-Executive Director of the Company, is currently Group Chief Executive of the Unipart Group of Companies. The total charges paid to Unipart Logistics during the year amounted to 1.5 million (2009: 2.3 million). The amount payable to Unipart Logistics as at 31 December 2010 was 0.2 million (2009: 0.2 million). In 2009 Hoeganaes Corporation (Hoeganaes), a wholly-owned subsidiary of GKN plc, supplied powdered metal to two subsidiaries of the Company, being ESAB Group Inc and ESAB Mexico SA de CV, with a total sales value of US$2.1 million. The amount payable to Hoeganaes at 31 December 2009 was US$0.3 million. The relationship between both Hoeganaes and the Companys subsidiaries is on an arms length basis and in the ordinary course of trade. Grey Denham, a Non-Executive Director of the Company, was Company Secretary and Group Director Legal and Compliance of GKN plc until his retirement on 7 May 2009 but had no day-to-day involvement in the management of Hoeganaes. 31 Dividends
2010 m 2009 m
Interim dividend for 2010 of 7.5p paid on 10 September 2010 Second interim dividend for 2009 of 14.5p paid on 7 May 2010 First interim dividend for 2009 of 7.0p paid on 9 September 2009 Dividend for 2008 of 14.0p paid on 5 May 2009
12.5 24.2 36.7
11.6 23.4 35.0
On 17 February 2011 the Directors declared a second interim dividend of 15.5 pence per share in respect of the year ended 31 December 2010. It is anticipated that the dividend will be paid on 6 May 2011 to holders of ordinary shares registered on 15 April 2011. This dividend, totalling 25.9 million, has not been included as a liability as at 31 December 2010. Income Access Share arrangements have been put in place to enable shareholders in the Company to elect to receive their dividends from a UK source (the IAS election). All elections remain in force indenitely unless revoked. Unless shareholders make an IAS election, dividends will be received from an Irish source and will be taxed accordingly. The Charter Employee Trust has waived its entitlement to receive dividends on its holding of 88,790 (2009: 74,120) ordinary shares in the Company.
105
Principal interests in Group undertakings
Subsidiary undertakings
Country of incorporation Group interest in equity capital (per cent)
Nature of business
Welding, cutting and automation

Europe ESAB AB ESAB Vamberk s.r.o. ESAB GmbH ESAB Cutting Systems GmbH ESAB Mor Kft ESAB Sp. z o.o. ESAB Saldatura S.p.A. OOO ESAB Zao ESAB Svel ESAB Europe AG North America The ESAB Group Inc.(iii) South America ESAB Industria e Comercio Ltda Eutectic do Brasil Ltda Conarco Alambres y Soldaduras S.A. China ESAB Welding and Cutting Products (Shanghai) Co Limited ESAB Welding Products (Jiangsu) Co Limited ESAB Cutting and Welding Automation (Shanghai) Co Limited ESAB Welding Products (Weihai) Co Limited Asia Pacic ESAB Asia/Pacic Pte Limited Romar Positioning Equipment International Pte Limited ESAB India Limited United Arab Emirates ESAB Middle East LLC ESAB Middle East FZE Sweden Czech Republic Germany Germany Hungary Poland Italy Russia Russia Switzerland USA Brazil Brazil Argentina China China China China Singapore Singapore India United Arab Emirates United Arab Emirates 100 100 100 100 100 100 100 100 51 100 100 100 100 100 100 100 100 100 100 100 56 100 100 Welding consumables and equipment Welding consumables and equipment Welding consumables and equipment Oxy-fuel, plasma, laser and water jet cutting Welding consumables Welding consumables Welding consumables and equipment Welding consumables and equipment Welding consumables Welding consumables Welding consumables and equipment Welding consumables and equipment Welding consumables and equipment Welding consumables and equipment Welding consumables and equipment Welding consumables and equipment Cutting and automation Welding consumables Welding consumables and equipment Welding equipment Welding consumables and equipment Welding consumables and equipment Welding consumables and equipment
Air and gas handling

