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Macfarlane Group PLC (MACF)

Macfarlane Group PLC

Interim Results
Macfarlane Group PLC
06 September 2005

                                                                6 September 2005


        MACFARLANE GROUP RECORDS TRADING PROFIT OF £0.2M IN FIRST HALF OF 2005


The Group trading performance improves by £2.6 million from a trading loss of
£2.4 million in 2004

Sales growth of 3.7% from continuing operations in the first six months of 2005

 Profit performance broadly in line with expectations for all businesses, with
          particularly strong improvement in International businesses

     Sale of Govan property for £2.7 million generated gain of £1.3 million

             Net debt reduced to £9.1m in the first half of 2005

Expectation to be strongly cash positive from trading activities in second half
of 2005

  All businesses have the capacity to deliver further performance improvements


Archie Hunter, Chairman of Macfarlane Group PLC today said :-

'I am glad to report group trading results for the first half of 2005 in line
with the Board's expectations. The recovery continues.

The movement in Group trading profit/(loss) is as follows:

Trading result              Under IFRS          Under UK GAAP
                                  £000                   £000
 Six months to
  30 June 2003                                         (6,982)
          2004                  (2,352)                (2,498)
          2005                     246

The progress shown is in accord with the Board's plans. Earnings per share in
the first six months amounted to 1.32p. The Board is confident that the Group is
heading in the right direction.

The improving trading position and asset disposals have had the expected
positive impact on our cash position. Positive cash flow, from trading plus the
proceeds from disposal of the redundant Govan site and the Grantham site in
February 2005, reduced bank borrowings by £4.0 million in the first half of 2005
and, as a consequence there is a further reduction in net debt as follows:

                                                                      Net debt
                                                                          £000
                                30 June 2003                            24,774
                                        2004                            17,973
                                        2005                             9,063

The Board anticipates significant net cash generation from trading in the second
half of 2005.

Trading

It has been a difficult market for Packaging Distribution in 2005 so far.
Reliable measures of the impact of the economic downturn in the markets in which
we operate are not easily obtained but certainly an impact there has been. In
these circumstances it is heartening to report growth in packaging distribution
turnover of 2% over the same period last year and that the majority of our 15
regional distribution centres are showing operating results improvement over the
first half of 2004. Some of our RDCs are showing quite exceptional growth and
results improvement. They show what can be achieved and demonstrate significant
further potential opportunity. We are determined to use our position as market
leader to generate additional profitable growth.

Trading result comprises profit before tax from continuing operations and loss
for the period from discontinued operations less gain on disposal of properties.

As reported last year, the Labels business has been experiencing price pressures
from both customers and suppliers as well as a shortening of order lead times.
Against that background a trading result broadly in line with original
expectations and, in particular, a strong order book as we exit the half-year,
are encouraging. Management focus continues to be on maintenance of profit
margins and pursuit of new business opportunities, particularly in the
toiletries, household product and pharmaceutical sectors.

Our International operations have performed strongly in the first half of 2005.
In the United States, Macfarlane Western Foam has traded ahead of our
expectations following a strengthening of the management team. In Hungary our
position has been reinforced by the retention of an important customer and
trading performance has been ahead of our expectations.

Both our UK Packaging Manufacturing and Plastics businesses are performing ahead
of the same period last year.

International Financial Reporting Statements (IFRS)

This half yearly statement is the first compiled under the new IFRS
requirements. In the income statement the impact has been to benefit reported
results by £0.4 million in the six months to 30 June 2005 and by £0.2 million in
the six months to 30 June 2004.

The most significant impact is in the balance sheet through the incorporation of
the deficit on the Group's final salary pension scheme amounting to £17.6
million, offset by a deferred tax asset of £5.3 million, resulting in a net
deficit of £12.3 million. It is the incorporation of this deficit that gives
rise to need for the capital restructuring, put to shareholders at the last AGM.
The object of this restructuring is to prevent the pension deficit impacting on
the Group's ability to pay dividends from profits to its shareholders.

The pension scheme deficit does of course represent an actual liability to the
Group. The Board has taken the view that it would be appropriate to take steps
to reduce this liability, without adversely affecting the cash needs of the
business or the payment of dividends. The Board has therefore agreed to make
additional payments to the scheme of £0.7 million per annum for three years
commencing 2005 to reduce this liability. These additional payments reduce the
pension scheme creditor; they are not a charge against profits.

Dividends

With last year's statement, I reported that as an expression of its confidence
and recognising property gains early in 2005, the Board intended to declare a
special interim dividend for 2005 of 0.75p per share, subject to completion of
the capital restructuring referred to above. The restructuring obtained
shareholder approval at the AGM in May and I can now report that the necessary
Court Process has been satisfactorily concluded. Accordingly this dividend will
be paid on Tuesday 27 September 2005 to those shareholders on the register at
Friday 16 September 2005.

No further dividend will be declared in respect of 2005 and as to the future,
dividends will be determined by the profits we earn and the cash generated.

Future prospects

The Board's determination was that the Group should return to profitable growth
in 2005 and that the scene should be set for further significant profit
improvement beyond that. Nothing has changed the Board's expectations in this
regard.

The recovery in performance is attributable in large part to Peter Atkinson's
leadership. The response of his team, some of it quite exceptional, is very much
appreciated by the Board.'

Further information: Archie S. Hunter    Chairman              0141 333 9666
                     Peter D. Atkinson   Chief Executive       0141 333 9666
                     John Love           Finance Director      0141 333 9666


The interim report will be sent to shareholders on 16 September 2005 and be
available to members of the public at the Company's Registered Office, 21 Newton
Place, Glasgow G3 7PY from 19 September 2005.

Trading performance

Packaging Distribution

Macfarlane's Packaging Distribution business is the leading UK distributor of
packaging materials, supplying a wide range of customers through 15 Regional
Distribution Centres ('RDCs'). We enable customers to cost effectively package
their products through the provision of a comprehensive product range, single
source supply, just-in-time delivery and tailored stock management programmes.

The results for the Packaging Distribution business in the first half of 2005
have seen year-on-year sales growth of 2%, consistent levels of customer service
in excess of 90% as measured by On-Time-In-Full ('OTIF') deliveries and the
stabilisation of the customer base. We have also successfully implemented a
further series of cost reduction measures, which have reduced the overhead to
sales ratio by 2 percentage points in the first half of the year. Our IT system
is increasingly being used to streamline transaction processing with both our
customer and supplier base.

Considerable duplication in the internal supply chain has been eliminated in the
year to date, supported by our key suppliers. Staff turnover levels have reduced
significantly and are now more in line with the average for service industries.
The headcount in the business has stabilised at 410.

The priority in the remainder of 2005 is to accelerate the current level of
sales momentum, whilst at the same time converting additional opportunities to
further reduce the cost base.

Labels & Plastics

Macfarlane Group's Labels and Plastic injection-moulding businesses operate from
locations in the UK, Ireland and Sweden and provide high quality self-adhesive
labels and plastic closures primarily for a range of major international
customers in the FMCG sector. Both businesses provide innovative solutions with
a high design component and strong emphasis on quality and service delivery.

