Final Results

Smith (DS) PLC
29 June 2006

                                                                    29 June 2006

                   DS SMITH PLC - 2005/06 PRELIMINARY RESULTS


DS Smith Plc, the international packaging manufacturer and office products
wholesaler, announces its results for the year ended 30 April 2006.



Financial Summary
                                                                                2005/06           2004/05
Revenue                                                                        £1,652.7m          £1,624.9m
Adjusted profit before tax(1)                                                     £53.4m             £73.9m
Profit before tax(2)                                                              £11.0m             £64.3m
Adjusted earnings per share(1)                                                     10.0p              14.4p
Earnings per share(2)                                                               1.1p              12.2p
Free cash inflow before dividends and net acquisitions                            £63.2m             £55.8m
Gearing(3)                                                                         43.9%              50.7%
Total dividend per share                                                            8.4p               8.4p

(1) before exceptional items of £42.4m (2004/05: £9.6m); 
(2) after exceptional items of £42.4m (2004/05: £9.6m);
(3) after restatement for the adoption of IAS 39 as at 1 May 2005



Operational Summary

•    Group results affected by:

     -    £23m increase in energy costs

     -    Stronger competition in UK Office Products Wholesaling

     -    £42.4m exceptional charge, mainly arising from restructuring actions

•    Strategic actions taken to improve performance:

     -    Achieved £14.5m of synergy benefits in UK Corrugated Packaging

     -    Closed uneconomic paper capacity

     -    Sold two non-core businesses

     -    Grew sales of plasterboard liner strongly

     -    Expanded our Corrugated Packaging operations in eastern Europe

     -    Further developed Office Products Wholesaling in continental Europe

•    We increased paper and corrugated packaging prices in the second half
     of the year


Commenting on the results, Chairman, Antony Hichens said:

'As indicated at the time of our trading update in April, the Group's results
were significantly affected by the further rise in energy costs and stronger
competition in the UK office products wholesaling market.  However, our
strategic actions have strengthened the Group: we closed uneconomic capacity;
sold two non-core businesses; improved our product mix; and further developed
our presence in continental Europe.

'We are achieving box price increases, but so far they have been insufficient to
recover fully the input cost rises incurred through the supply chain.  Based on
current forward energy market prices, we anticipate the increase in our
underlying energy costs in 2006/07 will be somewhat higher than the £10 million
that we indicated at the time of our trading update in April.  In Office
Products Wholesaling, we expect our actions to result in improved performance in
the second half of the 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 Walker


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.
The presentation slides from 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 by approximately 1.00pm BST.


CHAIRMAN'S STATEMENT

The Group's results in 2005/06 were significantly affected by the further rise
in energy costs. Additionally, stronger competition in the UK office products
wholesaling market eroded sales margins in our Spicers Office Products
Wholesaling UK business.  However, the strategic actions we have taken to reduce
the Group's reliance on commodity corrugated case materials (CCM) and to grow
our business base outside the UK have strengthened DS Smith.  In the UK, we
achieved the anticipated synergy benefits from our 2004 corrugated packaging
acquisition, grew sales of plasterboard liner strongly, closed two uneconomic
paper production operations and sold two non-core, loss-making businesses.  On
the continent, we expanded further both our eastern European corrugated
packaging and Spicers businesses.

Our actions to improve short-term performance have included cost cutting and, in
the second half of the financial year, raising paper and corrugated packaging
prices after an extended period of price decline; these price rises did not
benefit the 2005/06 result significantly.

The Group's adjusted profit before tax was £53.4 million (2004/05: £73.9
million) and adjusted earnings per share were 10.0 pence (2004/05: 14.4 pence).
Cash flow, before dividends and acquisitions, was £63.2 million (2004/05: £55.8
million).

Actions to restructure our UK operations and streamline the portfolio accounted
for the majority of the exceptional charge in 2005/06 of £42.4 million (2004/05:
£9.6 million); the balance included the impairment of an investment in an
independent UK packaging business.

The Board is proposing a final dividend of 5.8 pence which, together with the
interim dividend of 2.6 pence, maintains the total dividend for the year at 8.4
pence.

During the year, we further strengthened the Group's management with the
appointments of Huub van Beijeren as Chief Operating Officer, Packaging and Rob
Vale as Chief Executive, Spicers.  Both these senior executives bring valuable
experience and expertise to the Group's operations.

As we announced in March, I will be retiring from the Board at the end of 2006,
having reached the age of 70.  During my seven years as Chairman, we have
improved the operational performance of many of our businesses while pursuing
our strategy to change the shape of the Group.  We have expanded our downstream
Packaging activities through several major developments.  In Corrugated
Packaging, we have grown profits, substantially through acquisition, and we have
also significantly raised the profits from our continental European operations.
In Plastic Packaging, we have built an international position in liquid
packaging and dispensing.  These moves have reduced the Group's reliance on the
cyclical Paper business where we have also enhanced our product mix,
particularly through the development of our plasterboard liner business.  In
Office Products Wholesaling, we have established a significant presence for
Spicers in continental Europe.  These achievements are the result of the
continued hard work and enthusiasm of our people, often in the face of difficult
market conditions.  I thank them for their determination and the improvements
they have made within their businesses.

I am handing over the role of Chairman to Peter Johnson with effect from 1
January 2007.  Peter has made a major contribution to the Board's deliberations
and decision making as a non-Executive Director.  I am confident that he will
guide the Group wisely as it continues its development.  Jean-Paul Loison will
be retiring from his role as Divisional Chief Executive of DS Smith Kaysersberg
and stepping down from the Board at the end of September 2006.  I thank him, on
behalf of the Board, for his major contribution to the development of our
continental European paper and corrugated packaging business for which he has
had responsibility for many years.

Outlook

We are achieving box price increases, but so far they have been insufficient to
recover fully the input cost rises incurred through the supply chain.  Based on
current forward energy market prices, we anticipate the increase in our
underlying energy costs in 2006/07 to be somewhat higher than the £10 million
that we indicated at the time of our trading update in April.  In Office
Products Wholesaling, we expect our actions to result in improved performance in
the second half of the year.


CHIEF EXECUTIVE'S REVIEW

Overview

In 2005/06, the trading environment for the Group as a whole was extremely
challenging; the impact of this varied across our business segments.  Adjusted
operating profit in UK Paper and Corrugated Packaging, where increased energy
costs of approximately £18 million were incurred, was down by £11.1 million on
the prior year.  Although underlying performance in this segment has improved,
we must now recover a greater proportion of the increase in energy costs for us
to earn acceptable returns.  Continental European Corrugated Packaging produced
a good result: profits were broadly unchanged from the previous year, despite
higher energy costs, and we continued our growth in eastern Europe.  In Plastic
Packaging, our profits started to fall away some 18 months ago.  Our results
were down £2.1 million in 2005/06 but the segment exited the year on a much
improved trend.  Spicers' results were £8.9 million down on the previous year.
Its continental operations performed well, turning in higher profits compared
with the previous year, but the UK business saw a dramatic drop in profits, the
result of both a substantial reduction in sales margins, in the face of stronger
competition, and an increase in costs.  Cash performance across the Group was
good, highlighting the strong attention our managers give to cash management.

Energy costs continue to have a profound impact on the Group.  They have
increased from £64 million in 2003/04 to £95 million in 2005/06, despite our
consumption in 2005/06 being 6% less than in the previous year.  Based on
forward energy market prices, we now expect the increase in our underlying
energy costs in 2006/07 to be somewhat higher than the £10 million that we
indicated at the time of our trading update in April.  We are benefiting from
earlier investments made in on-site combined heat and power generation plants at
our two largest paper mills and in a waste-to-energy plant at our biggest mill.
 It is our smaller mills that have been most severely affected by the steep rise
in costs.  Our purchasing teams in the UK and France are hedging part of their
forward energy requirements, but the rise in energy prices has been so
substantial and sustained that we have only been able to mitigate a small
proportion of the increase.  Our business plans are based on the assumption that
energy prices will remain at higher than historical levels.  Consequently, in
our energy-intensive paper business we are concentrating investment where we
have competitive energy costs and exiting those units where energy costs cannot
be recovered in their product markets.

In view of the challenging trading environment we have put a lot of emphasis on
raising short-term performance, principally through a drive on cost recovery,
through increasing prices and raising productivity.  While we concentrated on
accelerating our profit improvement efforts, we continued with our strategy to
strengthen the Group.  We sold two non-core businesses: the John Dickinson
office products manufacturing business and the plastic film lamination
operation, BSK.  We closed loss-making paper capacity that could not be
competitive in the long-term and also exited some small loss-making corrugated
packaging operations.  In the UK, we captured the expected benefits from our
major corrugated packaging acquisition in 2004 and expanded plasterboard liner
paper sales substantially.  We grew our continental European corrugated
packaging business and opened a new corrugating plant in Poland.  We finished
the year with a much stronger order book in Plastic Packaging, thanks to a
number of product development initiatives.  In Spicers, we grew our start-up
businesses in Spain and Italy strongly and acquired Timmermans, the leading
office products wholesaler in the Benelux region.  These moves, which strengthen
our business base, should all contribute to the Group's performance going
forward.

Paper and Corrugated Packaging

During most of calendar year 2005, the paper industry suffered from weak demand,
overcapacity - particularly in corrugated case material (CCM), high waste paper
prices and greatly increased energy costs.  As a result of the overcapacity,
selling prices of CCM and corrugated packaging (boxes) fell significantly over a
large part of the year.  This downward pricing trend, coupled with rising input
costs, led to industry profits being hit hard.  The severe industry conditions
applied right across Europe but were worst in the UK, where demand was
particularly weak and both the energy cost rises and the energy price spikes
were higher than on the continent; the latter were most marked during the 2005/
06 winter months.

Our response to these external pressures has been to concentrate on supporting
our stronger businesses, pushing for price increases, improving the product mix
and cutting costs.  In the UK, we achieved the expected £14.5 million of
synergies following the restructuring we initiated after our 2004 corrugated
packaging acquisition.  We now have a more competitive conventional corrugated
plant network and are concentrating on running it hard.  In our UK Paper
business, our CCM raw material supply position was helped by the previous
expansion in 2004 of our Severnside Recycling operations, and we further
enriched the product mix by growing sales of plasterboard liner.  We are seeking
to mitigate the effect of the sustained high energy costs as far as possible
through a broad programme of actions, but the prospect of energy cost levels
continuing to be higher than historical levels has led us to close paper
capacity at two of our most energy-intensive mills.  On the continent, our
results benefited from our concentration on higher added-value products.  Our
speciality paper mill in France had a good year, benefiting from recent
investment, and our expanded operations in Poland showed good sales and profit
growth.  In the Ukraine, our associate business had another good year and we are
supporting its expansion plans.

The business environment improved during the second half of our financial year;
better growth on the continent, the impact of CCM capacity closures and the
sustained cost pressure within the industry, led to CCM price rises during
winter 2005/06.  In DS Smith, we achieved CCM price increases of approximately
20%.  The Group is broadly balanced between the quantity of CCM produced and the
quantity of CCM used in our box converting operations; therefore, we need these
higher CCM prices to be passed through to our external customers by means of
higher box prices if the Group is to derive any benefit.  We are achieving box
price increases, but they are coming through slower than we had anticipated and
at a level that does not fully recover the input cost increases; this will have
to be addressed in 2006/07.

Our programme of actions to raise returns in our UK Paper and Corrugated
Packaging operations is being led by Huub van Beijeren, whom we appointed as
Chief Operating Officer, Packaging in May 2006.  Huub has held a number of
senior management positions in manufacturing industry, most recently as a Main
Board Director of British Vita Plc.  In continental Europe, Jean Lienhardt,
currently Finance Director of DS Smith Kaysersberg, will take over as Chief
Executive of that division following the planned retirement of Jean-Paul Loison
at the end of September 2006.  Jean has been a key member of the team which has
grown the sales and profits of our continental corrugated packaging business in
recent years.

Plastic Packaging

The Group has built good market positions in its two principal sectors of liquid
packaging and dispensing and returnable transit packaging (RTP).  Profits in
both sectors were eroded during the second half of 2004/05 and in the first half
of 2005/06 by a combination of increased competition and sharply higher polymer
costs; the latter we were unable to pass on in full to our customers.  We have
further focused the division by selling one of its smaller businesses, BSK, and
are currently concentrating on rebuilding profits in both sectors towards the
levels we achieved previously.  In liquid packaging and dispensing, we have
strengthened our product development and sales functions and are winning new
business both in Europe and the USA.  In RTP, we are rebuilding sales volumes.
We have a number of promising new product developments and are extending into
eastern Europe, where we are growing sales in tandem with our Corrugated
Packaging operations in that region.  Our immediate objective is to maintain the
improving profit trend established in the second half of 2005/06.

Office Products Wholesaling

The deterioration in Spicers' result was all in the UK.  We made good progress
on the continent: we moved into the Benelux region through acquisition and our
existing businesses in France, Germany, Spain and Italy performed in line with
our plans.  Profits at Spicers UK were markedly down as a result of both a
severe reduction in sales margin, in the face of tough competition, and higher
costs.  The fall in margin was the result of a number of factors. Selling prices
were under pressure from general price deflation in the office products market.
 In addition, the competitive environment in the wholesaling sector has
intensified, which has resulted in lower prices and led to higher levels of
retrospective rebates being paid to customers.  Higher costs were incurred in
overcoming service shortcomings at a limited number of our UK distribution
centres.  Some of these factors were apparent in the first half of the year but
the extent of the increased customer rebates did not become fully apparent until
close to the year-end; the higher costs were very much weighted towards the
final months of our financial year.  We are giving significant attention to
getting the Spicers UK business back to healthy profitability.  Despite the poor
UK performance and the fact that two of the continental businesses are still in
a development phase, Spicers as a whole generated a good cash flow and its
return on capital employed exceeded the Group's cost of capital.

In February 2006, we appointed Rob Vale as Chief Executive, Spicers, following
the retirement of his predecessor.  Rob, who has extensive experience in office
products, has carried out a comprehensive review of the Spicers business.  In
the UK, he has made a number of management changes, strengthened the sales and
operations functions, tightened the financial disciplines and accelerated the
programme to reduce the cost base.  We are confident that in the coming year we
can start to rebuild profits in the UK and continue progress on the continent.

Strategy

Our objective is to generate value for shareholders through operational
improvement and the development of an enhanced business mix; reducing the
Group's reliance on commodity CCM and expanding outside the UK.  In the
near-term, strong emphasis will be given to raising returns in both our UK Paper
and Corrugated Packaging business and Spicers UK.

In UK Paper and Corrugated Packaging, our goal is to improve rapidly the returns
from our substantial existing market position.  The priorities for achieving
this are: recovery of the input cost rises; structural cost reduction;
productivity improvement; and targeting growth sectors of the market.  We will
focus our investment on: Severnside Recycling; those paper mills which we
believe can be long-term competitive at the likely future level of energy costs;
our network of conventional box plants; and a selected number of speciality
businesses.

Our objective in Continental European Corrugated Packaging is to build on our
current good returns and growth rates.  We will continue our targeted approach,
concentrating on selected markets and higher added-value product segments.  We
will maintain the competitiveness of our operations in France and Italy while
seeking further development opportunities in higher-growth markets.

In Plastic Packaging, our aim is to improve significantly the profitability of
our two principal businesses, particularly through new product development and
increased productivity.  In liquid packaging and dispensing, we will build on
our established international position through developing new outlets.  In
industrial RTP, we will continue to focus on the European market, seeking
particularly to extend our business in central and eastern Europe.

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 raise profits in the important UK business.  This will include
restructuring the cost base.  On the continent we will maintain the
competitiveness of our major established positions in France and Benelux and
continue to drive up the results of our developing businesses in Germany, Spain
and Italy.

We operate in markets that are expected to remain relatively tough.  However, I
am confident that the actions we have already taken and the strategy that we are
pursuing will enable the Group to make satisfactory returns and to grow.


FINANCIAL REVIEW

Trading Results

The major drivers of the 2005/06 results were the substantial increases in
energy costs of circa £23 million, incurred principally in the Paper and
Corrugated segments, stronger competition in the UK business of the Office
Products Wholesaling segment and higher polymer costs and increased competition
in the Plastic Packaging segment.

Revenue for the financial year ended 30 April 2006 increased by 1.7% over the
prior year; it was 2.7% higher in the first half of the year and 0.8% higher in
the second half compared to the same periods in 2004/05.  Excluding the effects
of the acquisition of Timmermans and the disposals of John Dickinson and BSK,
turnover was up 3.7%.  If in addition, one excludes the effect of movements in
foreign exchange rates, turnover was up 3.1% on 2004/05.

Adjusted Group operating profit (excluding exceptional items) in 2005/06 was
£60.4 million (2004/05: £82.6 million).  The reduction in adjusted Group
operating profit resulted from decreases in UK Paper and Corrugated Packaging of
£11.1 million, in Plastic Packaging of £2.1 million and in Office Products
Wholesaling of £8.9m.  Performance in Continental European Corrugated Packaging
was broadly flat (down £0.1 million).  Group adjusted operating profit in the
first half of the year was £33.2 million (2004/05 H1: £42.6 million) and in the
second half was £27.2 million (2004/05 H1: £40.0 million).  Adjusted full year
operating profit from UK operations fell by £26.4 million to £18.4 million,
principally due to lower profits in UK Paper and Corrugated Packaging and the UK
business within Office Products Wholesaling.  Adjusted operating profits from
non-UK operations were up £4.2 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 3.7% (2004/
05: 5.1%).

The Group incurred exceptional charges of £42.4 million during the year (2004/
05: net exceptional charges of £9.6 million).  These arose on the closure of
loss-making paper capacity and related restructuring in UK Paper and Corrugated
Packaging (£28.9 million), the disposals of the Office Products Manufacturing
business (£1.7 million) and a business in the Plastic Packaging segment (£2.6
million), and an impairment charge against an investment in an independent UK
packaging business (£9.2 million).  Operating profit after exceptional items was
£18.0 million (2004/05: £71.9 million).

The Group's adjusted return on capital employed (which is defined as the
annualised adjusted operating profit divided by the average month-end capital
employed) decreased from 8.7% in 2004/05 to 6.5% in 2005/06.  This return is
unacceptable as it is below the Group's estimated pre-tax cost of capital of
circa 9%.  The decline in the Group's return on capital employed reflects lower
returns in 2005/06 across all the Group's segments, either as a result of the
lower operating profits described above or, in the case of Continental European
Corrugated Packaging, an increase in the capital employed following substantial
investment in 2005/06, notably in a new Polish corrugated plant, the full-year
benefits of which are not yet reflected in the result.

Net interest expense decreased from £13.2 million in 2004/05 to £12.3 million in
2005/06, mainly reflecting lower euro interest rates on broadly similar average
net debt.  Employment benefit finance income was £1.2 million (2004/05: £1.1
million).

The Group included £4.1 million as the Group's share of associated undertakings'
after-tax profit, up from the adjusted share of after-tax profits of £3.4
million in 2004/05.  This increase related mainly to the Group's share of
operating profit from OJSC Rubezhansk, the Group's 39%-owned paper and packaging
company in the Ukraine.

Adjusted profit before tax was £53.4 million (2004/05: £73.9 million).  Profit
before tax after exceptional items was £11.0 million (2004/05: £64.3 million).

The Group's effective tax rate, excluding exceptional items and associates, at
27%, was slightly higher than last year's rate of 25%, both years' rates
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.

Adjusted basic earnings per share were 10.0p (2004/05: 14.4p).  Basic earnings
per share were 1.1p (2004/05: 12.2p).

Dividend

The proposed final dividend is maintained at 5.8p (2004/05: 5.8p).  The total
dividend for the year is 8.4p (2004/05: 8.4p).  Dividend cover before
exceptional items was 1.2 times in 2005/06 (2004/05: 1.7 times).  Dividend cover
after exceptional items was 0.1 times (2004/05: 1.5 times).

Cash Flow

Cash generated from operations was £138.2 million (2004/05: £139.7 million).
This reflects the lower adjusted operating profit, higher payments in respect of
exceptional items, a significant inflow from working capital and an increase in
pension payments.  There were cash outflows in respect of exceptional items of
£4.6 million (including cash outflows related to exceptional charges made in
2004/05), compared with £2.5 million in 2004/05.  There was a strong focus on
working capital management which resulted in a cash inflow of £27.4 million.  In
respect of pension payments, the Group agreed with the trustees to increase its
annual contributions into the UK Group Pension scheme from £10.0 million in 2004
/05 to £14.0 million in 2005/06, which is reflected in the higher pension cash
contributions; contributions by the Group to the UK scheme will remain at this
level in 2006/07.  Purchase of fixed assets was £62.7 million; the £9.1million
increase from 2004/05 reflects the investment in the new corrugated packaging
facility in Poland and the investment within St Regis to support growth in
plasterboard liner production in the UK.

Tax payments were £13.5 million (2004/05: £23.7 million) as a result of the
lower adjusted trading profit described above and the 2005/06 exceptional
charges, a substantial proportion of which gave rise to current tax deductions.

Free cash flow, before acquisitions, disposals and dividends, was £63.2 million
(2004/05: £55.8 million).  Cash dividend cover, defined as free cash flow
divided by dividends paid/declared for the year, was 1.9 times, up from 1.7
times in 2004/05.

The net cash outflow on acquisitions and disposals of £0.3 million (2004/05:
£11.7 million outflow) reflected disposal proceeds of £11.0 million, primarily
on the sales of John Dickinson and BSK, offset by the £10.5 million paid on the
acquisition of the Benelux office products wholesaling business, Timmermans NV.
The amount in 2004/05 was primarily the consideration and costs for the
acquisition of BPB Recycling.

Financial Position

Shareholders' funds totalled £532.1 million at 30 April 2006, up from £511.5
million at 30 April 2005.  Net assets per share were 138.5p (2004/05: 133.6p).
The profit attributable to the shareholders of DS Smith Plc was £4.2 million and
dividends of £32.6 million were charged to reserves during the year.  (These
dividends were the 2004/05 final dividend and the 2005/06 interim dividend,
since under IFRS the current year proposed dividend is not accrued in the
year-end balance sheet.)  In addition, after-tax actuarial gains of £37.9
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, related to foreign currency
differences and hedge accounting, totalled £9.9 million.

The Group's closing net debt was £237.8 million, £25.0 million lower than at the
start of the year, after adjusting for the adoption of IAS 39.

Gearing was 43.9% (2004/05: 50.7%, after adjusting for IAS 39); the decrease
reflected the improvement in borrowings from the net cash inflow for the year
and the increase in shareholders' funds from the reduction in the net pension
deficit.  Adjusted interest cover was 4.9 times, compared with 6.3 times last
year, the lower cover reflecting the lower adjusted operating profit.  The ratio
of net debt to EBITDA (before exceptional items) was 1.9 times (2004/05: 1.7
times).

Energy Costs

The Group's result in 2005/06 was significantly affected by a further rise in
energy costs, particularly during the winter period, even though the Group
reduced its consumption by 6%; the cost increase had a particularly marked
effect on our UK Paper operations which incur over three-quarters of the Group's
energy and fuel costs.  The Group's total costs for gas, electricity and diesel
fuel increased from circa £73 million in 2004/05 to circa £95 million in 2005/
06.  This equates to an increase of circa £23 million, after adjusting for
disposals, and was principally due to a 76% year-on-year rise in the UK average
market price of gas, which we had partially hedged, and the expiry in October
2005 of the Group's favourable previous fixed-price UK electricity contract.  A
new floating-rate electricity contract, including flexible hedging arrangements,
replaced the previous contract, reflecting the increase in the market price for
electricity which was up 71% in the year.

The Group is managing its energy costs through a five point strategy:

•      Maximising in-house energy generation from our combined heat and power
(CHP) plants in the UK and France and a UK waste-to-energy plant, thereby taking
advantage of the greater efficiency of the CHP process and benefiting from
long-term energy supply contracts.

•      Focusing our operational development and investment on our most
energy-efficient plants while withdrawing from the least energy-efficient
operations, such as Sudbrook Mill, the closure of which took place in April
2006.

•      Reducing our energy usage across the Group through energy-saving
projects, including investment in more energy-efficient boilers and electronic
controls for heating and lighting systems.  The Group's sites consumed 6% less
energy in 2005/06 compared with 2004/05.

•      Developing further our centralised energy purchasing operations in the UK
and France.  This approach enables us to obtain economies of scale in buying and
to apply high levels of expertise, including using the application of the
increasingly sophisticated price-hedging methods that are available.

•      Monitoring regulatory developments in the energy market and collaborating
with other heavy energy users in the paper and other industry sectors to
influence government on energy policy and the operation of the energy markets.

Despite these actions, based on current forward energy market prices we expect
the increase in our underlying energy costs in 2006/07 to be somewhat higher
than the £10 million that we indicated at the time of our trading update in
April.

Pensions

The Group operates two defined benefit pension schemes in the UK and has some
small, overseas arrangements.  The aggregate gross assets of the schemes at 30
April 2006 were £706.1 million and the gross liabilities at 30 April 2006,
calculated under IAS 19, were £756.4 million, resulting in the recognition of a
gross balance sheet deficit of £50.3 million (30 April 2005: £114.8 million); a
net £35.3 million (30 April 2005: £80.3 million) after the establishment of a
deferred tax asset of £15.0 million (30 April 2005: £34.5 million).

In order to control the future costs and financial obligations of these schemes,
the Group's UK defined benefit pension schemes were closed to new members.  The
contributions collected from members have been increased during 2005/06 and will
further increase during 2006/07.  The lower service cost in 2005/06, £11.4
million compared with £12.8 million in 2004/05, reflects these higher member
contributions.  The Group also agreed to increase its contributions to the main
UK scheme, from £10 million in 2004/05 to £14 million from 2005/06.  The next
triennial valuation of the scheme is to be carried out as at 30 April 2007.

The balance sheet funding position of the schemes is sensitive to market
conditions, in particular the level of stock markets and bond yields, and
actuarial assumptions, including the assumed longevity of scheme members.  The
balance sheet valuation of the schemes' obligations, under IAS 19, is generally
more conservative than the valuations carried out by the trustees' actuary,
since the balance sheet valuation discounts the future liabilities of the
schemes at a bond rate which takes no account of the expected long-term
out-performance of the schemes' investment in equities over gilts; the trustees'
actuary's valuations take some of this out-performance into account.

The balance sheet deficit (before related deferred tax) decreased from £114.8
million at 30 April 2005 to £50.3 million at 30 April 2006.  The decrease of
£64.5 million included net actuarial gains of £54.4 million; the actual return
on assets was higher than the expected return, but this was offset by an
increase in the schemes' liabilities that resulted from a reduction in the
discount rate used to value the liabilities, from 5.3% at 30 April 2005 to 5.1%
at 30 April 2006.  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

The European market for corrugated packaging is estimated to be approximately
€16 billion, equivalent to approximately 21 million tonnes or 39 billion square
metres1, of which the UK market is estimated to be approximately 10%.  Demand
for corrugated packaging is principally influenced by overall economic activity
and manufacturing output.

In the calendar year 2005, the European market by weight for corrugated board
grew by 0.9%2.  In western Europe the market grew by 0.3% while growth in
eastern and central Europe continued to be much stronger at 5.8%. In DS Smith's
principal markets, demand by weight fell by 1.9% in the UK, while in France and
Italy it was flat (0.3% and nil growth, respectively), and in Poland and Turkey
it grew strongly (by 9.3% and 7.6%, respectively).  The continuing trend towards
the use of more lighter-weight packaging, for cost and environmental reasons,
meant that demand by area declined by 1.5% in the UK while it rose by 1.3% in
Europe as a whole.  The European market strengthened in the course of calendar
year 2005 and has remained relatively buoyant in the early months of 2006,
especially in Germany.

1 Source: European Federation of Corrugated Board Manufacturers/DS Smith
  estimates

2 Source: European Federation of Corrugated Board Manufacturers

Within the total European market, the growth rates of different segments vary
considerably.  Corrugated packaging usage in some industrial manufacturing
sectors of western Europe has tended to decline as a result of the transfer of
manufacturing to lower cost countries, while usage for fast-moving consumer
goods, which account for approximately two thirds of the corrugated market, has
been relatively strong due to the resilience of this economic sector.  Other
current growth segments are the home delivery of products from internet
purchases, and retail-ready packaging which can be used as both transit and
display packaging.  Supply of corrugated board and boxes is generally relatively
local to the point of production, with a typical operational radius of
approximately 150 miles, owing to moderately high transport costs for what is a
low-density product and the service requirements of customers.

There has been downward pressure on selling prices in recent years.  Pricing and
margins in corrugated packaging are strongly influenced by pricing developments
on corrugated case materials (CCM), the paper used as the principal component in
manufacturing corrugated packaging and typically accounting for around 50% of
the cost of a box.  CCM prices have been falling as a result of overcapacity,
although in late 2005 this began to reverse as demand improved and CCM capacity
was closed.  The overall fall in CCM prices, compounded by the cost-down
requirements of our customers, many of which supply retailers, has put
significant pressure on prices.

Whereas boxes are generally sold locally, CCM is sold on a pan-European basis
and pricing is therefore affected by European supply and demand factors.  The
total demand for CCM in western Europe is circa 20 million tonnes, with an
additional approximately 3 million tonnes of demand in eastern Europe (not
including Russia).  The market for CCM in Europe is dependent upon European
demand for corrugated packaging as imports and exports of unfilled boxes are
negligible.  Demand for CCM in Europe as a whole has grown at approximately 1.5%
per annum over the last five years, while the UK market, of approximately 2
million tonnes, has been static or declining in recent years and is now some 3%
smaller than five years ago.  Approximately 75% of the market is waste-based or
recycled CCM, with the balance principally comprising kraftliner, made from
virgin wood pulp.

During the first half of 2005/06, low growth in corrugated packaging demand and
excess CCM manufacturing capacity resulted in CCM prices declining.  In early
2005, four new continental European CCM machines, with an aggregate capacity of
approximately 1.3 million tonnes were commissioned.  This new capacity, which
was concentrated on lighter-weight papers, resulted in a severe destabilisation
of selling prices throughout the European market.  Since the autumn of 2005, the
pace of removal of older CCM capacity from the market has increased with
announcements of capacity closures from most of the larger producers as well as
some from smaller independent companies.  It is estimated that approximately 2.3
million tonnes of older capacity has been closed, or has been announced for
closure, since the start of 2004.  One further CCM machine was commissioned in
early 2006, but no other significant capacity additions are expected in western
Europe before the end of 2007.

The squeeze on CCM producers' margins from depressed selling prices was
exacerbated during 2005 by the sharp increases in energy costs.  Against a
background of slightly stronger growth in demand for CCM across Europe and the
removal of some capacity, CCM producers increased prices by approximately 20%
between November 2005 and March 2006 to recover some of the margin decline.  In
response to this, box producers also increased prices in early 2006.  To date,
anecdotal evidence suggests that the rise in box prices across the industry is
well short of that required to recover the paper and energy cost increases.

The pressure on CCM margins has been exacerbated by the relatively high cost of
waste paper, the principal raw material for recycled CCM.  Waste paper is a
globally traded commodity; its continuing high level of demand from Asia is
contributing to a modest continuing increase and short-term spikes in its price
in Europe.  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.  As a reprocessor of waste paper, we receive revenue from the sale
of PRNs to packaging waste compliance schemes and companies in the packaging
supply chain that have an obligation under the Regulations to ensure that
sufficient quantities of packaging are being recycled.  We can set this PRN
revenue against the cost of purchasing waste paper and investment in our waste
collection and recycling operations.  Paper PRNs were in relatively plentiful
supply during 2005, mainly due to the sharply increased quantities of waste
packaging being exported for recycling.  Consequently, the price of paper PRNs
remained relatively low during 2005 and has softened further in calendar year
2006 to date.



UK Paper and Corrugated Packaging
                                                          2005/06        2004/05
Revenue - £m                                                649.6          631.2
Adjusted operating profit* - £m                              20.5           31.6
Adjusted EBITDA* - £m                                        55.1           67.3
Adjusted return on sales* - %                                3.2%           5.0%
Adjusted EBITDA margin* - %                                  8.5%          10.7%
Adjusted return on average capital employed* - %             4.0%           6.0%

* before exceptional items of £28.9 million (2004/05: £4.9 million)



2005/06 Performance

Our actions over the last two years to enlarge our Corrugated Packaging business
and to enrich our product mix in Paper have strengthened the UK Paper and
Corrugated Packaging segment.  However, the benefits of these actions were more
than offset by lower selling prices during much of the year and a circa £18
million increase in energy costs.

Revenue increased by 2.9% to £649.6 million as a result of increased sales of
higher added-value products from Kemsley, our principal paper mill, and growth
in Severnside Recycling's external sales.  Despite the achievement of the
expected synergies of £14.5 million (2004/05: £6.1 million), resulting from the
integration benefits of our 2004 corrugated packaging acquisition, adjusted
operating profit was lower at £20.5 million (2004/05: £31.6 million).

DS Smith Packaging, our UK Corrugated Packaging business, was affected by the
weak demand for boxes in the UK and some disruption to its operations as a
result of the integration process which required the closure of two large
facilities and the subsequent transfer of production to other plants to reduce
costs.  In the second half of the financial year, margins were squeezed by
increased CCM costs.  At the conventional plants, sales were lower and margins
were affected by substantial price pressure.  The speciality sector, which
concentrates on higher added-value products, performed well, benefiting
particularly from our businesses' design and printing capabilities.  The
Tri-Wall heavy-duty business, which sells predominantly to the industrial
manufacturing sector of the economy, had a difficult year.  Market conditions
for our sheet feeding operations, which supply corrugated sheet board, were
especially competitive due to industry over-supply.

At our UK paper business, St Regis, profits remained depressed due to a
combination of a further squeeze on margins from substantial increases in energy
costs and depressed selling prices for our main product, CCM, the latter during
the first half of the financial year.  We partly mitigated the impact of these
external factors by increased production and a better sales mix at the
division's largest mill at Kemsley.  This improvement came from our drive to
increase sales of plasterboard liner resulted in the sales volume of this
product increasing to a run-rate of approximately 160,000 tonnes per annum in
April 2006 from approximately 95,000 tonnes per annum in April 2005.  The
capital expenditure programme to upgrade existing machines at the Kemsley and
Wansbrough mills, in order to satisfy the plasterboard liner requirements of
BPB, is proceeding as planned.  This investment will also enhance the quality of
other products produced at these mills.

The Kemsley mill benefited from its advantageous energy supply position as a
result of previous investment in on-site combined heat and power and
waste-to-energy plants.  The five smaller mills experienced a further sharp
increase in energy costs.  This particularly affected results at the Sudbrook,
Wansbrough and Taplow mills, all of which were in loss. Hollins mill, which
specialises in white top testliner, raised its output and enhanced the quality
of one of its key products.  Higher Kings mill continued to focus on higher
margin, speciality, non-packaging papers.  Sudbrook mill, which was St Regis'
most energy-intensive production unit, was closed in March 2006 to staunch
losses, as part of the Group's strategy to concentrate on mills with a long-term
future.  The closure of the smaller of the two paper machines at Wansbrough mill
is expected early in the 2006/07 financial year.  These capacity closures
contributed £28.9 million to the overall exceptional charge of £42.4 million in
the profit and loss account in 2005/06.  Following these closures, Kemsley mill
now accounts for over 60% of the division's paper production; it ranks in the
upper quartile of European mills in terms of cost-competitiveness.

Sales and profits at our UK waste collection business, Severnside Recycling,
advanced, principally as a result of the enlargement of its network of
collection depots during the previous financial year.  The price of waste paper
remained high relative to the selling price of recycled paper with continued
strong export demand.  In addition to meeting the requirements of St Regis'
mills for waste paper, Severnside increased its exports of waste paper and grew
further its facilities management business where it manages customers' entire
waste recycling and disposal needs.

We raised prices of the main grades of CCM by approximately 20% during the
second half of the financial year in order to recover some of the previous
margin erosion.  Towards the end of the financial year, we increased box prices,
which had been falling consistently until that point.  Given that the Group's
CCM production and usage are broadly in balance overall, higher CCM prices need
to be passed on to our external customers through higher box prices in order to
benefit the overall result.  As the box price increase took place late in our
financial year, these box price rises had only a small effect on the 2005/06
profits.  The box price increases should benefit results in 2006/07 but the net
effect they have on profits across the UK businesses will depend heavily on how
input costs develop.  We currently expect to incur a further increase in energy
and fuel costs in our ongoing operations in this segment in 2006/07.  In
addition, the net cost of waste paper is continuing to increase as a result of
rising demand from Asia and the falling value of PRNs.



Continental European Corrugated Packaging
                                                          2005/06        2004/05
Revenue - £m                                                276.6          265.7
Operating profit - £m                                        20.1           20.2
EBITDA - £m                                                  33.6           33.6
Return on sales - %                                          7.3%           7.6%
EBITDA margin - %                                           12.1%          12.6%
Return on average capital employed - %                      12.4%          13.7%



2005/06 Performance

Despite the tough trading conditions, DS Smith Kaysersberg performed well thanks
to our targeted market positions, good management of product mix and growth in
eastern Europe.

Revenue increased by 4.1% to £276.6 million, principally as a result of strong
growth in Poland and increased sales of solid board in France.  Despite an
increase in energy costs of circa £3 million and sharply increased CCM costs
during the second half of the financial year, adjusted operating profit was flat
at £20.1 million (2004/05: £20.2 million).

Sales and profits at the French paper mills grew following investment at the
main Kaysersberg mill in 2005 which increased production capacity and reduced
costs, thereby raising productivity.  This mill, which has reduced its emissions
of carbon dioxide through investment in a combined heat and power plant, also
benefited from the sale of excess carbon credits under the EU Emissions Trading
Scheme.  The French Corrugated Packaging operations increased their market share
but were affected by the pressure on box prices during much of the financial
year.  Despite highly competitive trading conditions in its local market, our
Italian business performed satisfactorily and maintained its strong positions in
the pizza box and ceramics market sectors.

Our Polish business grew both its sales and profits strongly.  Its new
green-field factory at Kutno, west of Warsaw, opened in November 2005 and
complements the existing plant at Kielce.  This Polish business primarily
supplies the rapidly expanding, fast-moving consumer goods (FMCG) sector in
Poland.  Profits advanced well at our small converting business in the Czech
Republic.  In Turkey, where our business broke through into profit in 2004/05,
we continued to focus on growing sales in higher margin industrial market
sectors.  OJSC Rubezhansk Paper and Packaging Mill in the Ukraine, in which we
hold a 39% stake and the results of which are reported under associates,
continued to perform well.

We implemented box price increases in all continental markets in our efforts to
pass on the higher CCM costs but, as in the UK, this had little effect on
results in 2005/06.  In 2006/07, we anticipate being able to recover a
substantial proportion of the increased CCM and energy costs.


Plastic Packaging

                                                          2005/06        2004/05
Revenue - £m                                                202.4          195.9
Adjusted operating profit* - £m                               7.2            9.3
Adjusted EBITDA* - £m                                        19.3           20.6
Adjusted return on sales* - %                                3.6%           4.7%
Adjusted EBITDA margin* - %                                  9.5%          10.5%
Adjusted return on average capital employed* - %             5.6%           6.6%

* before exceptional items of £2.6 million (2004/05: £ 5.8 million)



Market Overview

The global market for liquid packaging and dispensing products is estimated to
be approximately $750 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).  There is modest volume growth in North America and
Europe but value growth is lower due to price competition.  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 uses.  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.

The European market for returnable transit packaging (RTP), which is estimated
to be approximately €1.4 billion, is fragmented into many sub-sectors.  The
overall market has experienced steady growth in recent years, due to the
increased requirement for the use of multi-trip, reusable packaging on cost and
environmental grounds.  However, during 2005/06 it is believed that there was
relatively little growth in the European RTP market, principally as a result of
the higher polymer costs.  RTP products are used most within the retail,
automotive, electronics and beverage sectors.  Demand is heavily influenced by
industry sector activity levels and, as RTP is often a capital purchase driven
by particular projects, annual demand can be of an uneven nature.



2005/06 Performance

Results at DS Smith Plastics were affected by the high level of polymer prices
and a more competitive trading environment in both of our major sectors, liquid
packaging and dispensing, and RTP.  Our actions to raise prices, strengthen our
sales and product development capability and increase productivity resulted in
an improving trend of profit in the second half of the financial year.

Revenue increased by 3.3% to £202.4 million but adjusted operating profit was
lower at £7.2 million (2004/05: £9.3 million).  First half adjusted operating
profit was £2.0 million (H1 2004/05: £6.2 million) while that in the second half
improved to £5.2 million (H2 2004/05: £3.1 million).  This result was adversely
affected by polymer and energy costs combined being circa £7 million higher
during 2005/06 than in the previous financial year.  We endeavoured to pass on
these higher costs by raising our selling prices but in some cases this led to a
loss of business and where we did achieve increases these were insufficient to
restore margins to acceptable levels.  The cumulative effect of this input cost
under-recovery was approximately £3 million during 2005/06, largely concentrated
in our RTP business.

In liquid packaging and dispensing, sales were flat and profits were
significantly lower.  Our US operations performed satisfactorily on the back of
good product development while sales of dispensing products remained strong.  In
contrast, we faced increased competition in Europe, particularly in higher
margin products, although in the second half of the financial year results
started to benefit from earlier restructuring action, our increased emphasis on
new product development and growth in higher margin sectors.

Sales of RTP for 2005/06 as a whole were significantly higher than in the
previous year despite being slow during the first half of the year.  Margins
were squeezed by the under-recovery of the higher polymer prices and, in the
extruded sheet sector, by industry capacity increases at a time of weaker
demand.  Results improved in the second half of the financial year with the
achievement of some price increases and a sharp revival in the volume of crate
sales.  The extruded product businesses continued to experience difficult
trading but benefited, in the second half of the year, from action taken to
strengthen its sales function.  We are expanding our capability to supply in
eastern Europe from the Group's plant in the Czech Republic, in response to
increased sourcing of RTP products in that region by some customers.

The aggregate result of the smaller speciality businesses improved
significantly.  The packaging management business moved from break-even into
profit following good sales growth, while sales at StePac, which specialises in
modified atmosphere packaging, grew strongly.  The small, non-core plastic
coating and laminating business, BSK, was sold in December 2005, resulting in a
loss on sale of £2.6 million.

Looking forward, a key issue in Plastic Packaging is the outlook for polymer
prices and the extent to which we can recover the higher costs and further
rebuild margins.  We expect the improving trend within this segment to continue
in 2006/07.



Office Products Wholesaling

                                                         2005/06         2004/05
Revenue - £m                                               518.7           499.7
Operating profit - £m                                       12.6            21.5
EBITDA - £m                                                 19.2            28.5
Return on sales - %                                         2.4%            4.3%
EBITDA margin - %                                           3.7%            5.7%
Return on average capital employed - %                      9.9%           18.1%



Market Overview

The office products markets of the UK, France and Germany, in which Spicers
currently has over 90% of its sales, are estimated to be worth approximately €9
billion, €8 billion and €11 billion, respectively, at trade prices.  In 2005,
these markets were estimated to have been broadly flat overall, with the
traditional stationery sector declining and electronic office supplies (EOS)
growing at up to 10% per annum3.  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.

3  Source: DS Smith estimates based on national data

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 sector that
Spicers principally supplies, that of office products dealers, 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 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 approximately 15%
of the total market; they generally sell to larger offices and offer a smaller
range of products than dealers.  The principal other competitor channels to
market are: mail order, office superstores, other retailers and manufacturers
selling direct to offices.



2005/06 Performance

Despite continued progress at our continental European businesses, Spicers'
result was substantially affected by a sharp decline in the profitability in its
UK business, largely from the erosion of its sales margin in the face of
stronger competition.  Spicers' cash flow remained strong.

Spicers' revenue advanced by 3.8% to £518.7 million, the growth coming almost
entirely from the contribution of Timmermans, the Benelux business acquired in
October 2005.  The fall in profit in the UK more than offset better profits from
continental Europe and resulted in the adjusted operating profit being lower at
£12.6 million (2004/05: £21.5 million).

Spicers UK's sales were flat but its profit was sharply lower.  This reflected
general market price deflation, a significantly reduced sales margin from
increased competitive pressure, and higher costs incurred to overcome service
shortcomings.  In response to increased competitor activity, Spicers UK's
selling prices were eroded and customer rebates were increased significantly.
The substantial deterioration in margins in Spicers UK, particularly from higher
levels of customer retrospective rebates, only became fully apparent late in the
financial year.  This highlighted management process and control issues in
Spicers UK which were addressed in that business unit through senior management
changes and a review and reinforcement of control processes.  The managing
director and finance director of Spicers UK have left the business and action
has been taken to strengthen the UK sales and operations functions.  We are also
accelerating the programme to reduce our structural cost base in the UK.

In 2005/06, Spicers made further major advances in rolling out its business
model in continental Europe.  Spicers France continued to perform well and
profits advanced strongly.  A new central distribution centre at Chateauroux, in
central France, has been commissioned early in 2006/07.  Spicers Germany
consolidated its profitable position by concentrating its business on higher
margin sectors of the market.  The Spanish business continued to grow strongly
and achieved a profit for the year through substantially higher sales at better
margins. A new distribution centre near to Madrid is due to open in autumn 2006
which will extend our sales coverage across central and southern Spain.  Spicers
Italy, which was launched in the autumn of 2004, continued its encouraging
build-up of sales.  On 1 October 2005, we further extended Spicers' sales
coverage in continental Europe through the acquisition of Timmermans NV, the
leading office products wholesaler in the Benelux region; Timmermans has
performed in line with our expectations.


Consolidated Income Statement
For the year ended 30 April 2006

                                                Before    Exceptional     After      Before    Exceptional     After
                                              exceptional items (note  exceptional exceptional items (note  exceptional
                                                 items         2)         items       items         2)         items
                                                  2006         2006        2006     2005           2005      2005

                                         Note       £m           £m          £m        £m           £m          £m

Revenue                                   1       1,652.7            -     1,652.7     1,624.9            -     1,624.9


Operating profit                          1          60.4       (42.4)        18.0        82.6       (10.7)        71.9


Finance income                                        2.3            -         2.3         4.7            -         4.7
Finance costs                                      (14.6)            -      (14.6)      (17.9)            -      (17.9)
Employment benefit finance income                     1.2            -         1.2         1.1            -         1.1
Net financing costs                                (11.1)            -      (11.1)      (12.1)            -      (12.1)



Profit after financing costs                         49.3       (42.4)         6.9        70.5       (10.7)        59.8


Share of profit of associates                         4.1            -         4.1         3.4          1.1         4.5
Profit before income tax                             53.4       (42.4)        11.0        73.9        (9.6)        64.3


Income tax (expense) / credit             3        (13.4)          7.7       (5.7)      (17.6)          1.4      (16.2)


Profit for the financial year                        40.0       (34.7)         5.3        56.3        (8.2)        48.1


Profit for the financial year
attributable to:
DS Smith Plc equity shareholders                     38.9       (34.7)         4.2        55.3        (8.2)        47.1
Minority interest                                     1.1            -         1.1         1.0            -         1.0

Basic earnings per share (pence)          4         10.0p                     1.1p       14.4p                    12.2p
Diluted earnings per share (pence)        4         10.0p                     1.1p       14.3p                    12.1p

Dividend per share

- interim, paid (pence)                   5                                   2.6p                                 2.6p

- final, proposed (pence)                 5                                   5.8p                                 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 2006 will be 
     posted to shareholders in July 2006.

d)   Subject to approval of shareholders at the Annual General Meeting to be 
     held on 6 September 2006, the final dividend of 5.8p will be paid on 19
     September 2006 to ordinary shareholders on the register on 18 August 2006.

e)   The 2005/06 and 2004/05 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 2005/06 results and 2004/05 
     comparatives have been extracted from the 2005/06 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.  The 2004/05 statutory accounts, which were prepared under UK 
     generally accepted accounting principles (UK GAAP), have been reported on 
     by the Group's auditors and filed with the Registrar of Companies.

