Preliminary Results

McBride PLC 06 September 2007 6 September 2007 McBride plc McBride plc, Europe's leading provider of Private Label Household and Personal Care products, announces its preliminary results for the year ended 30 June 2007 • Revenue up 10% to £592.0 million (2006: £540.1m) supported by improving organic growth • Adjusted operating profit up 11% to £34.5 million (2006: £31.2m)(1); reported operating profit up 17% to £31.9 million (2006: £27.2m) • Adjusted basic earnings per share up 10% to 13.0 pence (2006: 11.8p) (1); reported basic earnings per share up 16% to 11.9 pence (2006: 10.3p) • Return on capital employed of 22.1% (2006: 24.3%)(1) reflecting a higher capital base following recent acquisition activity • Proposed final dividend up 11% to 3.9 pence (2006: 3.5p), making a total for the year of 5.6 pence (2006: 5.1p), up 10% • Return to organic growth in Western Continental Europe • Significant acquisition activity focused on targeted geographies, products and distribution channels, particularly strengthening Western Continental Europe business (1) Adjusted operating profit, adjusted basic earnings per share and return on capital employed figures are calculated before amortisation of intangible assets and exceptional items Miles Roberts, Chief Executive, commented: 'McBride has delivered a strong performance in a year of significant activity and challenges for the Group. We recorded double digit growth in revenue, operating profits and dividends whilst completing five acquisitions and managing the effects of continued input cost pressure. Particularly notable is the progress made in improving the underlying performance of our Western Continental Europe business where decisive management actions delivered improving results towards the end of the year. The Group has made a satisfactory start to the new financial year. With continued focus on efficiency and organic growth, good progress should be made in the current year, in line with the Board's expectations. Market conditions remain very competitive, particularly as raw materials costs continue to increase. Our recent acquisitions are delivering the expected increase in financial and operating scale and present opportunities to extract additional value from synergies.' For further information please contact: McBride plc Miles Roberts, Chief Executive 01494 607050 Bob Beveridge, Group Finance Director 01494 607050 Financial Dynamics Andrew Dowler 020 7831 3113 McBride is Europe's leading provider of Private Label Household and Personal Care products, supplying over 1.3 billion products each year to Europe's leading retailers. It employs over 5,000 people in 11 European countries. For more information, visit www.mcbride.co.uk Overview This has been a year of significant development and achievement for the Group. The Group returned to broad based organic revenue growth, maintained operating margins in a challenging input cost environment and increased profits, earnings per share and dividends at the same time as completing five value enhancing acquisitions. • Revenues were up in all three divisions reflecting initial contributions from recent acquisitions and supported by organic growth in the UK and Eastern Continental Europe and a return to organic growth in Western Continental Europe in the second half. • Group organic revenue growth of 2% at constant exchange rates compared to a decline of 1% in the prior year. • Acquisitions have strengthened the Group's position in our identified priority product categories and targeted geographic markets and distribution channels. • Marketing, new product development and management were strengthened significantly in Eastern Continental Europe and country and customer focus enhanced across the business. • Labour productivity improved and other efficiencies and cost savings were secured. • In the UK, revenue increased 11% to £277.1 million (2006: £249.8m) due to 3% organic growth and £20.8 million (2006: £1.6m) of revenue generated from recent acquisitions. Operating profit, before amortisation of intangible assets and exceptional items, grew in line with revenue to £24.5 million (2006: £22.0m). • In Western Continental Europe, revenue increased 9% to £304.2 million (2006: £280.3m) primarily reflecting the contribution of acquisitions but also improved organic revenue in the second half. Operating profit, before amortisation of intangible assets and exceptional items, was up 16% to £10.4 million (2006: £9.0m). • In Eastern Continental Europe, revenue increased 14% to £25.0 million (2006: £21.9m) due mostly to organic growth and reflecting the buoyant market conditions in the region. Operating profit, before amortisation of intangible assets and exceptional items, declined slightly to £1.5 million (2006: £1.6m) reflecting a year of significant investment across the business. Markets McBride operates in large and growing markets. The West European household and personal care markets had a combined value of £48 billion (at retail selling prices) in 2006 and they grew at 1.8% and 3.7% per annum respectively in the 5 years to the end of 2006. These trends are expected to continue. McBride's specific private label markets have consistently outperformed the overall household and personal care markets, growing by 4.8% and 5.1% per annum in the 5 years to the end of 2006 in West European household and personal care products respectively. Within McBride's overall markets there are specific product categories and geographic regions that have particularly attractive dynamics and the Group is focused on many of these to drive superior growth. In household products, automatic dishwashing products have delivered consistently strong growth - 6.8% per annum across Western Europe in the 5 years to 2006 - driven by the trend of increasing penetration of automatic dishwashing machines in homes. Above average market growth has occurred over the same period in other household product categories such as air care and household cleaners driven by factors such as convenience and high levels of product innovation. Personal care products also have a well established record of superior growth relative to household products, having grown at 3.7% per annum across Western Europe in the 5 years to the end of 2006. The countries of Central and Eastern Europe are enjoying outstanding growth in both the household and personal care markets which had a combined value of £11.6 billion (at retail selling prices) in 2006. Over the 5 years to the end of 2006, these markets grew at 12% per annum, the high growth reflecting increasing disposable incomes, growing consumer affluence and aspiration and intense focus from industry participants. High growth is forecast by market analysts to continue. McBride has been present in these markets for many years and has benefited from these overall market dynamics. McBride will be looking to capitalise further on the exciting growth potential in these markets in the coming years. (Source of market data: Euromonitor; market sizes and growth rates based on sterling figures using actual