The first half of 2005 has seen the Labels business produce a creditable
performance despite pressure from customers to reduce prices and delivery times.
Management has taken action to reduce costs and increase capacity in order to
meet customer requirements and maintain performance. A significant new customer
for the ReSeal-It product will provide an opportunity to grow label sales on the
Continent.

The Plastics business achieved significantly increased volumes primarily due to
successfully securing a major new customer. The business reduced its losses
significantly, helped by the reduction in raw material prices and control of
overheads and was strongly cash generative in the first six months. Further
progress is expected in the second half of the year.

Packaging Manufacture UK and Overseas

Macfarlane's Packaging Manufacturing business currently operates from two UK
sites at Grantham and Westbury. The business manufactures a range of custom
designed packaging solutions to improve product storage, protection and
presentation. Customers benefit from the ability to cost effectively source low
volume, custom designed packaging solutions through flexible design and assembly
capability.

Progress in improving the performance of this business has been achieved in the
first half of 2005 and there are more actions planned in the second half to
continue this improvement.

Our International operations comprise packaging manufacturing and distribution
operations in the US and in Hungary, which are strategically positioned to
service key customers. The businesses provide tailored packaging solutions to
key international customers using Macfarlane design and assembly know-how. These
businesses also enhance our relationships with key global strategic suppliers.

Our US operations have achieved strong sales growth in the first half of the
year, with a number of significant new business wins. The new management team
has addressed a number of historic issues and is now achieving good levels of
profitability at both US sites. Our operation in Hungary again traded strongly
in the first half of 2005, with profits ahead of those achieved last year and a
major customer contract retained.

Reporting under International Financial Reporting Standards (IFRS)

For the first time our results are reported in accordance with International
Financial Reporting Standards. Previously the Group reported under UK Generally
Accepted Accounting Principles (UK GAAP). This commentary highlights the key
changes that have arisen due to the transition from reporting under UK GAAP to
reporting under IFRS. The Group's date of transition to IFRS is 1 January 2004,
which is the beginning of the comparative period for the 2005 financial year.
Therefore the opening balance for IFRS purposes is that reported at 31 December
2003 as amended for changes due to IFRS.

This interim financial report is the first to be prepared under IFRS. The
comparative figures are presented on the same basis and are therefore restated
from those previously reported under UK GAAP. To help understand the impact of
the transition, reconciliations have been produced to show the changes made to
statements previously reported under UK GAAP in arriving at the equivalent
statements under IFRS. The following five reconciliations are included in note
12 to this report.

(i)      Balance sheet as at 1 January 2004.
(ii)     Income statement for the year to 31 December 2004.
(iii)    Balance sheet as at 31 December 2004.
(iv)     Income statement for the six months to 30 June 2004.
(v)      Balance sheet as at 30 June 2004.

The income statement for the six months ended 30 June 2005 and the balance sheet
at that date are reported under IFRS. As they have not previously been reported
under UK GAAP, no reconciliation to IFRS is provided.

Key accounting policy changes are included within this report. A full set of
IFRS accounting policies will be published in the Group's report and accounts
for the year to 31 December 2005.

31 December 2004

The net effect of presenting the December 2004 full year financial statements
under IFRS rather than UK GAAP is to increase the profit before tax from
continuing operations previously reported from £1.9 million to £2.4 million as
set out in the reconciliation in Note 12 (ii). The increase arises from adding
back goodwill amortisation of £0.9 million offset by charges for share options
and increased pension scheme charges of £0.4 million. Net assets at 31 December
2004 reduced from £38.0 million to £26.6 million as set out in the
reconciliation in Note 12 (iii). This reduction is a result of absorbing the
pension scheme deficit of £17.4 million on to the balance sheet with offsets for
deferred tax on the pension scheme deficit, adding back goodwill and share
option charges of £6.0 million.

30 June 2004

The comparative information for June 2004 has also been restated for IFRS,
resulting in an increase in the profit before tax from continuing operations
previously reported from £2.2 million to £2.3 million as set out in the
reconciliation in Note 12 (iv). The increase arises from adding back goodwill
amortisation of £0.5 million offset by charges for share options, holiday pay
and increased pension scheme charges of £0.4 million. Net assets at 30 June 2004
reduced from £39.9 million to £28.7 million as set out in the reconciliation in
Note 12 (v). This reduction is a result of absorbing the pension scheme deficit
of £16.4 million on to the balance sheet with offsets for deferred tax on the
pension scheme deficit, adding back goodwill and share option and holiday pay
charges of £5.2 million.

The changes for both periods have no impact on the cash flows previously
reported.

Bringing the pension scheme deficit on to the balance sheet eliminated
distributable reserves. As a result a capital restructuring process was
undertaken, which concluded satisfactorily in September 2005, to have the share
premium account and capital redemption reserve cancelled and effectively
reinstated as distributable reserves. The effect of the restructuring was to
create distributable reserves in the parent company and to prevent any
constraint on the Group's ability to pay dividends in future.

INDEPENDENT REVIEW REPORT TO MACFARLANE GROUP PLC

Introduction

We have been instructed by the company to review the financial information for
the six months ended 30 June 2005, which comprises the consolidated income
statement, the consolidated statement of recognised income and expense, the
consolidated balance sheet, the consolidated cash flow statement and related
notes 1 to 12. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.

This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

International Financial Reporting Standards

As disclosed in note 2, the next annual financial statements of the Group will
be prepared in accordance with International Financial Reporting Standards as
adopted for use in the EU. Accordingly, the interim report has been prepared in
accordance with the recognition and measurement criteria of IFRS and the
disclosure requirements of the Listing Rules. The accounting policies are
consistent with those that the directors intend to use in the annual financial
statements.

Review work performed

We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.

Deloitte & Touche LLP
Chartered Accountants
Glasgow
6 September 2005

                              MACFARLANE GROUP PLC
                   CONSOLIDATED INCOME STATEMENT (UNAUDITED)
                     FOR THE SIX MONTHS ENDED 30 JUNE 2005

                                  Six months to  Six months to      Year to 31
                                   30 June 2005        30 June   December 2004
                                                          2004    (As restated
                                                  (As restated        for IFRS)
                                                      for IFRS)
                            Note           £000           £000            £000
Continuing operations
Revenue                                  63,941         61,653         126,075
Cost of sales                           (42,520)       (40,999)        (84,237)
                                      ---------       --------       ---------
Gross profit                             21,421         20,654          41,838
Distribution
expenses                                 (3,174)        (3,524)         (6,927)
Administrative
expenses                                (17,454)       (17,770)        (34,758)
Other
operating
income                                       47              5              73
                                      ---------       --------       ---------
Profit/(loss)
before gain on
disposal of
properties                                  840           (635)            226
Gain on
disposal of
properties                     3          1,335          3,845           3,845
                                      ---------       --------       ---------
Profit from
operations                                2,175          3,210           4,071
Investment
income                                       22             29              94
Finance costs                  4           (616)          (922)         (1,772)
                                      ---------       --------       ---------
Profit before
tax                                       1,581          2,317           2,393
Tax                            5            (96)             5              26
                                      ---------       --------       ---------
Profit for the
period from
continuing
operations                     8          1,485          2,322           2,419

