Final Results

Smith (DS) PLC
30 June 2005

30 June 2005

                   DS SMITH PLC - 2004/05 PRELIMINARY RESULTS

DS Smith Plc (LSE:SMDS), the international packaging manufacturer and office
products wholesaler, announces its results for the year ended 30 April 2005.

HIGHLIGHTS

Financial
     
•    Turnover £1,624.9m (2003/04: £1,488.5m)

•    Adjusted(1) profit before tax £76.1m (2003/04 restated(2): £64.8m; as
     previously reported: £81.4m)

•    Adjusted(1) earnings per share 14.7p (2003/04 restated(2): 13.6p; as
     previously reported: 16.9p)

•    Free cash inflow before dividends and net acquisitions £55.4m (2003/04:
     £63.0m)

•    Final dividend up 0.2p to 5.8p giving a full year dividend of 8.4p
     (2003/04: 8.2p)

•    Results after exceptional items and amortisation of intangibles: profit
     before tax £57.1m (2003/04 restated(2): £61.2m; as previously reported: 
     £77.8m); earnings per share: 10.1p (2003/04 restated(2): 12.6p; as 
     previously reported: 15.9p)

Operations
     
•    Results impacted by a weak paper market and c.£16m of higher energy and
polymer costs

•    Corrugated Packaging:
          
     -    Existing business continued its profit growth

     -    Linpac Containers contributed £21.0m to operating profit in first 
          full year's ownership

     •    Office Products Wholesaling increased profits for the third 
          successive year
     
(1)  before exceptional items and amortisation of intangibles - see note 2 to 
     the accounts

(2)  restated for the changes in accounting policy resulting from the adoption 
     of FRS 17 'Retirement benefits' and UITF Abstract 38 'Accounting for ESOP 
     trusts'

Commenting on the results, Chairman, Antony Hichens said:

'Our strategy to enhance earnings through acquisition and organic development
enabled the Group to produce a commendable result in a very challenging
environment which adversely affected profits in both our Paper and Plastic
Packaging businesses.  We made progress in Corrugated Packaging, thanks both to
an improved result from our existing business and to the substantial
contribution from our first full year of ownership of Linpac Containers.  The
Spicers Office Products Wholesaling business continued to advance, helped by
moving into profit in Germany.  Given the benefits now accruing from our
enlarged Corrugated Packaging business, the improving performance of Spicers and
the Group's commitment to generating strong free cash flow, the Board is
proposing an increased final dividend.
                                                 
'As stated in our April trading update, we have begun 2005/06 with energy and
other input costs at considerably higher levels than at the start of 2004/05.
Since April, future energy costs look like being even higher than previously
expected.  We anticipate delivering the previously indicated synergies from the
integration of Linpac Containers and achieving a further advance at Spicers, but
the extent to which these benefits will be offset by additional energy costs is
uncertain.  We will continue our focus on cost recovery and cash generation.'


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 7291

Richard Mountain/Robert Gurner

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 Company's
website (www.dssmith.uk.com) at 9.30am and a recording of the briefing will be
available on the website within 24 hours of the meeting.

CHAIRMAN'S STATEMENT

In 2004/05, a further weakening in the paper market and sharply higher energy
and polymer costs created a very challenging environment, which was reflected in
lower profits in both our Paper and Plastic Packaging businesses.  Nevertheless,
our strategy to enhance earnings through acquisition and organic development
enabled the Group to produce a commendable result.  We made progress in
Corrugated Packaging, thanks both to an improved result from our existing
business and to the substantial contribution from our first full year of
ownership of Linpac Containers.  The Spicers Office Products Wholesaling
business continued to advance, helped by moving into profit in Germany.

The Group's adjusted(1) earnings per share were 14.7 pence (2003/04 restated(2):
13.6 pence).  A strong cash flow, before dividends and acquisitions, of £55.4
million (2003/04: £63.0 million) enabled the Group to maintain a healthy balance
sheet, benefiting from the new financings put in place in the year.  The result
includes a significant charge in respect of DS Smith's UK defined benefit
pension scheme for the first time for many years and is now reported under the
FRS 17 pensions accounting standard.  As required in the accounting standard,
the 2003/04 result has been restated to include a pension charge in that year.
In May 2005, the Group introduced further changes to the pension scheme to
mitigate the higher cost of providing pensions.  We also increased the cash
payments into the scheme from £10 million to £14 million per annum.

We are now well advanced with the integration of Linpac Containers and
generating the expected synergies, despite the delay which resulted from the
referral of the acquisition to the Competition Commission; the acquisition
finally received unconditional clearance in October 2004.
The Group's financial performance reflects the benefits of the drive over the
last three years to raise the profit contribution of our non-Paper activities.
This has largely compensated for both the sharp cyclical fall in Paper profits
and accounting for the cost of the pension scheme.  In Paper and Corrugated
Packaging we began to generate considerable benefits from our enlarged position
in UK Corrugated Packaging, which materially offset the challenging conditions
in UK Paper, while we continued the development of our corrugated packaging
business in continental Europe.  We further strengthened the UK Paper business
by enlarging our recovered paper collection operations and by concluding a major
long-term supply agreement with BPB plc for plasterboard liner paper, an
important diversification for our paper sales into a growth market.  In Office
Products, Spicers continued its development in continental Europe; the German
business advanced into solid profit, the Spanish operation grew rapidly, and we
successfully launched the new Italian business.

Although trading conditions remain difficult, the Group has in recent years
taken steps to reduce its reliance on the cyclical Paper business and has
demonstrated its commitment to generating strong free cash flow.  With the
benefits now accruing from the enlarged Corrugated Packaging business and the
improving performance of Spicers, the Board is proposing a 0.2 pence increase in
the final dividend to 5.8 pence, giving a full year dividend of 8.4 pence (2003/
04: 8.2 pence).

Outlook

As stated in our April trading update, we have begun 2005/06 with energy and
other input costs at considerably higher levels than at the start of 2004/05.
Since April, future energy costs look like being even higher than previously
expected.  We anticipate delivering the previously indicated synergies from the
integration of Linpac Containers and achieving a further advance at Spicers, but
the extent to which these benefits will be offset by additional input costs is
uncertain.  We will continue our focus on cost recovery and cash generation.

Antony Hichens
Chairman

CHIEF EXECUTIVE'S REVIEW

Overview

At the start of 2004/05, we predicted a difficult year ahead and this proved to
be the case.  The external trading environment in Paper and Corrugated Packaging
remained weak, the Group had to absorb approximately £9 million of increased
energy costs and approximately £7 million of higher polymer costs, we faced a
Competition Commission inquiry into our acquisition of Linpac Containers, and
our results included an £11.7 million net pension charge, the first such charge
incurred in many years.  I believe the Group has responded well to the
challenges, generating satisfactory earnings, particularly at this low point in
the paper cycle, and maintaining a strong balance sheet.  We had a significant
advance in profit in our enlarged Corrugated Packaging business; in addition the
Spicers Office Products Wholesaling business increased profits for the third
successive year, while further developing its continental European business.

Following the completion of the triennial valuation of our UK defined benefit
pension scheme, the Group introduced a number of changes to the scheme to reduce
the impact of the increasing cost of pensions.  We also raised our payments into
the scheme from £10 million to £14 million per annum.  The Group's result for
2004/05, which includes a significant charge in respect of the UK pension
scheme, is now reported under the FRS 17 pensions accounting standard and the
2003/04 result  has been restated as required by accounting standards; under the 
previously applied SSAP 24 accounting standard there was no charge.  This change 
aids comparison between financial years and largely anticipates the 
International Accounting Standard 19 for Pensions which the Group will apply in 
2005/06.