exchange rates) Strategy and objectives McBride has a well-defined strategy for enhancing shareholder value. At its core, it is to lead the growth of private label household and personal care products in Europe. As the largest private label producer in these markets, in order to deliver against this strategy we need to demonstrate real commercial leadership continuously. This means developing and maintaining close partnerships with our customers as well as a consistent and intimate understanding of our geographic and product markets. We must also have clarity of purpose in focusing on the most attractive opportunities. In terms of our customers, focus is increasingly on devising and implementing private label category development plans that drive private label growth within their businesses. We are focusing on all retail formats including the convenience and discount sectors. We have identified five product categories - automatic dishwashing tablets, specialist cleaners, laundry liquids, air care and personal care - that we believe offer the greatest medium term growth prospects. Innovation and new product development is the lifeblood of our business. Our resources are focused on the key themes of improving the convenience and environmental performance of our products as well as developing more premium product ranges. Allied to commercial leadership we must deliver outstanding sustained operational performance that positions us as our customers' partner of choice. This means a relentless focus on delivering consistently excellent customer service levels. It also requires continuous attention to reducing costs by leveraging our scale, improving efficiency and intense cost management focus as well as ensuring the sustainability of our activities. Where appropriate, acquisitions of complementary businesses are considered when they help to accelerate the fulfilment of the Group's strategic objectives. The year to 30 June 2007 was a successful one for McBride but in our fast paced business environment we must always be looking forward, looking to capitalise fully on the most attractive opportunities we have identified whilst actively managing challenges as they arise. To achieve this we are further stepping up the intensity with which we manage the business, reflected in the broader range of business objectives we have set ourselves for the coming year:- • improve customer partnership and service, category development and product innovation • deliver further improvements in efficiency and reduction in costs • grow our priority product categories • further improve performance in Western Continental Europe • accelerate growth in Eastern Continental Europe • take advantage of further suitable acquisition opportunities as they arise Business performance Introduction Our significant achievements in the year reflect successful execution against the objectives we set ourselves and the outstanding dedication of all our people in making McBride successful. Most notably, the performance of our existing Western Continental Europe business improved after a difficult period in its main French household products market. The improvement reflects decisive management action to return to top line growth, exit unprofitable activities and enhance operating efficiencies. We delivered above market organic revenue growth in personal care and Italian and Spanish household products and saw a return to growth in French household products in the second half. Further, profits, margins and return on capital employed were higher in the second half due to the underlying business and the contribution of recent acquisitions. Our other businesses also performed well. Eastern Continental Europe saw strong double digit organic revenue growth. The UK delivered higher revenues and profits, driven by the contribution from acquisitions and improved organic revenue growth of 3%. Commercial leadership Our focus on the priority product categories of automatic dishwashing tablets, specialist cleaners, laundry liquids, air care and personal care produced organic revenue growth in these categories well ahead of the Group average. These product categories accounted for nearly half of Group revenue in the year. In terms of our customers, we made good progress with selected customers in developing stronger partnerships to drive private label growth within their businesses. Where we achieved this more active marketing of their private label household and personal care product ranges, encouraging results were seen with increased volumes and new business wins. We have also put significantly more resource closer to our customers through dedicated country and customer teams across our three businesses. Innovation and new product development is the lifeblood of our business and is critical to supporting McBride's future growth. Our resources are focused on the key themes of improving the convenience and environmental performance of our products and developing more premium product ranges. Developments in the environmental arena are broad, ranging from improving product compaction, increasing the use of recycled materials in our products, reducing packaging and making our products more ecologically sensitive. In particular, the year saw the launch of a record number of ecologically sensitive products for a number of UK retailers. Operational leadership Customer service is our main operational priority and a highly visible benchmark that influences directly our ability to maintain commercial leadership and support the Group's overall growth strategy. We measure our success in this area by reference to success in delivering products ordered by customers in the correct volumes and within agreed timescales. McBride sells over 1.3 billion products each year and in 2007 service levels were consistent with the prior year at 97% with a particularly good performance in the second half which saw service levels reach 98%. Our focus on cost reduction is built on a culture of continuous improvement with a broad range of current initiatives, such as alternative sourcing of materials, improving labour productivity and enhancing other operating efficiencies such as energy efficiency and levels of waste. In 2006 the Group opened an office in Hong Kong to enhance its ability to source raw materials, product components, finished products and machinery at competitive prices from Asia. Sourcing of materials from Asia is expected to play an increasingly important role in the Group's overall cost management activities. Significant advances were made in labour productivity in our Western Continental Europe business driven by investments to increase automation that enabled headcount to be reduced as well as continuous improvement activities assisted by greater employee engagement. Energy efficiency also improved, by around 6% year on year. We also continued to benefit from the ongoing move towards more compact and concentrated products. As well as helping enhance profitability, these developments illustrate our strong commitment to improving the long-term sustainability