Final Results

Smith (DS) PLC
28 June 2007








                                28 June 2007


                   DS SMITH PLC - 2006/07 PRELIMINARY RESULTS


DS Smith Plc, the international packaging manufacturer and office products
wholesaler, announces its results for the year ended 30 April 2007.



Financial Summary
                                                                                 2006/07            2005/06
Revenue                                                                        £1,766.1m          £1,652.7m
Adjusted profit before tax(1)                                                     £74.6m             £53.4m
Profit before tax                                                                 £78.5m             £11.0m
Adjusted earnings per share(1)                                                     13.1p              10.0p
Earnings per share                                                                 15.6p               1.1p
Free cash inflow before dividends and net acquisitions(2)                         £84.0m             £63.2m
Gearing                                                                            32.0%              43.9%
Total dividend per share                                                            8.6p               8.4p

(1) before net exceptional income of £3.9m (2005/06: exceptional charge £42.4m)

(2) including the net cash consideration of £29.6m for the sale of the Taplow
site



Highlights



•       Good organic growth achieved across our businesses

•       Results benefited from our previous restructuring actions

•       Spicers UK turnaround programme now underway

•       Continuing price increases in Paper and Corrugated Packaging to recover
        the higher input costs

•       Strong cash flow boosted by the sale of the Taplow site



Commenting on the results, Chairman, Peter Johnson said:



'In 2006/07, the Group benefited from both a better pricing environment in the
paper and corrugated packaging market and the actions taken to improve the
underlying business base. These actions have enhanced the Group's business mix,
increased operational efficiency and lowered operating costs. There was an
improving trend in the Group's results through the second half of the financial
year and profit for the full year was well ahead of the 2005/06 result. Given
these positive developments and the Group's potential to build on its
strengthened position, the Board is proposing an increased final dividend.'





Tony Thorne, Group Chief Executive said:



'Our priorities are to continue to drive for recovery of the high input costs
within our Packaging businesses and to raise profits at Spicers, particularly in
the UK. Entering 2007/08, the business is performing well and I am confident
that the Group will make good progress this year.'




Enquiries
DS Smith Plc                                                020 7932 5000
Tony Thorne, Group Chief Executive
Gavin Morris, Group Finance Director
Peter Aubusson, Group Communications Manager

Financial Dynamics                                          020 7269 7121
Richard Mountain/Susanne Yule



A briefing for analysts and investors will take place today at 9.30am BST at
Financial Dynamics, Holborn Gate, 28 Southampton Buildings, London WC2A 1PB.
This briefing may be heard live by dialing in on: [phone]. The
presentation slides used at this briefing will be posted on the Group's website
(www.dssmith.uk.com) at 9.30am and an audio recording of the briefing will be
available on the website from approximately 1.00pm BST today.





CHIEF EXECUTIVE'S REVIEW



The Group achieved a marked improvement in its profits in 2006/07. Although the
results throughout the financial year were held back by high input costs in
Packaging and lower profits in our UK Office Products Wholesaling business, we
benefited from actions taken to strengthen the Group and from an easing of the
recent harsh trading environment in Paper and Corrugated Packaging. Strong
European packaging demand combined with a tightened supply position for
corrugated case material (CCM) created a firmer pricing environment in both CCM
and corrugated boxes. In this changed situation, our drive to raise selling
prices so as to recover the previous substantial increases in our input costs of
energy and waste paper became increasingly successful. Additionally, our good
market positions allowed us to grow our sales volumes strongly in many sectors
of our business.



The positive trend in the Group's performance was reflected in the results for
the two halves of the financial year. While in the first half of 2006/07
adjusted operating profit was 8% lower than in the same period of the previous
year, in the second half of the year it was 74% higher than in the previous
second half; for 2006/07 as a whole it was 29% up on 2005/06 at £77.7 million.





UK Paper and Corrugated Packaging

The most significant segmental profit improvement was achieved in UK Paper and
Corrugated Packaging, where adjusted operating profit for the full year
increased by £16.0 million to £36.5 million. This advance was the result of a
combination of the extensive actions we have taken to raise efficiency, as well
as the improved pricing in both paper and corrugated packaging and strong growth
in corrugated packaging.



The programme to improve the cost competitiveness of our business and to enhance
the product mix was continued during 2006/07. In our UK paper business, we
closed Taplow Mill, which was loss-making and was not likely to be competitive
over the longer-term, and we sold the Taplow site for a net cash consideration
of £29.6 million. We continued the development of sales of plasterboard liner,
supported by an extensive capital expenditure programme to upgrade existing
machines. Our Severnside Recycling business strengthened its capability to
supply the waste paper raw material for our own mills and to generate other
revenue from its waste collection infrastructure and expertise. In our UK
corrugated packaging business, we are seeing the benefit of our actions to
establish a more competitive conventional box plant network and a strong group
of speciality corrugated businesses. The significant attention we have given to
supporting our customers in the trend to retail-ready packaging and promotional
packaging has contributed to our growth in corrugated box sales in these sectors
of the market.



The considerable CCM and corrugated products price increases achieved during
2006/07 enabled us to recover a substantial proportion of the additional
approximately £19 million of input cost increases incurred during the year and
the earlier margin erosion we experienced during the previous financial year.

The programme to raise returns in the UK Paper and Corrugated Packaging segment
will remain a focus for attention in the coming year.





Continental European Corrugated Packaging

Revenue advanced strongly in Continental European Corrugated Packaging. However,
operating profit in this segment, which is a substantial net buyer of paper, was
lower at £18.2 million (2005/06: £20.1 million) as a result of the higher costs
of CCM which it was not able fully to recover through increased prices during
the financial year. We gained market share in all our major markets and grew
sales particularly strongly in Italy, Poland and Turkey. Our corrugated box
businesses continued to benefit from concentrating on higher added-value
products, while our speciality paper mill in France had another good year,
exploiting its increased capacity as a result of recent investment.



Our Ukrainian associate business continued to make good profits and we are
supporting its investment programme which is designed to meet the growth in
market demand and to broaden its product range.



Box price increases were slower to take effect on the continent but have started
to come through strongly since the autumn of 2006. These increases have not been
sufficient, however, to recover the previous increases in our input costs and
the pressure on margins is being compounded by further rises in CCM and energy
costs in 2007/08. In the current financial year we will continue our strong
efforts to achieve the necessary cost recovery.





Plastic Packaging

Plastic Packaging achieved a healthy advance in adjusted operating profit to
£10.2 million (2005/06: £7.2 million). A further increase in energy, polymer and
film costs of around £5 million during the financial year was almost entirely
recovered through higher selling prices and a better sales mix. The result also
benefited from a 4.9% underlying advance in revenue, excluding the plastic
coating and laminating business which was sold in December 2005.



The Group has developed good market positions in its two principal sectors of
returnable transit packaging (RTP) and liquid packaging and dispensing. In RTP,
beverage crate sales were particularly strong in the early months of the
financial year but then slowed as a number of large contracts came to an end.
The extruded products businesses benefited from our previous actions to
strengthen the sales function and improve the sales mix. We have developed
several encouraging new product opportunities and are growing sales in eastern
Europe in partnership with our Corrugated Packaging operations in that region.



The liquid packaging and dispensing sector benefited from a higher-margin sales
mix, sales growth as a result of its strengthened product range and improved
operating efficiency. We are consulting with our employees about the proposed
restructuring of our European liquid packaging and dispensing operations.



Our Plastic Packaging segment is expected to continue to show steady progress.





Office Products Wholesaling

Adjusted operating profit was marginally higher at £12.8 million (2005/06: £12.6
million). The profitability of the UK business declined, in line with
expectations, but this was more than offset by the growth in profits from the
continental European businesses.