Europe Howden UK Limited Howden France Howden BC Compressors Howden Netherlands BV Howden Turbowerke GmbH Howden Ventilatoren GmbH Howden Denmark A/S Howden Spain SL Howden Compressors Limited James Howden & Company Limited (trading as Howden Process Compressors) North America Howden North America Inc.(iii) South America Howden South America Ventiladores e Compressores Industria e Comercio Ltda(iv) Asia Pacic Howden Hua Engineering Co Limited Howden Australia Pty Limited South Africa Howden Africa Holdings Limited Associates and joint ventures ESAB SeAH Corporation(v) (i) (ii) (iii) Northern Ireland France France Netherlands Germany Germany Denmark Spain Scotland Scotland USA 100 100 100 100 100 100 100 100 100 100 100 Power, industrial fans and heat exchangers Industrial fans Piston and diaphragm compressors Industrial fans Industrial fans Power and industrial fans Power and industrial fans Heat exchangers Screw compressors Screw compressor packages and blowers Power and industrial fans
Brazil
100
Industrial fans and heat exchangers
China Australia South Africa South Korea
70 100 55 50
Power and industrial fans, heat exchangers, compressors & blowers Power and industrial fans and heat exchangers Power and industrial fans, heat exchangers, gas cleaning equipment, pumps and cooling systems Welding consumables
The principal country of operation is the same as the country of incorporation. The Group undertakings above are all held by subsidiary undertakings of the Company. The ESAB Group Inc. and Howden North America Inc. (formerly Howden Buffalo Inc.) are both wholly-owned subsidiaries of Anderson Group Inc., the holding company of the Groups North America businesses. (iv) Aeolus Industria e Comercio Ltda merged into Howden South America Ventiladores e Compressores Industria e Comercio Ltda on 30 December 2010. (v) ESAB SeAH Corporation has only one class of capital.
106
Five-year record
2010 review 01 35
CONSOLIDATED INCOME STATEMENT Revenue continuing operations Operating prot continuing operations Adjusted operating prot Exceptional items Acquisition costs Amortisation and impairment of acquired intangibles and goodwill
2010 m
2009 m
2008 m
2007 m
2006 m
1,719.6 138.4 145.9 (1.5) (0.2) (5.8) 138.4 1.9 3.8 144.1 (25.2) 118.9 106.6 12.3 118.9 149.2 306.0 18.6 96.2 47.5 617.5 295.1 471.5 (421.1) 963.0 (38.4) (170.1) (60.6) (5.8) (274.9) 688.1 635.7 54.2 689.9 81.5 (83.3) (1.8) 688.1
1,659.2 96.0 125.6 (26.8) (0.3) (2.5) 96.0 (6.8) 3.5 92.7 (17.9) 74.8 63.5 11.3 74.8 139.1 280.2 18.0 88.5 37.3 563.1 238.5 438.2 (414.2) 825.6 (29.7) (178.1) (73.9) (3.5) (285.2) 540.4 549.9 41.4 591.3 24.7 (75.6) (50.9) 540.4
1,887.0 201.0 211.2 (8.3) (1.9) 201.0 (6.5) 3.2 197.7 (39.0) 158.7 150.2 8.5 158.7 136.0 275.0 17.7 69.7 65.7 564.1 292.0 581.6 (576.3) 861.4 (35.1) (174.4) (74.9) (10.5) (294.9) 566.5 578.3 40.0 618.3 43.9 (95.7) (51.8) 566.5
1,451.1 173.3 173.8 (0.5) 173.3 1.6 3.2 178.1 (33.3) 144.8 137.8 7.0 144.8 80.2 182.7 15.2 40.1 47.8 366.0 177.5 415.8 (399.9) 559.4 (27.4) (107.5) (55.6) (3.1) (193.6) 365.8 426.4 27.6 454.0 30.3 (118.5) (88.2) 365.8
1,257.9 144.6 144.6 144.6 (4.4) 5.8 146.0 (16.9) 129.1 123.4 5.7 129.1 48.7 116.6 19.6 34.6 38.9 258.4 132.0 328.9 (296.9) 422.4 (24.6) (130.5) (50.9) (3.1) (209.1) 213.3 246.1 10.3 256.4 19.2 (62.3) (43.1) 213.3 Directors and corporate governance 36 57
Net nancing credit/(charge)(i) Share of post-tax prots of associates and joint ventures Prot before tax Taxation charge(ii) Prot for the year Attributable to: Equity shareholders Non-controlling interests CONSOLIDATED BALANCE SHEET Intangible assets Property, plant and equipment Investments in associates and joint ventures Deferred income tax assets Other non-current assets Non-current assets Inventories Trade and other receivables(iii) Trade, other payables and income tax liabilities Total assets less current liabilities (excluding net cash/(debt) & provisions) Long-term liabilities and provisions Deferred income tax liabilities Retirement benet obligations Provisions Other long-term liabilities
Financed by: Equity shareholders funds Non-controlling interests