of our business. Acquisitions During the year we made five acquisitions that strengthen the Group's position in our identified priority product categories and our targeted geographic markets and distribution channels, in particular transforming our Western Continental Europe business. The most important of these were the acquisitions of Henkel's European private label household products business and Dasty Italia. The acquisition from Henkel is based mainly on a major automatic dishwashing (ADW) production facility in Luxembourg. It transforms our ADW capability on a group wide basis. It also provides a platform to develop further our presence in Germany. The acquisition also includes a smaller specialist cleaners business in the UK. Dasty Italia doubles our scale in Italy, one of our fastest growing household products markets, and brings additional expertise in specialist cleaners. These acquisitions have also significantly increased our penetration of the discount retail sector. The other acquisitions in the year were Coventry Chemicals and Darcy Industries in the UK and Schneider in Poland. The acquisitions were debt financed so before the end of the year, the Group, with the support of its bankers, increased its committed debt facilities to £150 million, on no less favourable terms, to reflect the increased scale of the business and provide flexibility to make further acquisitions should suitable opportunities arise. These acquisitions are expected to enhance earnings per share, before amortisation of intangible assets and exceptional items, in the first full financial year of ownership and overall they are performing in line with plan. In addition, there are significant opportunities to extract incremental value from these acquisitions. These will be balanced towards cost synergies in the near term. Areas of particular focus will be improving raw material procurement costs, increased internal bottle blowing and reconfiguring our manufacturing capabilities to optimise production efficiency. Reconfiguring our manufacturing capabilities has commenced with some production having moved between acquired and existing sites to enhance efficiencies. We expect further opportunities to arise as the new financial year progresses. People Our business succeeds because of the dedication of our employees. It is their determination and hard work that creates value for our shareholders. This year has been particularly notable with us welcoming a large number of new people into the business as a result of our significant acquisition activity. We are working very hard to ensure that we get the best out of our people through continuous improvement in the quality and depth of our management and by setting clear expectations of the performance that the business expects from all employees. Sincerest thanks go to all our employees for their outstanding contributions and ongoing commitment to the success of McBride. Shareholder returns The Group's continued strong cash generative characteristics has resulted in the Board recommending an increase of 11% in the final dividend to 3.9 pence per share (2006: 3.5p), giving a total dividend per share of 5.6 pence (2006: 5.1p). Board At the end of June 2007, Lord Allen Sheppard retired from the Board, having been Chairman since the Group's creation in 1993. Allen made a huge contribution to the Group's growth and development over many years and leaves us well placed for the future. We thank Allen for his commitment and leadership and express our best wishes for the future. Iain Napier was appointed as his successor and we look forward to benefiting from his strong experience of international consumer goods markets combined with proven leadership skills. Outlook The Group has made a satisfactory start to the new financial year. With continued focus on efficiency and organic growth, good progress should be made in the current year, in line with the Board's expectations. Market conditions remain very competitive, particularly as raw material costs continue to increase. Our recent acquisitions are delivering the expected increase in financial and operating scale and present opportunities to extract additional value from synergies. UK business review Markets The overall UK household products market grew 4% in value terms in the year to June 2007, whilst in volume terms it was broadly stable. Private label performance was similar to the overall market, with 3% value growth, resulting in flat private label value and volume shares. The household products market was driven by growth of 7% in air care, 7% in automatic dishwashing products, 5% in fabric conditioner and 4% in household cleaners. Private label saw similar drivers to the overall market in terms of categories driving growth. In personal care the overall UK market grew by 2% and 4% in volume and value terms respectively in the year to June 2007, reflecting growth in higher value products and some price inflation. Private label grew ahead of the market in value terms at 6% over the year, driven by growth in skin care products. Product categories displaying strong growth in the overall market included skin care, liquid soap, shaving products, deodorants and mouthwash. As a result, private label's value and volume shares were 18% and 24% respectively (2006: 17% and 25%). (Source of market data: McBride estimates based on Taylor Nelson Sofres retail selling price data) Business performance During the year there was continued focus on improving operational capability and efficiency through improved working practices and investment in new plant and equipment. In particular, a significant improvement in energy efficiency was achieved in the year. Significant investment went into both our household and personal care products businesses and into both production assets and further increasing our internal bottle blowing capabilities. A total of £9.1 million (2006: £8.7m) was invested in the year including in production and filling lines for automatic dishwashing tablets, fabric conditioner and bleach. These are all contributing to delivering growth and efficiency in our business. Acquisitions During the year, we made three acquisitions, the UK element of the Henkel transaction, Coventry Chemicals and Darcy Industries, for a combined cash consideration of £19.7 million. The Henkel and Darcy Industries acquisitions reflect our objective to increase our presence in our priority product categories, in this case automatic dishwashing tablets and specialist cleaning respectively. Coventry Chemicals brought additional household product volumes, further driving economies of scale. Significant integration work was completed relating to these acquisitions and that from Sanmex International in the prior year, including transfer of production from Sanmex International and Coventry Chemicals to the Group's existing facilities and completing a SAP system implementation for the UK business acquired from Henkel. Financial review Revenue grew by 11% to £277.1 million (2006: £249.8m). With £20.8 million (2006: £1.6m) of revenue attributable