Interim Results

API Group PLC
10 June 2003



                                 API GROUP PLC



             Interim Results for the half year ended 31 March 2003


  • Group operating profit increases to £0.1m (loss £0.9m), reflecting
    benefits from improved operating efficiencies, cost reductions and capital
    investment

  • Loss before interest and tax reduced to £0.1m compared to loss of £1.6m

  • Sales down 4% to £84.2m reflecting challenging trading conditions

  • Loss per share before exceptional items and goodwill amortisation improved
    to 2.2p (7.9p loss)

  • Balance sheet continued to be strengthened with borrowings reduced to
    £13.9m (£14.8m) with gearing at 23% (24%)

  • Foils and Laminates and Metallised Paper achieved improved profitability,
    reflecting ongoing cost reduction and performance improvement programmes.
    Converted Products was disappointing and remains under review

  • Further improvement in performance expected compared to last year albeit
    in difficult trading conditions



Commenting on the results and prospects, Chairman David Hudd said:



'The Group continued to improve its performance returning to an operating profit
before goodwill amortisation in the first half, reflecting an improvement in
operating efficiencies, reduced costs and benefits from capital investment.  In
addition, the balance sheet continued to be strengthened, benefiting from the
net cash inflow.



We expect to see further improvement for the year as a whole, albeit in
difficult conditions.'



Enquiries:

Derek Ashley, Group Chief Executive
API Group plc                                               01625 650334

David Walton, Group Finance Director 
API Group plc                                               01625 650334

Tim Spratt/Michelle Morton
Financial Dynamics                                          020 7831 3113




                          CHAIRMAN'S INTERIM STATEMENT



                 RESULTS FOR THE HALF YEAR ENDED 31 MARCH 2003





API's products are used in specialised packaging applications in luxury goods,
beverages, tobacco and other consumer goods sectors. The impact of general
economic uncertainty and the recent events in Iraq on the Group is now clear.
Weak demand and increased competition have adversely impacted the Group's
results. Despite this, further good progress has been made in restoring the
operating performance and stability of the Group and the profitability for the
first half represents a significant improvement over the same period in 2002.



The Group's core activities of Foils and Laminates and Metallised Paper made
good progress achieving improved profitability despite experiencing a reduction
in sales.  This reflects the benefits of ongoing performance improvement, cost
reduction and capital investment programmes. The performance of the Converted
Products division continued to be disappointing with declines in both sales and
profitability and these activities remain under review.



The economic fallout from the war in Iraq will affect many of the Group's
businesses and the outbreak of SARS will adversely affect our business in China.
The Group's results in the second half may be negatively impacted by these
factors. Nevertheless, there are clear prospects for continuing improvement in
the remainder of the year compared to 2002. Seasonal factors and the ongoing
realisation of benefits from rationalisation programmes and performance
improvement initiatives should help sustain performance.





REVIEW OF RESULTS



Sales declined by 4% to £84.2m compared with the same period in 2002 due to the
trading conditions referred to above. However, the operating result before
goodwill amortisation and exceptional items improved to a profit of £0.1m (loss
£0.9m), reflecting good operational progress in many areas of the Group.



Sales from the Group's UK businesses remained steady at £64.5m (£64.7m).
However, there was a change in mix with a 10% decline in domestic sales offset
by growth of 12% in sales to Continental Europe. The Group's competitive
position  benefited from favourable movements in the Euro-Sterling exchange rate
and the Laminates business performed particularly well in Europe.



Sales to the US declined by 14% to £12.1m. Sales to the Rest of the World fell
by 11% to £9.3m reflecting lower sales in the Chinese foils business and reduced
demand from the medical and hygiene sectors supplied by Coated Products.  The
Group also suffered on translation of the results of its foreign subsidiaries
into Sterling due to adverse movements in both the US dollar and Chinese
Renminbi exchange rates.



In the six months ended 31 March 2003, the Group reported a loss before interest
and taxation of £0.1m (loss £1.6m). There were no exceptional items (£0.5m net
charge).  Earnings per share before exceptional items and goodwill amortisation
improved to a loss of 2.2 pence (7.9 pence loss).  The Board is not recommending
payment of a dividend.





