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Brambles Industries (BI.)

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Wednesday 25 February, 2004

Brambles Industries

Interim Results - Part 3

Brambles Industries PLC
25 February 2004


TRADING PERFORMANCE

Trading performance in the first half was consistent with our expectations and
the outlook for the full year remains unchanged with a better performance
expected in the second half leading to good progress for the year as a whole.

Revenue from continuing businesses at £1.5 billion increased by 5% in constant
currency, with CHEP and Recall up 10% and 13% respectively and Cleanaway
slightly ahead. This achievement was in the face of slow economic growth in a
number of markets.

Comparable operating profit (profit before interest, tax, goodwill amortisation
and exceptional items) from continuing business was £169 million compared with
£179 million last year.

Profit before tax, goodwill amortisation and exceptional items was £131 million
compared with £142 million last year and was in line with the trading updates
given with the AGMs. Earnings per share on the same basis at 5.4 pence compared
with 5.7 pence.

The six months saw a continued strong cash performance with cash flow from
operations after capital expenditure of £108 million, up from £16 million in the
previous year. All divisions remain firmly focused on the more efficient use of
assets and on cash generation.

In CHEP Americas, short term one-off costs associated with the programme to
reduce excess pallets awaiting repair in CHEP USA adversely affected profits in
the first four months of the half, but resulted in a significant cashflow
improvement. Comparable operating profits were 35% below the first half of last
year and 10% below the second half. CHEP Europe profits were 5% higher with
revenue up by 8%. CHEP's capital expenditure was 15% lower in constant currency
and all regions including the US generated positive operating cash flow after
capital expenditure. This reflects improvements in CHEP's asset productivity and
working capital management.

Cleanaway's profits were lower than last year. The municipal business across
Cleanaway continued to benefit from recent contract wins but other business
areas in Europe, notably technical waste and Commercial and Industrial (C&I) in
the UK faced difficult markets in the first half. An upturn in the business is
expected in the second half.

Recall increased both revenue and comparable operating profits.

Brambles Industrial Services continued to perform strongly in Australia and
there was encouraging progress in the Northern Hemisphere businesses.

The performance of the Regional Businesses was adversely affected by the
depressed market conditions for Eurotainer, though there were some signs of
recovery in Interlake.

EXCEPTIONAL ITEMS

Exceptional items of £20 million mainly comprised the profit on the sale of
Meineke Car Care Centers (£30 million) and costs associated with the
reorganisation of CHEP Europe (£23 million). Since the start of the
reorganisation in CHEP Europe at the beginning of 2003, costs of £73 million
have been charged out of an original estimate of £85 million. The balance is
expected to be charged by 30 June 2004. In addition, Brambles has adopted a
prudent approach to the carrying value of Interlake by writing off the entire
£19 million goodwill, in the light of its medium term profitability and
notwithstanding some improvement in current trading. The balance of the
exceptional charge related to businesses sold and the reorganisation in
Cleanaway.

FINANCIAL POSITION

Cash inflow from operations after capital expenditure strengthened again and was
up by £92 million to £108 million.

                                        5

Interest expense was £39 million compared with £42 million in the same period
last year, due to lower interest rates.

Working capital, which has been the focus of significant management attention,
was reduced by £20 million, all of which reduction occurred in continuing
businesses. In particular, debtor days were reduced in CHEP Europe, CHEP USA,
Cleanaway UK and Recall.

Net debt at 31 December 2003 was £1.56 billion, with the EBITDA interest cover
at 8.7 times and net debt/EBITDA (annualised) at 2.3 times, leaving ample
headroom in Brambles' credit facilities of £2.4 billion.

CAPITAL EXPENDITURE

Capital expenditure in the first half was £222 million, which compared
favourably with £242 million in the previous comparable period. As previously
indicated, it is anticipated that capital expenditure for the full year will be
similar to that in the year ended June 2003.

In CHEP, capital expenditure at £162 million was £21 million below last year.
The principal driver of the reduction was CHEP Americas, where capital
expenditure reduced by 30% in constant currency, reflecting the surplus stock
reduction programme. In constant currency, CHEP Europe's capital expenditure
fell despite increased sales. Capital expenditure in CHEP RoW grew at below the
rate of revenue growth.

Capital expenditure in Cleanaway was £39 million (up £6 million to support new
municipal contracts), in Brambles Industrial Services £10 million (up £1
million) and in Recall £11 million (down £2 million).

BUSINESS DISPOSALS

The only significant disposal in the period was Meineke Car Care Centers, sold
in August 2003 for net proceeds of £42 million. The resulting profit on sale of
£30 million (£17 million after tax) is shown as an exceptional item.

TAXATION

The Group tax rate decreased slightly from 32% in the prior year to 31% of
profit before tax, goodwill amortisation and exceptional items. It is likely to
remain at approximately 32% going forward.

DIVIDEND

The Board has declared an interim dividend of 10 cents per share for
shareholders in Brambles Industries Limited and 4.155 pence per share for
Brambles Industries plc shareholders. This is consistent with the Board's stated
policy of at least maintaining this level of dividend per share. The dividend
will be paid on 8 April 2004 to those shareholders registered on 19 March 2004.

                                        6

OPERATIONAL REVIEW

CHEP
                       First half 2004     First half 2003    % Change
                        As       Constant                    As       Constant
£m                    Reported   Currency                  Reported   Currency
--------------------------------------------------------------------------------
Revenue                    694        679            620         12         10
Comparable operating
profit 1                    96         92            103         (7)       (11)

Operating cash flow 
after capital
expenditure                 65         67            (37)         -          -

1 A definition of comparable operating profit and a reconciliation to statutory
profit before tax are shown on page 20.

In constant currency, revenue from CHEP increased by 10% while comparable
operating profit was 11% below the prior period. This reduction was expected,
and was due entirely to the performance of CHEP Americas.

