Trading Statement

Macfarlane Group PLC
31 October 2001


Macfarlane Group PLC

31 October 2001



Trading statement


In August 2001 we reported good levels of profitability for the first six
months but indicated that trading was being impacted by the general slowdown
in the markets in which Macfarlane operates. This trend has continued into the
second half of 2001.


Demand from customers in the third quarter was below expectations with a
number of customers taking forced shutdowns. Demand in the electronics sector
continues to fall and the distress experienced by customers in other
manufacturing and industrial businesses is resulting in both price pressures
and reduced demand. The expected increase in business during the last quarter,
traditionally the Group's strongest trading period, now looks unlikely to
materialise, particularly given weaker business confidence and demand
aggravated by the events of 11 September 2001. As a result of these factors
the directors now expect that profit for the year before taking account of the
restructuring costs and asset impairment charges referred to below is likely
to be marginally below the levels of profit before taxation reported in the
year to 31 December 2000.


The Directors believe that the strategic direction of the Group is sound and
the Board is now taking steps to accelerate restructuring plans to strengthen
the prospects for 2002 and beyond by reducing the company's cost base. This
will ensure that a better business is created, which will not only withstand
the current economic slowdown, but will also better position Macfarlane to
benefit from the eventual upturn in economic conditions. The restructuring of
the distribution operations is progressing well with 5 sites already closed
and a further 7 sites planned for closure this year, all consolidated into
larger sites which will provide a platform for growth. This restructuring is
being funded by the proceeds from the sale of surplus assets. The Group's
strong balance sheet will allow additional cash restructuring costs to fully
integrate our packaging and distribution activities, in the current year these
are expected to amount to £2.5m. In addition the Group will take non-cash
asset impairment charges of £7.5m in the US and the UK to properly reflect the
impact of this slowdown. These actions will generate improved profitability in
2002.


Macfarlane Group has a strong balance sheet, which will be further
strengthened by our asset realization programme. The Board intends to use this
strength to continue to make further tactical share buy-backs where
appropriate, to maintain the annual dividend and to take advantage of any
opportunities that may present themselves.




END