REVIEW OF OPERATIONS



Foils and Laminates



Operating profits before goodwill amortisation and exceptional costs improved to
£2.2m (£1.1m) on sales down 1% to £51.8m (£52.3m).



The US Foils business continued to focus on profit improvement, by targeting new
markets and opportunities, eliminating low margin sales and achieving
productivity and efficiency gains. The net effect was a sales reduction of £2.4m
or 16%, although operating losses were reduced from £0.8m to £0.4m, reflecting
the success of our strategy and the aggressive cost-cutting initiatives
previously taken.



The European Foils business generated an operating profit of £0.4m (£0.2m loss)
on static sales of £16.2m, with sales growth in mainland Europe, assisted by
improved exchange rates, offsetting lower sales in the UK.  Although the
geographical mix and continuing price pressures adversely affected profits, the
efficiency benefits achieved as a result of previous plant consolidations and
reorganisations offset these factors and led to the overall improvement in
profits.



In China, sales revenues increased despite competitive pressures. However,
exchange rate movements impacted heavily, and sterling equivalent revenues fell
by 9% to £5.6m (£6.2m).  Similarly, although profitability was static in local
currency terms, exchange rate movements caused erosion to £1.2m (£1.3m). The
focus of the Chinese business continues to be the development of markets for
higher margin products such as holographics and further capital investment to
support these initiatives.



Laminates increased sales by 16% to £17.4m (£15.0m), while operating profit grew
20% to £1.0m (£0.8m).  Lower sales of tobacco related products were more than
offset by growth in the faster growing consumer goods markets of drinks, food,
health and beauty products.





Metallised Paper



The operating loss before goodwill amortisation and exceptional costs reduced by
£0.3m to just £0.2m (£0.5m) on sales down 6% to £11.7m (£12.5m).



Reduction in waste levels and increased production efficiencies, as well as the
full effect of the plant consolidation, continued to improve margins. Benefits
were also realised from the longer term strategy of replacing sales of
high-volume, low-margin products with more specialised products capable of
generating improved returns. With a high proportion of customers in Continental
Europe, sales benefited from the movement in the Euro-Sterling exchange rate.
However, the exchange rate movement adversely affected raw material prices and
this, together with increasing competitive pressure, offset much of the gain.





Converted Products



Operating losses before goodwill amortisation and exceptional costs increased to
£0.5m (£0.1m), on sales down 11% to £20.7m (£23.2m) reflecting competitive
market conditions.



Tenza sales were down 5% to £9.4m (£9.9m), although profit improved to £0.4m
(breakeven).  The self-adhesive labels activity continued to prove problematic,
with competitive pressures leading to margin erosion and a significant loss of
sales.  Overheads were successfully reduced to offset the lost revenue, and
capital projects are in place to enable new and more profitable products to be
manufactured efficiently, placing Tenza in a good position for further profit
growth.



Coated Products experienced increased competitive pressure and reduced demand
from its key customers, both in the UK and overseas, leading to a sales
reduction of 16% to £5.1m (£6.0m) and a breakeven operating result (£0.4m
profit).  Action is being taken to refocus the business, improve production
efficiency and regain lost volume.



The Learoyd Group continued to experience weak demand and increasing competitive
pressure, with sales declining 14% to £6.2m (£7.2m) and operating losses
increasing to £0.8m (£0.5m loss). At Learoyd Packaging and Morris Plastics, cost
reduction measures have been implemented in response to weak demand in most
product areas.  Filmcast Extrusions was successful in increasing both sales and
profitability, with spare capacity on the co-extrusion line being used more
efficiently. Several new and potentially significant developments are being
strongly pursued.





FINANCE



Cash Flow



The Group's net cash inflow from operating activities was £3.6m (£4.8m).
Seasonal increases in finished goods stocks were offset by a reduction in
debtors due to improved working capital management and lower sales.



Capital expenditure of £2.9m (£2.5m) was in line with expectations and compared
with a depreciation charge of £4.1m. Expenditure is expected to continue at a
similar level for the remainder of the year.



