Final Results

James Halstead PLC 01 October 2007 1 October 2007 JAMES HALSTEAD PLC PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2007 Key Figures • Turnover increased to £142.9 million (2006: £126 million) - up 13% • Pre tax profit increased to £23.3 million (2006: £17.48 million) - up 33% • Final dividend per ordinary share proposed of 11.25p ( 2006 : 8p) - up 41% • Underlying earnings per 5p ordinary share 31.2p (2006: 23.8p) - up 31% The Chief Executive, Mark Halstead, said: 'This year was the most successful in the Group's history. Overall, having regard to the operations we have around the globe, I am confident that our progress can be consolidated in the current year and beyond.' Enquiries: Mark Halstead, Chief Executive Gordon Oliver, Finance Director Telephone: 0161 767 2500 Nick Lyon - Hudson Sandler Telephone: 020 7796 4133 CHAIRMAN'S STATEMENT The results for the year to 30 June 2007 show the highest sales and profit ever reported by the Group, with sales levels achieved being £142.9 million (2006 : £126.0 million), an increase of 13.4%. Profit before taxation is £23.3 million (2006 : £17.5 million) which is 33% above last year. I believe that these results are commendable and reflect our simple approach of sourcing and producing the right products, effectively servicing our customers' needs, defending our market position and maintaining our reputation and credibility for the future. Our technical knowledge and worldwide industry recognised expertise continue to keep our products on the short list of choice for commercial flooring installations in a vast array of projects around the world. As usual our year featured many interesting flooring projects that are keenly contested and attract attention. This year we have supplied product to the Grand Egyptian Museum in Giza, dubbed the 'fourth pyramid'. Our Chinese sales office also secured the largest single hospital building project of 2007, the Chongqing South West Hospital. In addition, closer to home our computerised design service, using water jet cutting, is producing flooring inserts to highlight Manchester Hope Hospital's initiative to combat MRSA in an innovative use of our in-house facilities. Dividend The Board proposes to increase the final dividend to 11.25p (2006 : 8p) an increase of 40.6%. Acknowledgements All of our companies succeeded in meeting the challenges of very diverse market conditions across the globe to make progress and on behalf of the Board I commend their achievements and extend our thanks to all involved. In April 2007 the Group gained recognition by receiving the Queen's Award for Enterprise in the category of innovation and continuous development. This was in respect of our market leading Polysafe range of slip resistant flooring and followed the Queen's Award in 2006 for international trade. I believe these awards recognise years of effort and hard work by our workforce. I would like, specifically, to acknowledge the significant contribution to the business of Mr John Kay who has retired as the Technical Director of Polyflor Ltd after over thirty five years' service with the company. His expertise will not be lost as he will continue to act as a consultant on special projects. Outlook The drive onward has not become easier, but in taking stock of the Group at the present point in time we are in good standing. Compared to our competitors our turnover is relatively modest, and on the global scale of flooring there is market share to be gained. There are initiatives in place to move us forward and whilst there are, as ever, challenges in the marketplace and strong competition, we look forward, with every confidence, to building upon this year's growth. Geoffrey Halstead, Chairman CHIEF EXECUTIVE'S REPORT In the past year sales growth of 13.4% resulted in record turnover of £142.9 million (2006 : £126.0 million). This growth in turnover was the key driver in increasing profit before tax to £23.3 million (2006 : £17.48 million), up by over 33% on the previous year. Turnover was ahead in all geographic areas. UK turnover increased by 10.5%, European turnover by 13.8%, Australasian turnover by 17.3% and the other overseas markets (including North America) progressed by 27%. Our international sales overall achieved £80.8 million (2006 : £69.7 million), an increase of just under 16%. Whilst there were some markets reporting less than double digit growth, it is encouraging that our product offering and our strategy were effective from Norway to Australia and from Canada to China. The increasing levels of product sourced from third party/joint venture operations have, this year, as in recent years, offset some of the increased cost of UK manufacturing. They form a significant proportion of sales in many of our principal markets. It is important to note that, in the main, these are not proprietary factored products, but are designed, tested and trialled by James Halstead. Our technical and support expertise was historically dedicated to our Manchester manufacturing operation, but has been and will be additionally focused on James Halstead branded, out-sourced products, since we demand that these must meet the high standards established over many years in the UK. Patenting, branding and ownership of intellectual rights plus fifty years of expertise underpin the confidence of our customers in 'James Halstead' flooring products, which, like our company logo, bear our founder's signature. There were significant currency movements during the year