Financial Results

Group sales advanced by 9.2% to £1,624.9 million, the full year contribution of
Linpac Containers more than offsetting small reductions in some other segments.
Adjusted group operating profit was £83.9 million (2003/04 restated: £75.4
million) including a full year's contribution from Linpac Containers of £21.0
million, comprising £14.9 million (2003/04: £1.2 million from six weeks of DS
Smith ownership) from its operations and £6.1 million of synergy benefits in DS
Smith's existing operations.  The Group adjusted return on sales was 5.2% (2003/
04 restated: 5.1%) while adjusted return on average capital employed was 9.0%
(2003/04 restated: 9.6%).  Adjusted profit before tax was £76.1 million (2003/04
restated: £64.8 million).  If the £4.5 million of interest paid on the increased
debt attributable to the Linpac Containers acquisition is taken into account,
the acquisition after synergies contributed a net £16.5 million to adjusted
profit before tax.  The adjusted profit contribution from Linpac Containers of
£21.0 million represents a return on invested capital of 12.3% even before the
full synergy benefits have been realised and its contribution to 2004/05
earnings per share was 3.0p.

The cash inflow before, dividends and net acquisitions, was £55.4 million (2003/
04: £63.0 million).  After net expenditure on acquisitions, there was a net cash
inflow of £12.1 million, which resulted in net borrowings of £260.4 million
(2003/04: £274.7 million) after the effect of exchange rate movements.  The
balance sheet remains strong with gearing at 53.1% (year end 2003/04 restated:
54.9%) and net debt/adjusted EBITDA of 1.7 times (2003/04 restated: 2.0 times).
The adoption of the FRS 17 pension accounting standard has resulted in a net
pension scheme deficit of £80.3 million being recognised on the balance sheet
which accounts for the gearing increasing from the previously reported figure
for 2003/04.

The sharp rise in energy costs during the year significantly affected our 2004/
05 result, particularly in Paper which incurs approximately three-quarters of
the Group's energy and fuel costs.  The Group's total costs for gas, electricity
and diesel increased from circa £64 million in 2003/04 to circa £73 million in
2004/05, principally due to a 30% year-on-year rise in the UK average price of
gas, which was partially hedged; gas accounted for approximately 50% of the 2004
/05 total energy and fuel expenditure.  The Group has benefited from having
hedged its UK electricity until October 2005 but current market prices are
substantially higher.  Looking forward, the Group expects to incur in 2005/06 a
level of increase in energy and fuel costs at least of the scale of that seen in
2004/05 and possibly even greater, depending on energy price developments.
                                     
Paper and Corrugated Packaging

In our largest segment, Paper and Corrugated Packaging, which accounted for 55%
of Group sales and 62% of adjusted operating profit, demand was slightly
stronger than in the previous financial year but pricing remained very
competitive throughout the supply chain.  Adjusted operating profit was 26%
higher than last year as a result of a full year's contribution from Linpac
Containers and increased profits from our existing UK Corrugated operations
which was partly offset by a further significant fall in profits from Paper.

We achieved a good result from our UK Corrugated Packaging operations, despite
the heavy demands placed on management during the five-month-long Competition
Commission inquiry into the Linpac Containers acquisition.  After receiving
unconditional clearance for the deal from the Commission, we proceeded rapidly
with the integration and restructuring.  We have already generated substantial
synergies and are confident that, by early 2006/07, we will achieve the £14.5
million per annum originally indicated.  Our continental European operations
also produced a good result, with the Polish business continuing to perform
strongly, our Turkish operation reporting a profit after a number of difficult
years and our associate in the Ukraine making further good progress.

Although profits in Paper were significantly affected by the pressure on margins
from depressed selling prices and higher energy costs, we continued to raise
productivity and strengthened the business through a number of strategic moves.
We enlarged our important Severnside Recycling recovered paper collection
operation through the acquisition of BPB plc's waste collection depots and
advanced the development of sales in higher added-value paper products by
concluding a long-term agreement to supply plasterboard liner paper to BPB plc,
representing an important diversification into a growth market.

Plastic Packaging

Our Plastic Packaging business had a tough year.  Sales, which account for 12%
of the Group total, were 6% lower than the previous year and adjusted operating
profit was 29% lower.  The sharp fall in adjusted operating profit was mainly
due to the reduced sales and an approximate £3 million under-recovery of the
polymer cost increases, this despite securing price increases across our
customer base.  Sales of industrial returnable transit packaging (RTP) were
lower due to a slowdown in new crate contracts, exacerbated by some RTP
customers deferring orders owing to the sharp rise in polymer prices.  Sales in
the liquid packaging and dispensing business were affected by lower demand from
the US carbonated soft drinks sector.  The combined result of our three smaller
speciality businesses was flat year-on-year and, as indicated previously, an
exceptional impairment charge of £5.8 million was taken against the goodwill of
one of these, a business providing packaging management services.
                   
Office Products

Spicers, our Office Products Wholesaling business, accounted for 31% of total
Group sales and 26% of adjusted operating profit.  Sales were flat while
adjusted operating profit increased by 10%.  Spicers' UK and French businesses
continued to perform well with the UK having returned to sales growth during the
second half of the year.  Spicers' development businesses in continental Europe
made good progress: Spicers Germany moved into profit; Spicers Spain continued
to grow well and reduced its losses; and initial sales in Italy have been
encouraging since our launch there in November.

In Office Products Manufacturing, adjusted operating profit fell to break-even,
reflecting the continued difficult trading conditions in the envelope market.

Strategy

The strategy we have pursued for the last four years of Improve and Develop
remains in place.  We have reduced the Group's reliance on the cyclical Paper
business and developed and improved our Corrugated Packaging, Plastic Packaging
and Office Products Wholesaling activities in order to enhance the quality of
earnings.  Our aggressive programme to raise operational performance while
pursuing opportunities to develop our strong market positions has resulted in a
significant rise in the profit contribution from the Group's non-Paper
operations.  Adjusted return on average capital employed was 9.0%, primarily
reflecting our current poor returns in Paper at this low point in the paper
cycle.  Return on average capital employed is a key measure for us and we are
making determined efforts to improve it.  We are continuing our programme to
reduce costs and raise operational performance while concentrating capital in
areas offering good profit opportunity.  We will maintain investment in our key
assets; capital expenditure projects in 2005/06 will include completion of the
new green-field corrugated packaging plant in Poland and upgrading paper
manufacturing at our Kemsley and Wansbrough mills to underpin the supply of
plasterboard liner paper to BPB plc.

In Paper and Corrugated Packaging our focus in the UK is on realising the
remaining synergies from the Linpac Containers acquisition and improving the
return from our substantial integrated position.  This will be through cost
reduction and growing the sales of differentiated products.  In continental
Europe we will seek development opportunities arising from any further
consolidation in the industry and in the higher growth markets of eastern
Europe.

In Plastic Packaging, the priority is to improve significantly the profitability
of our two strategic businesses.  In liquid packaging and dispensing this will
be through increasing cost competitiveness in the mature end-use sectors, such
as wine and carbonated soft drinks, while concentrating development resource in
faster-growing end-use sectors such as dairy products and fruit juice.  In
industrial RTP, profit growth will be through maintaining our strong existing
market positions while following our customers into new geographic markets.

Spicers is already producing high levels of return on its capital employed but
we believe it has potential for further profit improvement.  Our medium term
goal is to see the Spicers' business model profitably established in the major
markets of western Europe.  In our established markets of the UK, Ireland and
France, the key objective is to generate profitable sales growth; our goal in
Germany is to build profits further; we expect the Spanish business to be in
profit in 2005/06 while we shall be driving sales in our new Italian operation.

Our People
           
I would like to thank all our employees worldwide for their considerable efforts
over the last year.  As I travel around the Group, I am continually impressed
with the skills of our people and their contribution to raising our performance.
I particularly wish to acknowledge the support and commitment that our new
colleagues from Linpac Containers maintained through the uncertain period of the
Competition Commission hearing.

Prospects

The considerable operational and strategic progress made over recent years
provides a sound base from which to tackle the current tough trading environment
and the uncertainty as to the future level of increase in energy costs.  We have
opportunities for improvement and we will be pursuing these hard in 2005/06.

Tony Thorne
Group Chief Executive

FINANCIAL REVIEW

The major drivers of the 2004/05 results were a full year's contribution from
Linpac Containers, significant energy and polymer cost increases and the
adoption of FRS 17 'Retirement benefits' for pensions accounting; the effects of
which are explained in detail below.  The 2003/04 figures have been restated for
the effects of changes in accounting policy, as required by the accounting
standard.

Group Profit and Loss Account

Turnover for the financial year ended 30 April 2005 increased by 9.2% over the
prior year; it was 7.4% higher in the first half of the year and 10.9% higher in
the second half compared to the same periods in 2003/04.  Excluding the net
increase in turnover from Linpac Containers and the effect of movements in
foreign exchange rates, turnover was up 0.8% on 2003/04 (down 1.2% in the first
half of the year and up 2.7% in the second half).
                                                    
Adjusted group operating profit, which includes an operating pension charge of
£12.8 million (2003/04 restated: £13.4 million), increased by 11.3%, from £75.4
million in 2003/04 (as restated) to £83.9 million in 2004/05.  The adjusted
return on sales grew from 5.1% in 2003/04 (as restated) to 5.2% in 2004/05.  The
adjusted return on capital employed (which is defined as the period's annualised
adjusted operating profit divided by the average month-end capital employed over
the period) decreased from 9.6% (as restated) to 9.0%.

The Group's 2004/05 adjusted total operating profit included £4.1 million as the
Group's share of associated undertakings' adjusted operating profit, up £1.1
million from last year.  This increase related mainly to the inclusion of profit
from Tri-Wall KK, the Group's 33.3% owned Japanese packaging company (a previous
impairment against this business was also released as an exceptional item, as
described below).  The Group's share of operating profit from OJSC Rubezhansk,
the Group's 39% owned paper and packaging company in the Ukraine, was slightly
ahead of last year.

Net interest expense rose from £10.4 million in 2003/04 to £13.0 million in 2004
/05.  The Group benefited from lower average interest rates as a result of
increasing the proportion of borrowings in euros, but the total interest charge
was higher as a result of the interest on the additional borrowings used to
finance part of the Linpac Containers acquisition in March 2004.  Other finance
income of £1.1million (2003/04 restated: other finance expense of £3.2 million)
is included in accordance with FRS 17 and is explained in detail in the pensions
accounting section below.  Adjusted profit before tax was £76.1 million (2003/04
restated: £64.8 million).  Group adjusted interest cover, excluding other
finance income, was 6.8 times (2003/04 restated: 7.5 times).

The Group's net exceptional charges against profit before tax of £9.6 million
(£8.2 million after tax) (2003/04: £nil), comprise: exceptional restructuring
costs of £4.9 million related to the integration of Linpac Containers; a
provision of £5.8 million for an impairment against the goodwill related to a
small business in Plastic Packaging; and the release of a previous impairment
against the investment in Tri-Wall KK of £1.1 million.  Total operating profit
after exceptional items and amortisation of intangibles fell from £74.8 million
in 2003/04 (as restated) to £69.0 million in 2004/05.  Profit before tax after
exceptional items and the amortisation of intangibles was £57.1 million (2003/04
restated: £61.2 million).

The Group's effective tax rate, excluding exceptional items and the amortisation
of intangibles, at 25.0%, was 1.2% below last year's rate of 26.2%.  The rate
benefited from a prior year credit of £4.4 million following the agreement of
certain matters with overseas tax authorities.  The effective tax rate is
expected to return to a rate closer to the UK statutory rate in the coming year.

Adjusted earnings per share (before exceptional items and amortisation of
intangibles) increased from 13.6p in 2003/04 (as restated) to 14.7p in 2004/05,
reflecting the higher profit before tax and the lower effective tax rate.  The
proposed final dividend is 5.8p, an increase of 0.2p or 3.6% on the final
dividend last year.  The total dividend for the year is 8.4p (2003/04: 8.2p).
Dividend cover before exceptional items and amortisation of intangibles rose
from 1.5 times in 2003/04 (as restated) to 1.7 times in 2004/05.

Cash Flow

Cash flow from operating activities was £139.3 million, up £7.5 million from
last year, reflecting higher operating profit.  The Group made payments of £10.0
million into the UK Group Pension scheme in both years (which form part of cash
flow from operating activities) and has announced its agreement with the
Trustees of the UK Group pension scheme to increase its contributions to £14.0
million in subsequent years.  Purchase of fixed assets was £53.6 million, £14.6
million below depreciation, and included the first expenditure on the
development of a corrugated box plant on a green-field site in Poland.

Tax payments were £23.7 million, approximately the same as the current tax
charge for the year but higher than last year's payments of £17.9 million as a
result of reversing deferred tax timing differences, mainly arising from reduced
capital expenditures.

Free cash flow (before dividends and net acquisitions) was £55.4 million (2003/
04: £63.0 million).  Cash dividend cover, defined as free cash flow divided by
dividends paid/declared for the year, was 1.7 times, down from 2.1 times in 2003
/04, reflecting higher interest costs and cash tax payments in 2004/05.

The net cash outflow on acquisitions and disposals related mainly to the
acquisition of BPB Recycling for £9.4 million during the period.  The amount in
2003/04 was primarily the consideration and costs, net of acquired cash, for the
acquisition of Linpac Containers of £166.8 million.

Financial Position

Shareholders' funds totalled £482.3 million at 30 April 2005, down from £494.4
million at 30 April 2004, as restated.  Shareholders' funds have been decreased
by a total of £80.3 million at 30 April 2005 (2003/04 restated £54.7 million)
through the inclusion of the after-tax FRS 17 pension liability.  Net assets per
share were 126p (2003/04 restated: 129p), or 147p (2003/04: 143p) if the FRS 17
pension scheme liability is added back.

The Group's closing net borrowings were £260.4 million, £14.3 million lower than
at the end of last year.  In August 2004, the bank borrowings repayable by
September 2005 used to part finance the acquisition of Linpac Containers were
refinanced from the proceeds of a private placement, due in 2014 and 2016, of
US$200 million.  In addition, the Group's previous £325 million revolving credit
facilities were replaced in April 2005 by a syndicated revolving credit facility
of £250 million which expires in 2010; these re-financings have extended the
weighted average maturity of the Group's borrowings to 6.9 years and reduced
their cost.

Gearing was 53.1% (2003/04 restated: 54.9%; as previously reported: 48.9%).  The
increase in gearing relative to the previously reported figure is due to the
inclusion of the net pension scheme liability.  Adjusted interest cover was 6.8
times, compared with 7.5 times last year (as restated), the lower cover
reflecting the additional interest arising on the borrowings used to part
finance the purchase of Linpac Containers in March 2004.  The ratio of net debt
to EBITDA (before exceptional items) was 1.7 times (2003/04 restated: 2.0
times).

International Financial Reporting Standards (IFRS)

The Group's project to implement the transition from reporting under UK GAAP to
IFRS is largely complete.  As the Group has adopted FRS 17 for pension
accounting in 2004/05 and, with it, has anticipated its pensions accounting
under IFRS (as FRS 17 is consistent with the Group's planned adoption of IAS 19,
which governs pensions accounting under IFRS), it is expected that the
transition to IFRS will not otherwise have a significant effect on the profit
and loss account or shareholders' funds in the future.  A reconciliation of the
UK GAAP 2004/05 results to IFRS will be provided in the autumn in advance of
announcing the Group's Interim Results.

Pensions Accounting - Adoption of FRS 17

DS Smith previously reported under the SSAP 24 pensions accounting standard.
Following the 2004 triennial valuation of the UK defined benefit pension scheme
and in anticipation of the introduction of IFRS for 2005/06, the Group has
adopted FRS 17 'Retirement benefits' for financial year 2004/05.  This change
has had a profound effect on the Group's reported results.

Under FRS 17 a charge of £12.8 million (2003/04 restated: £13.4 million) has
been made against operating profit for the 'service cost' that results from
employees accruing additional pension during the year.  This charge should
remain relatively stable over time.

FRS 17 also requires the inclusion in the profit and loss account, beneath
operating profit, of the net return on the scheme's own assets and liabilities
as 'other finance income or expense'.  This item is the difference between the
expected return on a scheme's assets and the interest cost on the liabilities
and can be volatile, since it is affected by external factors such as expected
asset returns and interest rates, and whether there is a surplus or deficit in
the scheme.  In 2004/05, the Group recorded net other finance income of £1.1
million, whereas in 2003/04 there was net other finance expense of £3.2 million;
the year-on-year difference of £4.3 million was principally due to a lower
opening scheme deficit and higher investment returns in 2004/05.

Finally, under FRS 17 the Group is required to recognise the after-tax deficit
of its pension scheme in the balance sheet as a reduction in net assets.  This
results in greater balance sheet volatility: the after-tax deficit was £80.3
million at 30 April 2005, £54.7 million at 30 April 2004 and £93.8 million at 30
April 2003.  The funding position of the scheme, being the difference between
the scheme's assets and liabilities, is reflected in the deficit, and is
sensitive to stock market conditions and actuarial assumptions.  The value of
the scheme's assets depends primarily on the level of stock markets and
investment returns.  The amount of the liabilities depends on a number of
actuarial assumptions, including discount and inflation rates, future salary and
pension increases and mortality.  The presence of a pension scheme liability or
asset on the balance sheet brings greater volatility to the Group's gearing and
net assets per share.

OPERATING REVIEW

In anticipation of the UK legislation requiring changes to the content of
companies' Operating and Financial Reviews to be published from April 2006
onwards, we have increased the detail provided on our markets in this review.

Paper and Corrugated Packaging


                                                                           2005                  2004 restated(2)

Turnover                                                                £896.9m                          £748.9m
Adjusted(1) operating profit                                             £52.3m                           £41.4m
Adjusted(1) return on sales                                                5.8%                             5.5%
Adjusted(1) return on average capital employed                             7.9%                             8.0%
     
(1)  before exceptional items and amortisation of intangibles

(2)  restated for the changes in accounting policy resulting from the adoption 
     of FRS 17 'Retirement benefits' and UITF Abstract 38 'Accounting for ESOP 
     trusts'; the 2004 adjusted operating profit reported previously under the 
     SSAP 24 accounting standard was £50.5 million

The adjusted operating profit of £52.3 million (2003/04 restated: £41.4
million), which includes a pension charge of £9.1 million (2003/04 restated:
£9.1 million), advanced due to a strong performance from the existing Corrugated
Packaging operations, a full year £14.9 million contribution (2003/04: £1.2
million from six weeks of DS Smith ownership) from Linpac Containers and synergy
benefits of £6.1 million, which, combined, more than offset a significant
reduction in profits from Paper.

Market Overview

The European market for corrugated packaging is estimated to be approximately
€17 billion, equivalent to 20 million tonnes or 38 billion square metres(3).
Within this, the UK market is estimated to be approximately 10% of the total
European market.  Demand for corrugated packaging is principally influenced by
overall economic activity and manufacturing output.

In the calendar year 2004, the European market by weight for corrugated board
grew by 2.2%, compared with 1.3% in 2003(4).  In western Europe the market grew
by 1.1% (2003: 0.3%) while growth in eastern and central Europe continued to be
much stronger at 12.8% (2003: 10.9%).  In DS Smith's principal markets, demand
fell slightly in the UK and France, by 0.1% and 0.4%, respectively, while Italy
was 1.2% ahead and Poland and Turkey grew strongly by 16.6% and 14.2%,
respectively.  The ongoing trend towards the use of lighter-weight packaging for
cost and environmental reasons, resulted in demand, when measured by area, being
up 1.7% in the UK and up 1.6% in western Europe as a whole.  The market softened
as 2004 progressed and has subsequently weakened further in the early months of
2005; offtake in all the leading western European countries is reported to be
down year-on-year in the first quarter of calendar year 2005.

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 accounts for at least 55% of the corrugated market, has been
relatively strong due to the continuing growth of this economic sector.  Other
current growth segments are the home delivery of products from internet
purchases, and shelf-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 due to moderately high transport costs for a
low density product and the service requirements of customers.

Downward pressure on selling prices is an ongoing feature of the corrugated
packaging market due to the purchasing power of retailers and direct customers.
In addition, pricing and margins in corrugated packaging are strongly influenced
by pricing developments on CCM, the paper used as the principal component in
manufacturing corrugated packaging, which typically accounts for approximately
50% of the cost of a box.

Within the total estimated European market for CCM of circa 20 million tonnes,
approximately 75% is recycled paper.  European CCM producers sell their product
throughout Europe, so demand and pricing for CCM is heavily influenced by demand
for corrugated packaging and the CCM supply position in Europe as a whole.
During 2003 and 2004, low growth in corrugated packaging and some excess CCM
manufacturing capacity resulted in CCM prices being depressed.  This situation
has been exacerbated in early 2005 by the commissioning of four new continental
European CCM machines, with an aggregate capacity of approximately 1.2 million
tonnes.  Although this new capacity, which is concentrated on lighter-weight
papers, has been partly offset by the removal of an estimated 0.6 million tonnes
of older capacity since the start of 2004, it has resulted in a continued
destabilisation of selling prices throughout the European market.  In the next
two years, the level of capacity additions is expected to be much lower than in
the last two years.  However, the outlook for CCM prices in the coming year will
depend upon future market growth across Europe and the extent to which
uneconomic capacity is rationalised further.

The squeeze on paper producers' margins from depressed selling prices has been
exacerbated by increased energy costs and by the relatively high cost of
recovered paper, the principal raw material for recycled CCM.  The continuing
high level of demand for recovered paper in Asia, some of which is being
supplied from Europe, is contributing to a modest secular increase and
short-term fluctuations in the price of recovered paper 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 and for which
we receive revenue to set against the cost of recovered paper.  The price of
paper PRNs remained relatively low during 2004 but has firmed in calendar year
2005 to date.

2004/05 Performance - UK

In the UK, the Group benefited from a substantial increase in contribution from
Corrugated Packaging, which more than offset the reduced contribution from
Paper.

DS Smith Packaging, our UK Corrugated Packaging business, produced a good result
despite flat demand, due to higher profits from DS Smith's existing operations,
the £14.9 million (2003/04: £1.2 million) first full year's profit contribution
from the former Linpac Containers business and £6.1 million of initial synergy
benefits from the integration of the two businesses.  Prices were increased
early in the financial year to recover some of the higher input costs but market
pressure resulted in some erosion in the second half of the financial year.

Our drive to raise efficiency lifted profitability across our conventional
corrugated network.  Our speciality and heavy duty segments, which concentrate
on higher added-value products, advanced further, particularly due to better
returns from several plants in which we have invested recently.  Our sheet
feeding operations, which supply corrugated sheet board, benefited from raised
service levels in a market which continued to be highly competitive and affected
by industry over-supply.

The referral of the Linpac Containers acquisition to the Competition Commission
meant that we could not begin the process of generating the expected synergies
until the second half of the financial year.  Following the Commission's
conclusion in October 2004 that the acquisition would not lead to a substantial
lessening of competition in the market, we rapidly began implementation of an
extensive integration programme.  The headquarters were merged, two factories
were closed with a high proportion of the business being successfully
transferred to other plants, and two plants are now being operated in tandem,
thereby reducing costs.  A new, combined raw materials procurement function is
producing the envisaged benefits in paper sourcing.  Despite the delay in
beginning the integration process, we are confident of generating the expected
pre-tax synergies of £14.5 million per annum, identified at the time of the
acquisition; £6.1 million has been achieved to date and we anticipate generating
at least 75% of the £14.5 million in 2005/06, with the balance being generated
in 2006/07. Exceptional restructuring charges of £4.9 million were incurred in
2004/05 with a cash cost of approximately £2.5 million.

At our UK paper business, St Regis, profits were again significantly lower than
in the previous year due to continuing depressed prices for our main product,
CCM, and margins were squeezed further by substantial increases in gas costs and
the relatively high cost of our raw material, recovered paper.  The impact of
these external factors was partly mitigated by improvements in productivity and
output volume, favourable sales mix, and improved raw material and energy usage.
The Kemsley paper mill, which accounts for over 50% of St Regis's paper
production, achieved another year of record total output and production per
employee, due to its ongoing programme of process optimisation.  Wansbrough and
Hollins mills increased their output through increased efficiency and operating
rates respectively; both mills benefited from an improved sales mix as a result
of the Linpac Containers acquisition.

In March 2005 we made a major advance in our drive to increase sales of higher
added-value product by entering into a long-term agreement with BPB plc for the
supply of plasterboard liner paper.  St Regis has been developing its sales of
this product in recent years and, under this agreement, will raise sales to BPB
plc to 100,000 tonnes per annum.  In order to satisfy this supply agreement, St
Regis will undertake a £30 million capital expenditure programme to upgrade
existing machines at its Kemsley and Wansbrough mills over the next two years.
This programme will also enhance the quality of St Regis' CCM and coreboard,
used for manufacturing tubes.

St Regis raised its CCM prices in March 2005, seeking to recover part of the gas
and recovered paper cost increases, but this had no significant effect on the
2004/05 result.  The extent to which this will benefit the Group's overall
result in 2005/06 depends upon developments in prices throughout the corrugated
packaging supply chain during the year; currently paper pricing across Europe
remains weak.

The results of St Regis' subsidiary, Severnside Recycling, were affected by
increased competition for recovered paper with strong export demand leading to
Severnside having to pay a higher price to source its recovered paper.  It
further enlarged its recovered paper collection operations with the acquisition,
in August 2004, of the five collection depots of BPB Recycling; this
substantially increased Severnside's ability to meet St Regis' recovered paper
requirement from its own collection infrastructure.  Severnside also increased
its trading in recycled materials and grew its business in managing customers'
entire waste recycling and disposal needs through facilities management.

2004/05 Performance - Continental Europe

Our continental European division, DS Smith Kaysersberg, performed well and
reported a small increase in profits despite difficult conditions in many of its
markets; it benefited from strong progress in the Polish and Turkish businesses.

The French paper mills, which principally manufacture solid board, increased
their productivity and sales volume following an investment programme, but
margins were squeezed, despite improved productivity, by weak market conditions,
lower selling prices and higher energy costs.  Results at the French Corrugated
Packaging operations were lower due to a decline in the French market and
intense price pressure from customers.  In Italy, we increased sales volume and
market share in a difficult market, assisted by good productivity levels from
our well-invested factories.  However, profits were affected by lower selling
prices due to competitor activity.

Output and profits at the Polish business advanced strongly, in line with our
plan to build sales at our existing factory ahead of the opening of our new
green-field factory at Kutno, west of Warsaw, in autumn 2005.  In Turkey, our
programme of action over the last two years to raise operational performance and
increase market share, enabled the business to record a further increase in
sales and to move into profit for the year.  Our associate operation in the
Ukraine, OJSC Rubezhansk Paper and Packaging Mill, continued to perform well,
benefiting from the recent major programme of investment.

Plastic Packaging



                                                                            2005            2004 restated(2)
Turnover                                                                 £195.9m                     £208.7m
Adjusted(1) operating profit                                               £9.9m                      £14.0m
Adjusted(1) return on sales                                                 5.1%                        6.7%
Adjusted(1) return on average capital employed                              7.1%                       10.0%
     
(1)  before exceptional items and amortisation of intangibles

(2)  restated for the changes in accounting policy resulting from the adoption 
     of FRS 17 'Retirement benefits' and UITF Abstract 38 'Accounting for ESOP 
     trusts'; the 2004 adjusted operating profit reported previously under the 
     SSAP 24 accounting standard was £15.2 million

DS Smith Plastics' adjusted operating profit of £9.9 million (2003/04 restated:
£14.0 million), which included a pension charge of £1.0 million (2003/04: £1.2
million), was adversely affected by lower sales, particularly in RTP, and in the
second half of the financial year by the under-recovery of polymer costs
following their sharp rise.

Market Overview

The bag-in-box market worldwide is estimated to be worth over $500 million and
has been growing at over 5% per annum by volume(5).  The principal uses of
bag-in-box packaging are for wine and carbonated soft drink concentrate but
there is growing usage in other sectors such as the dairy industry, edible oils,
fruit juices and chemicals.  In the USA, where usage is principally in the
carbonated soft drink concentrate industry, the market is estimated to be static
in volume while in Europe, where usage is primarily in the wine industry, the
market is estimated to be growing at over 10% per annum by volume.  Prices in
both the USA and Europe are under increasing pressure as the market matures.
Usage is at an early stage of development and growing rapidly in Asia.  The
market for taps, other than for bag-in-box systems, is fragmented across a wide
range of uses; a major sector supplied by DS Smith, principally in the USA, is
liquid detergent, which is estimated to be growing strongly.

The European market for RTP is fragmented into many sub-sectors but has in total
grown steadily in recent years, due to the increased requirement for multi-trip,
reusable packaging on cost and environmental grounds for some uses.  This market
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.

2004/05 Performance

In liquid packaging and dispensing, the bag-in box business was affected by
lower demand from the US carbonated soft drinks sector, increased competitor
activity in the European wine market and a change in mix towards lower
value-added bags.  The tap business produced an improved result, following
action in 2003/04 to reduce costs and strengthen sales and product development.

The RTP business was affected by a slowdown in new crate contracts, principally
from the brewing industry, after especially strong demand in 2003/04.  Margins
in the extruded sheet sector were additionally squeezed due to industry capacity
increases at a time of weaker demand and increased sourcing of packaging from
eastern Europe as some customers move their operations to that region.

The division's overall result was adversely affected in the second half of the
year by the sharp rise in polymer prices which ended the financial year some
35-40% higher than at the start of 2004/05 for our main polymer types.  Although
we raised our selling prices several times during the year it was not always
possible to recover these cost increases in full.  The cumulative effect of this
input cost under-recovery was approximately £3 million, largely concentrated in
the RTP business.  The high polymer prices also resulted in reduced sales in
sectors of the market such as crates and pallets, as some customers deferred
orders in the expectation that polymer prices would not remain at such high
levels.

The combined result of the three smaller speciality businesses was flat
year-on-year, and in one of these,which provides packaging management services
and was acquired in 1998, the Group took an exceptional impairment charge in
2004/05 of £5.8 million against its goodwill; this business is trading at around
breakeven and generating cash.

Office Products Wholesaling


                                                                          2005                2004 restated(2)
Turnover                                                               £499.7m                         £498.8m
Adjusted(1) operating profit                                            £21.7m                          £19.7m
Adjusted(1) return on sales                                               4.3%                            3.9%
Adjusted(1) return on average capital employed                           18.3%                           16.7%

(1)  before exceptional items and amortisation of intangibles
           
(2)  restated for the changes in accounting policy resulting from the adoption 
     of FRS 17 'Retirement benefits' and UITF Abstract 38 'Accounting for ESOP 
     trusts'; the 2004 adjusted operating profit reported previously under the 
     SSAP 24 accounting standard was £21.7 million

The adjusted operating profit of £21.7 million (2003/04 restated: £19.7
million), which included a pension charge of £1.7 million (2003/04: £2.0
million), advanced principally due to the German business moving into profit,
which more than offset the increased costs of the newly-launched Italian
business.