The Group's interest charge was unchanged at £0.7m (£0.7m).



Borrowings



Net borrowings reduced by £0.9m (£2.3m) during the period to £13.9m and
represented gearing of 23% at 31 March 2003, compared with 24% at 30 September
2002.



In January 2003, the Group concluded negotiations for a £40m borrowing facility
with its principal lender Barclays Bank PLC. The new facilities include a £15m
term loan falling due for repayment between 2004 and 2009 and a £10m revolving
credit facility falling due for review in 2007. The facilities are secured by
charges over the Group's UK assets.



Shareholders' funds at 31 March 2003 were £60.2m. Net tangible assets were
equivalent to £1.79 per share.





OUTLOOK



Trading conditions in the second half are expected to remain challenging.
Global uncertainty from the War in Iraq and the outbreak of SARS are likely to
have a negative impact on the Group's results in the remainder of the year.
However, productivity and efficiency continue to improve across the Group and we
remain confident of the prospects for further improvement in the Group's
performance compared to last year.



API Group plc

10 June 2003



David Hudd

Non Executive Chairman










GROUP PROFIT & LOSS ACCOUNT

for the six months ended 31 March 2003





                                                       6 months  to       6 months to        12 months to
                                                           31 March          31 March        30 September
                                                               2003              2002                2002
                                                              £'000             £'000               £'000

Turnover                                                     84,190            87,961             180,580

Operating profit/(loss)

Continuing operations before goodwill                            80             (872)                 213
amortisation and exceptional items
Goodwill amortisation                                         (225)             (226)               (446)

Continuing operations before exceptional items                (145)           (1,098)               (233)

Exceptional items                                                 -             (930)             (2,873)

Total operating loss from continuing operations               (145)           (2,028)             (3,106)

Profit on disposal of land and buildings                          -               395                 395

Loss on ordinary activities before interest and               (145)           (1,633)             (2,711)
taxation

Net interest                                                  (704)             (658)             (1,599)

Loss on ordinary activities before taxation                   (849)           (2,291)             (4,310)

Taxation                                                        322             (650)               1,303

Loss on ordinary activities after taxation                    (527)           (2,941)             (3,007)

Equity minority interests                                     (421)             (455)             (1,097)

Loss attributable to shareholders                             (948)           (3,396)             (4,104)

Dividends                                                         -                 -                   -

Balance transferred from reserves                             (948)           (3,396)             (4,104)


Earnings per ordinary 25p share (FRS3)                        pence             pence               pence
Basic and fully diluted                                       (2.9)            (10.2)              (12.3)

Adjusted loss per ordinary 25p share (before
exceptional items and goodwill amortisation)
Basic and fully diluted                                       (2.2)             (7.9)               (4.5)

Dividend per ordinary 25p share                                   -                 -                   -







GROUP BALANCE SHEET

at 31 March 2003




                                                           31 March          31 March        30 September
                                                               2003              2002                2002
                                                              £'000             £'000               £'000
Fixed assets

Intangible assets                                             6,188             6,633               6,413
Tangible assets                                              58,749            64,314              60,124
Investments                                                     435               435                 435
                                                             65,372            71,382              66,972
Current assets

Stocks                                                       22,081            21,303              19,356
Debtors                                                      35,608            40,417              38,455
Short term investments                                        1,506                 -               1,500
Cash at bank and in hand                                      6,320             7,642               7,194
                                                             65,515            69,362              66,505
Creditors - amounts falling due within one year            (39,224)          (64,608)            (62,584)


Net current assets                                           26,291             4,754               3,921

Total assets less current liabilities                        91,663            76,136              70,893

Creditors - amounts falling due after more than            (21,806)             (166)               (140)
one year

Provisions for liabilities and charges                      (2,484)           (3,684)             (2,742)

Accruals and deferred income                                  (605)             (887)               (766)

                                                             66,768            71,399              67,245

Share capital and reserves

Called up share capital                                       8,463             8,463               8,463
Share premium account                                        50,563            50,563              50,563
Revaluation reserve                                           2,892             2,892               2,892
Capital redemption reserve                                      549               549                 549
Profit and loss account                                     (2,275)             1,621             (1,410)
Equity shareholders' funds                                   60,192            64,088              61,057