and whilst diligent hedging of transactions was, as usual, in place, market movements inevitably affected results. The weak US dollar affected sales margins, not only in the USA, but in many of the Far Eastern markets whose currencies tend to mirror its movements. Benefits gained from purchases made in US dollars and favourable movements on exports in other currencies to a large degree mitigated these effects. Polyflor, the UK based operation Our active sales representatives support local distributors throughout the UK and globally, working on specifications and projects from inception to installation in a very wide range of applications. The variety of installations was perhaps best illustrated when recently our Voyager Marine product was used on the '50 Let Pobedy', a 25,000 tonne nuclear powered Russian ice breaker able to break ice up to 2.8 metres thick. Turnover in the year increased in the UK, to overseas subsidiaries and most particularly in third party export markets. Almost all direct export markets showed good growth, and all significant markets were well ahead of last year. North America has historically presented a challenge for Polyflor, but the current year has shown very good results. In the USA sales are 60% ahead of last year with Polyflor homogeneous flooring supplied to a number of important hospitals. In addition, Polyflor supplied luxury vinyl tiles for installation in some of North America's largest retail chain stores including 'Rite-Aid' and ' Bed, Bath and Beyond'. Sales to the Mediterranean region are also worthy of mention with the countries surrounding the Mediterranean having become some of our largest third party export markets. Particularly pleasing were the results of a change in distribution in Turkey, where our new representative has really shown what can be achieved in this market within a very short time frame. Sales growth in the UK has been solid, and some 10% ahead of last year. The mix of product was favourable, with good growth in the higher added value products such as luxury vinyl tile, heterogeneous product and safety flooring. Polyflor are now the only UK manufacturer of homogenous vinyl flooring and though this gives the logistical advantage of being local it does mean that the factory must continue to improve productivity as competitors move to lower labour cost countries. It is true to say that a significant part of the growth in sales emanating from Polyflor has come from Halstead branded products and this is a trend that seems set to continue. Manchester manufactured volumes increased by over 6%, which is encouraging, and this increase in output helped to offset margin erosion resulting from our inability to raise selling prices whilst facing increased costs. During the year there was no respite from high raw material prices and little relief from increased energy costs, but increased sales volumes, the benefit of product mix and the increased level of James Halstead branded products avoided margin erosion. The increased sales volume has meant that the logistics and distribution functions of the company have also been developed to handle the greater volumes. We continue to work with our local authority on site developments for the future. During the last twelve months there have been several product launches, for example Bevel Line Wood, a luxury vinyl tile, Gallery FX Acoustic and Forest FX Acoustic flooring, which are particularly suitable for affordable and social housing, 'Sport 67' and 'Sport 80' flooring, aimed at the UK secondary school rebuild programme, together with Polysafe Strata and new colours for Polyflor 2000 PUR. Each of these is targeted at our core markets in the UK where our market share continues to be supported with strong initiatives and a portfolio of products focused on end user requirements. The strong focus in the UK on initiatives to combat the recent rise in infections such as MRSA and E-Coli emphasises the extremely powerful case for the use of homogenous sheet vinyl, providing no sanctuary for dirt and bacteria, in healthcare establishments. For example Polyflor's Mystique PUR is installed in the wards and corridors of Reading's Royal Berkshire hospital and our products are in use throughout Alder Hey Hospital in Liverpool. For many years the ease of maintenance and cleanability of our ranges have made them the best flooring solution for almost every conceivable area within a hospital. Our research and development ensures that our products continue to maintain their superiority over the alternatives. The Polyflor campaign, '4 steps to safety', is the largest communication campaign we have ever undertaken with UK architects. It seeks to be balanced and educational about slip management and, we feel, underlines our position as the clear market leading brand, emphasising and reinforcing the Polysafe reputation for credibility and trust. A new initiative to raise the profile of slip resistant flooring in Germany has commenced with the German trade press visiting the UK to learn more about the UK market, which leads the world in sustainable slip resistant flooring. It has been especially pleasing that the upgrades to the Polysafe line, installed to deliver greater capacity and, potentially, new products, was commissioned without any disruption to our day to day safety flooring business. In April 2007 the Polysafe range was awarded the Queen's Award for innovation and continuous product development. Our training facility in Manchester, noted last year, has