f)   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 2006

                                                                                             2006            2005
                                                                                               £m              £m
Actuarial gains/(losses) on defined benefit pension schemes                                  54.4           (31.2)
Movements on deferred tax relating to actuarial (gains)/losses                             (16.5)              9.5
Currency translation differences, net of tax                                                  9.7            (0.3)
Changes in the fair value of cash flow hedges, net of tax                                     0.2
Net income / (expense) recognised directly in equity                                         47.8           (22.0)
Profit for the financial period                                                               5.3             48.1
Total recognised income and expense attributable to the equity shareholders                  53.1             26.1
and minority interests relating to the financial year

Changes in accounting policy - adoption of IAS 32 & 39 from 1 May 2005                      (1.5)
Total recognised income and expense since the last financial statements                      51.6


Total recognised income and expense relating to the financial year
attributable to:
DS Smith Plc equity shareholders                                                             52.0             25.1
Minority interest                                                                             1.1              1.0





Consolidated Balance Sheet
As at 30 April 2006

                                                                                            2006             2005
                                                                                              £m               £m
Assets
Non-current assets
Intangible assets                                                                           195.4            190.9
Property, plant and equipment                                                               536.1            559.3
Investments in associates                                                                    29.2             22.1
Other investments                                                                             0.5             10.1
Deferred tax assets                                                                          24.0             35.6
Other receivables                                                                             2.5              1.0
Derivative financial instruments                                                              1.4
Total non-current assets                                                                    789.1            819.0

Current assets
Inventories                                                                                 163.3            161.7
Other investments                                                                             0.1                -
Income tax receivable                                                                         4.8              1.0
Trade and other receivables                                                                 347.2            358.4
Cash and cash equivalents                                                                    60.4             58.8
Derivative financial instruments                                                              3.7
Total current assets                                                                        579.5            579.9
Total assets                                                                              1,368.6          1,398.9

Liabilities
Non-current liabilities
Interest-bearing loans and borrowings                                                     (264.9)          (294.1)
Post-retirement benefits                                                                   (50.3)          (114.8)
Other creditors                                                                             (3.6)            (2.4)
Provisions                                                                                  (2.8)            (7.2)
Deferred tax liabilities                                                                   (76.3)           (78.7)
Derivative financial instruments                                                           (25.0)
Total non-current liabilities                                                             (422.9)          (497.2)

Current liabilities
Bank overdrafts                                                                             (1.5)           (17.6)
Interest-bearing loans and borrowings                                                       (7.7)            (7.8)
Trade and other payables                                                                  (355.3)          (335.5)
Income tax liabilities                                                                     (21.0)           (18.7)
Provisions                                                                                 (16.7)            (2.3)
Derivative financial instruments                                                            (2.0)
Total current liabilities                                                                 (404.2)          (381.9)
Total liabilities                                                                         (827.1)          (879.1)

Net assets                                                                                  541.5            519.8

Equity
Issued capital                                                                               39.1             38.9
Share premium                                                                               259.4            257.0
Reserves                                                                                    233.6            215.6
DS Smith Plc shareholders' equity                                                           532.1            511.5
Minority interest                                                                             9.4              8.3
Total equity                                                                                541.5            519.8



Consolidated Statement of Cash Flows
For the year ended 30 April 2006

                                                                                             2006             2005
                                                                             Note              £m               £m
Operating Activities
Cash generated from operations                                                6              138.2            139.7
Interest received                                                                              0.8              4.7
Interest paid                                                                               (12.8)           (18.0)
Income tax paid                                                                             (13.5)           (23.7)
Net cash flows from operating activities                                                     112.7            102.7

Investing Activities
Acquisition of subsidiary businesses, net of cash acquired                                  (10.5)           (11.7)
Divestment of subsidiary businesses, net of cash disposed of                                  11.0                -
Capital expenditure                                                                         (62.7)           (53.6)
Proceeds from sale of assets                                                                   9.7              5.2
Proceeds from sale of associate and other non-current investments                              3.5              1.5
Cash flows from investing activities                                                        (49.0)           (58.6)

Financing Activities
Proceeds from issue of share capital                                                           2.6              2.6
Purchase of own shares                                                                           -            (2.1)
Repayments of borrowings                                                                    (17.2)            (3.7)
Repayment of finance leases obligations                                                      (0.9)            (0.9)
Dividends paid                                                                              (32.6)           (31.6)
Cash flows from financing activities                                                        (48.1)           (35.7)

Net increase in cash and cash equivalents                                                     15.6              8.4
Cash and cash equivalents at 1 May 2005                                                       41.2             31.1
Exchange gains on cash and cash equivalents                                                    2.1              1.7
Cash and cash equivalents at 30 April 2006                                                    58.9             41.2





Notes to the Financial Statements



1.   Segment Reporting



Primary reporting format - business segments
                                            UK Paper  Continental     Plastic       Office   Other(3) Total Group
                                                 and     European   Packaging     Products                     £m
                                          Corrugated   Corrugated          £m  Wholesaling         £m
                                           Packaging Packaging £m                       £m
Year ended 30 April 2006                          £m

External revenue                               649.6        276.6       202.4        518.7        5.4     1,652.7

Operating profit before exceptional             20.5         20.1         7.2         12.6          -        60.4
items
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)

Year ended 30 April 2005

External revenue                               631.2        265.7       195.9        499.7       32.4     1,624.9

Operating profit before exceptional             31.6         20.2         9.3         21.5          -        82.6
items
Exceptional items                              (4.9)            -       (5.8)            -          -      (10.7)
Segment result                                  26.7         20.2         3.5         21.5          -        71.9

Other segment items:
Adjusted return on sales - %(1)                 5.0%         7.6%        4.7%         4.3%          -        5.1%
Adjusted EBITDA - £m(1)                         67.3         33.6        20.6         28.5        1.2       151.2
Adjusted EBITDA margin - %(1)                  10.7%        12.6%       10.5%         5.7%       3.7%        9.3%
Year-end capital employed - £m                 508.3        149.6       132.2        126.2       12.6       928.9
Average capital employed - £m(2)               528.3        147.1       140.5        119.0       14.1       949.0
Adjusted Return on average capital              6.0%        13.7%        6.6%        18.1%          -        8.7%
employed - %(1),(2)

Secondary reporting format -
geographical segments
                                                                    Turnover
Year ended 30 April                                             2006        2005
                                                                  £m          £m
UK                                                             957.6       970.7
Western Continental Europe                                     570.5       543.3
Eastern Continental Europe                                      74.5        64.9
Rest of World                                                   50.1        46.0
Total                                                        1,652.7     1,624.9


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 represents the activity of the former Office Products Manufacturing
segment and, in 2005/06, the loss on the disposal of that business and the
impairment 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.

                                                                                         2006            2005
                                                                                          £m              £m

Loss on disposal of businesses                                                          (4.3)                -
UK Paper and Corrugated Packaging segment restructuring costs                          (28.9)            (4.9)
Impairment charges                                                                      (9.2)            (5.8)
Reversal of previous impairment of associate                                                -              1.1
Total exceptional items                                                                (42.4)            (9.6)


The loss on disposal of businesses 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 UK Paper and Corrugated Packaging restructuring costs in 2005/06 related to
the closure of a paper mill, £20.3m, the closure of a paper machine at another
mill, £5.0m, and other restructuring costs, £3.6m. The UK Paper and Corrugated
Packaging restructuring costs in 2004/05 related to the restructuring of an
acquired business.

The impairment charge in 2005/06 related to an investment in the debt securities
of an independent UK packaging business, the performance of which has been
affected by the current difficult trading conditions and the high costs of
energy. The charge in 2004/05 related to the impairment of goodwill in a
business in the Plastic Packaging segment.

The reversal of the previous impairment of associate in 2004/05 related to the
Group's minority investment in a Japanese packaging company.