Market Overview

Spicers' principal office products wholesaling markets of the UK, France and
Germany are estimated to be worth approximately €9.0 billion, €7.7 billion and
€11.1 billion, respectively, and in 2004 were estimated to have declined by at
least 2%, with the traditional stationery sector declining at a higher rate than
this, and electronic office supplies (EOS) growing at up to 10% per annum(6).
There was growing evidence during 2004/05 of rising market volumes but prices
remained under pressure.  EOS, which now accounts for 40-50% of the total office
products market, is particularly price competitive and margins on the highest
volume EOS products continue to be eroded.  The value of the overall market is
also being eroded by the trend for consumers to buy lower specification or
own-branded products.

2004/05 Performance

Spicers' met its key objectives for the year: Spicers Germany moved into profit;
sales in the UK grew; the Italian business was successfully launched; the
Spanish business made progress towards profitability.  The good result for the
year was assisted by total costs being held constant despite the increased costs
required to establish the Italian business.

In the UK, turnover grew slightly in the second quarter of the financial year,
being the first quarter in which growth had been recorded for over three years;
this trend was maintained through to the financial year-end, despite some
renewed softening of the market in the final quarter.  Good service levels were
maintained and a sound financial performance was achieved due to further cost
reduction and productivity improvements.  Profits in Ireland were significantly
affected by reduced sales and price pressure in an especially weak market; costs
were reduced and sales improved towards the end of the financial year.

The French business continued to perform well and gained market share in a
challenging market environment by supporting its customers with service at a
record high level.  Spicers Germany achieved a profit for the year, helped by
exiting unprofitable business and reducing costs, while growing sales with
independent dealers.  The Spanish business continued to grow sales strongly and
reduced its losses; in addition to growing in the Barcelona area adjacent to its
distribution centre, it has begun to develop the market in the Madrid area.
Spicers Italy was launched in November 2004; initial catalogue sales were strong
and product sales to date have been encouraging.

Office Products Manufacturing


                                                                           2005              2004 restated(2)
Turnover                                                                 £46.8m                        £48.0m
Adjusted(1) operating profit                                               £nil                         £0.3m
Adjusted(1) return on sales                                                   -                          0.6%
Adjusted(1) return on average capital employed                                -                          2.2%

(1)  before exceptional items and amortisation of intangibles

(2)  restated for the changes in accounting policy resulting from the adoption 
     of the FRS 17 'Retirement benefits' and UITF Abstract 38 'Accounting for 
     ESOP trusts'; the 2004 adjusted operating profit reported previously under 
     the SSAP 24 accounting standard was £1.4 million

The adjusted breakeven result (2003/04 restated: £0.3 million), which included a
pension charge of £1.0 million (2003/04: £1.1million), was lower due to
substantial European industry over-supply in envelopes and the trend towards
own-label product.  Strengthened merchandising and new products assisted
increased sales of branded books; costs have been reduced further across the
business.  John Dickinson's leading brands, product range developments and
productivity initiatives provide a good base for improvement.

Group Profit and Loss Account

For the year ended 30 April 2005

                                              2005                                        2004
                                    Before   Exceptional
                               exceptional     items and                       Before 
                                 items and  amortisation                 amortisation  Amortisation              
                              amortisation            of                           of            of
                                        of   intangibles                  intangibles   intangibles         Total       
                               intangibles      (note 2)      Total        (restated)      (note 2)    (restated)    
                         Note           £m            £m         £m                £m            £m            £m


Turnover                    1      1,624.9            -     1,624.9            1,488.5            -       1,488.5
Group operating profit      1         83.9        (20.5)       63.4               75.4         (4.0)         71.4
Share of operating
profits of associated
undertakings                           4.1          1.5         5.6                3.0          0.4           3.4
Total operating profit                88.0        (19.0)       69.0               78.4         (3.6)         74.8
Net interest payable
and other similar
items                                (13.0)           -       (13.0)             (10.4)           -         (10.4)
Other finance income/
(expense)                              1.1            -         1.1               (3.2)           -          (3.2)
Profit on ordinary
activities before
taxation                              76.1        (19.0)       57.1               64.8         (3.6)         61.2
Tax on profit on
ordinary activities                  (19.0)         1.4       (17.6)             (17.0)           -         (17.0)
Profit on ordinary
activities after
taxation                              57.1        (17.6)       39.5               47.8         (3.6)         44.2
Minority interests -
equity                                (0.6)           -        (0.6)              (0.6)           -          (0.6)
Profit for the
financial year                        56.5        (17.6)       38.9               47.2         (3.6)         43.6
Dividends paid and
proposed                             (32.3)           -       (32.3)             (30.6)           -         (30.6)
Retained profit for
the financial year                    24.2        (17.6)        6.6               16.6         (3.6)         13.0

Earnings per share:         3
Basic                                                          10.1p                                         12.6p
Diluted                                                        10.0p                                         12.5p
Adjusted                             14.7p
                                                                                  13.6p
Dividends per share         4                                   8.4p                                          8.2p


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 2004/05 exceptional items relate to: restructuring costs of £4.9m
     related to integrating the operations of Linpac Containers; a £5.8m charge 
     for an impairment against goodwill in a small business in Plastic 
     Packaging; and a credit of £1.1m for the reversal of previous impairment of 
     an associate. Amortisation of intangibles was £9.4m.  See also Note 2.
     
(d)  The results for 2003/04 have been restated for the changes in accounting
     policy resulting from the adoption of FRS 17 'Retirement benefits' and UTIF
     Abstract 38 'Accounting for ESOP trusts'.

(e)  The Annual Report and statements for the year ended 30 April 2005 will be
     posted to shareholders in July 2005.

(f)  Subject to approval of shareholders at the Annual General Meeting to be
     held on 7 September 2005, the final dividend of 5.8p will be paid on 20th
     September 2005 to ordinary shareholders on the register on 19th August 
     2005.

(f)  The 2004/05 and 2003/04 results in this preliminary statement are not
     the Group's statutory accounts for these years.  The 2004/05 and 2003/04 
     results have been extracted from statutory accounts which contained 
     unqualified audit reports with no adverse statement under Section 237 (2) 
     or (3) of the Companies Act 1985.  The 2003/04 statutory accounts have been 
     filed with the Registrar of Companies.


Group Statement of Total Recognised Gains and Losses

For the year ended 30 April 2005
                                                                                       2005           2004
                                                                                                (restated)
                                                                                         £m             £m


Profit for the financial year                                                          38.9           43.6
Exchange differences on foreign currency net investments                              (0.3)          (7.7)
Actuarial (losses)/gains recognised in the pension scheme                            (31.2)           62.5
Movement on deferred tax relating to actuarial (losses)/gains                           9.5         (18.8)
Total recognised gains and losses relating to the financial year                       16.9           79.6
Prior year adjustments                                                               (67.6)
Total recognised gains and losses since last annual report                           (50.7)



Group Reconciliation of Movements in Shareholders' Funds

For the year ended 30 April 2005
                                                                                       2005             2004
                                                                                                  (restated)
                                                                                         £m               £m
Opening shareholders' funds:
As previously stated                                                                  562.0            472.9
Prior year adjustments                                                               (67.6)           (99.0)
Opening shareholders' funds as restated                                               494.4            373.9
Profit for the financial year                                                          38.9             43.6
Dividends                                                                             (32.3)          (30.6)
Retained profit for the financial year                                                   6.6            13.0
Exchange differences on foreign currency net investments                              (0.3)            (7.7)
Actuarial (losses)/gains recognised in the pension scheme                            (31.2)             62.5
Movement on deferred tax relating to actuarial (losses)/gains                           9.5           (18.8)
New share capital issued under optional schemes                                          2.6             1.8
Proceeds from rights issue (net of issue costs of £1.9m)                                   -            70.4
Transfer of share-based payment obligation                                               2.6               -
Net purchase of own shares                                                             (1.9)           (0.7)
(Decrease)/increase in shareholders' funds                                            (12.1)           120.5
Closing shareholders' funds                                                           482.3            494.4