Discontinued
operations                     7
Loss for the
period from
discontinued
operations                                    -           (824)         (1,255)
Loss on
disposal of
discontinued
operations                                    -              -          (1,400)
                                      ---------       --------       ---------
Profit/(loss)
for the period                 8          1,485          1,498            (236)
                                      =========       ========       =========
Earnings/(loss) 
per ordinary
share of 25p                   8
From continuing
operations
Basic                                      1.32p          2.06p           2.15p
                                      =========       ========       =========
Diluted                                    1.31p          2.06p           2.15p
                                      =========       ========       =========

From continuing and
discontinued operations
Basic                                      1.32p          1.33p          (0.21p)
                                      =========       ========       =========
Diluted                                    1.31p          1.33p          (0.21p)
                                      =========       ========       =========


                              MACFARLANE GROUP PLC
      CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)
                         SIX MONTHS ENDED 30 JUNE 2005

                         Six months to      Six months to           Year to 31
                          30 June 2005            30 June        December 2004
                                                     2004         (As restated
                                             (As restated            for IFRS)
                                                 for IFRS)
               Note               £000               £000                 £000

Exchange
difference on
translation of
foreign
operations                        (341)              (472)                (180)
Actuarial
(losses)/gains
on defined
benefit
pension
schemes          10               (150)             1,128                  222
Tax on items
taken directly
to equity                           45               (338)                 (67)
                             ---------           --------            ---------
Net
(loss)/profit
recognised
directly in
equity                            (446)               318                  (25)
Profit/(loss)
for the period                   1,485              1,498                 (236)
                             ---------           --------            ---------
Total
recognised
income and
expense for
the period                       1,039              1,816                 (261)
                             =========           ========            =========


                                MACFARLANE GROUP PLC
             CONSOLIDATED BALANCE SHEET AT 30 JUNE 2005 (UNAUDITED)

                                                                     As at 31
                                            As at         As at      December
                                          30 June       30 June          2004
                                             2005          2004  (As restated
                                                   (As restated      for IFRS)
                                                       for IFRS)
Non-current assets               Note        £000          £000          £000
Goodwill                                   17,054        17,054        17,054
Property, plant and equipment              15,943        18,699        17,601
Investment property                         1,701         1,701         1,701
Other receivables                             867         3,463         2,242
Deferred tax assets                 10      5,272         4,905         5,227
                                        ---------     ---------      --------
Total non-current assets                   40,837        45,822        43,825
                                        ---------     ---------      --------
Current assets
Inventories                                 8,407         9,850         8,689
Trade and other receivables                29,205        30,433        28,611
Cash and cash equivalents                   1,798         1,951         2,018
                                        ---------     ---------      --------
Total current assets                       39,410        42,234        39,318
Non current assets classified as
held for sale                                   -         3,580         3,580
                                        ---------     ---------      --------
                                           39,410        45,814        42,898
                                        ---------     ---------      --------
                                        ---------     ---------      --------
Total assets                               80,247        91,636        86,723
                                        =========     =========      ========
Current liabilities
Trade and other payables                   23,266        26,441        26,777
Tax liabilities                               653             0           595
Obligations under finance leases              497           446           479
Bank overdrafts and loans                  10,244        19,042        14,226
                                        ---------     ---------      --------
Total current liabilities                  34,660        45,929        42,077
                                        ---------     ---------      --------
Net current assets/(liabilities)            4,750        (3,695)       (2,759)
                                        ---------     ---------      --------
Non current liabilities
Retirement benefit obligations      10     17,574        16,350        17,424
Deferred tax liabilities                      213           203           214
Obligations under finance leases              120           436           367
                                        ---------     ---------      --------
Total non-current liabilities              17,907        16,989        18,005
                                        ---------     ---------      --------
                                        ---------     ---------      --------
Total liabilities                          52,567        62,918        60,082
                                        =========     =========      ========
                                        ---------     ---------      --------
Net assets                                 27,680        28,718        26,641
                                        =========     =========      ========
Equity
Share capital                              28,755        28,755        28,755
Capital redemption reserve                  2,952         2,952         2,952
Share premium                               7,547         7,547         7,547
Revaluation reserve                           274           275           274
Own shares held by employee share trust    (1,406)       (1,406)       (1,406)
Translation reserve                          (521)         (472)         (180)
Retained earnings                          (9,921)       (8,933)      (11,301)
                                        ---------     ---------      --------
Total equity                        11     27,680        28,718        26,641
                                        =========     =========      ========

                              MACFARLANE GROUP PLC
                     CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
                        FOR THE SIX MONTHS ENDED 30 JUNE 2005

                                  Six months to     Six months to     Year to 31
                                      30 June           30 June       December
                       Note              2005              2004           2004
                                         £000              £000           £000
Net cash from
operating
activities                9            (1,090)           (2,933)         2,170
                                     --------         ---------      ---------
Investing activities
Interest
received                                   13                39             93
Proceeds on
disposal of
property,
plant and
equipment                               5,122             4,870          6,563
Purchases of
property,
plant and
equipment                                 (54)           (2,194)        (3,925)
                                     --------         ---------      ---------
Net cash from
investing
activities                              5,081             2,715          2,731
                                     --------         ---------      ---------
Financing activities
Dividends paid                              -              (844)          (844)
Repayments of
obligations
under finance
leases                                   (229)             (233)          (469)
(Decrease)/inc
rease in bank
overdrafts                             (3,982)            1,220         (3,596)
                                     --------         ---------      ---------
Net cash (used
in)/from
financing
activities                             (4,211)              143         (4,909)
                                     --------         ---------      ---------
Net decrease
in cash and
cash
equivalents                              (220)              (75)            (8)

Cash and cash
equivalents at
beginning of
period                                  2,018             2,026          2,026
                                     --------         ---------      ---------
Cash and cash
equivalents at
end of period                           1,798             1,951          2,018
                                     ========         =========      =========


                              MACFARLANE GROUP PLC
                         SIX MONTHS ENDED 30 JUNE 2005
                 NOTES TO THE CONSOLIDATED ACCOUNTS (UNAUDITED)

1. General information

The information for the year ended 31 December 2004 does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified pursuant to
Section 235 of the Companies Act 1985 and did not contain a statement under
sub-section 237 of that Act.

2. Summary of accounting policies

The following accounting policies have been applied consistently for items which
are considered to be material in relation to the financial statements.

(a)    Basis of preparation

These interim financial statements for the six months ended 30 June 2005 have
been prepared in accordance with International Financial Reporting Standards
(IFRS) for the first time, and are covered by IFRS1, 'First-time Adoption of
IFRS' as they are part of the period covered by the group's first IFRS financial
statements for the year ending 31 December 2005. These interim financial
statements have been prepared in accordance with those IFRS standards and IFRIC
interpretations issued and effective, or issued and early adopted at the time of
preparing these statements. The IFRS standards and IFRIC interpretations that
will be applicable at 31 December 2005, including those that will be applicable
on an optional basis, are not known with certainty at the time of preparing
these interim financial statements.