Revenue in Spicers UK, which represents 50% of Spicers' total revenue, grew but
the impact of strong competition on pricing and higher operating costs resulted
in a significant drop in profits. Our priority for 2006/07 was to strengthen the
UK management team and make good progress on implementing a comprehensive
programme to rebuild Spicers UK's profits over a three-year period. The new
management team has taken decisive action and there is good momentum behind a
range of improvement initiatives, principally aimed at enhancing the sales mix,
raising service levels and lowering costs. The UK distribution network has been
streamlined further through the closure in early June 2007 of the Park Royal
distribution depot in London. We are seeing the initial evidence of improved
performance arising from this ongoing turnaround programme and further
considerable benefits are expected over the next two years.



On the continent, the well-established French and Benelux businesses maintained
their strong performance and further confirmed the considerable potential for
Spicers' business model across Europe. The businesses in Germany, Spain and
Italy, which are each at a different stage in their development, all made good
progress. The Spanish business opened its new distribution centre near to Madrid
in October 2006 which gives it better national coverage.



The objectives within Spicers are to rebuild profitability in Spicers UK and
continue the development of our existing continental European network.





Our People

Our employees have made a very significant contribution to the recent
improvement in the Group's results. I am grateful for their considerable skill
and enthusiasm as we have looked to drive up our results. I thank them for their
hard work, commitment and support.





Strategy

In recent years, we have significantly changed the balance of the Group's
business. We have developed our Paper and Corrugated Packaging and Plastic
Packaging businesses in higher added-value and faster-growing product and market
sectors and grown the Office Products Wholesaling business in continental
Europe. At the same time, we have sold several peripheral activities and closed
parts of our Paper business that were not likely to be viable in the
longer-term. These moves have strengthened DS Smith and provided a good base
from which we can develop the Group further.



Adjusted return on average capital employed improved to 8.7% in 2006/07 (2005/
06: 6.5%) but this remains below our return target, which is to exceed the
Group's weighted average pre-tax cost of capital of circa 10% over the business
cycle. We are determined to achieve our targeted returns. This will be done by
continuing to focus on raising operational performance, exiting operations that
will not deliver adequate returns and concentrating capital in those parts of
the business which offer the best opportunities for profit growth. Given our
range of businesses and our strong market positions, we are confident that there
will be many opportunities for organic development of the Group. We also expect
that there will be further restructuring in the European paper and corrugated
packaging industry and that this may present opportunities for further
development through acquisitions.



In UK Paper and Corrugated Packaging, our objectives are to improve further the
returns from our substantial UK market positions and to sustain these better
returns over the business cycle. The priorities for achieving this are: a
continued drive to recover the current high input costs; further cost reduction;
and targeting growth sectors of the market. Investment will be concentrated on:
expanding Severnside Recycling; increasing the efficiency and enhancing the
product mix of our paper and conventional corrugated box businesses; and
developing a selected number of our specialist corrugated packaging businesses.



Our goal in Continental European Corrugated Packaging is to sustain and build on
our existing solid returns and good growth rates. We will continue our targeted
approach, concentrating on selected markets and higher added-value product
segments. In the short-term a priority is to recover the recent and prospective
rises in input costs. Investment will be concentrated on maintaining the
competitiveness of our existing operations and their expansion, through organic
development and bolt-on acquisitions.



In Plastic Packaging, our aim is to grow the profits of our two principal
businesses. We have an established international position in liquid packaging
and dispensing; our priorities in this business are to increase our
competitiveness through structural cost reduction and to expand sales through
new product development and penetration into new markets. In returnable transit
packaging, we will continue to focus on the European market but use our enhanced
development capability to grow in new markets, particularly in central and
eastern Europe. We will continue to make bolt-on acquisitions where these
support either a product range or market extension.



Our goal in Office Products Wholesaling is to establish the Spicers business
model profitably across the major markets of western Europe. An immediate
priority is to restore profits in the important UK business through improving
the sales mix, raising service levels and lowering costs. On the continent we
will maintain the competitiveness of our major established positions in France
and the Benelux region and continue to grow the returns from our developing
businesses in Germany, Spain and Italy.





Outlook

Our priorities are to continue to drive for recovery of the high input costs
within our Packaging businesses and to raise profits at Spicers, particularly in
the UK. Entering 2007/08, the business is performing well and I am confident
that the Group will make good progress this year.





FINANCIAL REVIEW



Trading Results

Revenue for the financial year ended 30 April 2007 increased by 6.9% over the
prior year; it was 5.7% higher in the first half of the year and 8.0% higher in
the second half. Excluding the effects of the acquisition of Timmermans within
Office Products Wholesaling and the closures of the Sudbrook and Taplow mills
within UK Paper and Corrugated (and the previous disposals of John Dickinson and
the BSK plastic coating and laminating business), revenue was up 9.9%. If, in
addition, the effect of movements in foreign exchange rates is excluded, revenue
was up 10.8% on 2005/06 (up 8.7% in the first half of the year and up 12.9% in
the second half).



Adjusted Group operating profit (excluding exceptional items) in 2006/07 was
£77.7million (2005/06: £60.4 million). The increase in adjusted Group operating
profit resulted from rises in UK Paper and Corrugated Packaging of £16.0
million, in Plastic Packaging of £3.0 million and £0.2 million in Office
Products Wholesaling, while Continental European Corrugated Packaging fell £1.9
million. Group adjusted operating profit in the first half of the year was
£30.4million (2005/06 H1: £33.2 million) and in the second half was £47.3
million (2005/06 H2: £ 27.2 million). Adjusted full year operating profit from
UK operations increased by £10.2million to £28.6million, principally due to
higher profits in UK Paper and Corrugated Packaging, offset by a slump in the
profits in the UK business within Office Products Wholesaling. Adjusted
operating profits from non-UK operations were up £7.1 million, reflecting the
stronger continental European performance of Office Products Wholesaling,
including the acquired business in the Benelux region, and a different
geographical mix of profits within Plastic Packaging. The Group's adjusted
return on sales was 4.4% (2005/06: 3.7%).



The Group recorded net exceptional income before tax of £3.9 million during the
year (2005/06: net exceptional charges of £42.4 million). This net exceptional
income arose from a profit of £20.5 million on the sale of the Taplow paper mill
site and a negative goodwill credit related to an increase in our ownership of
our associate, Rubezhansk, of £2.0 million, offset by costs on the closure of
loss-making paper capacity, and related restructuring, in UK Paper and
Corrugated Packaging (£13.8million), the proposed restructuring of our European
liquid packaging and dispensing operations within Plastic Packaging
(£1.9million) and the restructuring of the UK operations of Office Products
Wholesaling (£2.9 million). Operating profit after exceptional items was £79.6
million (2005/06: £18.0 million).



The Group's adjusted return on capital employed (which is defined as adjusted
operating profit divided by the average capital employed) increased from 6.5% in
2005/06 to 8.7% in 2006/07.





Interest, Tax and Earnings per Share

Net interest expense increased from £12.3 million in 2005/06 to £15.0 million in
2006/07, mainly reflecting higher euro interest rates on slightly lower average
net debt. Employment benefit net finance income was £8.0 million (2005/06: £1.2
million), reflecting the lower opening deficit on the defined benefit schemes.



The Group included £3.9 million as the Group's adjusted share of associated
undertakings' after-tax profits, down from £4.1 million in 2005/06. Within this
amount, £3.6 million (2005/06: £3.3 million) related to the Group's share of the
after-tax operating profit of Rubezhansk, the Group's associate paper and
packaging company in Ukraine (in which the Group's ownership increased from
38.8% to 49.6% towards the end of 2006/07); the decline in the associates'
profit is due to the Group's lower share of the profits from its Japanese
packaging associate, following the reduction in its stake from 14.8% to 6.3%
during 2006/07.