Equity minority interests                                     6,576             7,311               6,188
                                                             66,768            71,399              67,245





GROUP CASH FLOW STATEMENT

For the six months ended 31 March 2003




                                                        6 months to       6 months to        12 months to
                                                           31 March          31 March        30 September
                                                               2003              2002                2002
                                                              £'000             £'000               £'000
Reconciliation of operating loss to net cash inflow
from operating activities

Operating loss                                                (145)           (2,028)             (3,106)
Amortisation and depreciation less government grants          4,237             4,315               8,471
Loss on replacement of tangible fixed assets                     22                80                   3
(Increase)/decrease in stocks                               (2,766)             2,164               3,318

Decrease in debtors                                           2,811             3,262               3,638
(Decrease)/increase in creditors                              (198)           (2,639)                 604
(Decrease)/increase in provisions                             (401)             (352)                  55
Net cash inflow from operating activities                     3,560             4,802              12,983


Cashflow statement

Net cash inflow from operating activities                     3,560             4,802              12,983
Returns on investments and servicing of finance               (680)             (658)             (2,509)
Taxation                                                        770               539               2,254
Capital expenditure and financial investment                (2,887)           (2,535)             (3,082)
Acquisitions and disposals                                     (25)              (54)               (103)
Net cash inflow before use of management of liquid              738             2,094               9,543
resources and financing
Management of liquid resources                                    3             1,314               (312)

Financing                                                     2,531           (1,815)            (11,569)

Increase/(decrease) in cash in the period                     3,272             1,593             (2,338)

Exchange movement                                                44               207               (500)
Balance sheet movement in net cash                            3,316             1,800             (2,838)



Reconciliation of net cash flow to movement in net
debt
Increase/(decrease) in net cash                               3,272             1,593             (2,338)
(Decrease)/increase in short term investments                   (3)           (1,314)                 312
(Increase)/decrease in borrowings                           (2,531)             1,815              11,569
Change in net debt resulting from cash flows                    738             2,094               9,543

Exchange movement                                               173               171               (647)
Movement in net debt                                            911             2,265               8,896
Net debt at start of period                                (14,777)          (23,673)            (23,673)
Net debt at end of period                                  (13,866)          (21,408)            (14,777)




OTHER STATEMENTS




                                                        6 months to       6 months to        12 months to
                                                           31 March          31 March        30 September
                                                               2003              2002                2002
                                                              £'000             £'000               £'000
Statement of total recognised gains and losses

Loss attributable to shareholders                             (948)           (3,396)             (4,104)

Currency translation differences on foreign currency             83               814             (1,509)
net investments

Total recognised gains and losses relating to the             (865)           (2,582)             (5,613)
period

Prior year adjustment                                             -           (2,400)             (2,400)

Total gains and losses recognised since the previous          (865)           (4,982)             (8,013)
annual report and accounts




                                                        6 months to       6 months to        12 months to
                                                           31 March          31 March        30 September
                                                               2003              2002                2002
                                                              £'000             £'000               £'000
Reconciliation of movements in shareholders' funds
Loss attributable to shareholders                             (948)           (3,396)             (4,104)

Currency translation differences on foreign currency
net investments                                                 83               814             (1,509)

Net deduction to shareholders' funds                          (865)           (2,582)             (5,613)

Opening shareholders' funds                                  61,057            66,670              66,670

Closing shareholders' funds                                  60,192            64,088              61,057





NOTES




SEGMENTAL ANALYSIS

                                                        6 months to       6 months to        12 months to
                                                           31 March          31 March        30 September
                                                               2003              2002                2002
                                                              £'000             £'000               £'000
Analysis of turnover by destination

United Kingdom                                               33,637            37,413              74,940
Continental Europe                                           29,138            26,058              56,283
Americas                                                     12,128            14,083              29,130
Rest of World                                                 9,287            10,407              20,227
                                                             84,190            87,961             180,580