to the Sanmex International, Coventry Chemicals, Henkel and Darcy Industries acquisitions, 3% organic revenue growth was achieved. The personal care business had a particularly successful year, with organic revenue growth of 12%. In household products underlying revenue was flat, whilst reported revenue was up 10%. The year was also characterised by stronger revenues in the second half reflecting the contribution of acquisitions. Our profits also improved, reflecting both increased revenues and our success in minimising the impact of rising input costs. Operating profit, before amortisation of intangible assets and exceptional items, grew in line with revenues to £24.5 million (2006: £22.0m). Western Continental Europe business review Markets In the year to June 2007, the value of the total household products markets grew in all McBride's core markets in Western Continental Europe, with growth ranging from 2% in France, 4% in Italy and Germany to 9% in Spain. Private label grew in all these territories in value terms with growth typically ahead of the overall market. In our largest French market, household and personal care markets grew 2% and 1% respectively compared with a 3% decline in the prior year. Private label household and personal care products continued the growth reported at the half year with 4% and 6% growth respectively in the year to June 2007 resulting in increased shares of the French market. Recent legislation to allow supermarkets to advertise their private label ranges came into force in France on 1 January 2007 and should provide further impetus for private label growth in France. Private label laundry liquids and automatic dishwashing products both performed well, registering 8% year on year growth. In Italy, private label washing up liquids registered a 12% growth in sales with laundry liquids up 5% whilst private label automatic dishwashing products declined 6%. In Spain, private label laundry liquids registered a strong performance, with 22% growth in sales in the year. (Source of market data: IRI and Secodip) Business performance We entered the year with a tough retail market, particularly in Northern Europe, and continuing significant input cost inflation as well as a recently completed business reorganisation. We were also committed to returning the business to top line growth. One of the key objectives of the business reorganisation was the creation of a more customer focused environment. In order to return the business to top line growth, it was particularly important that we achieved this with our biggest customers in our main French market and specifically were able to work more closely with them on the active marketing of their private label household and personal care product ranges. Where we have been able to give this focus, this approach has already provided encouraging results with increased volumes and new business wins. Generally we performed in line with or better than the overall private label markets in our main territories. In France, personal care strongly outperformed the market whilst in household products, after taking account of exiting less profitable contracts we broadly maintained share. In Spain, we delivered a particularly strong performance whilst our Italian business also grew ahead of the market, excluding the benefit of the acquisition of Dasty Italia. We continued our focus on driving improved efficiency, reducing cost and building capability in order to both mitigate the difficult market conditions and position the business to benefit from an upturn in trading conditions. Initiatives included exiting less profitable contracts, improved labour productivity, reducing waste levels, value engineering and alternative sourcing of certain raw materials and components. The headcount reductions achieved as part of the reorganisation last year were maintained through the year and, combined with investments to increase automation and continuous improvement activities assisted by greater employee engagement, drove a significant year on year improvement in labour productivity. Our capital investment programme was £9.2 million in the year (2006: £10.1m) with the key features being investment to improve efficiency and increase internal bottle blowing in order to reduce total production cost. Our two sites in Ieper saw significant investment with the personal care facility investing in bottle blowing capability whilst the household products facility introduced additional automation to reduce costs. Acquisitions During the year we made two important acquisitions: Henkel's European private label household products business and Dasty Italia, for a combined cash consideration of up to £37.2 million. These acquisitions transform our presence in our identified priority product categories and targeted geographic markets as well as significantly progressing our plans to expand relationships with major participants in the growing discount retail format across Europe. They significantly increase our presence in Italy and Germany, which makes McBride's business more balanced across Western Europe, and are expected to increase the revenues of our Western Continental Europe business by around 35% in a full year. The acquisition from Henkel is based mainly on a major 45,000 tonne per annum automatic dishwashing production facility in Luxembourg. The acquisition also provides a platform in Germany, where McBride is keen to expand further, and a stronger presence in a number of other markets in Central Europe. Dasty Italia is primarily a producer of specialist cleaners based at a large, modern and well-invested factory that commenced production in 2003 and is near Bergamo, about 30 miles from McBride's existing Italian operation. Combined with our existing business, the acquisition creates the clear leader in Italian private label household products. Financial review Total Western Continental Europe revenue was up 9% to £304.2 million (2006: £280.3m) primarily reflecting the effect of acquisitions. Currency exchange rate movements adversely affected reported revenues by £3.5 million. Organic revenue, adjusting for acquisitions and disposals and currency exchange rate movements, was broadly flat in the year although slightly higher in the second half versus the first half and the prior year second half. We delivered good organic revenue growth in personal care, Italian and Spanish household products and were encouraged by stabilisation in French household products, our largest market, in the second half of the year. Operating profit, before amortisation of intangible assets and exceptional items, was up 16% to £10.4 million (2006: £9.0m). The increased profitability in the year reflects a strong second half driven by both improved performance in the underlying business and the initial contribution of recent acquisitions. Improvements in the underlying business reflect the decisive management actions taken in areas such as labour productivity outlined above. Eastern Continental Europe business review Markets The household and personal care markets are