Adjusted profit before tax was £74.6 million (2005/06: £53.4 million). Profit
before tax after exceptional items was £78.5 million (2005/06: £11.0 million).



The Group's effective tax rate, excluding exceptional items and associates, at
32%, was higher than last year's rate of 27%, the 2005/06 rate benefiting from
prior year items following the resolution of historical tax uncertainties.
Excluding the effect of any prior year items, the effective tax rate is expected
to be slightly higher than the UK statutory rate in the coming year, largely
because of higher overseas tax rates.



Adjusted basic earnings per share were 13.1p (2005/06: 10.0p). Basic earnings
per share were 15.6p (2005/06: 1.1p).





Dividend

The proposed final dividend is increased to 6.0p (2005/06: 5.8p). The total
dividend for the year is 8.6p (2005/06: 8.4p). Dividend cover before exceptional
items was 1.5 times in 2006/07 (2005/06: 1.2 times). Dividend cover after
exceptional items was 1.8 times (2005/06: 0.1 times).





Cash Flow

Cash generated from operations was £128.0 million (2005/06: £138.2 million).
This reflects the higher adjusted operating profit, offset by the exceptional
cash restructuring costs and a reduced inflow from working capital. The cash
outflow in respect of exceptional restructuring costs of £7.2 million (including
cash outflows related to exceptional charges made in 2005/06), compared with a
cash outflow from restructuring costs of £4.6 million in 2005/06. This was more
than offset by the £29.6 million of net exceptional cash realised on the sale of
the Taplow site, included within sales of assets. There was a strong focus on
working capital management which resulted in a cash inflow of £8.5 million. In
respect of pension payments, the agreed annual contributions into the UK Group
Pension scheme were £14.0 million in 2006/07 (2005/06: £14.0 million). Capital
expenditure payments were £55.8 million, the most significant investment being
within St Regis to support growth in plasterboard liner production in the UK,
down from £62.7m in 2005/06, which included the cost of our new corrugated plant
in Poland and the first phase of the St Regis plasterboard liner investment. The
proceeds from the sales of assets include £29.6m (after disposal costs) from the
sale of the Taplow mill site. The interest paid increased in line with the
income statement charge.



Tax payments were £15.1 million (2006/07: £13.5 million) as the effect of the
higher adjusted trading profit described above was partially offset by the tax
deductions from the exceptional restructuring charges (the exceptional gain
being relieved by previously unrecognised tax losses).



Free cash flow, before acquisitions, disposals and dividends (but including the
proceeds from the disposal of the Taplow site), was £84.0 million (2005/06:
£63.2 million). Cash dividend cover, defined as free cash flow divided by
dividends paid/declared for the year, was 2.5 times, up from 1.9 times in 2005/
06.



The net cash inflow on acquisitions and disposals was £0.2 million (2005/06:
£0.5 million inflow).





Financial Position

Shareholders' funds totalled £569.4 million at 30 April 2007, up from £532.1
million at 30 April 2006. Net assets per share were 144.9p (2005/06: 138.5p).
The profit attributable to the shareholders of DS Smith Plc was £60.6 million
and dividends of £32.7 million were paid to reserves during the year. In
addition, after-tax actuarial gains of £11.9 million on the Group's defined
benefit pension schemes were credited to reserves through the statement of
recognised income and expense, as explained further below. Other items
recognised directly in equity, relating to the issue of new share capital,
foreign currency differences, hedge accounting, and share-based payment expense
(all with associated tax), totalled £2.5 million.



The Group's closing net debt was £181.2 million, £56.6 million lower than at the
start of the year, reflecting the net cash inflow during the year of £55.2
million and non-cash movements, principally exchange differences and related
fair-value movements, of £1.4 million.



Gearing was 32.0 % (2005/06: 43.9%); the decrease reflected the improvement in
borrowings from the net cash inflow for the year and the increase in
shareholders' funds from the profit for the year and the reduction in the net
pension deficit. Adjusted interest cover was 5.2 times, compared with 4.9 times
last year, the higher cover reflecting the higher adjusted operating profit
partially offset by the increased interest charge. The ratio of net debt to
EBITDA (before exceptional items) was 1.3 times (2005/06: 1.9 times).





Energy Costs

The high level of energy costs continued to be a significant factor for the
Group in 2006/07. The Group's total costs for gas, electricity and diesel fuel
decreased from circa £95 million in 2005/06 to circa £88 million in 2006/07;
after adjusting for the effects of the closures of two paper mills, this
represents an underlying increase of circa £6 million. Although market energy
prices in the UK eased to some extent during the year, the benefits of this were
more than offset by the expiry in October 2005 of the Group's previous
favourable fixed-price UK electricity contract and the effects of lagged price
increases resulting from the supply contracts for some of our operations.



Approximately 40% of the Group's energy costs, principally related to our
largest energy-consuming facilities, are incurred under supply contracts in
which our energy costs tend to lag the trends in market prices. The remainder of
our energy costs relate to fuel which is purchased on the open market, for which
we use price-hedging techniques, as appropriate, to limit pricing volatility.





Pensions

The Group operates one defined benefit pension scheme in the UK and has some
small, overseas arrangements. The aggregate gross assets of the schemes at 30
April 2007 were £737.9 million and the gross liabilities at 30 April 2007,
calculated under IAS 19, were £756.5 million, resulting in the recognition of a
gross balance sheet deficit of £18.6 million (30 April 2006: £50.3 million), a
net deficit of £13.0 million (30 April 2006: £35.3 million) after the
establishment of a deferred tax asset of £5.6 million (30 April 2006: £15.0
million).



In order to control the future costs and financial obligations of these schemes,
the Group's UK defined benefit pension scheme is closed to new members. The
contributions collected from members have been increased during 2006/07. The
lower current service cost in 2006/07, £9.4 million compared with £11.1 million
in 2005/06, reflects these higher member contributions and the reduction in the
number of active scheme members following the closure or disposal of facilities.
The Group's agreed annual cash contributions to the main UK scheme were £14.0
million (2005/06: £14.0 million). The next triennial valuation of the scheme is
to be carried out as at 30 April 2007.



The balance sheet deficit (before a related deferred tax asset) decreased from
£50.3 million at 30 April 2006 to £18.6 million at 30 April 2007. The decrease
of £31.7 million included net actuarial gains of £17.0 million, principally
because the scheme's liabilities decreased as a result of the increase in the
discount rate used to value the liabilities, from 5.1% at 30 April 2006 to 5.4%
at 30 April 2007. No changes were made during the year to the assumptions made
in respect of the longevity of scheme members.





OPERATING REVIEW



Paper and Corrugated Packaging Market Overview



In the calendar year 2006, the European market by weight for corrugated
packaging grew by 3.1% (2005: 0.9%)1. In western Europe the market grew by 2.5%
(2005: 0.3%) while growth in eastern and central Europe continued to be much
stronger at 7.7% (2005: 5.8%). DS Smith's principal markets are the UK, where
demand by weight was flat (2005: a fall of 1.9%), France and Italy, where it
grew moderately by 0.9% and 2.2%, respectively (2005: 0.3% and nil), and Poland
and Turkey, where it grew more strongly, by 4.7% and 14.3%, respectively (2005:
9.3% and 7.6%). The stronger demand in the total European market in 2006 was
significantly influenced by Germany, the largest national market, where demand
grew by 4.8% (2005: 3.1%). Indicators of demand in the early months of 2007
suggest that growth is at similar levels to those of 2006.



A major feature of the corrugated packaging market during the last two years has
been the increasing demand for retail-ready packaging (RRP) which can be readily
converted from its initial role as a protective transit pack into its second
role as a box or tray that can be placed on display in the retail store. The
increased proportion of these higher added-value boxes, often requiring
multi-passes within the production process, has absorbed some of the excess
capacity across the corrugated industry.



The combination of stronger demand and the closure of over 1.5 million tonnes of
older corrugated case material (CCM) capacity in Europe during 2005 and 2006,
resulted in a significant change in the European industry's supply and demand
balance during 2006. Since November 2005 selling prices of CCM have been
increased on several occasions in order to recover the severe margin erosion
that had occurred as a result of industry over-capacity and the sharp rise in
energy costs. In June 2007 CCM prices are on average circa 45%2 higher than in
the autumn of 2005. In response to this, box producers have increased prices
several times to recover the higher CCM costs. Box price increases were slower
to take effect in continental Europe as the impact of energy cost increases on
the supply chain occurred later and with less severity than in the UK. However,
the upward pressure on CCM and box prices from energy cost increases has
continued through into the spring of 2007 in many continental countries. To
date, anecdotal evidence suggests that the rises in box prices achieved across
the European industry have not yet been sufficient to recover all of the paper
and energy cost increases.



1  Source: European Federation of Corrugated Board Manufacturers

2  Source: RISI industry price data for the UK and France





The pressure on CCM producers to increase selling prices has been intensified by
the relatively high cost of waste paper, the principal raw material for recycled
CCM. Waste paper is a globally traded commodity; the continuing high level of
demand for it from Asia, where there has recently been substantial investment in
recycled paper manufacturing, is contributing to European prices remaining firm
and being subject to short-term, demand-driven spikes. Waste paper prices were
relatively stable during 2006 but rose by approximately 20% in March 2007. In
the UK, the net cost of our raw material is also affected by the price of
Packaging Recovery Notes (PRNs), which are issued as evidence that packaging has
been reprocessed, in compliance with the UK Packaging Waste Regulations. The
price of paper PRNs fell steadily through 2006 to a current very low level,
raising the net cost of our waste paper.



Looking ahead, no significant CCM capacity additions are expected in western
Europe during 2007 or 2008 but new capacity is expected to come on stream from
2009. If the CCM market continues to grow by over 2% per annum, demand for CCM
will have increased by at least 1.5 million tonnes between 2006 and 2009.





UK Paper and Corrugated Packaging


                                                                             2006/07        2005/06
Revenue - £m                                                                   687.1          649.6
Adjusted operating profit - £m*                                                 36.5           20.5
Adjusted EBITDA - £m*                                                           68.0           55.1
Key performance indicators:
Revenue growth - %                                                              5.8%           2.9%
Adjusted return on sales - %*                                                   5.3%           3.2%
Adjusted EBITDA margin - %*                                                     9.9%           8.5%
Adjusted return on average capital employed - %*                                7.6%           4.0%

* before an exceptional credit of £6.7 million (2005/06: exceptional charge
£28.9 million)



2006/07 Performance

Results in UK Paper and Corrugated Packaging benefited from a combination of the
improved pricing environment in the European paper and corrugated packaging
market and the actions we have taken over the last three years to strengthen our
businesses in this segment. The strong advance in adjusted operating profit was
achieved despite a circa £19 million increase in the segment's input costs for
energy and net waste paper.



Revenue advanced by 5.8% to £687.1 million as a result of higher sales in
Corrugated Packaging, raised selling prices for both Paper and Corrugated
Packaging and increased external sales of waste paper and services by Severnside
Recycling. On a like-for-like basis, excluding the two paper mills that were
closed during calendar year 2006, revenue increased by 13.0%. Adjusted operating
profit was markedly higher at £36.5 million (2005/06: £20.5 million).



Against a background of stronger European demand for CCM and corrugated boxes,
and tighter European supply of CCM, we significantly raised our prices of CCM
and boxes over the course of the financial year in order to recover the higher
input costs. These increases, in conjunction with those achieved in the second
half of the prior year, are enabling us to recover a substantial proportion of
the margin erosion experienced as a result of the higher input costs and the
fall in prices that took place over the previous two years. The box price
increase programme is being maintained so as to recover more fully the most
recent increases in CCM costs.



DS Smith Packaging, our UK Corrugated Packaging business, achieved strong sales
volume, partly as a result of its focus on meeting the increased demand for
retail-ready packaging. Throughout the financial year, margins were under
pressure from the rises in CCM costs. Our network of conventional plants
benefited from better productivity while the speciality sector, which
concentrates on higher added-value products, performed well despite its higher
input costs. Sales of heavy-duty packaging, which is predominantly used by the
industrial manufacturing sector, held up well given the continued pressure on
its customer base. Our sheet feeding operations, which supply corrugated sheet,
performed well, particularly as a result of strong sales of lighter-weight and
speciality board. Our sheet plant business, which converts corrugated board into
boxes, was affected by us having to close a plant after a major customer
transferred its production to eastern Europe.



At our UK paper business, St Regis, revenue was flat as the benefits of the
higher selling prices for paper and the increased revenue at Severnside
Recycling were offset by lower paper sales volume as a result of the closures of
Sudbrook Mill in March 2006 and Taplow Mill in October 2006. Margins improved
significantly as a result of the plant closures and the actions taken to
increase selling prices and enrich the business mix.



The capital expenditure programme to upgrade existing machines at the Kemsley
and Wansbrough mills, in order to enhance the quality of plasterboard liner and
other products produced at these mills, is well-advanced and is expected to be
completed by the end of 2007. Kemsley Mill, which now accounts for approximately
65% of St Regis' ongoing paper production, made good progress despite some
planned loss of production during the upgrading of one of its three machines.
The mill continues to benefit from the previous investment in its combined heat
and power plant and waste-to-energy plant but its energy costs rose as a result
of the lagged pricing arrangements in the energy supply contracts for these
plants. Hollins Mill benefited from healthy demand for its principal product,
white top testliner, and the action taken to raise its product quality.
Increased output, as a result of our recent investment, contributed to an
improved result at Wansbrough Mill. The previously announced closure of PM1, the
smaller of the two paper machines, at Wansbrough Mill, which was planned to take
place at the end of June 2006, was re-considered following the closure in
mid-June 2006 of another UK paper producer. In view of the consequent
improvement in the market environment for envelope and imitation kraft paper
grades, products PM1 is well suited to producing, it was decided to continue
operating PM1 to satisfy the increased demand for these speciality grades.
Higher Kings Mill, which focuses on higher margin, speciality, non-packaging
papers, grew its sales volume, raised its prices and improved its profitability.



Taplow Mill, which made losses in 2005/06, was closed at the end of October 2006
because it was not likely to be an economic proposition over the longer-term,
even under a more benign market and energy environment. The Taplow site was sold
to a commercial property developer for a net cash consideration of £29.6
million, resulting in a net gain, after the costs of closure of the mill's
operations and related restructuring, of £6.7 million.



Our UK waste collection business, Severnside Recycling, which we enlarged
through acquisition in 2004, sourced a greater volume of material and made good
progress. In addition to meeting the requirements of St Regis' mills for waste
paper, Severnside exported an increased quantity of waste paper for recycling in
continental Europe and Asia. It also grew its added-value services, including
its facilities management business which manages customers' entire waste
recycling and disposal needs.



In 2007/08, we will look to build on the progress made in 2006/07. This will be
through continuing our efforts to recover the higher input costs through price
increases, growing sales in the higher value-added sectors and raising the
efficiency of our operations.





Continental European Corrugated Packaging


                                                                             2006/07         2005/06
Revenue - £m                                                                   308.0           276.6
Operating profit - £m                                                           18.2            20.1
EBITDA - £m                                                                     31.5            33.6
Key performance indicators:
Revenue growth - %                                                             11.4%            4.1%
Return on sales - %                                                             5.9%            7.3%
EBITDA margin - %                                                              10.2%           12.1%
Return on average capital employed - %                                         11.1%           12.4%



2006/07 Performance

DS Smith Kaysersberg grew its revenue by 11.4% to £308.0 million through strong
advances in sales volume and higher selling prices. This segment, which is a
substantial net buyer of paper, was affected by higher input costs of CCM and
energy which it was not able fully to recover through increased box prices
during the financial year. Operating profit was lower at £18.2 million (2005/06:
£20.1 million).



We implemented a box price increase programme across our continental European
markets with the aim of recovering the higher input costs. The considerable
increase in prices we have achieved has recovered part of the additional costs
of energy and CCM which we have incurred and the price increase programme is
continuing.



Our French paper business, which focuses on providing a high level of customer
service in speciality markets, had another good year despite increases in its
energy and waste paper costs. We increased production and sales, assisted by the
previous investment which enlarged the capacity at the main Kaysersberg Mill.



Strong sales volumes and higher selling prices enabled our corrugated packaging
businesses partially to offset the effects of higher bought-in paper and energy
costs. The French business increased its market share and raised productivity,
while in Italy we also gained share in this highly competitive market. Our
Polish business, which we are developing through substantial investment,
maintained its high growth-rate despite some slow-down in the market as a whole.
It is benefiting from its highly-competitive Kutno factory, opened in autumn
2005, which supplies the rapidly expanding FMCG sector in Poland. Our small
converting business in the Czech Republic, which principally supplies heavy-duty
packaging to the automotive industry, performed well. We have recently created a
similar operation in Slovakia and have opened a marketing unit in Lithuania. Our
business in Turkey continues to develop its sales, principally in speciality
products and industrial market sectors although profits are being affected by
the slow progress in passing on the higher CCM costs. We are investing in this
business to enable it to meet the considerable potential demand in Turkey. We
increased our stake in our Ukrainian associate business, Rubezhansk, which is
reported under associates, taking our holding to 49.6%. This business continued
to perform well and is investing further to broaden its product range and meet
the burgeoning demand in its region.



Our priorities in this sector in 2007/08 are to continue our price increase
programme to recover the higher input costs and to grow further our market share
in higher added-value sectors.





Plastic Packaging


                                                                             2006/07         2005/06
Revenue - £m                                                                   201.8           202.4
Adjusted operating profit - £m*                                                 10.2             7.2
Adjusted EBITDA - £m*                                                           21.9            19.3
Key performance indicators:
Revenue growth - %                                                            (0.3)%            3.3%
Adjusted return on sales - %*                                                   5.1%            3.6%
Adjusted EBITDA margin - %*                                                    10.9%            9.5%
Adjusted return on average capital employed - %*                                8.3%            5.6%

* before exceptional charges of £1.9 million (2005/06: £2.6 million)



Market Overview

Returnable transit packaging (RTP) products are mostly used within the retail,
automotive, electronics and beverage sectors. Demand is heavily influenced by
industry sector activity levels.  As RTP is often a capital purchase for our
customers, being driven by particular projects, and raw materials represent a
high proportion of the cost, annual demand can be of an uneven nature. The
European market for RTP, which is estimated to be approximately €1.5 billion, is
fragmented into many product sub-sectors and has a large number of suppliers. In
western Europe, market growth is estimated to be approximately 2-3% per annum;
the trend towards the use of multi-trip, reusable packaging on cost and
environmental grounds has been slower over the last two years than was
previously the case. The slow-down in demand has been partly as a result of the
higher polymer costs and partly due to the relocation of some major customer
sectors, such as the automotive and electronics industries, to eastern Europe,
where RTP market growth is estimated to be approximately 15% per annum.



The global market for liquid packaging and dispensing products is estimated to
be approximately £400 million. The principal uses of bag-in-box packaging are
for wine, agricultural produce (such as fruit juice and dairy products) and food
service applications such as carbonated soft-drink concentrate (for the hotel
and restaurant industries). Volume growth in the North American and European
markets is estimated to be approximately 5% per annum while the market in
Asia-Pacific is at an early stage of development and growing rapidly. The market
for dispensing products (principally taps), other than for bag-in-box systems,
is fragmented across a wide range of applications. DS Smith is a major supplier
to the wine and liquid detergent sector; the latter has grown strongly in recent
years in the USA and is now starting to develop in Europe.



2006/07 Performance

Revenue at DS Smith Plastics was broadly flat but on an underlying basis,
excluding the BSK plastic coating and laminating business which was sold in
December 2005, it increased by 4.9% to £201.8 million as a result of our actions
to strengthen our sales and product development capability and to raise prices.
Adjusted operating profit advanced by 41.7% to £10.2 million with good progress
in both RTP and liquid packaging and dispensing. This result was achieved
despite energy, polymer and film costs being approximately £5 million higher
than in the previous year; almost all of this was recovered during the year
through higher prices and a better sales mix.



Revenue in RTP, which accounted for 46% of the segment revenue, advanced by
5.2%. Beverage crate sales were particularly strong in the first half of the
financial year due to the fulfilment of a number of large contracts in that
period. The extruded product businesses grew their sales well and achieved a
richer sales mix, benefiting from our actions to strengthen and to co-ordinate
better the sales and product development functions on a pan-European basis. We
are expanding our capability to supply RTP in eastern Europe from an existing
plant in the Czech Republic and a new one in Slovakia, in response to increased
sourcing of RTP products in that region by some customers, particularly in the
automotive sector.



In liquid packaging and dispensing, which accounted for 45% of the segment
revenue, we increased revenue by 2.7%.  Our US operations grew sales in new
market sectors through innovative product development. In Europe, we benefited
from a higher margin sales mix, sales growth as a result of a strengthened
product range, and improved operating performance following the restructuring
undertaken in 2005/06. In April 2007 we established a small joint venture in
Bulgaria to increase our sales of wine bags into the rapidly growing eastern
European market. We are consulting with our employees about the proposed
restructuring of our European liquid packaging and dispensing operations.



Our small packaging management business was adversely affected during much of
2006/07 by competitive pressure and the contraction of a major customer's
operations; nevertheless, the business remained in profit and is now benefiting
from restructuring action taken in the UK and some new business which has been
subsequently won. Our Israel-based development business, StePac, which
specialises in modified atmosphere packaging, achieved record sales and moved
into profit for the first time.



Although present indications are that in 2007/08 this segment is likely to face
higher energy costs in its continental operations and further increases in
polymer costs, our objective is to achieve steady progress in the year ahead.





Office Products Wholesaling


                                                                             2006/07         2005/06
Revenue - £m                                                                   569.2           518.7
Adjusted operating profit - £m*                                                 12.8            12.6
Adjusted EBITDA - £m*                                                           19.2            19.2
Key performance indicators:
Revenue growth - %                                                              9.7%            3.8%
Adjusted return on sales - %*                                                   2.2%            2.4%
Adjusted EBITDA margin - %*                                                     3.4%            3.7%
Adjusted return on average capital employed - %*                                9.8%            9.9%

* before exceptional charges of £2.9 million (2005/06: nil)



Market Overview

The office products markets of the UK, France and Germany, in which Spicers
currently has approximately 85% of its sales, are estimated to be worth
approximately €7 billion, €6 billion and €8 billion, respectively, at
manufacturers' selling prices. Recent annual growth in these markets is
estimated to have been low or flat overall, with the traditional stationery
sector being flat or in decline and the electronic office supplies (EOS) sector
showing strong growth3. The volume of products bought by offices continues to
increase, but the value of the market is being held back by price deflation
caused by intense competition between suppliers and the trend for consumers to
buy lower-specification or own-branded products. EOS, which is a growing sector
of the market, accounts for approximately 50% of the total office products
market; it is especially price-competitive on the high-volume EOS products.