Gross debt Cash Net cash
Basic earnings per share (expressed in pence per share) Adjusted(iv) Headline
(i) (ii) (iii) (iv)
66.1 63.9
55.0 38.1
99.2 90.1
84.7 82.7
68.1 74.4
(v)
Net nancing credit/(charge) includes retranslation gains on intercompany loans of 7.5 million, 4.0 million and 0.2 million, in 2010, 2009 and 2006 respectively, and losses of 4.6 million and 2.5 million in 2008 and 2007 respectively. Tax on prot on ordinary activities in 2006 includes an exceptional credit of 10.5 million. Trade and other receivables includes assets held for sale, derivative nancial instruments and current income tax receivables. Amortisation and impairment of acquired intangibles and goodwill, exceptional items and exchange gains and losses on retranslation of intercompany loans (including attributable tax and non-controlling interests) are excluded from the calculations of adjusted earnings per share. For 2010 and 2009, acquisition costs and the non-cash net nancing costs attributable to retirement benet obligations have also been excluded in calculating adjusted earnings per share as these amounts do not relate to underlying business performance. Previous years have not been restated. The 2006 results have been restated to reect the change in accounting policy in 2007 to recognise actuarial gains and losses arising on employee benets in full. Charter International plc Annual Report 2010
107
Audit opinion parent Company nancial statements
Independent Auditors report to the members of Charter International plc We have audited the accompanying parent Company nancial statements of Charter International plc for the year ended 31 December 2010 which comprise the Company prot and loss account, Company balance sheet and the related notes. The nancial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards. Respective responsibilities of directors and auditors As explained more fully in the Directors Responsibilities Statement, the Directors are responsible for the preparation of the nancial statements and for being satised that they give a true and fair view. Our responsibility is to audit and express an opinion on the nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Boards Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the Companys members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the nancial statements sufcient to give reasonable assurance that the nancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Companys circumstances and have been consistently applied and adequately disclosed; the reasonableness of signicant accounting estimates made by the Directors; and the overall presentation of the nancial statements. Opinion on financial statements In our opinion the nancial statements:
Q
Opinion on other matter In our opinion the information given in the Directors Report for the nancial year for which the nancial statements are prepared is consistent with the nancial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:
Q
proper accounting records have not been kept by the parent Company; or the parent Company nancial statements are not in agreement with the accounting records; or we have not received all the information and explanations we require for our audit.
Other matter We have reported separately on the Group nancial statements of Charter International plc for the year ended 31 December 2010. Graham McGregor For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants London 17 February 2011 Notes: (a) The maintenance and integrity of the Charter International plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the nancial statements since they were initially presented on the website. (b) Legislation in Jersey governing the preparation and dissemination of nancial statements may differ from legislation in other jurisdictions.
give a true and fair view of the state of the Companys affairs as at 31 December 2010 and of its prot and cash ows for the year then ended; have been properly prepared in accordance with United Kingdom Accounting Standards; and have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
108
Company prot and loss account