Analysis of turnover by origin

United Kingdom                                               64,543            64,658             135,527
Continental Europe                                            1,360             1,212               3,895
Americas                                                     12,089            14,870              28,835
Rest of World                                                 6,198             7,221              12,323
                                                             84,190            87,961             180,580

Analysis of loss before interest and tax by origin

United Kingdom                                              (1,186)           (1,350)             (1,878)
Continental Europe                                              447                87                 233
Americas                                                      (386)             (850)               (855)
Rest of World                                                 1,205             1,241               2,713
                                                                 80             (872)                 213

Exceptional items and goodwill amortisation                   (225)             (761)             (2,924)

                                                              (145)           (1,633)             (2,711)


Analysis of turnover by activity

Foils and Laminates                                          51,795            52,323             107,406
Metallised Paper                                             11,724            12,492              26,594
Converted Products                                           20,671            23,146              46,580
                                                             84,190            87,961             180,580

Analysis of loss before interest and tax by activity

Foils and Laminates                                           2,185             1,118               4,677
Metallised Paper                                              (192)             (539)               (978)
Converted Products                                            (481)              (61)             (1,031)
Central Costs                                               (1,432)           (1,390)             (2,455)
                                                                 80             (872)                 213
Exceptional items and goodwill amortisation                   (225)             (761)             (2,924)
                                                              (145)           (1,633)             (2,711)



NOTES




OPERATING LOSS

                                                        6 months to       6 months to        12 months to
                                                           31 March          31 March        30 September
                                                               2003              2002                2002
                                                              £'000             £'000               £'000


Exceptional items charged against operating loss
comprise

Restructuring of operating businesses                             -               780               2,324
Cost of major interruptions to production                         -                 -                 383
Other                                                             -               150                 166
                                                                  -               930               2,873





EARNINGS PER SHARE                      6 months to                 6 months to                 12 months to
                                           31 March                    31 March                 30 September
                                               2003                        2002                         2002
                               pence          £'000        pence          £'000        pence           £'000
Earnings per share are
based on

Loss attributable to           (2.9)          (948)       (10.2)        (3,396)       (12.3)         (4,104)
shareholders
Add exceptional items              -              -          1.6            535          7.5           2,478
Add goodwill amortisation        0.7            225          0.7            226          1.3             446
Less tax relief                    -                           -              -        (1.0)           (325)

Adjusted loss attributable     (2.2)          (723)        (7.9)        (2,635)        (4.5)         (1,505)
to shareholders

Basic and diluted weighted        33,262,578                  33,262,578                 33,262,578
average number of ordinary
shares



The weighted average number of shares exclude the shares owned by the API Group
plc No.2 Employee Benefit Trust.



BASIS OF PREPARATION

The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
30 September 2002.



PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information contained in this interim statement is unaudited and
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985.  The financial information for the full preceding year is
based on the statutory accounts for the financial year ended 30 September 2002.
Those accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.



INTERIM STATEMENT

The interim statement is being mailed to shareholders on 17 June 2003 and will
be available at the company's registered office, Second Avenue, Poynton
Industrial Estate, Poynton, Stockport, Cheshire, SK12 1ND.



INDEPENDENT REVIEW REPORT

To API Group plc





Introduction

We have been instructed by the company to review the financial information for
the six months ended 31 March 2003, which comprises Group Profit and Loss
Account, Group Balance Sheet, Group Cash Flow Statement, Statement of Total
Recognised Gains and Losses, Reconciliation of Movements in Shareholders' Funds
and the related notes.  We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board.  To the fullest extent permitted by the law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.



Directors' responsibilities

The interim report, including the financial information contained therein is the
responsibility of, and has been approved by, the directors.  The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in the preceding annual accounts except where any changes,
and the reasons for them, are disclosed.



Review work performed

We conducted our review in accordance with the guidance contained in Bulletin
1999/4 'Review of interim financial information' issued by the Auditing
Practices Board for use in the United Kingdom.  A review consists principally of
making enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied,
unless otherwise disclosed.  A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions.  It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit.  Accordingly we do not express an audit opinion on the financial
information.



Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2003.



Ernst & Young LLP
Manchester

10 June 2003


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