The relative shares of the various supply channels to the end-user market differ
by country. However, in the countries in which Spicers operates, the channel
that Spicers principally supplies - that of office products dealers or resellers
- accounts, on average, for approximately 35% of the total office products
market. The share of the market held by dealers has been relatively stable in
recent years. Office products dealers primarily sell to smaller and medium-sized
offices, generally offer a high standard of service to their customers, and
source most of their products either from wholesalers or direct from
manufacturers.



Wholesalers, on average, account for approximately 10% of the total market. The
direct wholesaling competition that Spicers faces varies by country. In the UK
there is one other significant national wholesaler of office products. In most
continental European markets competition from other national wholesalers is
limited, but there are significant numbers of regional and local wholesalers.
The European scale of Spicers' business assists it in offering a broad range of
products at competitive prices relative to those of many of its smaller
wholesaling competitors. Spicers' commitment to supplying only the trade, and
not, as some of its competitors do, supplying end-users, gives it a competitive
advantage. Spicers competes indirectly with a number of other distribution
channels. The most significant of these, contract stationers, accounts for
10-15% of the total market; they generally sell to larger offices and offer a
smaller range of products than is stocked by Spicers. The other principal
competitor channels to market are: mail order, office superstores, other
retailers and manufacturers selling direct to offices.



3  Source: DS Smith estimates based on national data



2006/07 Performance

Spicers' revenue advanced by 9.7% to £569.2 million, both as a result of a full
year's contribution from Timmermans, the Benelux business acquired in October
2005, and strong growth in Spain and Italy. Significantly higher profit from the
continental European businesses was largely offset by a substantial decline in
profit in the UK but overall there was a slight increase in adjusted operating
profit to £12.8 million (2005/06: £12.6 million).



Although Spicers UK continued to be significantly affected throughout the year
by competitive pressure, its performance towards the end of the second half
reflected some initial benefits from the steps we have taken to date, as part of
our three-year plan to restore UK profits. The business ended the year with an
encouraging sales trend while service levels at the important dealer
distribution centre improved significantly. The substantially strengthened UK
management team is vigorously implementing a programme of actions aimed at
improving the sales mix, raising service levels and lowering costs. The regional
distribution centre (RDC) network has been further consolidated with the closure
in early June 2007 of the Park Royal RDC in London. We expect the benefits of
these actions to be increasingly evident through the 2007/08 financial year.



In 2006/07, Spicers made further advances in developing its business and
profitability in continental Europe. Spicers France continued to gain market
share and grew its profit, particularly as a result of the further expansion of
its own branded dealer groups, Plein Ciel and Calipage. In January 2007, a new
central distribution centre was commissioned at Chateauroux, in central
France, to support sales growth and to improve further customer service. The
Benelux business, Timmermans, continued to perform well; its increased focus on
developing its business in The Netherlands contributed to good sales growth.
Spicers Germany advanced, partly as a result of new marketing initiatives which
enabled it to grow sales with its target dealer customer base. The Spanish
business saw excellent sales growth; it consolidated its profitable position
and, in October 2006, opened its new distribution centre near Madrid; this has
extended our distribution coverage across central and southern Spain. Spicers
Italy, which has been in operation for two and a half years, continued to
broaden its customer base and build its sales rapidly. It recently concluded an
important supply agreement with Italy's leading franchised stationery store
operator.



In 2007/08, we will focus on rebuilding Spicers' profit performance in the UK
and further developing our continental businesses.




Consolidated Income Statement
For the year ended 30 April 2007






                                                 Before Exceptional        After      Before Exceptional        After
                                                              items  exceptional                   items  exceptional
                                            exceptional                    items exceptional                    items
                                                           (note 2)                             (note 2)
                                                  items                                items
                                                   2007        2007         2007        2006        2006         2006
                                       Note          £m          £m           £m          £m          £m           £m


Revenue                                 1       1,766.1           -      1,766.1     1,652.7           -      1,652.7

Operating profit                        1          77.7         1.9         79.6        60.4      (42.4)         18.0

Finance income                                      1.7           -          1.7         2.3           -          2.3
Finance costs                                    (16.7)           -       (16.7)      (14.6)           -       (14.6)
Employment benefit net finance income               8.0           -          8.0         1.2           -          1.2
Net financing costs                               (7.0)           -        (7.0)      (11.1)           -       (11.1)

Profit after financing costs                       70.7         1.9         72.6        49.3      (42.4)          6.9

Share of profit of associates                       3.9         2.0          5.9         4.1           -          4.1
Profit before income tax                           74.6         3.9         78.5        53.4      (42.4)         11.0

Income tax (expense) / credit           3        (22.8)         5.6       (17.2)      (13.4)         7.7        (5.7)

Profit for the financial year                      51.8         9.5         61.3        40.0      (34.7)          5.3

Profit for the financial year
attributable to:
DS Smith Plc equity shareholders                   51.1         9.5         60.6        38.9      (34.7)          4.2
Minority interest                                   0.7           -          0.7         1.1           -          1.1

Basic earnings per share (pence)        4         13.1p                    15.6p       10.0p                     1.1p
Diluted earnings per share (pence)      4         13.0p                    15.4p       10.0p                     1.1p

Dividend per share
- interim, paid (pence)                 5                                   2.6p                                 2.6p
- final, proposed (pence)               5                                   6.0p                                 5.8p









Notes:

(a)           The Group's results shown above are derived from continuing
operations.

(b)           The difference between the reported and historical cost profits
for each of the years reported above is not material.

(c)       The Annual Report and statements for the year ended 30 April 2007 will
be posted to shareholders in July 2007. Statutory accounts for the year ended 30
April 2006 have been delivered to the Registrar of companies.

(d)       Subject to approval of shareholders at the Annual General Meeting to
be held on 5 September 2007, the final dividend of 6.0p will be paid on 18
September 2007 to ordinary shareholders on the register on 17 August 2007.

(e)           The 2006/07 and 2005/06 results in this preliminary statement do
not constitute the statutory accounts of DS Smith Plc within the meaning of
section 240 of the Companies Act 1985.  The 2006/07 results and 2005/06
comparatives have been extracted from the 2006/07 statutory accounts, which have
been prepared under International Financial Reporting Standards as adopted by
the EU (IFRS) and which contained an unqualified audit report with no adverse
statement under Section 237 (2) or (3) of the Companies Act 1985.

(f)            Whilst the financial information included in the preliminary
announcement has been prepared in accordance with IFRS, this announcement does
not itself contain sufficient information to comply with all the disclosure
requirements of IFRS.

(g)           Items are presented as 'exceptional' in the accounts where they
are significant items of financial performance that the directors consider
should be separately disclosed, to assist in the understanding of the trading
and financial results achieved by the Group (see note 2).