The policies set out below have been consistently applied to all the periods
presented, and comparative figures in respect of 2004 have been restated to
reflect IFRS adjustments. Disclosures required by IFRS 1 concerning the
transition from UK GAAP to IFRS for the comparative prior period are given in
note 12.

The Group has opted not to prepare the Interim Financial Information under IAS
34, 'Interim Financial Reporting'. The interim financial statements have been
prepared on the historical cost basis as modified by the revaluation of certain
group properties.

(b)    Application of IFRS 1

The Group's financial statements for the year ended 31 December 2005 will be the
first financial statements to be prepared under IFRS. These interim financial
statements have been prepared as disclosed in this note including the options
set out in IFRS 1.

Under the first time adoption provisions set out in IFRS 1, the Group is
required to establish its IFRS accounting policies as at 1 January 2005 and
apply these retrospectively in the determination of prior period comparatives
from 1 January 2004, the date of transition. There are a number of exemptions
available to this principle and the most significant to the group are set out
below:

IFRS 2. 'Share Based Payments'

The Group has elected to apply this standard to all share-based awards granted
since 7 November 2002 but that had not vested at 1 January 2005.

IFRS 3. 'Business Combinations'

The Group has elected not to restate business combinations prior to the date of
transition.

IAS 16. 'Property, Plant & Equipment'

The Group has elected to retain the existing base cost of its property, plant
and equipment and not to revalue to fair value.

IAS 19. 'Employee Benefits'

The Group has elected to recognise all cumulative actuarial gains and losses in
relation to the employee benefit schemes at the date of transition. In
subsequent periods all actuarial gains and losses will be recognised in full in
the period in which they occur in the statement of recognised income and
expense.

IAS 21. 'The Effects of Changes in Foreign Exchange Rates'

The Group has elected to deem that cumulative exchange differences are nil at
the date of transition.

(c)    Basis of consolidation

The consolidated income statement and balance sheet include the financial
statements of the parent company and all its subsidiaries (all of which are
wholly owned) made up to the end of the financial period. Transactions between
group companies are eliminated on consolidation. The results of subsidiaries
acquired or disposed of during the period are included in the consolidated
income statement from the effective date of acquisition or disposal, as
appropriate.

(d)    Goodwill

Goodwill, representing the excess of the cost of acquisition over the net fair
values of the indentifiable assets and liabilities of the acquired subsidiary,
was written off to reserves in respect of acquisitions up to 31 December 1997.
From 1 January 1998, goodwill is initially recognised as an non-current asset at
amortised carrying value under GAAP at the transition date. Goodwill is
allocated to cash generating units for the purpose of impairment testing. The
carrying value of goodwill is tested annually for impairment and subsequently
carried at carrying value at the transition date less any accumulated impairment
losses.

The consolidated profit or loss on disposal of a subsidiary is the difference
between the net proceeds of sale and the Group's share of the subsidiary's net
assets together with any attributable goodwill originally written off on
acquisition or the carrying value of any goodwill at the date of disposal.

(e)    Non-current assets held for sale

Non-current assets classified as held for sale are measured at the lower of
carrying amount and fair value less costs to sell.

(f)    Revenue recognition

Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided to
third parties in the normal course of business, net of discounts, VAT and other
sales related taxes. Sales of goods are recognised when goods are delivered and
title has passed.

(g)    Leasing

Leases are classed as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.

Rentals payable under operating leases are charged to profit or loss on a
straight-line basis over the term of the relevant lease. The cost of assets held
under finance leases is included in tangible assets and depreciation provided in
accordance with the Group's accounting policy for the class of asset concerned.
Interest costs are charged over the lease term and future obligations included
in creditors.

(h)    Foreign currencies

The financial statements of each subsidiary are presented in the currency of the
primary economic environment in which the business operates (its functional
currency). For the purpose of the Group financial statements, the results and
the financial position of each business are expressed in sterling, being the
Group's functional and presentation currency. Exchange differences arising on
the settlement and retranslation of monetary items on an ongoing basis are
included in the profit or loss for the period.

For the purposes of preparing the Group's financial statements, the assets and
liabilities denominated in foreign currencies and financial statements of
foreign subsidiaries are translated into sterling at the rates of exchange
prevailing on the balance sheet date. Exchange differences arising in the
consolidated accounts on the retranslation at closing rates of the Group's net
investments in foreign subsidiary companies and on foreign currency borrowings
to the extent that they hedge the Group's investment in such operations are
recorded as movements on the Group's translation reserve and reported in the
statement of recognised income and expense. Such translation differences are
recognised in the profit or loss in the period in which the foreign business is
disposed of.

(i)    Retirement benefit costs

Payments made to defined contribution retirement benefit schemes are charged as
an expense as they fall due. For defined benefit retirement benefit schemes, the
cost of providing benefits is determined using the Projected Unit Credit Method,
with actuarial valuations being carried out triennially and updated at each
balance sheet date. Actuarial gains and losses are recognised in full in the
period in which they occur in the statement of recognised income and expense.

Past service cost is recognised immediately to the extent that benefits are
already vested and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognised
past service cost, and as reduced by the fair value of the scheme assets. The
obligations are measured on an actuarial basis and discounted at a rate
equivalent to the current rate of return on a high quality corporate bond of
equivalent currency and term to the scheme liabilities.
(j)    Share-based payments

The Group has applied the requirements of IFRS2 'Share-Based Payments' and in
accordance with the transitional provisions IFRS2 has been applied to all grants
of equity instruments after 7 November 2002.

Equity settled share based payments are measured at fair value at the date of
the grant. The fair value determined at the grant date of the equity-settled
share based payments is expensed as an employee benefits expense on a
straight-line basis over the vesting period, based on the Group's estimate of
shares that will eventually vest. The fair value is determined by the use of a
binomial model.

(k)    Taxation

The tax expense represents the sum of the tax currently payable and deferred
tax.

The tax currently payable is based on the taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised.

The carrying value of deferred tax assets is reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity. Deferred tax assets and liabilities are not discounted.

(l)    Property, plant and equipment

Property, plant and equipment are stated at cost to the Group except in the case
of certain properties, which are stated at valuations by professional valuers.
The Group adopted the transitional provisions of FRS 15 in 2002 and has frozen
the valuations at modified historic cost. No depreciation is provided on land.
Depreciation is charged so as to write off the cost or valuation of the assets,
less estimated residual values, by equal annual instalments over their estimated
useful lives. The rates of depreciation vary between 2% - 5% per annum on
buildings and 7% - 33% per annum on plant, vehicles and fittings.

(m)    Investment properties

Investment properties, which are properties held to earn rentals and/or capital
appreciation, are stated at cost at the balance sheet date.

(n)    Inventories

Inventories are consistently valued at the lower of cost and net realisable
value. Such cost is determined by average cost and is stated less any provisions
required for obsolescence. In the case of work in progress and finished goods,
cost comprises direct cost and attributable overheads. Net realisable value is
based on estimated selling price, less further costs expected to be incurred to
completion and disposal.

(o)    Financial instruments

(i)                 Trade receivables do not carry interest and are stated at
their nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts.
(ii)                Interest-bearing bank overdrafts are recorded at the
proceeds received, net of direct issue costs.
(iii)               Trade payables are not interest bearing and are stated at
their nominal value.

3. Trading profit/(loss)   Six months to     Six Months to          Year to 31
                                 30 June           30 June       December 2004
                                    2005              2004        (As restated
                                              (as restated           for IFRS)
                                                 for IFRS)
                                    £000              £000                £000
Profit before
tax from
continuing
operations                         1,581             2,317               2,393
Loss for the
period from
discontinued
operations                             -              (824)             (2,655)
Gain on
disposal of
properties
(see below)                       (1,335)           (3,845)             (3,845)
                                --------          --------            --------
Trading
profit/(loss)                        246            (2,352)             (4,107)
                                ========          ========            ========

Two properties were sold in February 2005 for a combined consideration of £4.6
million. On 4 February 2005, the Group sold its vacant premises at Govan near
Glasgow for a consideration after attributable expenses of £2.7 million. The
disposal gave rise to a gain of £1.3 million. On the same date, the Group
disposed of a six-bay distribution site in Grantham, with the company, as part
of the disposal, taking a lease for the two bays from which its Grantham
Distribution business operates. Sale proceeds from the Grantham site of £1.9
million after attributable expenses equated to book value. During the first half
of 2004, the Group sold its vacant premises in Braehead near Glasgow at a gain
of £3.8 million.

4. Finance costs      Six months to       Six Months to             Year to 31
                            30 June             30 June          December 2004
                               2005                2004           (As restated
                                           (as restated              for IFRS)
                                              for IFRS)
                               £000                £000                   £000
Interest on
bank loans and
overdrafts                     (367)               (623)                (1,183)
Interest on
obligations
under finance
leases                          (26)                (41)                   (72)
Interest cost
of pension
scheme
liabilities                  (1,371)             (1,367)                (2,734)
                           --------            --------               --------
Total interest
expense                      (1,764)             (2,031)                (3,989)
Expected
return on
pension scheme
assets                        1,148               1,109                  2,217
                           --------            --------               --------
                               (616)               (922)                (1,772)
                           ========            ========               ========

5. Taxation            Six months to       Six Months to            Year to 31
                             30 June             30 June         December 2004
                                2005                2004          (As restated
                                            (as restated             for IFRS)
                                               for IFRS)
Current tax                     £000                £000                  £000
UK corporation tax
Overseas
taxation                         (96)                (45)                  (99)
Prior year                         -                   -                    24
                            --------            --------              --------
Current tax                      (96)                (45)                  (75)
Deferred tax                       -                  50                   101
                            --------            --------              --------
Total                            (96)                  5                    26
                            ========            ========              ========

Corporation tax has been provided for the period to 30 June 2005, reflecting the
expected tax rate for the full year on overseas earnings. No tax has been
provided on the UK results, reflecting the expected tax rate for the full year.

6. Dividends                       Six months to Six Months to      Year to 31
                                         30 June       30 June   December 2004
                                            2005          2004
                                            £000          £000            £000
Amounts recognised as distributions
to equity holders in the period         
Special interim dividend                       
in respect of the year ended 31
December 2004                                  -           844             844
                                         ========      ========        ========

Dividends are not payable on shares held in the employee share trust.

7. Discontinued operations

The directors of the Company's subsidiary Tom Brands Electrical Services Limited
petitioned for the appointment of a provisional liquidator on 26 October 2004 to
realise the assets of the business. An exceptional cost of £1.4 million was
incurred in the second half of 2004 as a result of this exit. The trading
activities of the Brands business have been disclosed as discontinued activities
in these financial statements and the relevant information for the comparative
periods is as follows:-

                                                Six Months to       Year to 31
                                                      30 June         December
                                                         2004             2004
                                                         £000             £000

Revenue                                                   869            1,295
Cost of sales                                            (416)            (534)
                                                     --------         --------
Gross profit                                              453              761
Net expenses                                           (1,277)          (2,016)
                                                     --------         --------
Pre and post-tax loss from discontinued
operations                                               (824)          (1,255)
                                                     ========         ========

Cash outflows in respect of the discontinued operations for operating activities
amounted to £nil for the six months ended 30 June 2005, £730,000 for the six
months ended 30 June 2004 and £1,156,000 for the year ended 31 December 2004.
There were no cash flows in respect of investing and financing activities for
these respective periods.

8. Earnings/(loss) per share       Six months to Six Months to      Year to 31
                                         30 June       30 June   December 2004
                                            2005          2004    (As restated
                                                  (as restated       for IFRS)
                                                     for IFRS)
                                            £000          £000            £000
Earnings
Earnings from continuing
operations for the purposes
of earnings per share being net
profit attributable to equity
holders of the parent                      1,485         2,322           2,419
                                        --------      --------        --------
Earnings from continuing and
discontinued operations for
the purposes of earnings per share
being net profit attributable to equity
holders of the parent                      1,485         1,498            (236)
                                        --------      --------        --------
Weighted average number of ordinary
shares in issue '000                     115,019       115,019         115,019
Own shares in Employee Share Ownership
Trusts '000                               (2,491)       (2,491)         (2,491)
                                        --------      --------        --------
Weighted average number of shares in
issue for the                            112,528       112,528         112,528
purposes of basic earnings per share
'000
Effect of dilutive potential ordinary
shares due to share options                  620            26              69
                                        --------      --------        --------
Weighted average number
of shares in issue for the               
purposes of diluted earnings per
share '000                               113,148       112,554         112,597
                                        ========      ========        ========

9. Notes to the cash flow          Six months to    Six Months      Year to 31
statement                                30 June    to 30 June        December
                                            2005          2004            2004
                                            £000          £000            £000
Profit from operations Co
ntinuing operations                        2,175         3,210           4,071
Discontinued operations                        -          (824)         (1,255)
                                        --------      --------        --------
Profit from operations                     2,175         2,386           2,816
Adjustments for:
Depreciation of property, plant and
equipment                                  1,521         1,658           3,407
Gain on disposal of property,
plant and equipment                       (1,382)       (3,968)         (3,911)
                                        --------      --------        --------
Operating cash flows before movements 
in working capital                         2,314            76           2,312

Decrease in inventories                      282            69           1,205
Decrease/(increase) in receivables           788        (5,194)           (437)
(Decrease)/increase in payables           (3,891)        2,985              36
                                        --------      --------        --------
Cash generated by operations                (507)       (2,064)          3,116
Income taxes (paid)/received                 (38)          (84)            744
Interest paid                               (545)         (785)         (1,690)
                                        --------      --------        --------
Net cash from operating activities        (1,090)       (2,933)          2,170
                                        ========      ========        ========

Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash at bank and other short-term highly
liquid investments with a maturity of three months or less.

                                       Six months to   Six Months   Year to 31
                                             30 June   to 30 June     December
                                                2005         2004         2004
Movement in net debt                            £000         £000         £000

(Decrease) in cash and cash
equivalents in the period                       (220)         (75)          (8)
Decrease/(increase) in bank overdrafts         3,982       (1,220)       3,596
Cash flows from debt and lease financing         229          233          469
Loan notes issue in the period                     -            -         (200)
                                            --------     --------     --------
Movement in net debt in the year               3,991       (1,062)       3,857
Opening net debt                             (13,054)     (16,911)     (16,911)
                                            --------     --------     --------
Closing net debt                              (9,063)     (17,973)     (13,054)
                                            ========     ========     ========

Net debt comprises:-
Cash and cash equivalents                      1,798        1,951        2,018
Bank overdrafts and loans                    (10,244)     (19,042)     (14,226)
Obligations under finance leases                (617)        (882)        (846)
                                            --------     --------     --------
Closing net debt                              (9,063)     (17,973)     (13,054)
                                            ========     ========     ========
10. Pension scheme creditor

The figures below have been based on the provisional results of the triennial
actuarial valuation as at 1 May 2005, updated to 30 June 2005. The figures for
30 June 2004 and 31 December 2004 were based on an actuarial valuation at 1 May
2002 updated to the respective period ends. The assets in the scheme, the net
liability position of the scheme as calculated under IAS 19 and the principal
assumptions were:

                                         30 June       30 June     31 December
                                            2005          2004            2004
                                            £000          £000            £000
                                            
Fair value of assets                      37,294        33,056          35,121
Present value of scheme liabilities      (54,868)      (49,406)        (52,545)
                                        --------      --------       ---------
Pension scheme deficit                   (17,574)      (16,350)        (17,424)
Deferred tax asset                         5,272         4,905           5,227

Pension scheme deficit net of related
deferred tax asset                       (12,302)      (11,445)        (12,197)
                                        ========      ========       =========

The scheme's liabilities were calculated on the following bases as required
under IAS 19:

Assumptions                         30 June 2005   30 June 2004    31 December
                                                                          2004

Discount rate                               5.00%          5.75%        5.25%
Rate of increase in salaries                2.50%          4.25%        2.75%
Rate of increase in pensions in          
payment                                  3% or 5%       3% or 5%     3% or 5%
                                         for fixed      for fixed    for fixed
                                         increases      increases    increases
                                      or 2.75% for   or 2.75% for or 2.75% for
                                             LPI            LPI          LPI
Inflation assumption                       2.50%          3.00%        2.75%

                                    Six months to   Six Months to   Year to 31
                                          30 June         30 June     December
                                             2005       2004 2004          (As
                                                     (As restated restated for
                                                         for IFRS)       IFRS)
Analysis of amounts charged in
administrative expenses                      £000            £000         £000

Current service costs                         152             219          438
                                         ========        ========     ========
Analysis of amount charged to net
finance costs
Expected return on pension scheme
assets                                      1,148           1,109        2,217
Interest cost of pension scheme
liabilities                                (1,371)         (1,367)      (2,734)
                                         --------        --------     --------
Net cost                                     (223)           (258)        (517)
                                         ========        ========     ========
Analysis of the actuarial
(loss)/gain shown in the
statement of recognised
income and expense                           £000            £000         £000

Actual return less expected
return on scheme assets                     1,433            (548)         814
Experience gains & losses
arising on scheme liabilities                (318)             (1)         338
Changes in assumptions
underlying the present value of the
scheme's liabilities                       (1,265)          1,677         (930)
                                         --------        --------     --------
Actuarial (loss)/gain                        (150)          1,128          222
                                         ========        ========     ========
Movement in scheme deficit                   £000            £000         £000

At start of period                        (17,424)        (17,312)     (17,312)
Current service cost                         (152)           (219)        (438)
Contributions                                 375             311          621
Net finance costs                            (223)           (258)        (517)
Actuarial (loss)/gain in the period          (150)          1,128          222
                                         --------        --------     --------
At end of period                          (17,574)        (16,350)     (17,424)
                                         ========        ========     ========

11. Reconciliation of movements in    Six months    Six Months      Year to 31
equity                                to 30 June    to 30 June   December 2004
                                            2005          2004    (As restated
                                                  (As restated        for IFRS)
                                                      for IFRS)
                                            £000          £000            £000

Profit/(loss) for the period               1,485         1,498            (236)
Dividends to equity holders
in the period                                  -          (844)           (844)
Exchange differences on translation of
foreign operations                          (341)         (472)           (180)
Actuarial (losses)/gains on pension
schemes                                     (150)        1,128             222
Taxation on items taken direct to
equity                                        45          (338)            (67)
                                        --------      --------        --------
Movements in equity in the period          1,039           972          (1,105)
Opening equity                            26,641        27,746          27,746
                                        --------      --------        --------
Closing equity                            27,680        28,718          26,641
                                        ========      ========        ========

12. Explanation of transition to IFRS

The balance sheet reconciliation at 1 January 2004 (date of transition to IFRS)
and at 31 December 2004 (date of last UK GAAP statements) and the reconciliation
of profit for IFRS1 are shown on the following pages. The balance sheet
reconciliation at 30 June 2004 and the reconciliation of profit for the six
months to 30 June 2004 have also been included to enable a comparison of the
2005 interim figures with those published in the corresponding period of the
previous financial year. IFRS1 'First Time Adoption of International Financial
Reporting Standards' sets out the approach to be followed when IFRS are applied
for the first time. The major policy choices with an impact on results are noted
below.

Goodwill

Under UK GAAP, goodwill was amortised over its useful economic life. Under IFRS3
'Business Combinations' goodwill is no longer amortised but held at carrying
value with impairment reviews being undertaken annually or when there is an
indication that the carrying value has been reduced. Under IFRS1 the Group has
applied the change from the date of transition as opposed to full application to
all business combinations prior to that date. As a result, goodwill arising from
previous acquisitions is recorded initially in the opening balance sheet at the
amortised carrying value under UK GAAP on that date. The goodwill on the balance
sheet at the date of transition was £17.1 million. The impact on the 31 December
2004 income statement is a reversal of the amortisation previously charged under
UK GAAP of £0.9 million. Goodwill was tested for impairment at 1 January 2004
and 31 December 2004 in accordance with IFRS and no adjustment deemed necessary.

Employee benefits

Under UK GAAP, the transitional provisions of FRS17 'Retirement Benefits'
required the pension deficit to be shown as a memorandum disclosure in the notes
to the accounts for periods up to 31 December 2004 rather than accounted for on
the balance sheet. IAS19 'Employee Benefits' permits the operating and financing
costs of the defined benefit pension schemes to be shown separately in the
consolidated income statement and requires the pension deficit be shown on the
face of the balance sheet. IAS19 also allows a number of options for the
recognition of actuarial gains and losses.

The Group has adopted the approach of recognising the full pension deficit at
the date of transition. The overall impact of recognising the pension deficit,
net of incorporating the related deferred tax asset, is a reduction in net
assets of £12.1 million at 31 December 2003, £11.5 million at 30 June 2004 and
£12.2 million at 31 December 2004. Actuarial gains and losses have been
recognised in full in the consolidated statement of recognised income and
expense on the assumption that the EU will endorse the revised version of IAS19
during 2005.

IAS19 requires the recording of a holiday pay accrual. The holiday year of the
Group is the calendar year and no holidays can be carried forward. Consequently
no accrual is required at the year-end. Accruals of £160,000 and £140,000 have
been made at June 2004 and June 2005 respectively.

Share-based payments

Under UK GAAP, no charge was made to the profit and loss account for the value
of options granted to employees as options were granted at their intrinsic
value. Under IFRS2 'Share-Based Payments' a charge is made reflecting the fair
value of options granted since 7 November 2002, adjusted to reflect the actual
and expected levels of vesting, which is applying the exemption permitted under
IFRS1. The impact has been a charge to operating profit for the six months to 30
June 2004 of £12,000 and a charge of £32,000 in the year to 31 December 2004.

Foreign Exchange

Under IFRS, translation differences arising from the date of transition to IFRS
that are permitted to be taken to reserves must be tracked in a separate foreign
exchange reserve. The Group has elected to take the exemption, permitted under
the transitional rules of not applying IAS 21 'The Effect of Changes in Foreign
Exchange Rates' retrospectively; this has permitted the Group to absorb its
foreign exchange gains and losses for the period to 31 December 2003 in retained
earnings.

Non-current Assets Held for Sale

Under IFRS5 'Non-current Assets Held for Sale and Discontinued Operations' the
Group reclassified the values of surplus properties from 'Property, plant and
equipment' to 'Non current assets classified as held for sale' on the balance
sheet. The reclassifications made relate to Group's properties at Braehead,
Govan and Grantham, which were sold in March 2004, February 2005 and February
2005 respectively.

(i) Unaudited balance sheet reconciliation at 1 January 2004

               UK GAAP £000 IAS 19 Employee      IFRS 2   Reclassify      IFRS
                                   benefits
                                       £000 Share based         £000      £000
                                               payments
                                                   £000
Non-current
assets
Goodwill             17,054                                             17,054
Property,
plant and
equipment            28,613                                   (7,686)   20,927
Investment
property                  0                                    1,701     1,701
Other
receivables               0                                      838       838
Deferred tax
assets                    0           5,193                              5,193
                  ---------        --------    --------     -------- ---------
Total
non-current
assets               45,667           5,193           0       (5,147)   45,713
                  ---------        --------    --------     -------- ---------

Current
assets
Inventories           9,919                                              9,919
Trade and
other
receivables          28,901                                     (838)   28,063
Cash and cash
equivalents           2,026                                              2,026
                  ---------        --------    --------     -------- ---------
Total current
assets               40,846                                     (838)   40,008
Non-current
assets held
for sale                  0                                    5,985     5,985
                  ---------        --------    --------     -------- ---------
                     40,846               0           0        5,147    45,993
                  ---------        --------    --------     -------- ---------
                  ---------        --------    --------     -------- ---------
Total assets         86,513           5,193           0            0    91,706
                  ---------        --------    --------     -------- ---------

Current
liabilities
Trade and
other payables       27,526                          (5)                27,531
Tax
liabilities               0                                                  0
Obligations
under finance
leases                  432                                                432
Bank
overdrafts and
loans                17,822                                             17,822
                  ---------        --------    --------     -------- ---------
Total current
liabilities          45,780               0          (5)           0    45,785
                  ---------        --------    --------     -------- ---------

Non current
liabilities
Retirement
benefit
obligations               0         (17,312)                            17,312
Deferred tax
liabilities             180                                                180
Obligations
under finance
leases                  683                                                683
                  ---------        --------    --------     -------- ---------
Total
non-current
liabilities             863         (17,312)          0            0    18,175
                  ---------        --------    --------     -------- ---------
                  ---------        --------    --------     -------- ---------
Total
liabilities          46,643         (17,312)         (5)                63,960
                  ---------        --------    --------     -------- ---------
                  ---------        --------    --------     -------- ---------
Net assets           39,870         (12,119)         (5)           0    27,746
                  =========        ========    ========     ======== =========

Equity
Share                28,755                                             28,755
capital
Capital
redemption
reserve               2,952                                              2,952
Share                 7,547                                              7,547
premium
Revaluation
reserve                 279                                                279
Own shares           (1,406)                                            (1,406)
Retained
earnings              1,743         (12,119)         (5)               (10,381)
                  ---------        --------    --------     -------- ---------
Total equity         39,870         (12,119)         (5)           0    27,746
                  =========        ========    ========     ======== =========

(ii) Unaudited income statement reconciliation for the year to 31 December 2004

               UK GAAP £000 IAS 19 Employee      IFRS 2   IFRS 3 Business    IFRS
                                   benefits                 Combination
                                       £000 Share based            £000      £000
                                               payments
                                                   £000
Continuing
operations
Revenue             126,075                                               126,075
Cost of             (84,237)                                              (84,237)
sales             ---------        --------    --------        -------- ---------
Gross profit         41,838                                                41,838
Distribution
expenses             (6,927)                                               (6,927)
Administrative
expenses            (35,799)            183         (32)            890   (34,758)
Other
operating
income                   73                                                    73
                  ---------        --------    --------        -------- ---------
Profit/(loss)
before gain on
disposal of
properties             (815)            183         (32)            890       226
Gain on
disposal of
properties            3,845                                                 3,845
                  ---------        --------    --------        -------- ---------
Profit from
operations            3,030             183         (32)            890     4,071
Investment
income                   94                                                    94
Finance              (1,255)           (517)                               (1,772)
costs             ---------        --------    --------        -------- ---------
Profit before
tax                   1,869            (334)        (32)            890     2,393
Tax                     (75)            101                                    26
                  ---------        --------    --------        -------- ---------
Profit for the
period from
continuing
operations            1,794            (233)        (32)            890     2,419

Discontinued
operations
Loss for the
period from
discontinued
operations           (1,255)                                               (1,255)
Loss on
disposal of
discontinued
operations           (1,400)                                               (1,400)
                  ---------        --------    --------        -------- ---------
Loss for the
period                 (861)           (233)        (32)            890      (236)
                  =========        ========    ========        ======== =========

(iii) Unaudited balance sheet reconciliation at 31 December 2004

              UK GAAP £000 IAS 19 Employee    IFRS 2   IFRS 3 Business   Reclassify      IFRS
                                  benefits                 Combination
                                      £000   Share based          £000         £000      £000
                                              payments
                                                  £000
Non-current
assets
Goodwill            15,994                                       1,060                 17,054
Property,
plant and
equipment           22,882                                                   (5,281)   17,601
Investment
property                 0                                                    1,701     1,701
Other
receivables              0                                                    2,242     2,242
Deferred tax
assets                   0           5,227                                              5,227
                   -------        --------    --------       ---------     -------- ---------
Total
non-current
assets              38,876           5,227           0           1,060       (1,338)   43,825
                   -------        --------    --------       ---------     -------- ---------