experiencing dynamic growth across Eastern Continental Europe reflecting increasing disposable incomes, growing consumer affluence and aspiration and intense focus from industry participants. Growth is particularly strong in Russia and certain other CIS states with, for example, the Russian household and personal care products markets growing by 18% and 20% respectively in value terms in 2006 alone. In McBride's current core Eastern Continental Europe markets of Poland, the Czech Republic, Hungary and Slovakia, the combined household and personal care products markets increased in value terms by 5% and 7% respectively in 2006. Private label market shares in these markets are also consistently increasing but they remain at low levels compared to Western Europe, typically no more than 5%, providing ample scope for future growth. This future growth should be supported by the fact that retail growth and consolidation is being led by discounters and international retail chains that are experienced in the use of private label in their overall retail offer. (Source of market data: Euromonitor) Business performance Our Eastern Continental Europe business has developed well since we entered these markets a number of years ago. However, we are confident there is much more we can achieve in the region, making the business a more substantial business in a Group context. Our confidence is founded on the strong growth in household and personal care products being seen in the region, the rapidly increasing share of international retailers and the scope to drive the growth of private label market share, capitalising on the significantly increased resources we now have available in the business. In order to capitalise on these outstanding growth opportunities, we significantly increased investment across the business from undertaking a major new product development programme, substantial enhancements in general management and market facing resources and capital investment across our full production capability. We also purchased the minority interest in our Polish subsidiary, simplifying the management of the business. The management team was strengthened by new Managing, Finance and Sales Directors and we also placed greater sales and marketing resource in our main target markets. We continued the significant increase in investment to expand our Polish production facility to support continued growth in the Eastern Continental Europe region. Capital expenditure of £1.7 million (2006: £0.7m) was incurred. Major investment included adding further bottle blowing machines, mixing and filling facilities, factory capacity as well as water treatment facilities. The division also underwent significant systems investment to support the growing scale of the business. Acquisitions and minority interests We acquired Schneider, a Polish producer of private label household products, for £0.8 million in January 2007. The acquisition included a small production facility close to our existing site. In April 2007, we purchased the 15% minority interest in Intersilesia McBride Polska for £1.7 million. Financial review Total Eastern Continental Europe revenue rose 14% to £25.0 million (2006: £21.9m) with organic growth of 10% and the remainder attributable to the acquisition of Schneider. The revenue growth primarily reflects strong household product sales in Poland. Operating profit, before amortisation of intangible assets and exceptional items, was £1.5 million (2006: £1.6m). Operating profit remained similar to the prior year's level despite strong revenue growth primarily due to the costs of increased new product development, marketing and management resources. Group financial review Revenue Group revenue increased 10% to £592.0 million (2006: £540.1m) with organic revenue growth at constant exchange rates of 2% and personal care products delivering particularly strong growth of 9%. Other key factors benefiting the Group's revenue performance were the acquisitions of Henkel's European private label household products business and Dasty Italia and a full year contribution from the business acquired from Sanmex International. Currency exchange rate movements adversely impacted revenues by £3.5 million and lower local currency revenues were reported in the French and Benelux household products markets. However, we saw stabilisation in our local currency revenues in the second half in our key French household products market. By geographic origin, UK revenues grew 11% to £277.1 million (2006: £249.8m) with organic growth of 3% and the remainder due to full or part year contributions from acquisitions. Revenues in Western Continental Europe increased 9% to £304.2 million (2006: £280.3m) primarily due to the Henkel and Dasty Italia acquisitions. In Eastern Continental Europe, revenues were up 14% to £25.0 million (2006: £21.9m) which was predominantly organically driven. Operating profit Group operating profit, before amortisation of intangible assets and exceptional items ('adjusted operating profit'), increased 11% to £34.5 million (2006: £31.2m). This reflects improved profitability of the underlying business as well as the contributions from our recent acquisitions. The adjusted operating profit margin was the same as in the prior year at 5.8% with strong control of administrative costs offsetting higher cost of sales and distribution costs. Group reported operating profit increased 17% to £31.9 million (2006: £27.2m), the higher rate of increase relative to adjusted operating profit reflecting the lower level of exceptional items in the current year. Interest Reported net finance costs increased to £2.4 million (2006: £1.3m) primarily reflecting increased interest expense arising from a higher debt level to fund the acquisitions in the year. Exceptional items There was a £2.1 million pre-tax operating exceptional charge to the income statement in the year (2006: £3.8m). This related to integration costs associated with the recent acquisitions. Profit before tax and tax charge Profit before tax for the year was up 14% to £29.5 million (2006: £25.9m) and before amortisation of intangible assets and exceptional items it was up 7% to £32.1 million (2006: £29.9m). The £8.2 million (2006: £7.5m) taxation charge for the year represents a 28% effective tax rate (2006: 29%). Earnings per share and dividend Basic earnings per share (EPS) were up 16% to 11.9 pence (2006: 10.3p). Basic EPS, before amortisation of intangible assets and exceptional items, increased 10% to 13.0 pence (2006: 11.8p). The weighted average number of shares in issue in the year used in calculating these EPS figures was 177,405,917 (2006: 177,364,227). A final dividend of 3.9p per share, an increase of 11%, is recommended, giving a full year dividend of 5.6p, an overall increase of 10%. The final dividend, if approved by shareholders at the AGM on 30 October 2007, will be paid on 30 November 2007 to shareholders on the register on 26 October 2007. The ex-dividend date will be 24 October 2007. The £9.9 million total dividend relating to the year is covered 2.3 