Consolidated Statement of Recognised Income and Expense
For the year ended 30 April 2007




                                                                                              2007            2006
                                                                                                £m              £m
Actuarial gains on defined benefit pension schemes                                            17.0            54.4
Movements on deferred tax relating to actuarial gains                                        (5.1)          (16.5)
Currency translation differences, including tax                                              (6.7)             9.7
Changes in the fair value of cash flow hedges, including tax                                 (1.2)             0.2
Net income recognised directly in equity                                                       4.0            47.8
Profit for the financial period                                                               61.3             5.3
Total recognised income and expense attributable to equity shareholders and
minority interest relating to the financial year                                              65.3            53.1

Total recognised income and expense relating to the financial year
attributable to:
DS Smith Plc equity shareholders                                                              64.7            52.0
Minority interest                                                                              0.6             1.1










Consolidated Balance Sheet
As at 30 April 2007


                                                                                             2007             2006
                                                                                               £m               £m
Assets
Non-current assets
Intangible assets                                                                           192.9            195.4
Property, plant and equipment                                                               517.1            536.1
Investments in associates                                                                    30.5             29.2
Other investments                                                                             0.5              0.5
Deferred tax assets                                                                          21.4             24.0
Other receivables                                                                             2.4              2.5
Derivative financial instruments                                                              0.2              1.4
Total non-current assets                                                                    765.0            789.1



Current assets
Inventories                                                                                 160.5            163.3
Other investments                                                                             0.1              0.1
Income tax receivable                                                                         0.9              4.8
Trade and other receivables                                                                 350.2            347.2
Cash and cash equivalents                                                                    92.4             60.4
Derivative financial instruments                                                              0.7              3.7
Total current assets                                                                        604.8            579.5
Total assets                                                                              1,369.8          1,368.6



Liabilities
Non-current liabilities
Interest-bearing loans and borrowings                                                     (230.9)          (264.9)
Post-retirement benefits                                                                   (18.6)           (50.3)
Other payables                                                                              (5.1)            (3.6)
Provisions                                                                                  (8.9)            (2.8)
Deferred tax liabilities                                                                   (81.4)           (76.3)
Derivative financial instruments                                                           (31.7)           (25.0)
Total non-current liabilities                                                             (376.6)          (422.9)



Current liabilities
Bank overdrafts                                                                            (10.8)            (1.5)
Interest-bearing loans and borrowings                                                       (1.6)            (7.7)
Trade and other payables                                                                  (384.8)          (355.3)
Income tax liabilities                                                                     (16.6)           (21.0)
Provisions                                                                                 (10.6)           (16.7)
Derivative financial instruments                                                            (1.7)            (2.0)
Total current liabilities                                                                 (426.1)          (404.2)
Total liabilities                                                                         (802.7)          (827.1)


Net assets                                                                                  567.1            541.5



Equity
Issued capital                                                                               39.3             39.1
Share premium                                                                               262.9            259.4
Reserves                                                                                    267.2            233.6
DS Smith Plc shareholders' equity                                                           569.4            532.1
Minority interest                                                                           (2.3)              9.4
Total equity                                                                                567.1            541.5








Consolidated Statement of Cash Flows
For the year ended 30 April 2007


                                                                                              2007             2006
                                                                             Note               £m               £m
Operating Activities

Cash generated from operations                                                6              128.0            138.2
Interest received                                                                              2.8              0.8
Interest paid                                                                               (16.9)           (12.8)
Tax paid                                                                                    (15.1)           (13.5)
Cash flows from operating activities                                                          98.8            112.7

Investing Activities
Acquisition of subsidiary businesses and joint ventures, net of cash and                     (0.8)           (10.5)
cash equivalents acquired
Disposal of subsidiary businesses, net of cash and cash equivalents                            1.0             11.0
disposed of
Capital expenditure payments                                                                (55.8)           (62.7)
Proceeds from the sale of assets                                                              39.2              9.7
Proceeds from the sale of associates, net of additions of £0.5m (2006:                         1.8              3.5
nil)
Cash flows from investing activities                                                        (14.6)           (49.0)

Financing Activities
Proceeds from issue of share capital                                                           3.7              2.6
Repayment of borrowings                                                                     (28.7)           (17.2)
Repayment of finance lease obligations                                                       (2.5)            (0.9)
Dividends paid                                                                              (32.7)           (32.6)
Cash flows from financing activities                                                        (60.2)           (48.1)

Increase in cash and cash equivalents                                                         24.0             15.6
Net cash and cash equivalents at 1 May 2006                                                   58.9             41.2
Exchange (losses)/gains on cash and cash equivalents                                         (1.3)              2.1
Net cash and cash equivalents at 30 April 2007                                                81.6             58.9





Notes to the Financial Statements



1.                               Segment Reporting



Primary reporting format - business segments
                                            UK Paper  Continental     Plastic       Office     Other3       Total
                                                 And     European   Packaging     Products         £m       Group
Year ended 30 April 2007                  Corrugated   Corrugated          £m  Wholesaling                     £m
                                           Packaging    Packaging                       £m
                                                  £m           £m


External revenue                               687.1        308.0       201.8        569.2          -     1,766.1


Adjusted operating profit(1)                    36.5         18.2        10.2         12.8          -        77.7
Exceptional items                                6.7            -       (1.9)        (2.9)          -         1.9
Segment result                                  43.2         18.2         8.3          9.9          -        79.6

Other segment items:
Adjusted return on sales - %(1)                 5.3%         5.9%        5.1%         2.2%          -        4.4%
Adjusted EBITDA - £m(1)                         68.0         31.5        21.9         19.2          -       140.6
Adjusted EBITDA margin - %(1)                   9.9%        10.2%       10.9%         3.4%          -        8.0%
Year-end capital employed - £m                 444.6        146.4       110.9        115.4          -       817.3
Average capital employed - £m(2)               478.4        164.4       122.2        130.0          -       895.0
Adjusted return on average capital              7.6%        11.1%        8.3%         9.8%          -        8.7%
employed - %(1),(2)

Year ended 30 April 2006

External revenue                               649.6        276.6       202.4        518.7        5.4     1,652.7


Adjusted operating profit(1)                    20.5         20.1         7.2         12.6          -        60.4
Exceptional items                             (28.9)            -       (2.6)            -     (10.9)      (42.4)
Segment result                                 (8.4)         20.1         4.6         12.6     (10.9)        18.0

Other segment items:
Adjusted return on sales - %(1)                 3.2%         7.3%        3.6%         2.4%          -        3.7%
Adjusted EBITDA - £m(1)                         55.1         33.6        19.3         19.2        0.4       127.6
Adjusted EBITDA margin - %(1)                   8.5%        12.1%        9.5%         3.7%       7.4%        7.7%
Year-end capital employed - £m                 471.4        162.0       109.9        122.8          -       866.1
Average capital employed - £m(2)               509.3        162.3       129.3        127.0        2.1       930.0
Adjusted return on average capital              4.0%        12.4%        5.6%         9.9%          -        6.5%
employed - %(1),(2)

Secondary reporting format -
geographical segments
                                                                                                         Turnover
Year ended 30 April                                                                              2007        2006
                                                                                                   £m          £m
UK                                                                                              999.7       957.6
Western Continental Europe                                                                      632.8       570.5
Eastern Continental Europe                                                                       82.5        74.5
Rest of World                                                                                    51.1        50.1
Total                                                                                         1,766.1     1,652.7




1.       Before exceptional items (see note 2)

2.       The return on average capital employed is defined as operating profit
before exceptional items divided by average capital employed; average capital
employed is the average monthly capital employed

3.       Other in 2005/06 represents the activity of the former Office Products
Manufacturing segment, the loss on the disposal of that business and the
impairment of an investment described in note 2 below




2.       Exceptional items



Items are presented as 'exceptional' in the accounts where they are significant
items of financial performance that the Directors consider should be separately
disclosed, to assist in the understanding of the trading and financial results
achieved by the Group.


Exceptional items                                                                          2007              2006
                                                                                             £m                £m
Restructuring costs
     UK Paper and Corrugated Packaging                                                   (13.8)            (28.9)
     Plastic Packaging                                                                    (1.9)                 -
     Office Products Wholesaling                                                          (2.9)                 -
Total restructuring costs                                                                (18.6)            (28.9)
Gain on sale of Taplow Mill                                                                20.5                 -
Loss on disposal of businesses                                                                -             (4.3)
Impairment charge                                                                             -             (9.2)
Total exceptional items recognised in operating profit                                      1.9            (42.4)
Negative goodwill recognised in associate accounting                                        2.0                 -
Total exceptional items                                                                     3.9            (42.4)





The restructuring costs relate to the following.