been opened and will not only showcase our work but be a working facility to train new floor layers hopefully combating skills shortages in our industry. I see this as an important initiative for our industry and have confidence that its cost will be justified. New product development is a key priority to enable us to maintain growth, enter new market sectors and maximise plant utilisation in all areas of our manufacturing units. Furthermore, we will need to continue to ensure that our service levels match the requirements of a growing business, and our customers, who have delivered this growth, continue to be provided with an excellent product backed up with outstanding service levels. Objectflor Art & Design, and Karndean International GmbH, our German based operations The year to June 2007 was Objectflor's most successful to date. Turnover increased by nearly 16%. As the year progressed, it was clear that a more confident economic environment increased business despite intense competitive pressure which was a feature of the whole year. The German business is solid in terms of turnover and profitability and is a significant player in the world's foremost vinyl flooring market. The initiative noted earlier to raise the profile of safety flooring is being well reported and received in Germany and Central Europe. It is clear that lobbying and presenting to decision makers professionally and in detail is enhancing trading opportunities in the long term. Two new updated collections were also launched during this business year. Performa, our homogeneous range, was received throughout the market with great interest, and the new collection, launched in January of this year, has raised the profile of our homogeneous business. In addition, the Expona Domestic Collection was revitalised and consolidated this brand's status as one of the most successful luxury vinyl tile range in the German market. We believe that both businesses increased their market share in Germany and in the neighbouring countries. In addition to servicing day to day demand this level of growth was achieved by the sales force securing important projects against our competition - such as Mechelen Hospital and IKEA, Dusseldorf. Some of the reasons for the successful result of our German based operations in the past financial year are: improved stock levels in the market place, a stable, experienced and motivated staff combined with outstanding training schools for customers, providing not only installation training but in addition, training in sales techniques. Underlying these factors we have very clear sales concepts and consistent implementation in each of the Central European markets that the companies service. It is clear that the strong sales growth in Germany and the surrounding markets will require additional warehousing and plans for further expansion are at an advanced stage. The German market is one of the most developed markets for vinyl flooring in the world and our success in this market continues with attention to product range and design that will be crucial to further expansion. Both businesses are well placed and well structured for continued progress. Polyflor Nordic, comprising Polyflor Norway, based in Oslo and Falck Design based in Gothenburg 2006/07 has been a year of significant growth for the Scandinavian region. Falck Design, our business in Sweden, acquired three years ago, has grown strongly with turnover very significantly ahead of the previous year. The newly designed Megastrong range of luxury vinyl tiles was re-launched during the year and the product offering has been augmented by adding the Polyflor range into markets where our products were previously under-represented. During the year Falck confirmed distributor arrangements with local parties to ensure that products were more readily available ex-stock. This process is on-going and the prospect for increasing market share in Sweden is particularly good. In the Norwegian market, where we have been longer established, this was another year of growth which saw our strong position in this market place maintained and expanded. Overall our ranges saw significant growth and the company made gains in market share with sales of rubber floor coverings being particularly encouraging. Polyflor Pacific, encompassing our businesses in Australia and New Zealand The year saw the reorganisation of the Pacific Region bringing Australia, New Zealand and peripheral markets under a single management structure. This provides synergy between the Australian and New Zealand businesses, with the benefits having an encouraging impact over the course of the year. The Australian business reported a 16% increase in turnover over the previous year with growth in all States and as a consequence profit moved strongly ahead. During the year there was significant focus on logistics and on delivering added value following recent investment in operating systems. An Operations business team was established with resultant improvements in stock holding and stock turn which improved cash flow and customer service. The sales growth not only came from recent product launches, most significantly luxury vinyl tile, but also the sales in Polyflor sheet vinyl which showed double digit volume growth on the previous year. As well as ensuring product availability and maintaining customer service the company continued with successful marketing initiatives such as the prestigious Polyflor Highflyers awards. The Melbourne Cup is a high profile sporting event in Australia and our company has supplied flooring to the 'Bird Cage Restaurant' overlooking the famous Flemington Racecourse at this legendary venue. Whilst our day to day business is more mundane these prestigious installations enhance the profile of the product offering. The year also saw the introduction by the Australian business of the Kiesel range of cementitious screeds and adhesives which have been sold in Europe for many years but were sourced for the first time by the Australian business, and have taken significant market share in their first year in the market. This not only increases sales but, just as importantly, means that the company can offer a total flooring package to its customers. The New Zealand business recovered after a slow start to record improved turnover, up 4% on the previous year. The centralisation of some administration functions and an improved sales mix contributed to a healthier net profit than the prior year. Major changes were also made to improve focus on customer service. Whilst maintaining a full sales presence in the area, our Wellington warehouse was closed and we plan to expand the Christchurch and Auckland warehouse operations. At the same time there was a radical consolidation of the carpet portfolio to a smaller, more focused range of products. This enables the business to present a more balanced branded flooring products range and to give focus to the core ranges of James Halstead and, most particularly, Forbo branded products. From the 1 August 2007 the New Zealand company changed its name to James Halstead Flooring New Zealand to emphasise its affiliation to the parent and its multi-brand credentials, as a major distributor of flooring products. The Sky Tower in Auckland looms over the city and again is fitted with products supplied by ourselves. Polyflor Hong Kong, sales office for Asian and Far East Markets We have a significant presence in Asia and during the year there was modest sales growth in the region reflecting the effect of a very weak US Dollar, this being the currency of trade in most Asian markets. Polyflor continued to be short listed and to be specified in diverse government and private building projects across China, in the face of very strong competition. The diversity is illustrated by the examples of the Beijing Rolex Customer Service Centre, which will repair, locally, luxury watches, and the Chinese People's Liberation Army Shenyang Military Area Command Headquarters. During the year we have built up local stock holding on mainland China to service and support a wider distribution base which has increased local day-to-day business. In addition, one of the major European manufacturers has opened a manufacturing facility in China but we continue to be competitive with our UK manufacturing capabilities in which we have invested heavily in over the years. With lower price point products it seems clear that basic homogenous vinyl is becoming a commodity product but increasingly we look to specify and supply higher value products, such as the Polysafe range, which offers added benefits and more unique selling features to a marketplace that is ever more sophisticated. Phoenix Distribution, based in Stoke-on-Trent, distributor of motorcycle accessories The strategy of focusing on the core Arai business, commenced eighteen months ago, has been successful. New motorcycle sales, as evidenced by registration statistics, have been static and despite the sluggishness in the accessories market Phoenix has performed exceptionally well. Arai motorcycle helmet sales have increased by 14% year on year, Abus motorcycle locks, introduced in 2006, showed continued growth and other brands (Yoshimura, Kappa, Fog City, Pinlock and Shift It) have all performed steadily in a depressed market. Phoenix was appointed the UK Arai car helmet distributor in January 2007. This specialised market, although smaller than the motorcycle market, opens up many new exciting sales opportunities and ties in nicely with their public relations and promotional activities with high profile racing drivers such as Lewis Hamilton, Fernando Alonso, Jensen Button and David Coulthard, all using the Arai product. Sales activities are focused through the Arai 'Five Star' retailer concept which has proved its value, and a strong network of premier dealers add strength and depth to the brand; each of these dealers has staff fully trained by Phoenix and have detailed technical knowledge to underline the difference between cheaper brands that use marketing to create an image of race performance and Arai which is a race led brand. Given the market conditions and the very wet summer, tight control of working capital has been a key task but there has also been a very significant improvement in bottom line performance. In 2008 we look forward to additional helmet standards coming into force which will affect the UK helmet market and, hopefully, make it clearer to the customer how important it is to invest in a high quality product, such as Arai, that far exceeds the basic European Standard for motorcycle helmets. The input of ideas and cross fertilisation of concepts with our much larger flooring operations are, over time, beneficial. Environment In the UK, as a manufacturer and supplier, we continue to issue a regular environmental report. We continue to see this as one of the criteria a responsible manufacturer should meet. We continue to support our EN 14001 accreditation and some of the key achievements are: ongoing reduction in energy usage (down 20% over the last five years), reduction in wet and dry waste (down over 23% in the last year) and ongoing initiatives to increase the use of post-consumer waste and recycled content. Looking Forward This year was the most successful in our Group's history. New production equipment was installed to upgrade our facilities in Manchester, and new distribution facilities were added in key areas. The volume of product manufactured in Manchester has risen but price pressure is constant. There is no doubt that out-sourcing additional James Halstead branded product is a major part of our activities and will continue. In recent years sales price increases have been, in many markets, precluded by volume-driven competitors offering ever more price incentives. The year ahead shows signs of inflationary pressures and in certain areas selling prices will need to reflect these pressures. Some initiatives envisaged may detract from short term profit opportunities but as the Group approaches its centenary we must look to the future. Overall, having regard to the operations we have around the globe I am confident that this excellent year can be consolidated in the next year and look forward to further progress. I and the Board have a proud regard for our long history of dividend growth and see this as the bulwark of a strategy of delivering shareholder value. Mark Halstead, Chief Executive FINANCIAL DIRECTORS REPORT I preface my report by noting that these accounts have been prepared in accordance with generally accepted accounting principles, using accounting policies which the directors consider are appropriate to give a true and fair view. The directors do not take their responsibility in presenting the accounts lightly and the fundamental principles of going concern, matching of costs and revenues, consistency and prudence, are the basis for their policies. Profit before tax at £23.3 million (2006: £17.5 million) shows an increase of 33% despite high raw material and energy costs. Some of the key statistics are: • Group turnover at £142.9 million (2006: £126 million) up 13% • Underlying earnings per share at 31.2p (2006: 23.8p) up 31% • Dividends at 16.50p (2006: 12.25p) up 34.7%, being interim paid May 2007 and final proposed December 2007 • Trade debtors at £18.8 million (2006: £18.4 million) up 2% • Net cash at £22.8 million (2006: £30 million), despite spending £15.3 million on the special dividend During the year we returned cash of £15.3 million to shareholders by way of a special dividend of 30p per ordinary share. The final proposed dividend represents the 31st year of dividend increases. Defined Benefit Pension Scheme In recent years the final salary scheme has become an area of increasing work, partly the result of the growing cost of the provision of this type of pension and partly the increasing legislative environment. The final salary scheme was closed to new members some years ago and a new defined contribution scheme introduced. This has not meant that the issues associated with the original scheme have lessened, merely that they are not compounded. I noted last year that several changes were made to the final salary scheme, effectively reducing future benefit accrual for individual members (with reduced contributions from the employee but not the employer). To date these changes have mitigated the increased cost of the scheme to the group. Individual employees can choose to augment their future benefits by way of personal contributions to the group's defined contribution scheme. The full accounts will detail the FRS 17 analysis of the scheme and whilst this seems to be the main focus of attention for analysts and shareholders, it gives only a snapshot of the scheme and the creditor in the balance sheet is very fluid. It is sensitive to gilt yields and other assumptions and is at best a rough guide to the ongoing liability. Certainly it falls well short of a ' buy-out' figure. It is important to appreciate that whilst the scheme is closed to new members and future accrual rates for benefits have been reduced, the liabilities of the scheme are not capped but will continue to be determined not just by investment returns but also by longevity of pensioners. It is worth noting the decline in the FRS 17 deficit despite all this, but as many of the factors that dictate this figure are outside the group's control the issue remains under close scrutiny. The group will adopt International Financial Reporting Standards ('IFRS') for the first time in its annual report for the year ending 30 June 2008. Consequently the group's interim results for the six months to 31 December 2007 will be presented under IFRS. All UK employees are offered, by way of gift, share participation. This reflects the longer-term objective of rewarding employees for the success of the Group. Rewarding employees by way of shares has extended the shareholder base and a significant number of employees retain shares. Allocation is on various criteria but heavily biased to length of service Cash inflow from operating activities remained strong at £26.3 million (2006: £25.1 million).The overall decrease in cash of £7.3 million is after net capital expenditure of £3.3 million, payment of taxation and dividends (including the special dividend) less interest of £29.3 million and the repayment of borrowings of £1.5 million. £0.5 million was received from share issues. The net funds (cash net of loans and preference