Current
assets
Inventories          8,689                                                              8,689
Trade and
other
receivables         30,853                                                   (2,242)   28,611
Cash and cash
equivalents          2,018                                                              2,018
                   -------        --------    --------       ---------     -------- ---------
Total current
assets              41,560                                                   (2,242)   39,318
Non-current
assets held
for sale                 0                                                    3,580     3,580
                   -------        --------    --------       ---------     -------- ---------
                    41,560               0           0               0        1,338    42,898
                   -------        --------    --------       ---------     -------- ---------
                   -------        --------    --------       ---------     -------- ---------
Total               80,436           5,227           0           1,060            0    86,723
assets             -------        --------    --------       ---------     -------- ---------

Current
liabilities
Trade and
other               26,570                         (37)           (170)                26,777
payables
Tax
liabilities            595                                                                595
Obligations
under finance
leases                 479                                                                479
Bank
overdrafts
and                 14,226                                                             14,226
loans              -------        --------    --------       ---------     -------- ---------
Total current
liabilities         41,870               0         (37)           (170)           0    42,077
                   -------        --------    --------       ---------     -------- ---------

Non current
liabilities
Retirement
benefit
obligations              0         (17,424)                                            17,424
Deferred tax
liabilities            214                                                                214
Obligations
under finance
leases                 367                                                                367
                   -------        --------    --------       ---------     -------- ---------
Total
non-current
liabilities            581         (17,424)          0               0            0    18,005
                   -------        --------    --------       ---------     -------- ---------
                   -------        --------    --------       ---------     -------- ---------
Total
liabilities         42,451         (17,424)        (37)           (170)           0    60,082
                   -------        --------    --------       ---------     -------- ---------
                   -------        --------    --------       ---------     -------- ---------
Net assets          37,985         (12,197)        (37)            890            0    26,641
                   =======        ========    ========       =========     ======== =========

Equity
Share               28,755                                                             28,755
capital
Capital
redemption
reserve              2,952                                                              2,952
Share                7,547                                                              7,547
premium
Revaluation
reserve                274                                                                274
Own shares          (1,406)                                                            (1,406)
Translation
reserve                  0                                                     (180)     (180)
Retained
earnings              (137)        (12,197)        (37)            890          180   (11,301)
                   -------        --------    --------       ---------     -------- ---------
Total               37,985         (12,197)        (37)            890            0    26,641
equity             =======        ========    ========       =========     ======== =========

(iv) Unaudited income statement reconciliation for the six months to 30 June
2004

               UK GAAP £000   IAS 19 Employee    IFRS 2   IFRS 3 Business    IFRS
                                   benefits                 Combination
                                       £000   Share based          £000      £000
                                               payments
                                                   £000
Continuing
operations
Revenue              61,653                                                61,653
Cost of             (40,999)                                              (40,999)
sales              --------        --------    --------       --------- ---------
Gross profit         20,654                                                20,654
Distribution
expenses             (3,524)                                               (3,524)
Administrative
expenses            (18,174)            (68)        (12)            484   (17,770)
Other
operating
income                    5                                                     5
                   --------        --------    --------       --------- ---------
Profit/(loss)
before gain on
disposal of
properties           (1,039)            (68)        (12)            484      (635)
Gain on
disposal of
properties            3,845                                                 3,845
                   --------        --------    --------       --------- ---------
Profit from
operations            2,806             (68)        (12)            484     3,210
Investment
income                   29                                                    29
Finance                (664)           (258)                                 (922)
costs              --------        --------    --------       --------- ---------
Profit before
tax                   2,171            (326)        (12)            484     2,317
Tax                     (45)             50                                     5
                   --------        --------    --------       --------- ---------
Profit for the
period from
continuing
operations            2,126            (276)        (12)            484     2,322

Discontinued
operations
Loss for the
period from
discontinued
operations             (824)                                                 (824)
                   --------        --------    --------       --------- ---------
Profit for the
period                1,302            (276)        (12)            484     1,498
                   ========        ========    ========       ========= =========

(v) Unaudited balance sheet reconciliation at 30 June 2004

              UK GAAP £000   IAS 19 Employee    IFRS 2   IFRS 3 Business Reclassify     IFRS
                                  benefits                 Combination
                                      £000   Share based          £000         £000     £000
                                              payments
                                                  £000
Non-current
assets
Goodwill            16,570                                         484                17,054
Property,
plant and
equipment           23,980                                                   (5,281)  18,699
Investment
property                 0                                                    1,701    1,701
Other
receivables              0                                                    3,463    3.463
Deferred tax
assets                   0           4,905                                             4,905
                  -------        --------     -------        --------      ------- --------
Total
non-current
assets              40,550           4,905           0             484         (117)  45,822
                   -------        --------     -------        --------      ------- --------

Current
assets
Inventories          9,850                                                             9,850
Trade and
other
receivables         33,896                                                   (3,463)  30,433
Cash and cash
equivalents          1,951                                                             1,951
                   -------        --------     -------        --------      ------- --------
Total current
assets              45,697                                                   (3,463)  42,234
Non-current
assets held
for sale                 0                                                    3,580    3,580
                   -------        --------     -------        --------      ------- --------
                    45,697               0           0               0          117   45,814
                   -------        --------     -------        --------      ------- --------
                   -------        --------     -------        --------      ------- --------
Total               86,247           4,905           0             484            0   91,636
assets             -------        --------     -------        --------      ------- --------

Current
liabilities
Trade and
other               26,264            (160)        (17)                               26,441
payables
Tax
liabilities              0                                                                 0
Obligations
under finance
leases                 446                                                               446
Bank
overdrafts
and                 19,042                                                            19,042
loans              -------        --------     -------        --------      ------- --------
Total current
liabilities         45,752            (160)        (17)              0            0   45,929
                   -------        --------     -------        --------      ------- --------

Non current
liabilities
Retirement
benefit
obligations              0         (16,350)                                           16,350
Deferred tax
liabilities            203                                                               203
Obligations
under finance
leases                 436                                                               436
                   -------        --------     -------        --------      ------- --------
Total
non-current
liabilities            639         (16,350)          0               0            0   16,989
                   -------        --------     -------        --------      ------- --------
                   -------        --------     -------        --------      ------- --------
Total
liabilities         46,391         (16,510)        (17)              0            0   62,918
                   -------        --------     -------        --------      ------- --------
                   -------        --------     -------        --------      ------- --------
Net assets          39,856         (11,605)        (17)            484            0   28,718
                   =======        ========     =======        ========      ======= ========

Equity
Share               28,755                                                            28,755
capital
Capital
redemption
reserve              2,952                                                             2,952
Share                7,547                                                             7,547
premium
Revaluation
reserve                275                                                               275
Own shares          (1,406)                                                           (1,406)
Translation
reserve                  0                                                     (472)    (472)
Retained
earnings             1,733         (11,605)        (17)            484          472   (8,933)
                   -------        --------     -------        --------      ------- --------
Total               39,856         (11,605)        (17)            484            0   28,718
equity             =======        ========     =======        ========      ======= ========




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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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