The UK Paper and Corrugated Packaging restructuring costs in the year to 30
April 2007 of £13.8m related to the closure of paper-making operations at Taplow
Mill and related restructurings. The UK Paper and Corrugated Packaging
restructuring costs in 2005/06 related to the closure of a paper mill (£20.3m),
the planned closure of a paper machine at another mill (£5.0m), and other
restructuring costs (£3.6m).



The Plastic Packaging restructuring costs in the year to 30 April 2007 relate to
the proposed restructuring of our European liquid packaging and dispensing
operations.



The Office Products Wholesaling restructuring costs in the year to 30 April 2007
relate to the closure of a regional distribution centre within the UK operations
and related restructuring.



The gain of £20.5m arising on the sale of the Taplow site, in the UK Paper and
Corrugated Packaging segment, resulted from the sale of the site for net
proceeds of £29.6m.



The negative goodwill credit recognised in associate accounting of £2.0m arose
in respect of an increase in the Group's investment in Rubezhansk.



The loss on disposal of businesses in 2005/06 arose on the disposal of the
Office Products Manufacturing business (loss of £1.7m) and a business in the
Plastic Packaging segment (loss of £2.6m).



The impairment charge in 2005/06 related to an investment in the debt securities
of an independent UK packaging business.






3.       Income tax expense




Income tax expense recognised in the income statement                                         2007             2006
                                                                                                £m               £m
Current tax (expense)/credit
Current year                                                                                (17.2)           (13.5)
Over-provided in prior years                                                                   2.3              1.9
                                                                                            (14.9)           (11.6)
Deferred tax (expense)/credit
Origination and reversal of temporary differences                                              0.9              6.2
Under-provided in prior years                                                                (3.2)            (0.3)
                                                                                             (2.3)              5.9
Total income tax expense in income statement                                                (17.2)            (5.7)



The reconciliation of the actual tax charge to that at the domestic corporation
tax rate is as follows:


                                                                                              2007             2006
                                                                                                £m               £m
Profit before tax                                                                             78.5             11.0
Less: share of profit of associates                                                          (5.9)            (4.1)
Profit before tax and share of profit of associates                                           72.6              6.9

Income tax calculated using the domestic corporation tax rate of 30%                        (21.8)            (2.1)
Effect of tax rates in foreign jurisdictions                                                 (1.2)            (1.5)
Non-deductible expenses                                                                      (0.9)            (5.6)
Recognition of previously unrecognised tax losses                                              6.7              1.9
Adjustment in respect of prior years                                                         (0.9)              1.6
Other                                                                                          0.9                -
Income tax expense                                                                          (17.2)            (5.7)





4.       Earnings per share



Basic earnings per share

The calculation of basic earnings per share at 30 April 2007 is based on the net
profit attributable to ordinary shareholders of £60.6m (2006: £4.2m) and the
weighted average number of ordinary shares outstanding during the year ended 30
April 2007 of 389.5m (2006: 387.2m).  The number of shares excludes the weighted
average number of the Company's own shares held as treasury shares during the
year of 2.2m (2006: 2.5m).


                                                                                              2007             2006
Net profit attributable to ordinary shareholders (£m)                                       £60.6m            £4.2m
Weighted average number of ordinary shares at 30 April (millions)                           389.5m           387.2m
Basic earnings per share (pence per share)                                                   15.6p             1.1p



Diluted earnings per share

The calculation of diluted earnings per share at 30 April 2007 is based on net
profit attributable to ordinary shareholders of £60.6m (2006: £4.2m) and the
weighted average number of ordinary shares outstanding during the year ended 30
April 2007, as adjusted for potentially issuable ordinary shares, of 392.9m
(2006: 388.8m), calculated as follows:


                                                                                              2007             2006
                                                                                                £m               £m
Net profit attributable to ordinary shareholders                                              60.6              4.2

In millions of shares
Weighted average number of ordinary shares at 30 April                                       389.5            387.2
Potentially dilutive shares issuable under share-based payment                                 3.4              1.6
arrangements
Weighted average number of ordinary shares (diluted) at 30 April                             392.9            388.8
Diluted earnings per share (pence per share)                                                 15.4p             1.1p





Adjusted earnings per share

The Directors believe that the presentation of an adjusted earnings per share
amount, being the basic earnings per share adjusted for exceptional items, helps
to explain the underlying performance of the Group.  A reconciliation of basic
to adjusted earnings per share is as follows:


                                                                               2007                          2006
                                                                  £m      Pence per             £m      Pence per
                                                                              share                         share

Basic earnings                                                  60.6          15.6p            4.2           1.1p
(Deduct)/add-back exceptional items after tax                  (9.5)         (2.5)p           34.7           8.9p
Adjusted earnings                                               51.1          13.1p           38.9          10.0p






5.       Dividends



Dividends proposed and paid by the Group are as follows:
                                                                               2007                          2006
                                                           Pence per             £m      Pence per             £m
                                                               share                         share


Interim dividend paid                                           2.6p           10.2           2.6p           10.1
Final dividend proposed                                         6.0p           23.5           5.8p           22.5
                                                                8.6p           33.7           8.4p           32.6

                                                                                              2007           2006
                                                                                                £m             £m
Paid during the year                                                                          32.7           32.6



A final dividend in respect of 2006/07 of 6.0 pence per share (£23.5m) has been
proposed by the Directors after the balance sheet date.





6.            Cash generated from operations


                                                                 2007           2007           2006           2006
                                                                   £m             £m             £m             £m
Profit for the financial year                                                   61.3                           5.3
Adjustments for:
Exceptional items - non-cash amounts                           (11.1)                          37.8
Depreciation and amortisation                                    62.9                          67.2
Profit on sale of non-current assets                            (6.6)                         (7.1)
Share of profit of associates                                   (3.9)                         (4.1)
Employment benefit net finance income                           (8.0)                         (1.2)
Share-based payment expense                                       1.0                           0.1
Finance income                                                  (1.7)                         (2.3)
Finance costs                                                    16.7                          14.6
Income tax expense                                               17.2                           5.7
                                                                                66.5                         110.7
Changes in:
Inventories                                                     (1.9)                         (4.2)
Trade and other receivables                                    (11.5)                          13.1
Trade and other payables                                         21.9                          18.5
Provisions and employee benefits                                (8.3)                         (5.2)
                                                                                 0.2                          22.2
Cash generated from operations                                                 128.0                         138.2






7.             Reconciliation of net cash flow to movements in net debt


                                                                                             2007            2006

                                                                                               £m              £m
Operating profit before exceptional items                                                    77.7            60.4
Depreciation and amortisation                                                                62.9            67.2
Adjusted EBITDA                                                                             140.6           127.6
Working capital movement                                                                      8.5            27.4
Exceptional cash costs                                                                      (7.2)           (4.6)
Other                                                                                      (13.9)          (12.2)
Cash generated from operations                                                              128.0           138.2
Capital expenditure payments                                                               (55.8)          (62.7)
Proceeds from sales of assets and investments                                                41.0            13.2
Tax paid                                                                                   (15.1)          (13.5)
Interest paid                                                                              (14.1)          (12.0)
Free cash flow before net (acquisitions)/disposals and dividends                             84.0            63.2
Dividends                                                                                  (32.7)          (32.6)
Net (acquisitions)/disposals of subsidiaries                                                  0.2             0.5
Net cash flow                                                                                51.5            31.1
Proceeds from the issue of share capital                                                      3.7             2.6
Net debt acquired                                                                               -           (2.6)
Non-cash movements                                                                            1.4           (6.1)
Net debt movement                                                                            56.6            25.0
Opening net debt                                                                          (237.8)         (262.8)
Closing net debt                                                                          (181.2)         (237.8)






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