shares classed as borrowings under FRS 25) at £19.9 million (2006: £25.6 million) show a healthy ungeared position. The overall decrease in net assets is £1.4 million with the increase from profits after tax and ordinary dividends of £8.9 million and exchange movements, actuarial gains (net of deferred tax) and share issues of £5.0 million being offset by the effects of the special dividend of £15.3 million. Net assets per ordinary share decreased to 79.5p (2006: 82.6p). However to give a fair comparison, the 2006 figure should be adjusted to 52.6p to reflect the 30p per share special dividend. Treasury The group's UK cash and bank balances are managed centrally at the group's head office. As a norm, the group makes use of foreign currency bank balances and fixed forward exchange contracts rather than more exotic financial derivatives in managing its currency exposures. Foreign currency bank accounts are operated in all major currencies in which the group's UK subsidiaries have transactional exposures. Balances on these accounts are monitored daily. Where appropriate, overseas subsidiaries have borrowing facilities with their local banks. At 30 June 2007 all overseas subsidiaries had positive bank balances. The group has significant transactional exposures relating to both sales and purchases denominated in foreign currencies. In particular it is the group's stated policy to undertake much of its export trade in local currency. This works to our advantage by ensuring the sales volume does not fluctuate as a result of exchange rate movements and removes risks from our trading partners. The level of forward cover in place is reported to the group board on a regular basis. Overall, our approach to treasury management is to identify appropriate instruments to facilitate the group's trading activities, and to be risk averse. There is no intention to trade in financial instruments or for the group treasury department to act as a profit centre in its own right and, consequently, 'speculative' instruments and practices are avoided. Key Performance Indicators The group's subsidiaries are measured against detailed budgets and prior year comparatives. Monthly reports to the group executive directors and senior management are required from their function directors. In terms of key performance indicators for the group as a whole the board considers growth in profit before tax and growth in dividend levels to be of most importance. Since increase in the former is heavily linked to growth in turnover, close attention at main board level is given to sales strategies, product mix and gross margin. Dividend payments require sales to be translated into cash, and control of working capital is closely monitored. Levels of stock, debtors and creditors are collated and reported to the board on a monthly basis. Our focus is on stock availability, stock turn and appropriate credit being given to and received from our customers and suppliers respectively, rather than performance indicators associated with cash flow directly. No individual key performance indicator is regarded so highly that it can replace the informed background knowledge, at board level, of our individual businesses, which underpins the way our group is managed. The board seeks to give an informative business review, but remains conscious that the group's competitors do not offer significant disclosure of their individual key performance indicators. The board remains reluctant to publish key statistics which may lead to loss of competitive advantage. The nature of key performance indicators is information and given the complexity of large scale manufacture many indicators are non-ratio or statistically based and are assessed on absolute monetary cost to the group. Cost of 'sick pay' in manufacturing can and does attract more attention than product margin in many cases, as indeed can corporate entertaining, customer complaints, employee liability claims and consultancy fees. Principal Business Risks and Uncertainties The ongoing nature of a business such as ours dictates that the board both understands the nature of the business and its direction. I would like to underline the importance of detailed strategic board meetings held regularly at Group and subsidiary level. The board constantly assesses risks. To the extent risk is insurable the board is risk averse and is widely insured. The board is of the belief that internal control, risk management and stewardship are linked and inseparable. Whilst principally risk and control are measured and assessed from a financial prospective, this is not to the exclusion of non-financial risks and uncertainties. A comprehensive insurance appraisal takes place annually to mitigate risk exposures to business interruption, fire, etc. but obviously key risks such as escalating raw material prices and energy costs fall outside any insurable event. There are key customers and key suppliers which create dependencies. Sales and purchasing policies are under regular review to assess these dependencies. It is clear that scenarios can be envisaged where the group's activities may be disrupted and little could be done to mitigate the negative effects. In Conclusion The nature of our annual report is to give information and demonstrate accountability to our owners. The board's role is also to fulfil the obligations of stewardship and to maintain and defend shareholder value. There is a vast increase in prescribed disclosure and a lengthening of the annual report which has the potential to detract from the core objectives, profit, dividend and growth. The Board welcomes shareholder views on this matter Gordon Oliver, Finance Director Accounting Standards and Prior Year Adjustments There is one new Financial Reporting Standard which has an effect on these accounts. FRS 20 - Share Based Payment, requires the inclusion of a charge to the profit and loss account in respect of share options granted to employees. This charge, spread over the vesting period, is based on the fair value of the option at the date of grant. There is no adjustment to the results of prior years in respect of the adoption of this accounting standard since the effects are immaterial. Audited Consolidated Profit and Loss Account for the year ended 30 June 2007 2007 2006 £'000 £'000 Turnover 142,948 126,024 Operating profit 22,452 16,567 Interest and other finance costs 856 914 Profit on ordinary activities before taxation 23,308 17,481 Taxation on ordinary activities (7,657) (5,647) Profit on ordinary activities after taxation 15,651 11,834 Earnings per ordinary share (as defined in Note 4) -basic earnings per ordinary share 30.7p 23.3p -diluted earnings per ordinary share 30.5p 23.2p All the above results derive from continuing operations. Audited Consolidated Balance Sheet as at 30 June 2007 2007 2006 £'000 £'000 Fixed assets Intangible assets 3,004 3,232 Tangible assets 18,334 18,687 21,338 21,919 Current assets Stocks 23,899 19,770 Debtors 22,511 21,093 Cash at bank, in hand and on short-term deposit 22,756 30,050 69,166 70,913 Creditors - amounts falling due within one year (44,880) (37,685) Net current assets 24,286 33,228 Total assets less current liabilities 45,624 55,147 Creditors - amounts falling due after more than one year (506) (4,441) Net assets excluding pension scheme deficit 45,118 50,706 Pension scheme deficit (4,502) (8,681) 40,616 42,025 Capital and reserves Equity share capital 2,555 2,543 Equity share capital (B shares) 160 160 Called up share capital 2,715 2,703 Share premium account 803 321 Revaluation reserve 3,544 3,544 Capital redemption reserve 3,626 3,449 Profit and loss account 29,928 32,008 40,616 42,025 Audited Consolidated Cash Flow Statement for the year ended 30 June 2007 2007 2006 £'000 £'000 Net cash inflow from operating activities 26,309 25,130 Returns on investments and servicing of finance 945 856 Taxation paid (8,182) (6,866) Capital expenditure (3,289) (1,035) Equity dividends paid (22,013) (18,113) Cash outflow before financing (6,230) (28) Financing: Shares issued 494 285 Decrease in debt (1,539) (1,794) Decrease in cash (7,275) (1,537) Reconciliation of net cash flow to movement in net funds Decrease in cash (7,275) (1,537) Movement in debt 1,539 1,794 Change in net funds resulting from cash flows (5,736) 257 Effect of exchange differences 18 (151) Movement in net funds for the period (5,718) 106 Net funds at start of year 25,621 25,515 Net funds at end of year 19,903 25,621 Statement of Total Recognised Gains and Losses for the year ended 30 June 2007 2007 2006 £'000 £'000 Profit for the financial year 15,651 11,834 Currency translation differences on foreign currency net investments 284 (438) Actuarial gain on the pension scheme 5,943 1,546 Movement on deferred tax asset relating to the pension scheme (1,783) (464) Total recognised gains relating to the year 20,095 12,478 Prior year adjustment (implementation of FRS 17) - (9,790) Total recognised gains since the last report 20,095 2,688 Reconciliation of Movements in Shareholders' Funds for the year ended 30 June 2007 2007 2006 £'000 £'000 Profit for the financial year 15,651 11,834 Equity dividends paid (22,013) (18,113) (6,362) (6,279) Other recognised gains and losses relating to the financial year 4,444 644 FRS 20 share option charge 15 - New share capital subscribed 494 285 Net decrease in shareholders' funds for the year (1,409) (5,350) Opening equity shareholders' funds 42,025 47,375 (at 1 July 2005 originally £57,475,000 before prior year adjustments of £10,100,000) Closing equity shareholders' funds 40,616 42,025 NOTES 1. The final dividend of 11.25p per ordinary share will be paid on 7 December 2007 to shareholders on the register as at 9 November 2007. The full report and accounts will be posted to shareholders on 29 October 2007. 2. The financial information on pages 15 to 20 does not represent the statutory accounts of the Group. Statutory accounts for the year ended 30 June 2006 have been delivered to the Registrar of Companies, carrying an unqualified audit report and no statement under section 237 (2) or (3) of the Companies Act 1985. 3. Statutory accounts for the year ended 30 June 2007 have not yet been delivered to the Registrar of Companies. They will carry an unqualified audit report and no statement under section 237 (2) or (3) of the Companies Act 1985. 4. Calculation of earnings per ordinary share 2007 2006 £'000 £'000 Basic earnings 15,651 11,834 Goodwill amortisation charge 228 228 Underlying earnings 15,879 12,062 Weighted average number of ordinary shares in issue 50,897,640 50,764,031 Weighted average number of ordinary shares in issue 51,273,344 51,008,831 (diluted for the effect of outstanding share options) Basic earnings per ordinary share 30.7p 23.3p Underlying earnings per ordinary share 31.2p 23.8p Diluted earnings per ordinary share 30.5p 23.2p This information is provided by RNS The company news service from the London Stock Exchange

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