2010 review 01 35
Note
2010 m
2009 m
Continuing operations Administrative expenses Loss before interest Net interest and nancing (charge)/credit Loss before taxation Taxation Loss for the nancial year
5 11
(3.6) (3.6) (4.9) (8.5) (8.5)
(3.5) (3.5) 0.5 (3.0) (3.0)
The Company has no recognised gains and losses other than those included in the prot and loss account and therefore no separate statement of total recognised gains and losses has been presented.
Company balance sheet

At 31 December 2010
2010 m 2009 m
Note
Fixed assets Tangible xed assets Investment in subsidiary undertakings Current assets Debtors Cash Creditors: amounts falling due within one year Net current liabilities Net assets Capital and reserves Called-up share capital Share premium Prot and loss account Shareholders funds equity interests
Approved by the Board of Directors on 17 February 2011 and signed on its behalf by: M.G. Foster Director R.A. Careless Director
6 7
0.2 652.0 652.2
0.2 650.9 651.1 368.0 0.1 (380.4) (12.3) 638.8 3.3 0.8 634.7 638.8
329.0 0.1 (355.2) (26.1) 626.1
10 11 11
3.3 1.2 621.6 626.1
109
Notes to the nancial statements of the Company

1 Basis of preparation The registered ofce of the Company is situated at 22 Grenville Street, St Helier, Jersey JE4 8PX, Channel Islands. The separate nancial statements of the Company are presented in compliance with the requirements for companies whose shares are listed on the London Stock Exchange. They were approved by the Board on 17 February 2011. The Companys nancial statements are presented in sterling, as that is the functional currency of the Company. The nancial statements for the Company have been prepared on a going concern basis and under the historical cost convention, with the exception of share-based payments awards measured at fair value, and in accordance with the Companies (Jersey) Law 1991 and United Kingdom Generally Accepted Accounting Practice (UK GAAP) on the basis of the accounting policies set out in note 2 below. These nancial statements comprise the prot and loss account, balance sheet and related notes. The Company has taken advantage of the exemption from preparing a cash ow statement under the terms of FRS 1 (Revised 1996) Cash ow statements. The Company is also exempt under the terms of FRS 8 Related party disclosures from disclosing transactions with other members of the Charter Group. 2 Principal accounting policies The principal accounting policies are set out below. Foreign currencies Foreign currency transactions are translated using the exchange rate at the date of transaction. Foreign exchange gains and losses arising from the settlement of transactions and from the translation at year-end exchange rates of monetary assets and liabilities are recognised in the prot and loss account. Investments in subsidiary undertakings Investments in subsidiary undertakings are included at cost less provision for any impairment in value. Deferred income taxation Deferred income taxation is provided on the incremental liability approach in respect of timing differences giving rise to an asset or liability. Deferred income taxation assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred income taxation assets and liabilities are not discounted. Share-based payments The Company operates equity-settled share-based compensation plans. These include awards made in respect of shares in the then Charter plc exchanged for awards in respect of shares in the Company, following the Scheme of Arrangement establishing the Company as the holding company of the then Charter plc in 2008. The fair value of the employee services received in exchange for participation in the plan is recognised as an expense in the prot and loss account. The fair value of the employee service is based on the fair value of the equity instruments granted. This expense is spread over the vesting period of the instrument. The corresponding entry is credited to equity. The Companys liability for social security costs arising in relation to the awards is remeasured at each reporting date based on the share price as at the reporting date and the elapsed portion of the relevant vesting periods to the extent it is considered probable that a liability will arise. Where a parent company grants rights to its equity instruments to employees of a subsidiary, and such share-based compensation is accounted for as equity-settled in the consolidated nancial statements of the parent, the subsidiary is required to record an expense for such compensation in accordance with FRS 20 Share-based payment, with a corresponding increase recognised in equity as a contribution from the parent. Consequently, in the nancial statements of the parent (Charter International plc), the Company has recognised an addition to xed asset investments of the aggregate amount of these contributions of 1.1 million (2009: 1.0 million) with a corresponding credit to equity shareholders funds. Dividends Dividend distributions to the Companys shareholders are recognised in the period when paid. Dividends receivable are recognised when the Companys right to receive payment has been established and is unconditional.
110
2010 review 01 35
3 Operating loss The operating loss is stated after charging:

2010 m 2009 m
(i) Staff costs (including Directors emoluments)

Wages and salaries Social security costs 1.1 1.1 0.9 0.1 1.0
The average number of employees during the year was three (2009: three) all of whom performed administrative work in Ireland in both 2010 and 2009. Executive directors of the Company are employed by other companies within the Group.
2010 m 2009 m
(ii) Fees payable to the Companys Auditor and its associates:

Audit services Fees payable to Companys Auditor for the audit of the parent company nancial statements were 2,000 (2009: 2,000) Fees payable to Companys Auditor for the audit of the consolidated nancial statements Non-audit services Fees payable to Companys Auditor and its associates for other services 0.1 0.6 0.7 0.7 0.2
0.5
0.7
(iii) Directors emoluments (included in staff costs)

Salaries and benets 0.7 0.2
Highest paid director

Total amount of emoluments
Retirement benets are accruing to three Directors under a dened benet scheme.
Details of the remuneration of Directors are set out in the Remuneration report on pages 46 to 53. 4 Net interest and nancing (charge)/credit
2010 m 2009 m
Interest receivable from subsidiary undertakings Net exchange losses on retranslation of intercompany loan balances
0.5 (5.4) (4.9)
0.5 0.5
5 Taxation (i) Tax charge for the year There was no tax charge for the current or prior year. The applicable rate of corporation tax in Ireland is 25 per cent. The reconciliation of the tax charge for the year is as follows:
2010 m 2009 m
Loss before taxation Loss on ordinary activities before tax multiplied by the applicable rate of corporation tax in Ireland of 25% (2009: 25%) Effects of: Losses not recognised Current tax charge for the year
(8.5) 2.1 (2.1)
(3.0) Other information 115 116 0.8 (0.8)
(ii) Factors that may affect future tax charges In the foreseeable future, the Companys tax charge will continue to be inuenced by the nature of its income and expenditure in subsequent accounting periods and could be affected by changes in tax law.
111
Notes to the nancial statements of the Company (continued)

6 Tangible xed assets ofce equipment

At cost Opening balance Additions Closing balance Depreciation Opening balance Charge for the year Closing balance Net book amount Closing balance
2010 m
2009 m
0.2 0.2 0.2
0.2 0.2 0.2
7 Investment in subsidiary undertakings (i) Shares in subsidiary undertakings

Opening balance Additions Closing balance
2010 m
2009 m
1.0 1.1 2.1
1.0 1.0
(ii) Long-term loan to subsidiary undertaking

2010 m 2009 m
Opening and closing balance
649.9
649.9
(iii) Total investment in subsidiary undertakings

2010 m 2009 m
Closing balance
652.0
650.9
Additions of 1.1 million (2009: 1.0 million) comprised the fair value of employee service in relation to share-based payment awards granted to employees of subsidiary undertakings. Principal interests in Group undertakings are shown on page 106. 8 Debtors amounts falling due within one year
2010 m 2009 m
Amounts due from subsidiary undertakings Other debtors
(i)
328.9 0.1 329.0
367.9 0.1 368.0
(i) Amounts due from subsidiary undertakings are unsecured and are repayable on demand. Amounts due from subsidiary undertakings of 19.9 million (2009: 40.8 million) receive interest at LIBOR plus 1 per cent (2009: 1 per cent) and 309.9 million (2009: 327.1 million) are interest free. 9 Creditors amounts falling due within one year
Amounts due to subsidiary undertakings(i) Other creditors Accruals
2010 m 2009 m
354.9 0.3 355.2
380.3 0.1 380.4
(i) Amounts due to subsidiary undertakings are interest free, unsecured and are repayable on demand.
112
2010 review 01 35
10 Called-up share capital

