VIA FACSIMILE AND U.S. MAIL
July 5, 2005
Derrick A. Nicholson
Chief Financial Officer
Avecia Group plc.
P.O. Box 42, Hexagon House
Blackley, Manchester M9 8ZS
United Kingdom
RE: Form 20-F for the Fiscal Year Ended December 31, 2004
Filed May 18, 2005
File No. 333-11268
Dear Mr. Nicholson:
We have reviewed these filings and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information
so we may better understand your disclosure. After reviewing this
information, we may or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or on any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
FORM 20-F FOR THE YEAR ENDED DECEMBER 31, 2004
General
1. Where a comment below requests additional disclosures or other
revisions, please show us in your response what the revisions will
look like. These revisions may be included in your future
filings.
Some of our comments refer to US GAAP literature. If your
accounting
under IFRS differs from your accounting under US GAAP, please also
show us the additional disclosures that will be included in your
US
GAAP reconciliation note.
Item 5 - Operating and Financial Review and Prospects, page 24
Financial Results, page 25
2. You discuss the business reasons for changes between periods in
your financial statement line items. However, where there is more
than one business reason identified as contributing to a change,
you
should quantify the incremental impact of each individual business
reason discussed if practicable. Please also discuss business
reasons
for changes in your other financial statement line items such as
operating costs, exceptional operating costs, and other operating
income.
Aggregate Contractual Arrangements, page 35
3. Please revise your table of contractual cash obligations to
include
estimated interest payments on your debt, planned funding of
pension
benefit obligations and estimated payments under your interest
rate
swaps and caps and foreign currency contracts. Because the table
is
aimed at increasing transparency of cash flow, we believe these
payments should be included in the table. Please also disclose
any
assumptions you made to derive these amounts. Please refer to
note 46
of SEC Release 33-8350.
Item 9 - The Offer and Listing, page 40
4. Please disclose the annual high and low market prices for the
five
most recent full financial years pursuant to Item 9A.4(a) of Form
20-
F.
Item 15 - Controls and Procedures, page 54
5. You indicate that your Chief Executive Officer and Chief
Financial
Officer concluded that the your disclosure controls and procedures
were effective in timely identifying material information
potentially
required to be included in your SEC filings. Please revise your
disclosure to state your conclusion while providing the complete
definition of disclosure controls and procedures, or
alternatively,
state that your disclosure controls and procedures are effective,
or
not effective, without providing any part of the definition of
disclosure controls and procedures that is included in Exchange
Act
Rule 13a-15(e).
Financial Statements
Note 2 - Accounting Policies, page 65
Investments, page 65
6. Please provide us with the significance tests required by Rule
3-09
of Regulation S-X for Image Polymers Europe and Image Polymers
Company, individually and in combination with other 50% or less
owned
entities, for each period presented.
Note 4 - Group Operating profit, page 78
7. Although your restructuring costs are unallocated, these
restructuring activities relate to specific segments. SFAS 146
requires that you disclose, for each reportable segment, the total
amount of costs expected to be incurred in connection with the
activity, the amount incurred in the period, and the cumulative
amount
incurred to date, net of any adjustments to the liability. Please
provide the required disclosures in a tabular format supplemented
with
explanation for any adjustments to related liabilities. Please
refer
to paragraph 20(d) of SFAS 146.
Note 24 - Contingent Liabilities and Contingent Assets, page 114
Environmental, page 114
8. You indicate that the ultimate requirement for remediation work
and
its costs are difficult to estimate. Please disclose the impact
of
SFAS 143 and any significant differences between UK GAAP and US
GAAP.
9. You state that you believe the outcome of environmental matters
will not have a material effect on your financial position.
Please
revise your disclosure to clarify whether you believe outstanding
environmental matters will have a material effect on cash flows or
results of operations. Please also similarly revise your
discussion
of litigation and other claims.
10. If true, please confirm that additional losses related to
environmental matters, in total and for each site individually,
are
not reasonably possible. If not, please revise your discussion to
include each of the disclosures required by paragraph 10 of SFAS 5
and
question 2 in SAB Topic 5:Y.
Note 26 - Pension Scheme, page 117
11. Please provide the disclosures required by paragraph 5 of SFAS
132(R), including a description of your investment strategy and
target
allocations for each scheme and benefits expected to be paid in
the
next five fiscal years and in the aggregate for the five years
thereafter. Please refer to paragraph 5 subparts (d)2 and (e)-(f)
of
SFAS 132(R).
Note 33 - Difference Between UK and US Accounting Principles, page
131
Purchase Accounting Adjustments (Goodwill and Intangibles), page
132
12. Note 3 does not allocate goodwill to reportable segments.
Please
disclose US GAAP goodwill in total and for each reportable segment
and
disclose any significant changes in the allocation of goodwill by
reportable segment. If any portion of goodwill has not yet been
allocated to a reporting unit, please disclose the unallocated
amount
and the reasons that amount has not been allocated. See paragraph
45
of SFAS 142.
13. Please provide us with additional information to help us
understand your conclusion that goodwill related to the
biotechnology
and chemicals segments is not impaired in light of their recent
operating losses.
Note 34 - Condensed Financial Statements, page 139
14. If true, please confirm to us and revise your disclosures to
clarify that your guarantor subsidiaries are 100% owned as defined
by
Rule 3-10(h)(1) of Regulation S-X. Please note that this
definition
is different than the term wholly-owned, as defined by Rule 1-
02(aa)
of Regulation S-X.
* * * *
Please respond to these comments within 10 business
days, or
tell us when you will provide us with a response. Please provide
us
with a response letter that keys your responses to our comments
and
provides any requested information. Detailed letters greatly
facilitate our review. Please file your response on EDGAR as a
correspondence file. Please understand that we may have
additional
comments after reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Exchange
Act of
1934 and that they have provided all information investors require
for
an informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
In connection with responding to our comments, please
provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in our review of your filing or in response
to
our comments on your filing.
You may contact Ernest Greene, Staff Accountant, at (202)
551-
3733, or in his absence, Scott Watkinson, at (202) 551-3741, if
you
have questions regarding comments on the financial statements and
related matters.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Derrick A. Nicholson
July 5, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE