Final Results

Marshalls PLC 09 March 2007 Preliminary results for the year ended 31 December 2006 Marshalls plc, the specialist Landscape Products Group, announces a robust trading performance in a flat building materials market. Financial highlights Year ended Year ended Increase 31 December 2006 31 December 2005 % Revenue Â£378.1m Â£359.3m 5.2 Operating profit Â£47.8m Â£44.4m 7.5 Profit before tax Â£41.7m Â£38.0m 9.7 Basic EPS (from continuing operations) 20.34p 18.55p 9.6 Final dividend per share 8.85p 8.40p 5.4 Operating highlights â€¢ Continued investment and development in the business to drive future growth: â€¢ investment in new technologies including robot handling and machine lay of concrete block paving â€¢ further development of an integrated product offering for the Public Sector and Commercial market â€¢ creating 'pull through' demand in the Domestic business including three operational Drive & Garden Transformation Centres with a fourth to open shortly in North London â€¢ promotion of the Marshalls brand including a three year sponsorship of the Royal Horticultural Society's Chelsea Flower Show â€¢ Membership of the Ethical Trading Initiative: â€¢ independent auditing of the Indian and Chinese natural stone supply chains â€¢ Pursuing the strategy of acquiring complementary businesses: â€¢ six bolt on acquisitions between May 2006 and February 2007 which enhance the core product offering and provide a solid platform for future growth Commenting on these results, Graham Holden, Chief Executive, said: 'We are pleased to announce a robust trading performance for the full year despite mixed market conditions. Looking forward, market intelligence shows that Public Sector and Commercial demand, which represents half of the Group's revenue, remains good although the Domestic market is expected to remain subdued during 2007. We will continue the roll out phase of the consumer initiatives. The Royal Horticultural Society's Chelsea Flower Show sponsorship, together with the national launch of the Marshalls design and installation service, will further increase brand awareness and profile. A range of initiatives has also been developed to grow our Public Sector and Commercial business, and the Group's management and workforce are committed to continue this growth strategy and deliver increased shareholder value. Although poor weather conditions in January and early February meant a flat start to 2007, the underlying indicators, including the installer order books and the Barbour ABI Building data, are encouraging and the outlook for the year is positive.' Enquiries: Graham Holden Chief Executive Marshalls plc 0207 404 5959 on 9 March 2007 Ian Burrell Finance Director Marshalls plc 01484 438900 thereafter Jon Coles Brunswick Group LLP 0207 404 5959 Kate Miller Brunswick Group LLP 0207 404 5959 Group Results Marshalls is pleased to announce a robust trading performance in a flat building materials market. Marshalls' revenue from continuing operations, including acquisitions, increased 5.2 per cent to Â£378.1 million (2005: Â£359.3 million). Like for like revenue, excluding acquisitions, was 2.6 per cent ahead at Â£368.8 million (2005: Â£359.3 million). Operating profit rose by 7.5 per cent to Â£47.8 million (2005: Â£44.4 million). EBITDA was Â£67.6 million (2005: Â£63.4 million), an improvement of 6.7 per cent. The net effect of one-off items in the year was a net credit to operating profit of approximately Â£1.0 million, giving an underlying operating profit of Â£46.8 million (2005: Â£46.5 million). The Group expensed Â£2.0 million (2005: Â£1.0 million) of consumer initiative start up costs as the landscape installation strategy is a key element of future growth. Works closure costs in the year were approximately Â£1.1 million (2005: Â£3.0 million) as we reduced the fixed cost base of the business. During the year, following an extensive consultation process, the Final Salary section of the Pension Scheme was replaced with a Defined Contribution section for future benefits. This reduces risk and the volatility of the accounting charge in the Income Statement. As a consequence, there has been a one-off curtailment gain, net of expenses, of Â£4.4 million (2005: Â£0.1 million gain). During the year there has also been a small net loss on property transactions of Â£0.3 million (2005: Â£1.8 million profit). After the net effect of the one-off items detailed above, profit before tax increased by 9.7 per cent to Â£41.7 million (2005: Â£38.0 million). Basic earnings per share from continuing operations increased by 9.6 per cent to 20.34 pence (2005: 18.55 pence). The Board is recommending a final dividend of 8.85 pence (2005: 8.40 pence) per ordinary share, an increase of 5.4 per cent. This dividend will be paid on 6 July 2007 to shareholders on the register at the close of business on 8 June 2007. The ex dividend date will be 6 June 2007. Operating Performance Overall market conditions were mixed in 2006. The Construction Products Association ('CPA') estimates that construction output has grown by only 0.9 per cent. Half of the revenue of the business continues to be from the Public Sector and Commercial market and half from the consumer driven Domestic market. This provides a balance to demand as the performance of the two markets can be counter cyclical. The Public Sector and Commercial market was good with the CPA estimating that Other New Work, a proxy for demand, was up by 4.2 per cent in 2006. This contrasts with the Domestic market where the CPA estimate that Private Housing Repair, Maintenance and Improvement expenditure, a proxy for Domestic demand, was down by 4.0 per cent. At the heart of Marshalls is a single logistics operation that supports the two main markets and this provides a fundamental competitive advantage and delivers industry leading product availability and delivery performance. During the year the closure of the Mansfield site, which commenced in 2005, was completed. This site did not form part of the Service Centre and National Manufacturing structure. In the second half of 2006 the Group also moved the manufacture of its internal paving business from a specialist unit near Bristol to a National Manufacturing Unit. These two initiatives have given rise to one-off works closure costs in the year of Â£1.1 million and will further reduce the fixed cost base going forward. Investment continues to be made in new technology to improve productivity, such as robot handling, to make our workplace safer and to reduce the environmental impact of our operations. The Public Sector and Commercial market continued to perform well with like for like revenue up 5.0 per cent. An important part of Marshalls' strategy for this business is the development of an integrated product offering for the Public Sector and Commercial market. In response to market demand, and working closely with architects, designers and contractors, the Group continues to offer design solutions that combine natural stone and concrete paving, linear drainage, bollards, seating and attractively designed lighting. Marshalls is also leading the development of machine lay concrete block paving for large paved areas. This improves cost effectiveness and increases the potential market for this product. In the Domestic market the Group operates under the Marshalls and Stonemarket brands. Like for like revenue was flat with a robust Installed market offset by the weaker DIY market. There is continuing investment in a range of consumer initiatives designed to build the brand, 'pull through' demand and facilitate quality design and installation. This is expected to result in increased demand for the Group's products and services and improve product mix. Drive & Garden Transformation Centres are designed to make a range of services available to the consumer from the opportunity to see how the product looks in a garden setting to assistance with design and the arrangement of installation. Three Centres are now operational and a fourth, at Enfield in North London, will open in the spring. The initial results from these Centres are encouraging and this concept will be developed further in 2007. In order to improve brand recognition further, in December 2006, Marshalls announced the sponsorship of the Royal Horticultural Society's ('RHS') Chelsea Flower Show for a period of three years commencing in 2007. This provides the platform to launch a garden design and installation service nationally. The Group will also have a presence in 2007 at the Hampton Court and Tatton Park Flower Shows. The Group now sources significant quantities of natural stone from India and China. Marshalls is the only industry member from our sector of the Ethical Trading Initiative ('ETI'), an alliance of companies, trade unions and non-profit organisations that aims to promote respect for the rights of workers worldwide. As a member of ETI, Marshalls has a programme in place to assess working conditions in suppliers' workplaces. These suppliers are regularly and independently audited on the ETI nine point base code, which covers working conditions in the supply chain, to ensure compliance with that code. During 