times (2006: 2.3 times) by earnings before amortisation of intangible assets and exceptional items. Cash flow The Group maintained its strong cash generative characteristics with net cash inflow from operations, excluding exceptional items, of £49.5 million (2006: £45.9m). This improvement was due primarily to the higher profitability achieved in the year with the net working capital outflow similar to the prior year. Capital expenditure increased 3% in the year to £20.0 million (2006: £19.5m) with investment supporting selective capacity increases, introduction of more modern efficient production equipment as well as increased investment in the Eastern Continental Europe business. The total capital expenditure figure for the year included £1.0 million invested in the Dasty Italia and Chemolux businesses between their acquisition dates and the year end. There was significant acquisition activity in the year with expenditure, net of cash acquired, of £59.5 million on five acquisitions made in the year, deferred consideration on a prior year acquisition and to purchase the minority interest in the Group's Polish subsidiary. Ordinary dividend payments were higher at £9.2 million (2006: £8.7m) reflecting the increase in the dividend. Reflecting the Group's continued strong cash generative characteristics, after the £59.5 million acquisition net outflow and £4.1 million of acquired debt, the Group's net debt only increased by £51.8 million to £80.9 million (2006: £29.1m). Balance sheet Net assets increased by £16.4 million in the year to £120.3 million (2006: £103.9m). The amounts of intangible assets, property, plant and equipment, working capital items and debt all increased significantly due primarily to the acquisitions completed in the year. Liabilities for pensions and other post-employment benefits declined from last year to £6.4 million, net of associated deferred tax asset (2006: £9.6m). The majority of this liability, £5.2 million (2006: £8.6m), relates to the UK defined benefit pension scheme. The pre-tax, before amortisation of intangible assets and exceptional items, return on average capital employed reduced from 24.3% to 22.1% with the positive influence of increased profitability offset by the fact that, whilst providing returns ahead of the Group's cost of capital, recent acquisitions contributed lower returns on capital than the existing Group average. Consolidated income statement for the year ended 30 June 2007 Pre Exceptional Post Pre Exceptional Post exceptional items exceptional exceptional items exceptional items (note 4) items items (note 4) items 2007 2007 2007 2006 2006 2006 Note £m £m £m £m £m £m Revenue 3 592.0 - 592.0 540.1 - 540.1 Cost of sales (393.0) - (393.0) (355.8) - (355.8) Gross profit 199.0 - 199.0 184.3 - 184.3 Distribution costs (39.7) - (39.7) (35.2) - (35.2) Administrative costs Before amortisation of intangible assets (124.8) (2.1) (126.9) (117.9) (3.8) (121.7) Amortisation of intangible (0.5) - (0.5) (0.2) - (0.2) assets Administrative costs including amortisation of intangible assets (125.3) (2.1) (127.4) (118.1) (3.8) (121.9) Operating profit 3,4 34.0 (2.1) 31.9 31.0 (3.8) 27.2 Financial income 4.8 - 4.8 3.9 - 3.9 Financial expenses (7.2) - (7.2) (5.2) - (5.2) Net financing costs (2.4) - (2.4) (1.3) - (1.3) Profit before tax 31.6 (2.1) 29.5 29.7 (3.8) 25.9 Taxation 7 (8.8) 0.6 (8.2) (8.7) 1.2 (7.5) Profit for the year 22.8 (1.5) 21.3 21.0 (2.6) 18.4 Attributable to: Equity holders of the parent 22.7 (1.5) 21.2 20.8 (2.6) 18.2 Minority interest 0.1 - 0.1 0.2 - 0.2 Profit for the year 22.8 (1.5) 21.3 21.0 (2.6) 18.4 All activities relate to continuing operations Earnings per ordinary share 6 (pence) Basic 11.9 10.3 Diluted 11.7 10.1 Dividends Paid in year (£m) 9.2 8.7 Paid in year (pence per share) 5.2 4.9 Proposed (£m) 6.9 6.2 Proposed (pence per share) 3.9 3.5 Consolidated balance sheet at 30 June 2007 2007 2006 Note £m £m Non-current assets Intangible assets 41.1 15.4 Property, plant and equipment 164.3 130.6 Other non-current assets 0.5 0.5 Deferred tax 2.6 5.1 208.5 151.6 Current assets Inventories 59.7 41.3 Trade and other receivables 130.7 106.6 Cash and cash equivalents 6.6 1.3 Assets classified as held for sale 1.3 - 198.3 149.2 Total assets 3 406.8 300.8 Current liabilities Interest bearing loans and borrowings 9.9 5.2 Trade and other payables 173.1 141.7 Current tax payable 1.9 1.7 Provisions 2.0 1.3 186.9 149.9 Non-current liabilities Interest bearing loans and borrowings 77.6 25.2 Pensions and other post-employment benefits 8.9 13.7 Provisions 1.6 1.0 Deferred tax 11.5 7.1 99.6 47.0 Total liabilities 3 286.5 196.9 Net assets 120.3 103.9 Equity Issued share capital 17.8 17.7 Share premium account 141.8 141.8 Other reserves (0.2) (0.8) Retained earnings (39.1) (55.2) Total equity attributable to equity holders of the parent 120.3 103.5 Minority interest - 0.4 Total equity and reserves 120.3 103.9 M W Roberts Director Consolidated cash flow statement for the year ended 30 June 2007 2007 2006 Note £m £m Profit before tax 29.5 25.9 Net financing costs 2.4 1.3 Pre-tax exceptional charge in the year 2.1 3.8 Share based payments 0.2 - Profit on sale of property, plant and equipment (0.1) (0.3) Depreciation 17.2 17.8 Amortisation of intangible assets 0.5 0.2 Operating cash flow before changes in working 51.8 48.7 capital (Increase)/decrease in receivables (3.8) 2.1 (Increase)/decrease in inventories (7.1) 1.5 Increase/(decrease) in payables 8.6 (6.4) Cash flow in respect of exceptional items (1.7) (5.5) Cash generated from operations 47.8 40.4 Interest paid (3.3) (2.4) Taxation paid (6.3) (6.5) Net cash from operating activities 38.2 31.5 Cash flows from investing activities Proceeds from sale of land and buildings 0.1 2.2 Acquisition of property, plant and equipment (19.8) (19.1) Acquisition of intangible assets (0.2) (0.4) Acquisition of businesses, net of cash acquired 5 (57.8) (7.3) Acquisition of minority interest 5 (1.7) - Interest received 1.3 0.3 Net cash used in investing activities (78.1) (24.3) Cash flows from financing activities Proceeds from issue of share capital 0.7 0.6 Repurchase of own shares - (3.3) Increase of borrowings 49.3 6.0 Payment of finance lease liabilities (0.7) (0.4) Dividends paid (9.2) (8.7) Net cash generated/(used) in financing activities 40.1 (5.8) Net increase in cash and cash equivalents 0.2 1.4 Cash and cash equivalents at start of year (1.3) (2.7) Effect of exchange rate fluctuations on cash held 0.1 - Cash and cash equivalents at end of year (1.0) (1.3) Reconciliation of cash and cash equivalents per the balance sheet and cash flow statement Cash and cash equivalents per the balance sheet 6.6 1.3 Overdrafts (7.6) (2.6) Cash and cash equivalents per the cash flow (1.0) (1.3) statement Reconciliation of net cash flow to movement in net debt for the year ended 30 June 2007 2007 2006 £m £m Increase in cash and cash equivalents in the year 0.2 1.4 Cash inflow from movement in debt (49.3) (6.0) Movement on finance leases 0.7 0.4 Change in net debt resulting from cash flows (48.4) (4.2) Lease financing