Group Balance Sheet

                                                                                    30 April         30 April
                                                                                        2005             2004
                                                                                                   (restated)
                                                                      Note                £m               £m
Fixed assets
Intangible assets                                                                      173.7            185.6
Tangible assets                                                                        560.4            568.5
Investments                                                                             28.9             28.6
                                                                                       763.0            782.7

Current assets
Stocks                                                                                 164.0            154.9
Debtors: amounts falling due within one year                                           356.8            345.1
Debtors: amounts falling due after more than one year                                    1.0              1.4
Short-term investments                                                   5              28.4             20.8
Cash at bank and in hand                                                 5              30.4             40.8
                                                                                       580.6            563.0

Creditors: amounts falling due within one year
Trade and other creditors                                                           (370.9)           (361.5)
Borrowings                                                               5           (25.1)            (39.7)
Net current assets                                                                     184.6            161.8


Total assets less current liabilities                                                  947.6            944.5


Creditors: amounts falling due after more than one year
Borrowings                                                               5          (294.1)           (296.6)
Other                                                                                 (2.4)             (2.4)
Provisions for liabilities and charges                                               (80.7)            (90.6)

Net assets excluding pension liability                                                570.4             554.9
Net pension liability                                                                (80.3)            (54.7)
Net assets including pension liability                                                490.1             500.2

Capital and reserves
Called up share capital                                                                38.9              38.7
Share premium account                                                                 257.0             254.6
Revaluation reserve                                                                     7.9               8.5
Profit and loss account                                                               178.5             192.6

Shareholders' funds - equity                                                          482.3             494.4

Minority interests - equity                                                             7.8               5.8
                                                                                      490.1             500.2


Group Cash Flow Statement

For the year ended 30 April 2005

                                                                    2005         2005            2004        2004
                                                                                           (restated)  (restated)
                                                      Note            £m           £m              £m          £m

Net cash inflow from operating activities             6(a)                      139.3                       131.8
Returns on investments and servicing of finance
Net interest paid                                                 (13.1)                        (9.8)
Interest element of finance leases                                 (0.2)                        (0.2)
Net cash outflow from returns on investments and                               (13.3)                      (10.0)
servicing of finance
Taxation                                                                       (23.7)                      (17.9)
Capital expenditure and financial investment
Purchase of tangible fixed assets                                 (53.6)                       (51.7)
Sale of tangible fixed assets                                        5.2                          9.1
Sale of fixed asset investments                                      1.5                          1.7
Net cash outflow from capital expenditure and
financial investment                                                           (46.9)                      (40.9)
Acquisitions and disposals
Purchase of subsidiary undertakings                               (11.7)                      (182.2)
Net cash acquired                                                      -                          9.0
Deferred consideration paid in relation to prior
year acquisitions                                                      -                        (9.0)
Purchase of associated undertakings                                    -                        (1.0)
Sale of associated undertakings                                        -                          0.8
Disposal of businesses                                                 -                          0.8
Net cash outflow from acquisitions and disposals                               (11.7)                     (181.6)
Equity dividends paid                                                          (31.6)                      (28.2)
Net cash inflow/(outflow) before use of liquid
resources and financing                               6(b)                       12.1                     (146.8)
Management of liquid resources                        6(c)                      (6.9)                         4.3
Financing
Issue of ordinary shares                                             2.6                         74.1
Purchase of holding company shares                                 (2.1)                        (1.0)
Rights issue costs                                                     -                        (1.9)
(Decrease)/increase in debt and lease financing                    (4.6)                         96.3
Net cash (outflow)/inflow from financing                                        (4.1)                       167.5
Increase in cash in the year                                                      1.1                        25.0


Reconciliation of Net Cash Flow to Movement in Net Debt

Increase in cash in the financial year                                            1.1                        25.0
Decrease/(increase) in debt and lease financing                                   4.6                      (96.3)
Increase/(decrease) in liquid resources                                           6.9                       (4.3)
Decrease/(increase) in net debt resulting from
cash flow                                                                        12.6                      (75.6)
Loans and finance leases acquired with subsidiary
undertakings                                                                        -                       (0.5)
Exchange differences                                                              1.7                         3.7
Decrease/(increase) in net debt in the financial                                 14.3                      (72.4)
year
Opening net debt                                                              (274.7)                     (202.3)
Closing net debt                                 5, 6(d)                      (260.4)                     (274.7)


Notes to the Financial Statements
     
1    Analysis of Group turnover, operating profit and capital employed

                                        Group
                                    operating                                                          
                                profit before                                                          Adjusted
                                  exceptional                                                         return on
                                    items and         Group    Adjusted     Year end       Average      average
                              amortisation of     operating   return on      capital       capital      capital
2005                 Turnover     intangibles        profit    sales(1)     employed      employed   employed(1)
                           £m              £m            £m           %           £m            £m            %
Packaging

Paper & Corrugated
Packaging               896.9            52.3          40.3        5.8%        645.7         663.2         7.9%
Plastic Packaging       195.9             9.9           1.5        5.1%        129.9         139.6         7.1%
                      1,092.8            62.2          41.8        5.7%        775.6         802.8         7.7%
Office Products
Wholesaling             499.7            21.7          21.6        4.3%        125.6         118.4        18.3%
Manufacturing            46.8               -             -           -         12.4          13.8            -
Inter-segment          (14.4)               -             -           -            -             -            -
                        532.1            21.7          21.6        4.1%        138.0         132.2        16.4%
Total                 1,624.9            83.9          63.4        5.2%        913.6         935.0         9.0%

United Kingdom          970.7            46.1          34.2        4.7%        619.8         637.9         7.2%
Rest of World           654.2            37.8          29.2        5.8%        293.8         297.1        12.7%
Total                 1,624.9            83.9          63.4        5.2%        913.6         935.0         9.0%

2004 (restated(2))

Packaging
Paper & Corrugated
Packaging               748.9            41.4          40.4        5.5%        648.2         517.8         8.0%
Plastic Packaging       208.7            14.0          11.1        6.7%        134.2         139.8        10.0%
                        957.6            55.4          51.5        5.8%        782.4         657.6         8.4%

Office Products
Wholesaling             498.8            19.7          19.6        3.9%        121.3         117.8        16.7%
Manufacturing            48.0             0.3           0.3        0.6%         13.1          13.9         2.2%
Inter-segment          (15.9)               -             -           -            -             -            -
                        530.9            20.0          19.9        3.8%        134.4         131.7        15.2%
Total                 1,488.5            75.4          71.4        5.1%        916.8         789.3         9.6%

United Kingdom          829.4            33.9          33.0        4.1%        624.8         493.6         6.9%
Rest of World           659.1            41.5          38.4        6.3%        292.0         295.7        14.0%
Total                 1,488.5            75.4          71.4        5.1%        916.8         789.3         9.6%

     
(1)  before exceptional items and amortisation of intangibles

(2)  2004 results have been restated for the change in accounting policy
     resulting from the adoption of FRS 17 'Retirement benefits' and UITF 
     Abstract 38 Accounting for ESOP trusts'

The operating profits shown above exclude the Group's share of operating profits
and losses of associated undertakings.  Adjusted return on sales is defined as
operating profit before exceptional items and amortisation of intangibles
divided by turnover.  Average capital employed is the average monthly capital
employed including the intangible assets on the balance sheet.  Capital employed
excludes net borrowings, corporation tax balances, deferred tax provisions,
dividends payable, fixed asset investments and net pension liabilities.
Adjusted return on average capital employed is defined as operating profit
before exceptional items and amortisation of intangibles divided by the average
capital employed.


