ARC International plc Announces Unaudited Preliminary Results For the Year Ended December 31, 2008

6. Provision for other liabilities and charges
      Office  
Onerous restoration Total
Reorganisation leases costs provision
Group  

£000

    £000   £000     £000  
At January 1, 2008 183 183
Provisions made in the year 1,131 1,142 60 2,333
Utilized (790 ) (12 ) (802 )
Foreign exchange   15           15  
At December 31, 2008   356     1,142   231     1,729  
 
Non-current 778 80 858
Current   356     364   151     871  
 
Reorganisation
In September 2008 the group committed to a plan of restructuring of the group’s organisation. Following the announcement of the plan the group recognised a provision of £2,273,000 for expected restructuring costs, including onerous leases, contract termination costs, consulting fees and employee termination benefits. Estimated costs were based on the terms of the relevant contracts. £790,000 was charged against the provision in 2008. The restructuring is expected to be completed in early 2009.
 
Onerous leases
As part of the restructuring above the group had non-cancellable leases for office space which the group had ceased to use. The lease on the office space in San Jose expires in 2011 and the lease on the office space in St Albans expires in 2012. The obligation for the discounted future payments (at a risk free rate of 4.5%), net of expected rental income, has been provided for. In both cases the company is seeking to sublet the space, but due to recent economic conditions, the expected rental income is nil.
 
Office restoration costs
The group has entered into property leases whereby the company is responsible for the restoration of the office space back to the condition in which it was let. The company vacated a property in Elstree UK in July 2007, and had made a provision for these restoration costs. There is currently uncertainty as to the timing and amount of the restoration payments. The company has established a provision to cover the restoration costs for the office space in St Albans UK and provides a set amount each year so that at the end of the lease the provision will cover the expected restoration costs.

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