acquired with subsidiary (1.2) - Loans acquired with subsidiaries (2.9) - Translation differences 0.7 (0.5) Movement in net debt in the year (51.8) (4.7) Net debt at the beginning of the year (29.1) (24.4) Net debt at the end of the year (80.9) (29.1) Consolidated statement of recognised income and expense for the year ended 30 June 2007 2007 2006 £m £m Foreign exchange translation differences (1.1) 0.7 Net gain/(loss) on hedge of net investment in foreign 0.8 (0.7) subsidiaries Cash flow hedge reserve movement (0.3) 0.4 Tax on items taken directly to equity 0.1 (0.1) Actuarial gain/(loss) net of deferred tax 3.1 (0.6) Income and expense recognised directly in equity 2.6 (0.3) Profit for the year 21.3 18.4 Total recognised income and expense for the year 23.9 18.1 Attributable to: Equity shareholders of the parent 23.8 17.9 Minority interest 0.1 0.2 23.9 18.1 Total recognised income and expense for the year 23.9 18.1 Adjustments relating to the implementation of IAS 32 and IAS 39 from 1 July - (1.5) 2005 23.9 16.6 NOTES TO THE FINANCIAL STATEMENTS 1) Exchange rates The exchange rates against sterling used for the periods were as follows: 2007 2006 2007 2006 Average rate Closing rate Euro 1.48 1.46 1.49 1.45 Polish Zloty 5.74 5.74 5.59 5.90 Czech Koruna 41.8 42.4 42.7 41.3 Hungarian Forint 384.2 372.1 365.0 409.7 2) Basis of preparation This financial information has been prepared in accordance with IFRS adopted for use in the EU ('adopted IFRS') in accordance with EU law (IAS Regulation EC 1606 /2002). This financial information has been prepared on the basis of recognition and measurement requirements of adopted IFRSs as at 30 June 2007. 3) Segment information Segment information is presented below in respect of the Group's geographic and business segments. The primary format, geographic segments, is based on the Group's operating divisions and internal reporting structure. Transfer prices between segments are set on an arm's length basis. Segment revenue and profit include transfers between segments, which are eliminated in consolidation. Geographic segments United Kingdom Western Eastern Elimination Total Continental Continental Europe Europe 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m £m £m External revenue 274.5 247.3 292.8 271.0 24.7 21.8 - - 592.0 540.1 Inter segment revenue 2.6 2.5 11.4 9.3 0.3 0.1 (14.3) (11.9) - - Total segment revenue 277.1 249.8 304.2 280.3 25.0 21.9 (14.3) (11.9) 592.0 540.1 Segment profit pre 24.5 22.0 10.4 9.0 1.5 1.6 (0.1) - 36.3 32.6 amortisation of intangible assets Amortisation of (0.2) (0.2) (0.2) - (0.1) - - - (0.5) (0.2) intangible assets Segment profit 24.3 21.8 10.2 9.0 1.4 1.6 (0.1) - 35.8 32.4 Corporate costs* (1.8) (1.4) Exceptional items (2.1) (3.8) (see note 4) Operating profit 31.9 27.2 Net finance costs (2.4) (1.3) Taxation (8.2) (7.5) Profit for the year 21.3 18.4 *Corporate costs relate primarily to head office costs that are not allocated to one of the geographic segments United Kingdom Western Eastern Corporate* Total Continental Continental Europe Europe 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m £m £m Segment assets 155.4 119.1 231.9 163.2 15.8 12.1 3.7 6.4 406.8 300.8 Segment liabilities (74.8) (70.1) (110.9) (85.0) (5.0) (4.0) (95.8) (37.8) (286.5) (196.9) Capital expenditure* 9.1 8.7 9.2 10.1 1.7 0.7 - - 20.0 19.5 Amortisation and 7.7 9.0 9.5 8.4 0.5 0.5 - 0.1 17.7 18.0 depreciation *Corporate liabilities include external debt and tax liabilities. Capital expenditure includes property, plant and equipment and intangible assets 3) Segment information (continued) Business segments Household Personal Care Total 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m Segment revenue 476.9 434.9 115.1 105.2 592.0 540.1 Segment profit pre amortisation of intangible assets 26.9 23.3 9.4 9.3 36.3 32.6 Amortisation of intangible assets (0.4) (0.1) (0.1) (0.1) (0.5) (0.2) Segment profit 26.5 23.2 9.3 9.2 35.8 32.4 Corporate* (1.8) (1.4) Exceptional items (see note 4) (2.1) (3.8) Operating profit 31.9 27.2 *Corporate costs relate primarily to head office costs that are not allocated to one of the business segments Household Personal Care Corporate Total 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m Segment assets 327.2 229.7 75.9 64.7 3.7 6.4 406.8 300.8 Capital expenditure* 12.9 14.5 7.1 5.0 - - 20.0 19.5 *Capital expenditure includes property, plant and equipment and intangible assets External revenue by destination Segmental information is also presented below in respect of external revenue by destination. United Kingdom Western Eastern Total Continental Continental Europe Europe and Rest of World 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m External revenue by destination 261.0 233.7 282.6 263.9 48.4 42.5 592.0 540.1 4) Exceptional items The Group presents certain items as 'exceptional'. These are items which, in management's judgement, need to be disclosed by virtue of their size or incidence in order to obtain a proper understanding of the financial information. There was a £2.1 million pre-tax operating exceptional charge to the income statement in the year relating to the incremental costs of integrating the recently acquired businesses detailed in note 5 and Sanmex International acquired in 2006. This includes disruption costs, asset write offs and consultant costs. The £3.8 million 2006 pre-tax operating exceptional charge included rationalisation of Western Continental Europe's administration costs, £2.5 million, restructuring the UK, £0.5 million and a termination payment and related costs for the previous Chief Executive, £0.8 million. In terms of segment analysis in note 3, the exceptional charge relates to the UK £0.8 million (2006: £0.5m), Western Continental Europe £0.8 million (2006: £2.5m) and Corporate £0.5 million (2006: £0.8m), on a geographic basis, and Household £1.6 million (2006: £2.9m), Personal Care nil (2006: £0.1m) and Corporate £0.5 million (2006: £0.8m) on a business basis. 5) Acquisitions Dasty Italia S.p.A. On 28 February 2007, the Group acquired all of the shares of Dasty Italia S.p.A., a manufacturer of private label household cleaning liquids in Italy for a total consideration of £15.9 million. Henkel's European private label household products businesses On 13 April 2007, the Group acquired all of the shares of Chemolux S.a.r.l., a manufacturer of automatic dishwashing products in both private label and branded formats in Luxembourg for a total initial consideration of £22.8 million. The potential consideration for the Chemolux acquisition includes a further £4.7 million contingent on achieving certain operating and financial criteria. At the balance sheet date, it was not probable that any of the criteria would be met and therefore, this has not been considered in the amount of initial consideration referred to above. If the situation changes and there is additional consideration, it will be treated as an adjustment to the cost of the acquisition. On 13 April 2007, the Group also acquired as part of the same negotiation the business and assets of Henkel's UK private label household products business for a total consideration of £13.7 million. 