2010 2009
Opening balance Issued Closing balance

2010 Number of ordinary shares of 2 pence each
3,339,103 1,318 3,340,421

2009 Number of ordinary shares of 2 pence each
3,335,032 4,071 3,339,103
2010
2009
Authorised: Issued:
300,000,000
6,000,000
300,000,000
6,000,000
Fully-paid shares
167,021,060
3,340,421
166,955,167
3,339,103
In 2010, 65,893 (2009: 54,497) ordinary shares were issued for nil consideration on the vesting of awards under the CI LTIP. In 2009, 149,089 ordinary shares were issued for consideration of 324,999 on the vesting of awards under the MF Plan. As a result a total of 0.4 million (2009: 0.8 million) share premium arose. At 31 December 2010 and 2009, one participant held options over a total of 66,413 ordinary shares of the Company. These options were granted under an employee share option scheme and are exercisable up to 29 March 2011 at a price of 139.9 pence. Details of awards of contingent rights to the allotment of ordinary shares in the Company under long-term incentive plans are given in the Remuneration report on pages 46 to 53. 11 Reserves
At 31 December 2008 Loss for the year Share-based payments charge for year shares issued Dividends At 31 December 2009 Loss for the year Share-based payments charge for year shares issued Dividends At 31 December 2010
Share premium m Prot and loss account m
Total m
0.8 0.8 0.4 1.2
642.7 (3.0) 1.0 (0.5) (5.5) 634.7 (8.5) 1.1 (0.4) (5.3) 621.6
642.7 (3.0) 1.0 0.3 (5.5) 635.5 (8.5) 1.1 (5.3) 622.8 Financial statements 58 114
The Charter International plc shares issued pursuant to the Scheme of Arrangement which established the Company as the holding company of the then Charter plc were recorded at fair value based on the closing mid-market price of the then Charter plc shares on 21 October 2008, the day prior to their delisting and the Scheme of Arrangement becoming effective. This resulted in the creation of a share premium account of 646.6 million. On 6 November 2008, following conrmation by the Jersey court, a reduction of capital became effective with all amounts then standing to the credit of the share premium account being recharacterised as a distributable reserve. The Companys reconciliation of movements in equity shareholders funds was as follows:
2010 m 2009 m
Loss for the nancial year Total recognised gains and losses Shares issued Share-based payments charge for year Dividends Net decrease in shareholders funds Opening shareholders funds Closing shareholders funds
(8.5) (8.5) 1.1 (5.3) (12.7) 638.8 626.1
(3.0) (3.0) 0.3 1.0 (5.5) (7.2) 646.0 638.8
113
Notes to the nancial statements of the Company (continued)

12 Share-based payments On 22 October 2008, pursuant to the Scheme of Arrangement, awards of contingent rights to the allotment of 609,507 ordinary shares of the then Charter plc granted under the MF Plan, the CI LTIP and the Deferred Bonus Plan (DBP) were converted to awards of contingent rights to the allotment of ordinary shares in the Company. There were no other changes to the terms of these awards. The awards granted during the year under the CI LTIP and the DBP were valued using the Stochastic (Monte Carlo) model as follows:
Grant date (CI LTIP) 30 April 2010 Grant date (DBP) 7 April 2010 Grant date (CI LTIP) 9 March 2009 Grant date (DBP) 9 March 2009
Number of shares Fair value pence per share Expected volatility % Risk-free interest rate % Dividend yield %
245,380 1,679,800 684.6 64.9 1.7
9,133 71,000 777.4 N/A N/A
396,537 1,174,700 296.2 58.7 1.8
44,236 171,400 387.5 N/A N/A
Expected volatility is calculated based on historical volatility for the Company and the then Charter plc. The total shareholder return performance condition of the awards has been incorporated into the measurement of fair value. Participants are entitled to a dividend equivalent at the end of the vesting period and therefore a dividend yield is not included in the valuation. Share-based compensation arrangements established since 7 November 2002 for the Executive Directors and selected other senior executives are set out in the Remuneration report on pages 46 to 53. 13 Guarantees
2010 m 2009 m
Subsidiary company borrowings
60.8
5.1
In addition there are contingent liabilities arising in the normal course of business, including surety bonds and guarantees in relation to certain of the Groups dened benet pension arrangements, from which no liability is expected to crystallise. 14 Commitments operating lease The Company has annual commitments of 0.1 million (2009: 0.1 million) in respect of the lease of land and buildings up to 2012 (2009: up to 2012). 15 Dividends Following the Scheme of Arrangement establishing the Company as the holding company of the Charter Group in 2008, Income Access Share arrangements have been put in place to enable shareholders in the Company to elect to receive their dividends from a UK source (the IAS election). All elections remain in force indenitely unless revoked. Unless shareholders make an IAS election, dividends will be received from an Irish source and will be taxed accordingly. During the year, as disclosed in note 31 to the consolidated nancial statements, dividends were paid to the Companys shareholders as follows:
2010 m 2009 m
Interim dividend for 2010 of 7.5p paid on 10 September 2010 Second interim dividend for 2009 of 14.5p paid on 7 May 2010 First interim dividend for 2009 of 7.0p paid on 9 September 2009 Dividend for 2008 of 14.0p paid on 5 May 2009
12.5 24.2 36.7
11.6 23.4 35.0
Of these amounts 5.3 million (2009: 5.5 million) was paid by the Company to those shareholders who did not elect to receive dividends under the IAS election and 31.4 million (2009: 29.5 million) was paid by Charter Limited under the IAS election. On 17 February 2011 the Directors declared a second interim dividend of 15.5 pence per share in respect of the year ended 31 December 2010. It is anticipated that the dividend will be paid on 6 May 2011 to holders of ordinary shares registered on 15 April 2011. This dividend, totalling 25.9 million, has not been included as a liability as at 31 December 2010. The Charter Employee Trust has waived its entitlement to receive dividends on its holding of 88,790 (2009: 74,120) ordinary shares in the Company.
114
Shareholder information
2010 review 01 35
Financial calendar Financial year-end Preliminary results announced Record date for second interim dividend of 2010 AGM Interim management statement Q1 2011 Payment date of interim dividend Announcement of half-yearly results Record date of interim dividend 2011* Payment date of interim dividend 2011* Interim management statement Q3 2011 Financial year-end * Subject to the declaration of an interim dividend for 2011. Dividends On 17 February 2011 the Directors declared a second interim dividend of 15.5 pence per share to be paid on 6 May 2011 to ordinary shareholders on the register on 15 April 2011. Shareholders can elect to have future dividends paid directly into their bank account rather than being sent by cheque to their registered address by completing a dividend mandate. Mandates can be obtained by contacting the Companys Registrars, Computershare Investor Services (Jersey) Limited (Computershare) at the address given overleaf or can be downloaded from Computershares website www.investorcentre.co.uk/je. The Company operates Income Access Share Arrangements (IAS) that enable shareholders to elect to either receive their dividends direct from the Company, which is tax resident in the Republic of Ireland, or from a subsidiary company, which is resident for tax purposes in the UK. Further details of the IAS Arrangements can be found on the Companys website at www.charter.ie. Shareholder enquiries The Companys shareholder register is managed by Computershare. Shareholders can view or update personal details of their shareholding at any time by visiting Computershares website or by contacting Computershare via the details listed overleaf. Electronic communication In 2007, shareholders approved a resolution to allow the Company to send or supply documents or information to shareholders by their publication on a website. Where shareholders have not provided an email address for this purpose, notication of the publication of documents will be by letter. Shareholders can elect to receive all communications electronically by registering an email address online at www.investorcentre.co.uk/je or by writing to Computershare at the address given overleaf. Shareholders can amend their instructions or provide new instructions regarding how they wish to receive communications at any time by contacting Computershare. A hard copy of a document can also be requested at any time. Shareholder analysis Analysis of shareholdings as at 31 December 2010
Range 1 1000 1001 5,000 5,001 10,000 10,001 100,000 100,001 250,000 250,001 500,000 500,001 1,000,000 1,000,000 plus Total
Total holders Units % of issued c apital
31 December 2010 18 February 2011 15 April 2011 20 April 2011 21 April 2011 6 May 2011 29 July 2011 12 August 2011 8 September 2011 15 November 2011 31 December 2011
3,835 740 97 258 82 45 33 40 5,130
1,154,752 1,530,548 688,447 9,880,035 13,057,290 15,160,454 22,938,978 102,610,556 167,021,060
0.69 0.92 0.41 5.92 7.82 9.08 13.73 61.43 100
115
Shareholder information continued