2    Exceptional items and amortisation of intangibles

                                                                                      2005              2004
                                                                                        £m                £m

Exceptional restructuring costs                                                      (4.9)                 -
Impairment of goodwill                                                               (5.8)                 -
Reversal of previous impairment of associate                                           1.1                 -

Total exceptional items                                                              (9.6)                 -
Amortisation of intangibles                                                          (9.8)             (4.0)
Amortisation of negative goodwill of associates                                        0.4               0.4

                                                                                    (19.0)             (3.6)
Tax on exceptional items                                                               1.4              -

Total                                                                               (17.6)             (3.6)


The exceptional restructuring costs relate to costs incurred in the Paper and
Corrugated Packaging segment in integrating the operations of Linpac Containers
acquired in March 2004.

The impairment of goodwill relates to a subsidiary in the Plastic Packaging
segment and follows the Group's annual assessment of the carrying amount of
fixed assets, including goodwill.  The reversal of the previous impairment of
associate relates to a 33% owned Japanese packaging company.


3    Earnings per share


Basic earnings per share are calculated by dividing the profit for the financial
year of £38.9m (2004 restated: £43.6m) by the weighted average number of shares
in issue and fully paid during the year of 385.3m (2004: 348.2m). The number of
shares excludes the weighted average number of the Company's own shares held by
the General Employee Benefit Trust of 2.5m (2004: 1.5m).

The adjusted earnings per share are calculated on the profit for the financial
year excluding exceptional items and amortisation of intangibles of £56.5m (2004
restated: £47.2m) and on the same number of shares.  Diluted earnings per share
are calculated on the same earnings numbers as basic earnings per share but on
387.3m (2004: 350.1m) shares.


4          Dividends per share

                                                                                      2005              2004
                                                                                     Pence             Pence
                                                                                 per share         Per share
Dividends proposed
Interim dividend paid                                                                 2.6p              2.6p
Final dividend proposed/paid                                                          5.8p              5.6p

Total dividend to be paid                                                             8.4p              8.2p

The prior year interim dividend per share has been restated for the bonus
element of the rights issue on
26 March 2004.


5    Borrowings
                                                                                         2005             2004
                                                                                           £m               £m
The   The Group's book value of net borrowings comprised:
Bank loans and overdrafts and other loans                                               316.3            332.5
Finance lease liabilities                                                                 2.9              3.8
Short term investments                                                                 (28.4)           (20.8)
Cash at bank and in hand                                                               (30.4)           (40.8)

Total                                                                                   260.4            274.7

Gearing (net borrowings expressed as a
percentage of net assets including pension liability)                                   53.1%            54.9%

Net debt to EBITDA (net debt expressed as a percentage of EBITDA before
exceptional items)                                                                       1.7x             2.0x


As at 30 April 2005, the Group had committed facilities of £497.4m.


6   Group cash flow statement
                                                                                         2005             2004
                                                                                                    (restated)
                                                                                           £m               £m
(a) Reconciliation of operating profit to net cash inflow from operating
      activities:
Operating profit before exceptional items and amortisation of intangibles                83.9             75.4
Exceptional cash costs                                                                  (2.5)                -
Depreciation                                                                             68.2             64.5
Increase in working capital                                                             (7.1)            (7.0)
Other                                                                                   (3.2)            (1.1)

Net cash inflow from operating activities                                               139.3            131.8



(b) Reconciliation to free cash flow/net cash flow
Net cash inflow from operating activities (see 6(a))                                     139.3           131.8
Capital expenditure payments                                                            (53.6)          (51.7)
Proceeds from sale of fixed assets                                                         6.7            10.8
Interest paid                                                                           (13.3)          (10.0)
Tax paid                                                                                (23.7)          (17.9)

Free cash inflow                                                                          55.4            63.0
Dividends                                                                               (31.6)          (28.2)

Cash inflow after dividends (before net acquisitions)                                     23.8            34.8
Net acquisitions                                                                        (11.7)         (181.6)

Net cash inflow/(outflow)                                                                 12.1         (146.8)

(c) Net (purchase)/sale of short term investments                                        (6.9)             4.3

                 Short term investments mainly comprise deposits with banks.

(d) Reconciliation of movement in net borrowings
Opening net borrowings                                                                 (274.7)         (202.3)
Net cash inflow/(outflow)  (see 6(b))                                                     12.1         (146.8)
Share issues                                                                               2.6            74.1
Purchase of own shares                                                                   (2.1)           (1.0)
Rights issue costs                                                                           -           (1.9)
Net borrowings acquired                                                                      -           (0.5)
Exchange differences                                                                       1.7             3.7

Closing net borrowings                                                                 (260.4)         (274.7)


7    Acquisitions and disposals

The Group acquired BPB Recycling, a recovered paper collection business, from
BPB plc in August 2004, for consideration of £9.4m.  The book amounts of assets
acquired were: tangible fixed assets, £6.5m; and working capital, £1.7m.  A fair
value adjustment of £1.4m was made, to increase the book amount of land and
buildings in fixed assets, and negative goodwill of £0.2m arose.

The Group completed the process of assessing the fair value of assets and
liabilities acquired as part of the acquisition of Linpac Containers Group in
the year to 30 April 2004.  The adjustments, none of which was significant,
resulted in additional goodwill of £1.8m.

Fair value adjustments on other acquisitions are not significant.  Goodwill
associated with these and other finalisations of fair value adjustments totalled
£1.7m.


Group Profit and Loss Account

Half-yearly profit and loss account analysis

For the year ended 30 April 2005                First half             Second half
                                                (Unaudited)            (Unaudited)            Total year
                                               2005        2004        2005       2004        2005         2004
                                                     (restated)             (restated)          £m   (restated)
                                                 £m          £m          £m         £m                       £m

Turnover                                      800.1       744.7       824.8      743.8     1,624.9      1,488.5

Operating profit before exceptional items      42.1        36.8        41.8       38.6        83.9         75.4
and amortisation of intangibles

Share of profits of associated                  1.5         1.3         2.6        1.7         4.1          3.0
undertakings

Exceptional items and amortisation of
intangibles                                   (4.7)       (1.3)      (14.3)      (2.3)      (19.0)        (3.6)

Profit on ordinary activities before           38.9        36.8        30.1       38.0        69.0         74.8
interest

Net interest payable                          (6.8)       (5.5)       (6.2)      (4.9)      (13.0)       (10.4)

Other finance income/(expense)                  0.5       (1.6)         0.6      (1.6)         1.1        (3.2)

Profit on ordinary activities before           32.6        29.7        24.5       31.5        57.1         61.2
taxation

Tax on profit on ordinary activities          (9.3)       (8.1)       (8.3)      (8.9)      (17.6)       (17.0)

Profit on ordinary activities after            23.3        21.6        16.2       22.6        39.5         44.2
taxation

Minority interests - equity                   (0.2)       (0.4)       (0.4)      (0.2)       (0.6)        (0.6)

Profit for the period                          23.1        21.2        15.8       22.4        38.9         43.6

Earnings per share:
Basic                                            6.0p         6.2p   4.1p          6.4p     10.1p         12.6p
Adjusted (note 1)                                7.2p         6.6p   7.5p          7.0p     14.7p         13.6p


Notes

     
1.   Adjusted earnings per share exclude exceptional items and amortisation
     of intangibles.

--------------------------

     
(1)  before exceptional items and amortisation of intangibles

(2)  restated for the changes in accounting policy resulting from the adoption 
     of FRS 17 'Retirement benefits' and UITF Abstract 38 'Accounting for ESOP 
     trusts'

(3)  Source: European Federation of Corrugated Board Manufacturers/DS Smith

(4)  Source: European Federation of Corrugated Board Manufacturers

(5)  DS Smith estimates

(6)  DS Smith estimates based on national data



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