5) Acquisitions (continued) Other acquisitions On 12 September 2006 the Group completed the purchase of the business and assets of Coventry Chemicals Limited, a privately owned UK company for a total consideration of £2.3 million. On 2 January 2007 the Group acquired the business and assets of Zaklad Chemiczny Schneider SJ, a privately owned company in Poland, for a total consideration of £0.8 million. On 27 April 2007 the Group purchased from the Administrator of Darcy Industries Limited the business and assets of this UK company for a total consideration of £4.7 million. In aggregate, these acquired businesses contributed £36.8 million revenue, including £21.6 million from the former Henkel businesses and £9.3 million from Dasty Italia S.p.A., and £2.0 million operating profit for the periods between their respective acquisition dates and 30 June 2007. If these acquisitions had been completed on the first day of the financial year, they would have contributed approximately £136 million of revenue to the Group. It would be impractical to disclose the operating profit impact as this would require an evaluation of synergistic benefits and because a significant element of the acquisitions have been incorporated into existing facilities. The acquisitions had the following effect on the Group's assets and liabilities on acquisition date: Dasty Italia S.p.A. Henkel Other acquisitions Total European private label businesses Book Fair value Book Fair value Book Fair value Book Fair value Fair adjustments value value adjustments value value value adjustments adjustments £m £m £m £m £m £m £m £m £m Net assets acquired: Property, plant and 9.6 4.9 17.9 (0.1) 2.4 (0.3) 29.9 4.5 34.4 equipment Intangible assets - 0.4 - 6.0 0.1 0.1 0.1 6.5 6.6 Working capital 2.6 - 8.3 (1.8) 2.2 (0.8) 13.1 (2.6) 10.5 Cash and cash 0.7 - 1.6 - - - 2.3 - 2.3 equivalents Net debt and (4.1) - - - - - (4.1) - (4.1) finance leases Non-current (1.7) (1.8) (1.9) (1.0) - (1.0) (3.6) (3.8) (7.4) liabilities 7.1 3.5 25.9 3.1 4.7 (2.0) 37.7 4.6 42.3 Fair value of 10.6 29.0 2.7 42.3 assets acquired Goodwill on 5.3 7.5 5.2 18.0 acquisition Total consideration 15.9 36.5 7.9 60.3 Satisfied by: Cash 15.4 34.7 7.6 57.7 Costs associated 0.5 1.8 0.3 2.6 with the acquisition 15.9 36.5 7.9 60.3 The goodwill arising on the acquisitions is mainly attributable to operating synergies obtained by including acquired production in existing plants. Intangible assets mostly relate to the fair value placed on customer relationships along with a small amount attributable to brands. The fair values of the Henkel identifiable assets and liabilities have been prepared on a provisional basis as a result of the proximity of the acquisition date to the year end. The value of assets and liabilities recognised on acquisition are their estimated fair values. The Group has stated in its accounting policies the basis of valuing intangible assets acquired on acquisitions. The £57.8 million cash outflow in the cash flow statement relating to the acquired businesses net of cash acquired represents £60.3 million 2007 acquisition costs plus £0.3 million of final 2006 acquisition costs less £0.5 million of 2007 acquisition costs unpaid at 30 June 2007 less £2.3 million of cash acquired. 5) Acquisitions (continued) Acquisition of minority interest In April 2007, the Group acquired the remaining 15 percent interest in Intersilesia McBride Polska Sp. Z.o.o. for £1.7 million, increasing its ownership from 85 percent to 100 percent. 6) Earnings per share Basic earnings per ordinary share is calculated on profit after tax and minority interest, attributable to equity holders of the parent, divided by the weighted average number of ordinary shares in issue during the year in accordance with IAS 33. 2007 2006 Total earnings (£m) a 21.2 18.2 Weighted average number of ordinary shares b 177,405,917 177,364,227 Basic earnings per share (pence) a/b 11.9 10.3 Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue on assumption of conversion of all dilutive ordinary shares. The Company has three categories of potentially dilutive ordinary shares: share options issued whose exercise price is less than the average price of the Company's ordinary shares during the year, share awards with no option price and shares allocated to an approved Save As You Earn scheme. 2007 2006 Weighted average number of ordinary shares (million) b 177.4 177.4 Effect of dilutive share options (million) 0.3 0.9 Effect of dilutive share awards (million) 0.8 0.2 Effect of dilutive SAYE scheme shares (million) 2.7 2.5 c 181.2 181.0 Diluted basic earnings per share (pence) a/c 11.7 10.1 Adjusted basic earnings per share applies to earnings excluding exceptional items and amortisation of intangible assets since the directors consider that this gives additional information as to the underlying performance of the Group. Restated 2007 2006 £m £m Earnings used to calculate basic and diluted EPS a 21.2 18.2 Exceptional items after tax 1.5 2.6 Amortisation of intangible assets after tax 0.4 0.2 Earnings before exceptional items and amortisation of intangible d 23.1 21.0 assets Adjusted basic earnings per share (pence) d/b 13.0 11.8 Adjusted diluted earnings per share (pence) d/c 12.7 11.6 The 2006 restatement relates to the adjustment to earnings for amortisation of intangible assets not previously included. 7) Taxation The £8.2 million tax charge for the year ended 30 June 2007 (2006: £7.5m) consists of £5.4 million (2006: £4.8m) of UK tax and £2.8 million (2006: £2.7m) of overseas tax. 8) Other notes i) The financial information set out above does not constitute the company's statutory accounts for the years ended 30 June 2007 or 2006. Statutory accounts for 2006, which were prepared under IFRS, as adopted by the EU, have been delivered to the Register of Companies. The auditors have reported on those accounts. The annual financial information presented in this the preliminary announcement for the year ended 30 June 2007 is based on, and is consistent with, that in the Group's audited financial statements for the year ended 30 June 2007, and the financial statements will be sent to shareholders in due course. The auditors report on the financial statements is unqualified and does not contain any statement under section 237(2) or (3) of the Companies Act 1985. ii) The Annual Report for 2007 will be issued to shareholders on 29 September 2007 and will be available from the Company secretary at the Company's Registered Office, McBride House, Penn Road, Beaconsfield, Buckinghamshire, HP9 2FY; the Annual General Meeting will be held on Tuesday 30 October 2007. iii) If approved at the Annual General Meeting on 30 October 2007, a final dividend of 3.9 pence per share will be paid on 30 November 2007 to shareholders on the register at 26 October 2007. The ex-dividend date will be 24 October 2007. This information is provided by RNS The company news service from the London Stock Exchange

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