Share-dealing service An execution-only share-dealing service for the purchase and sale of Charter International plc shares is available from NatWest Stockbrokers. NatWest Stockbrokers is authorised and regulated by the Financial Services Authority and is a member of the London Stock Exchange and PLUS. For details, please contact: NatWest Stockbrokers Limited Corporate & Employee Services Premier Place 2 1/2 Devonshire Square London EC2M 4BA Telephone 0808 208 4433. Share price The Companys shares are listed on the London Stock Exchange and shareholders can check the current price by visiting www.londonstockexchange.com. The graph below illustrates the Companys share price performance over a ve-year period to 31 December 2010.
1600 1400 1200 1000 pence 800 600 400 200 0 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10
Corporate Information Registered office 22 Grenville Street St Helier Jersey JE4 8PX Registered in Jersey Company no: 100249 www.charter.ie Head ofce 27 Northwood House Northwood Park Santry Dublin 9 Ireland Auditors PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH Stockbrokers RBS Hoare Govett 250 Bishopsgate London EC2M 4AA JP Morgan Cazenove Limited 20 Moorgate London EC2M 4AA Registrars Computershare Investor Services (Jersey) Limited Queensway House Hilgrove Street St Helier Jersey JE1 1ES Shareholder line: +44 (0) 870 707 4040 Email: info@computershare.ci.com Bankers HSBC Bank plc Corporate Investment Banking and Markets 8 Canada Square London E14 5HQ Solicitors Slaughter and May One Bunhill Row London EC1Y 8YY Financial PR advisers Brunswick 16 Lincolns Inn Fields London WC2A 3ED
Charter FTSE 350 industrials (rebased)
116
*H\[PVUHY` Z[H[LTLU[ Certain sections of this Annual Report contain forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which the Company and its subsidiaries and associates operate. It is believed that the expectations reected in the Annual Report are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.
Designed and produced by Merchant www.merchant.co.uk Printed by Park Communications
117
Charter International plc 27 Northwood House Northwood Park Santry Dublin 9 Ireland Telephone +353 1 842 7190 Facsimile +353 1 816 1587 www.charter.ie

Ar 2010

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ar 2010

Uploaded by

Copyright:

Available Formats

Charter International plc Annual Report 2010

Performance critical solutions for growth industries

Adjusted operating prot1

Adjusted prot before tax2

Total equity shareholders funds

Directors and corporate governance 36 57

Adjusted earnings per share2

Dividend per share (total for the year)

Financial statements 58 114

Other information 115 116

Charter International plc Annual Report 2010

Revenue (2009: 1,659.2m)

Adjusted operating prot* (2009: 137.5m)

Employee numbers (2009: 12,451)

*Before central operations of 11.2m (2009: 11.9m)

International 02 CharterReport 2010 plc Annual

A global presence spread across developed and emerging markets

Revenue by region in 2010

Directors and corporate governance 36 57

Rest of the world

1,719.6m 145.9m 8.5% 66.1p 635.7m

1,659.2m 125.6m 7.6% 55.0p 549.9m

1,887.0m 211.2m 11.1% 99.2p 578.3m

1,451.1m 173.8m 11.9% 84.7p 426.4m

1,257.9m 144.6m 11.5% 68.1p 246.1m

Charter International plc Annual Report 2010

Chief Executives statement

Financial statements 58 114

Other information 115 116

Chief Executives statement (continued)

World Trade Center

Charter International plc Annual Report 2010

Chief Executives statement (continued)

Coal bed methane

Directors and corporate governance 36 57

Financial statements 58 114

Other information 115 116

Chief Executives statement (continued)

Adjusted operating prot (m)

2010 2009 2008 2007 2006

145.9 125.6 211.2 173.8 144.6

Adjusted operating margin ESAB (%)

Adjusted operating margin Howden (%)

Howden order book (m)

2010 2009 2008 2007 2006

423.8 441.1 499.3 416.7 361.0

Cash ow from operations (m)

2010 2009 2008 2007 2006

85.5 171.5 159.5 149.1 106.8

International 10 CharterReport 2010 plc Annual

Adjusted earnings per share (p)

Directors and corporate governance 36 57

2010 2009 2008 2007 2006 55.0

99.2 84.7 68.1

Equity shareholders funds (m)

2010 2009 2008 2007 2006 246.1 426.4 549.9

Financial statements 58 114

Capital expenditure (m)*

2010 2009 2008 2007 2006 27.6 52.1

62.5 64.7 70.1

Research and development expenditure (m)

Other information 115 116