2006 Marshalls' Indian stone supplier has successfully demonstrated compliance with the ETI base code. Corporate Activity Marshalls continues to pursue its strategy of acquiring complementary businesses that provide quality products to enhance the core product offer. On 4 May 2006 the Group acquired a business which specialises in the sale of a range of shelters and associated products, particularly to the Education Sector. In the second half of the year two other small businesses were acquired; a business that manufactures temporary kerbs from recycled materials, and a business which manufactures high capacity drainage systems which complement Marshalls' existing range of linear drainage products. On 30 November 2006 the Group acquired Scenic Blue, a design and installation franchising business. Scenic Blue was a Gold Award winner for its show garden at the RHS Chelsea Flower Show in 2006. It is intended to launch a design and installation service nationally at the 2007 RHS Chelsea Flower Show. Since the year end the Group has acquired a natural stone business and a business supplying high quality and widely specified seating systems for a combined consideration of Â£8.3 million. A programme to introduce modern business systems and consolidate all of these businesses into the Group, to deliver synergies and provide a solid platform for future organic growth, is in progress. The Group continues to seek opportunities to expand reserves and geographical coverage in natural stone. During 2006 Marshalls acquired the rights to develop an aggregate reserve in North West England and, following capital investment of approximately Â£2.0 million, operations will commence fully during 2007. Balance Sheet Net assets at 31 December 2006 grew by 10.9 per cent to Â£184.5 million (2005: Â£166.3 million), representing 129.0 pence (2005: 116.3 pence) per share. An evaluation of Marshalls' portfolio of commercial properties and mineral assets is being undertaken by CB Richard Ellis and Wardell Armstrong respectively. The property portfolio is being valued on an existing use basis for the commercial and mineral portfolio and on a market value basis for the surplus portfolio. These bases are in accordance with the valuation methods recommended by the Royal Institute of Chartered Surveyors. The draft valuation of the property portfolio as at 31 December 2006 is approximately Â£40.0 million above the net book value of the equivalent assets. The liability for defined benefit pension obligations decreased from Â£65.3 million at 31 December 2005 to Â£41.9 million at 31 December 2006. Following the move to defined contribution for future service, special cash contributions of Â£10.0 million were made to the Pension Scheme in the second half of the year and, as a consequence of a change to the actuarial assumptions, there has been a one-off curtailment gain, net of expenses, of Â£4.4 million. There was also an increase in the AA corporate bond rate from 4.8 per cent to 5.1 per cent, an increase in investment returns and a strengthening of the mortality rate which together resulted in an actuarial gain of Â£7.3 million (net of deferred taxation) and this has been recorded in the Consolidated Statement of Recognised Income and Expenses. Outlook Market intelligence shows that Public Sector and Commercial demand, which represents half of the Group's revenue, remains robust. The latest CPA forecast estimates that the Public Sector and Commercial market will grow by 4.9 per cent in 2007 and a further 5.1 per cent in 2008. From 2008 onwards, it is anticipated that building for the 2012 Olympics will start to deliver benefit. The Domestic market is more difficult to predict. The CPA is forecasting growth of 1.0 per cent in Private Housing Repair, Maintenance and Improvement expenditure for 2007 and flat in 2008. Domestic installers' average order books from the latest survey at the end of February 2007 were an encouraging 9.1 weeks (2006: 8.4 weeks). In 2007 the Group will continue the roll out phase of the consumer initiatives. The Royal Horticultural Society's Chelsea Flower Show sponsorship together with the national launch of the Marshalls design and installation service will further increase brand awareness and profile. A range of initiatives has also been developed to grow our Public Sector and Commercial business and the Group's management and workforce are committed to continuing this growth strategy and delivering increased shareholder value. Although poor weather conditions in January and early February meant a flat start to 2007, the underlying indicators, including the installer order books and the Barbour ABI Building data, are encouraging and the outlook for the year is positive. Graham Holden Chief Executive MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 Notes 2006 2005 Â£'000 Â£'000 Revenue 2 378,100 359,310 Net operating costs (330,339) (314,885) ------- ------- Operating profit 2 47,761 44,425 Financial expenses 4 (14,904) (14,421) Financial income 4 8,846 8,014 ------- ------- Profit before tax 2 41,703 38,018 Income tax expense 5 (12,623) (11,661) ------- ------- Profit after tax but before post tax gain on sale and post tax profit of discontinued operation 29,080 26,357 Post tax gain on sale and post tax profit of discontinued operation 3 - 31,517 ------- ------- Profit for the financial period attributable to equity shareholders of the parent 29,080 57,874 ------- ------- Earnings per share (total operations including post tax gain on sale in 2005): Basic 7 20.34p 40.73p ------- ------- Diluted 7 20.32p 40.71p ------- ------- Earnings per share (continuing operations): Basic 7 20.34p 18.55p ------- ------- Diluted 7 20.32p 18.54p ------- ------- Dividend: Pence per share 6 12.70p 12.10p ------- ------- Dividends declared 6 18,158 17,169 ------- ------- MARSHALLS PLC PELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006 Assets Notes 2006 2005 Â£'000 Â£'000 Non-current assets Property, plant and equipment 202,941 198,030 Intangible assets 52,667 46,461 Deferred taxation assets 15,018 19,690 ------- ------- 270,626 264,181 ------- ------- Current assets Inventories 68,256 67,759 Trade and other receivables 34,290 36,598 Cash and cash equivalents 22 5,210 ------- ------- 102,568 109,567 ------- ------- Total assets 373,194 373,748 ------- ------- Liabilities Current liabilities Bank overdraft 999 - Trade and other payables 65,547 64,570 Interest bearing loans and borrowings 3,565 348 ------- ------- 70,111 64,918 ------- ------- Non-current liabilities Trade and other payables - 475 Interest bearing loans and borrowings 50,064 51,550 Employee benefits 8 41,945 65,264 Deferred taxation liabilities 26,532 25,201 ------- ------- 118,541 142,490 ------- ------- Total liabilities 188,652 207,408 ------- ------- Net assets 184,542 166,340 ------- ------- Equity Capital and reserves attributable to equity shareholders of the parent Share capital 35,777 35,772 Share premium account 2,732 2,694 Own shares (453) (102) Capital redemption reserve 73,298 72,573 Consolidation reserve (213,067) (213,067) Hedging reserve (6) (2) Retained earnings 286,261 268,472 ------- ------- Equity shareholders' funds 184,542 166,340 ------- ------- MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 Notes 2006 2005 Â£'000 Â£'000 Net cashflow from operating activities (after special pension scheme contributions of Â£10,000,000 (2005: Â£nil)) 9(i) 38,846 42,750 Net cashflow from investing activities 9(ii) (28,033) 35,668 Net cashflow from financing activities 9(iii) (17,000) (56,539) ------- ------- Net (decrease)/increase in cash and cash equivalents (6,187) 21,879 Cash and cash equivalents at 1 January 5,210 (16,669) ------- ------- Cash and cash equivalents at 31 December (977) 5,210 ------- ------- The above includes the operating, investing and financing cashflows of the discontinued operation disclosed in Note 3. The relevant cash flows of the discontinued operation are included in Note 9. Reconciliation of Net Cash Flow to Movement in Net Debt 2006 2005 Â£'000 Â£'000 Net (decrease)/increase in cash and cash equivalents (6,187) 21,879 Cash (inflow)/outflow from (increase)/ decrease in debt and lease financing (1,731) 39,910 Finance leases acquired on acquisition of subsidiary undertakings - (238) ------- ------- Movement in net debt in the period (7,918) 61,551 Net debt at 1 January (46,688) (108,239) ------- ------- Net debt at 31 December (54,606) (46,688) ------- ------- MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSES FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 Â£'000 Â£'000 Cash flow hedges: Effective portion of changes in fair value (net of deferred taxation) (4) 4 Actuarial gains/(losses) (net of deferred taxation) 7,342 (8,563) ------- ------- Net expense recognised directly in equity 7,338 (8,559) Profit for the financial period attributable to equity shareholders of the parent 29,080 57,874 ------- ------- Total recognised income and expenses for the period (equity shareholders of the parent) 36,418 49,315 ------- ------- MARSHALLS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS AUDITED CONSOLIDATED NOTES FOR THE YEAR ENDED 31 DECEMBER 2006 1. Basis of Preparation The Consolidated Financial Statements have been prepared on the basis of the requirements of International Financial Reporting Standards (IFRSs) in issue and adopted by the EU and effective (or available for early adoption) at 31 December 2006. The IFRS accounting policies have been applied consistently to all periods presented in these Consolidated Financial Statements. The accounting policies have been applied consistently throughout the Group for the purposes of these Consolidated Financial Statements and are set out on the Company's website (www.marshalls.co.uk). The Consolidated Financial Statements are presented in sterling, rounded to the nearest thousand. The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 2. Segmental analysis Revenue Operating Profit 2006 2005 2006 2005 Â£'000 Â£'000 Â£'000 Â£'000 Continuing operations 378,100 359,310 47,761 44,425 ------- ------- Financial income and expenses (net) (6,058) (6,407) ------ ------ Profit on ordinary activities before taxation 41,703 38,018 ------ ------ The Directors have undertaken a review of the Group's continuing operations and its associated business risks and consider that the continuing operations should be reported as a single business segment. The Directors consider that the continuing operations represent one product offering with similar risks and rewards and should be managed and reported as a single business segment in line with the Group's internal reporting framework. 2006 2005 Â£'000 Â£'000 Geographical destination of revenue: United Kingdom 374,627 356,051 Rest of the world 3,473 3,259 ------- ------- 378,100 359,310 ------- ------- All revenue originates in the United Kingdom from continuing operations and there is no material inter-segmental turnover. Segmental information for the discontinued operations is included in Note 3 below. 3. Discontinued operations On 4 January 2005 Marshalls Clay Products Limited was sold to Hanson PLC for a cash consideration of Â£65.0 million (including the repayment of all intergroup indebtedness) and a post-tax gain of Â£31.5 million was realised. The results of this former business have been disclosed under discontinued operations in the Consolidated Income Statement. The cash flow disclosures in respect of these discontinued operations are shown in Note 9. There is no tax arising in the year in respect of the gain on sale of discontinued operations. 4. Financial expenses and income 2006 2005 Â£'000 Â£'000 (a) Financial expenses Interest expense on bank loans, overdrafts and loan notes 2,406 2,487 Interest on obligations under the defined benefit pension scheme 10,107 9,505 Debenture interest expense 2,275 2,275 B share dividend expense 92 132 Finance lease interest expense 24 22 ------- ------- 14,904 14,421 ------- ------- (b) Financial income Expected return on scheme assets under the defined benefit pension scheme 8,802 7,953 Interest receivable and similar income 44 61 ------- ------- 8,846 8,014 ------- ------- 5. Income tax expense 2006 2005 Â£'000 Â£'000 Current tax expense Current year 11,004 12,165 Adjustments for prior year (947) (274) ------- ------- 10,057 11,891 Deferred taxation expense Origination and reversal of temporary differences Current year 2,235 371 Adjustments for prior year 331 (601) ------- ------- Income tax expense in the Consolidated Income Statement 12,623 11,661 ------- ------- Reconciliation of effective tax rate 2006 2006 2005 2005 % Â£'000 % Â£'000 Profit before tax 100.0 41,703 100.0 38,018 ----- ------ ----- ------ Tax using domestic corporation tax rate 30.0 12,511 30.0 11,405 Disallowed amortisation of intangible fixed assets 0.3 107 0.2 77 Net items not taxable 1.5 621 2.8 1,054 Prior year items (1.5) (616) (2.3) (875) ----- ------ ----- ------ 30.3 12,623 30.7 11,661 ----- ------ ----- ------ The net amount of deferred taxation credited to the Consolidated Statement of Recognised Income and Expenses in the year was Â£3,146,000 (2005: Â£3,677,000). 6. Dividends Ordinary dividends: equity shares 2006 2005 per share Â£'000 per share Â£'000 2005 Final: paid 7 July 2006 8.40p 12,010 8.00p 11,353 2006 Interim: paid 8 December 2006 4.30p 6,148 4.10p 5,816 ------ ------ ------ ------ 12.70p 18,158 12.10p 17,169 ------ ------ ------ ------ 7. Earnings per share Basic earnings per share on total operations of 20.34 (2005: 40.73) pence per share is calculated by dividing the profit attributable to ordinary shareholders from total operations of Â£29,080,000 (2005: Â£57,874,000) by the weighted average number of shares in issue during the year of 142,949,818 (2005: 142,106,234). Basic earnings per share on continuing operations of 20.34 (2005: 18.55) pence per share is calculated by dividing the profit attributable to ordinary shareholders from continuing operations of Â£29,080,000 (2005: Â£26,357,000) by the weighted average number of shares in issue during the year of 142,949,818 (2005: 142,106,234). Basic earnings per share for discontinued operations of nil (2005: 22.18) pence per share is calculated by dividing the profit attributable to ordinary shareholders from discontinued operations of nil (2005: Â£31,517,000) (see Note 3) by the weighted average number of shares in issue during the year of 142,949,818 (2005: 142,106,234). Profit attributable to ordinary shareholders 2006 2005 Profit attributable to ordinary shareholders: Â£'000 Â£'000 - Continuing operations 29,080 26,357 - Discontinued operations - 31,517 ------ ------ Total 29,080 57,874 ------ ------ Weighted average number of ordinary shares 2006 2005 Issued ordinary shares at 1 January 143,087,712 141,913,313 Effect of shares issued in the year 14,536 192,921 Effect of shares transferred into employee benefit trust (152,430) - ----------- ----------- Weighted average number of ordinary shares at 31 December 142,949,818 142,106,234 ----------- ----------- Diluted earnings per share on total operations of 20.32 (2005: 40.71) pence per share is calculated by dividing the profit attributable to ordinary shares, and potentially dilutive ordinary shares, from total operations of Â£29,080,000 (2005: Â£57,874,000) by the weighted average number of shares in issue during the year of 142,949,818 (2005: 142,106,234) plus dilutive shares of 152,430 (2005: 44,303) which totals 143,102,248 (2005: 142,150,537). Diluted earnings per share on continuing operations of 20.32 (2005: 18.54) pence per share is calculated by dividing profit attributable to ordinary shares, and potentially dilutive ordinary shares, from continuing operations of Â£29,080,000 (2005: Â£26,357,000) by the weighted average number of shares in issue during the year of 142,949,818 (2005: 142,106,234), plus dilutive shares of 152,430 (2005: 44,303) which totals 143,102,248 (2005: 142,150,537). Diluted earnings per share for discontinued operations of nil (2005: 22.17) pence per share is calculated by dividing profit attributable to ordinary shares, and potentially dilutive ordinary shares, from discontinued operations of Â£nil (2005: Â£31,517,000) by the weighted average number of shares in issue during the year of 142,949,818 (2005: 142,106,234), plus dilutive shares of 152,430 (2005: 44,303) which totals 143,102,248 (2005: 142,150,537). Weighted average number of ordinary shares (diluted) 2006 2005 Weighted average number of ordinary shares at 31 December 142,949,818 142,106,234 Effect of share options in issue - 44,303 Effect of shares transferred into employee benefit trust 152,430 - ----------- ----------- Weighted average number of ordinary shares at 31 December 143,102,248 142,150,537 ----------- ----------- 8. Employee benefits The Group operates the Marshalls plc Pension Scheme (the 'Scheme') which has both a defined benefit and a defined contribution section. The assets of the Scheme are held in separately managed funds which are independent of the Group's finances. After extensive consultation with the employees affected and their representatives, the Group introduced a new defined contribution section to the Scheme to replace the existing defined benefit section which closed to future service accrual on 1 July 2006. Following this change the Company has made special cash contributions amounting to Â£10.0 million to the Scheme. 2006 2005 Â£'000 Â£'000 Present value of funded obligations (209,152) (212,245) Fair value of scheme assets 167,207 146,981 ------- ------- Recognised liability for defined benefit obligations (see below) (41,945) (65,264) ------- ------- Movements in the net liability for defined benefit obligations recognised in the balance sheet 2006 2005 Â£'000 Â£'000 Net liability for defined benefit obligations at 1 January (65,264) (50,855) Contributions received 10,960 1,695 Gain/(expense) recognised in the Consolidated Income Statement 1,870 (3,862) Actuarial gains/(losses) 10,489 (12,242) ------- ------- Net liability for the defined benefit obligations at 31 December (41,945) (65,264) ------- ------- 9. Notes to the cash flow statement 2006 2005 Continuing Discont- Group Continuing Discont- Group operations inued operations inued operations operations Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 9(i) Cashflows from operating