3.   Income tax expense

Recognised in the income statement

                                                                                             2006             2005
                                                                                               £m               £m
Current tax expense

Current year                                                                               (13.5)           (23.3)
Over-provided in prior years                                                                  1.9              1.4
                                                                                           (11.6)           (21.9)
Deferred tax expense

Origination and reversal of temporary differences                                             6.2              1.3
Over-provided in prior years                                                                (0.3)              4.4
                                                                                              5.9              5.7
Total income tax expense in income statement                                                (5.7)           (16.2)


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

                                                                                              2006             2005
                                                                                                £m               £m
Profit before tax                                                                             11.0             64.3

Less: share of profits of associates                                                         (4.1)            (4.5)
Profit before tax and share of profit of associates                                            6.9             59.8

Income tax calculated using the domestic corporation tax rate of 30%                           2.1             17.9
Effect of tax rates in foreign jurisdictions                                                   1.5              1.9
Non-deductible expenses                                                                        5.6              3.1
Recognition of previously unrecognised tax losses                                            (1.9)            (0.7)

Other                                                                                            -            (0.2)
Adjustment in respect of prior years                                                         (1.6)            (5.8)
Income tax expense                                                                             5.7             16.2


4.   Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 30 April 2006 is based on the net
profit attributable to ordinary shareholders of £4.2m (2005: £47.1m) and the
weighted average number of ordinary shares outstanding during the year ended 30
April 2006 of 387.2m (2005: 385.3m).  The number of shares excludes the weighted
average number of the Company's own shares held as treasury shares during the
year of 2.5m (2005: 2.5m).

                                                                                              2006             2005
                                                                                                £m               £m
Net profit attributable to ordinary shareholders                                               4.2             47.1
Weighted average number of ordinary shares at 30 April (millions)                            387.2            385.3
Basic earnings per share (pence per share)                                                    1.1p            12.2p


Diluted earnings per share

The calculation of diluted earnings per share at 30 April 2006 is based on net
profit attributable to ordinary shareholders of £4.2m (2005: £47.1m) and the
weighted average number of ordinary shares outstanding during the year ended 30
April 2006, as adjusted for potentially issuable ordinary shares, of 388.8m
(2005: 387.3m), calculated as follows:

                                                                                             2006              2005
                                                                                               £m                £m
Net profit attributable to ordinary shareholders                                               4.2             47.1

In millions of shares
Weighted average number of ordinary shares at 30 April                                       387.2            385.3
Potentially dilutive shares issuable under share option schemes                                0.3              0.5
Estimated vesting of Long-Term Incentive Plan shares                                           1.3              1.5
Weighted average number of ordinary shares (diluted) at 30 April                             388.8            387.3
Diluted earnings per share (pence per share)                                                  1.1p            12.1p



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:

                                                                  2006                          2005
                                                                  £m      Pence per             £m      Pence per
                                                                              share                         share

Basic earnings                                                   4.2            1.1           47.1           12.2

Add back: exceptional items in operating profit,                34.7            8.9            9.3            2.5
after tax
Deduct: reversal of impairment of associate                        -              -          (1.1)          (0.3)
Adjusted earnings                                               38.9           10.0           55.3           14.4


5.   Dividends

Dividends declared and paid by the Group are as follows:

                                                                  2006                          2005
                                                           Pence per             £m      Pence per             £m
                                                               share                         share


Interim dividend paid                                            2.6           10.1            2.6            9.9

Final dividend proposed                                          5.8           22.5            5.8           22.4
                                                                 8.4           32.6            8.4           32.3

                                                                                              2006           2005

                                                                                                £m             £m
Paid during the year                                                                          32.6           31.6



A final dividend in respect of 2005/06 of 5.8 pence per share (£22.5m) was
proposed by the Directors after the balance sheet date.  Under IFRS, this
dividend has not been provided for in the financial statements.

Subject to approval of shareholders at the Annual General Meeting to be held on
6 September 2006, the final dividend will be paid on 19 September 2006 to
shareholders on the register at the close of business on 18 August 2006.


6.   Cash generated from operations

                                                              2006           2006        2005           2005
                                                                £m             £m          £m             £m
Profit for the year                                                             5.3                           48.1
Adjustments for:
Exceptional items - non-cash amounts                            37.8                           7.1
Depreciation and amortisation                                   67.2                          68.6
Profit on sale of non-current assets                           (7.1)                         (1.8)
Share of profit of associates (after tax)                      (4.1)                         (3.4)
Other finance income                                           (1.2)                         (1.1)
Equity settled share-based payment expenses                      0.1                           1.1
Interest income                                                (2.3)                         (4.7)
Interest expense                                                14.6                          17.9
Income tax expense                                               5.7                          16.2
                                                                              110.7                           99.9
Changes in working capital:
- Inventories                                                  (4.2)                         (9.1)
- Trade and other receivables                                   13.1                         (9.5)
- Trade and other payables                                      18.5                          11.7
- Provisions and employee benefits                             (5.2)                         (1.4)
                                                                               22.2                          (8.3)
Cash generated from operations                                                138.2                          139.7



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

                                                                                           2006             2005
                                                                                            £m                £m
Operating profit before exceptional items                                                    60.4            82.6
Depreciation and amortisation                                                                67.2            68.6
EBITDA                                                                                      127.6           151.2
Working capital movement                                                                     27.4           (6.9)
Exceptional cash costs                                                                      (4.6)           (2.5)
Other                                                                                      (12.2)           (2.1)
Cash generated from operations                                                              138.2           139.7
Capital expenditure                                                                        (62.7)          (53.6)
Proceeds from sales of assets and investments                                                13.2             6.7
Taxation                                                                                   (13.5)          (23.7)
Interest                                                                                   (12.0)          (13.3)
Free cash flow before net acquisitions/disposals and dividends                               63.2            55.8
Dividends                                                                                  (32.6)          (31.6)
Net (acquisitions)/disposals of subsidiaries                                                  0.5          (11.7)
Net cash flow                                                                                31.1            12.5
Proceeds from issue of share capital                                                          2.6             2.6
Net purchase of own shares                                                                      -           (2.1)
Borrowings (acquired)/disposed of                                                           (2.6)               -
Non-cash movements                                                                          (6.1)             1.7
Net debt movement                                                                            25.0            14.7
Opening net debt*                                                                         (262.8)         (275.4)
Closing net debt                                                                          (237.8)         (260.7)


* Opening net debt at 1 May 2005 has been restated for the effects of the
adoption of IAS 39, as explained further in note 9 below.


8.   Acquisitions and disposals

On 30 September 2005, the Group acquired 100% of the voting share capital of
Timmermans NV, the largest office products wholesaler in the Benelux region of
Europe. The effect of the acquisition on the Group's assets and liabilities was
as follows:

                                                                                       Carrying  Provisional fair
                                                                                  values before            values
                                                                                 acquisition £m                £m
Intangible assets                                                                             -               1.7
Property, plant and equipment                                                               0.6               3.4
Other working capital items and provisions                                                  7.3               5.2
Other interest-bearing loans and borrowings                                               (2.6)             (2.6)
Net assets acquired                                                                         5.3               7.7
Goodwill                                                                                                      2.8
Consideration                                                                                                10.5
Consideration satisfied by:
Cash paid of £11.7m, less cash and cash equivalents acquired of £1.2m                                        10.5



The fair value adjustments relate to the recognition of intangible assets, the
valuation of land and buildings and the alignment of accounting policies within
working capital and provisions.  The fair value adjustments contain some
provisional amounts; these will be finalised in the accounts to 30 April 2007.

The Group paid £11.7m as consideration for the purchase of Timmermans, acquired
cash and cash equivalents of £1.2m and acquired borrowings of £2.6m, as shown in
the table above. Additional consideration, of up to £2.8m, is payable to the
previous owners depending on the performance of the business in future financial
periods.

In July 2005, the Group sold its Office Products Manufacturing business, John
Dickinson, for a loss of £1.7m.  In December 2005, the Group sold its plastic
coating and laminating business, BSK, in the Plastic Packaging segment for a
loss of £2.6m.  Total proceeds for the disposals in the year were £11.0m, net of
cash and cash equivalents disposed of.

In August 2004, the Group acquired BPB Recycling, a recovered paper collection
business, from BPB Plc for consideration of £9.4m.  Negative goodwill of £0.2m
arose, which was credited to the income statement.



9.   Basis of preparation - adoption of IFRS

The financial statements for the year to 30 April 2006 have been prepared under
International Financial Reporting Standards, as adopted for use in the EU
(IFRS).  The 2004/05 comparative information has been restated from UK GAAP
accordingly, other than for financial instruments, in respect of which the Group
has chosen to adopt IAS 32 and IAS 39 from 1 May 2005.  A comprehensive analysis
and explanation of the adjustments made by the Group on the transition to IFRS
from UK GAAP was first published on 13 October 2005 and a copy of this
announcement can be found on the Company's website www.dssmith.uk.com/
invest-report.asp.


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