activities Profit before tax 41,703 - 41,703 38,018 - 38,018 Adjustments for: Depreciation 19,530 - 19,530 18,716 - 18,716 Amortisation 357 - 357 259 259 Loss/(gain) on sale of property, plant and equipment 66 - 66 (1,545) - (1,545) Equity settled share based expenses 250 - 250 - - - Financial income and expenses (net) 6,058 - 6,058 6,407 - 6,407 ----- ----- ----- ----- ----- ----- Operating cashflow before changes in working capital, provisions and special pension scheme contributions 67,964 - 67,964 61,855 - 61,855 Decrease/(increase) in trade and other receivables 2,323 - 2,323 (533) - (533) (Increase) in inventories (53) - (53) (6,805) - (6,805) (Decrease)/increase in trade and other payables (3,197) - (3,197) 3,336 - 3,336 (Decrease)/increase in employee benefits (2,968) - (2,968) 1,225 - 1,225 Special pension scheme contributions (10,000) - (10,000) - - - ------- ----- ------- ----- ----- ----- Cash generated from the operations 54,069 - 54,069 59,078 - 59,078 Financial expenses paid (4,265) - (4,265) (4,969) - (4,969) Non equity dividends paid (149) - (149) (75) - (75) Income tax paid (10,809) - (10,809) (11,284) - (11,284) ------- ----- ------- ------- ----- ------- Net cash flow from operating activities (after special pension scheme contributions) 38,846 - 38,846 42,750 - 42,750 ------ ----- ------ ------ ----- ------ 9(ii) Cash flows from investing activities Proceeds from sale of property, plant and equipment 565 - 565 3,172 - 3,172 Financial income received 44 - 44 61 - 61 Disposal of subsidiary, net of cash disposed of - - - - 65,000 65,000 Acquisition of subsidiaries (4,157) - (4,157) (9,406) - (9,406) Bank balance acquired with subsidiaries 79 - 79 664 - 664 Acquisition of property, plant and equipment (24,564) - (24,564) (23,823) - (23,823) ------ ----- ------ ------ ----- ------ Net cash flow from investing activities (28,033) - (28,033) (29,332) 65,000 35,668 ------ ----- ------ ------ ------ ------ 9(iii) Cash flows from financing activities Proceeds from issue of share capital 43 - 43 2,701 - 2,701 Payments to acquire own shares (453) - (453) - - (Decrease) in other debt and finance leases (302) - (302) (293) - (293) Redemption of B shares (848) - (848) (1,102) - (1,102) Increase in /(repayment of) borrowings 2,758 - 2,758 (38,281) - (38,281) Payment of transaction costs (40) - (40) (118) (2,277) (2,395) Equity dividends paid (18,158) - (18,158) (17,169) - (17,169) ------ ----- ------ ------ ----- ------ Net cash flow from financing activities (17,000) - (17,000) (54,262) (2,277)(56,539) ------ ----- ------ ------ ----- ------ 10. Annual General Meeting The Annual General Meeting will be held at Birkby Grange, Birkby Hall Road, Birkby, Huddersfield, West Yorkshire HD2 2YA at 12.00 (noon) on Wednesday 16 May 2007. 11. Other The financial information set out above does not constitute the Company's consolidated statutory accounts for the years ended 31 December 2006 or 2005 but is derived from those accounts. Statutory accounts for the year ended 31 December 2005 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2006 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Forward Looking Statements This Preliminary Announcement of Results for the year ended 31 December 2006 contains certain forward looking statements with respect to the Group's financial condition, its results, strategy, plans and objectives. The forward looking statements contained in this document are not forecasts or guarantees of future performance and are subject to risks, uncertainties and other factors. Some of these factors are beyond the Group's control, are difficult to predict and could cause actual results to differ materially from those expressed, implied or forecast in the forward looking statements. These factors include, but are not limited to, the fact that the Group operates in a highly competitive environment, is subject to the effects of government regulation and is reliant upon technology, which is subject to risk, change and development. Other factors include risks inherent in the implementation of large scale capital expenditure projects and the Group's ability to continue to communicate and market its services effectively. All forward looking statements in this document are based on information known to the Group as at 9 March 2007. The Group has no obligation publicly to update or revise any forward looking statements, whether as a result of new information or future events. This information is provided by RNS The company news service from the London Stock Exchange

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