CHEP's global programme to develop and implement standard metrics for business
performance measurement is now well established and is enhancing our ability to
manage the growth and development of the business in a controlled manner.

CHEP AMERICAS

In the Americas, revenue increased by 10% in constant currency, to £307 million.
Comparable operating profit at £27 million was 35% lower than the prior period
and as previously indicated was marginally below the second half of last year at
constant exchange rates. The shortfall came from the US and resulted largely
from one-off costs associated with the programme to relocate and repair the
excess pallet inventory within CHEP USA.

In CHEP USA, revenue growth slowed slightly around the turn of the year though
profits remained on track.

Operating cash flow after capital expenditure improved by £68 million, resulting
in a positive cash flow of £37 million. Improvements were seen in working
capital and capital expenditure was 30% below the previous period as excess
pallets were brought back into use.

In CHEP USA, although the new service centre network has been largely completed
during the last financial year, transitional inefficiencies had built up in the
pool resulting in an excess stock of pallets awaiting repair. During the first
half these excess pallets were moved into the new service centres and repaired.
The pallets are now back in the operational pallet pool and the programme
completed.

Compared with the first half of last year, repair costs in the Americas
increased by £7 million, in part due to the accelerated repair programme noted
earlier. An initiative to ensure adherence to CHEP pallet quality standards
whilst avoiding over-repair has been successful, with the damage ratio (the
percentage of pallets returning to the service centre which require repair)
having dropped during the six months to December from 34% to 32%. Transportation
costs were £11 million higher, largely due to the additional activity required
to bring pallets out of temporary storage locations. In addition, collection
costs from Total Pallet Management (TPM) agreements (particularly The Home
Depot) increased.

                                        7

Short term costs incurred in the half year were £11 million and most of these
were included in the increases in transport and repair costs noted above.

The management of the Non Participating Distributor (NPD) channel has continued
to improve. Fewer than 4% of total issues from our customers are now delivered
to NPDs and all carry a surcharge.

Within the Americas, CHEP's businesses in Mexico, Argentina, Brazil, Chile and
Canada continued to perform well.

In the second half of the current financial year it is anticipated that CHEP
Americas profits will rebound, driven by lower costs and continuing revenue
growth.

CHEP EUROPE

Revenue in Europe at £304 million was 8% higher boosted to some extent by the
hot summer and the resulting increased demand for soft drinks.

Comparable operating profit was 5% higher in constant currency, at £48 million,
in line with our expectations. As noted below, no benefits relating to the
restructuring programme arose in the first half, although some are expected in
the coming months.

The CHEP Europe business has stabilised, although the half year continued to
reflect the impact of servicing customers at prices that do not reflect the true
cost of servicing. This issue is currently being addressed and selective price
increases are now being implemented.

The project to consolidate CHEP Europe's administration in Spain and the UK is
proceeding to plan and the risks associated with its execution have reduced.

CHEP Europe Restructuring
=========================

Overall, the execution of the CHEP Europe restructuring programme is on track.
The programme focuses on two objectives, operational efficiency and asset
productivity.

Operational Efficiency Improvement Programme
--------------------------------------------

The cost of the programme to increase operational efficiency is anticipated to
remain within the initial estimate of £40 million. To the end of December 2003,
£31 million has been incurred since the inception of the project. The balance is
expected to be expended in the second half.

The benefits from the programme are expected to accrue over three years, with
the total benefit being derived by the year to June 2006 when the first full
year impact of the pricing initiatives will be visible.

Our estimates are for a combined benefit of £8 million in the second half of the
current year. The overhead reductions and pallet network optimisation are
anticipated to save at least a further £8 million in the next financial year in
addition to the benefits from the pricing initiatives designed to cover the cost
to serve our customers. The following year will benefit from the first full year
of these pricing initiatives and is expected to gain further from network
optimisation.

                                        8

The new centralised administration centres in the UK and Spain are now
operational, with the full transfer of all the European finance and
administrative processes expected to be complete by June this year. Up to the
end of December 2003 there had been a net reduction of 221 employees, with a
further reduction of 129 expected by the end of June. The majority of the
expenditure has already been committed although, due to temporary labour costs
incurred to underpin the implementation of the project, the benefits of its
reduction will not flow through until the second half.

New pricing initiatives have been communicated to customers. The initiatives are
designed to raise prices to recover the costs associated with slower pallet
return cycles and collecting from small and remote distributors while still
providing a significant value-added proposition to our customers. These
initiatives will affect approximately 90% of the distributor locations served,
but only around 10% of CHEP Europe's volumes. Discussions with affected
customers are continuing and second half results should show some benefit from
this programme.

Asset Productivity Improvement Programme
----------------------------------------

The cost of the asset productivity improvement programme is expected to remain
at the original estimate of £45 million. To the end of December 2003, £42
million had been incurred since the start of the project. The balance will be
incurred in the second half.

Since this programme was first announced, a considerable effort has been made to
improve the asset productivity of the European pallet pool. A focused audit
programme is nearing completion and should be finalised in the current half.

As a result of audits completed in the first half, 0.3 million pallets were
added to customer accounts and a further 1.1 million which were found to be
missing from our customers' premises will be subject to compensation charges. A
provision of £6 million has been made in relation to a further two million
pallets thought to be not recoverable from distributors' locations.

CHEP - REST OF WORLD

Revenue growth in these regions remained strong and at £83 million, revenue was
13% higher than the previous year. The pallet business continued to show growth
despite its relative maturity and the container business continued to gain from
the roll out of new contracts. Asset productivity initiatives continued to drive
strong financial returns.

Comparable operating profit at £21 million was 13% above the previous year.

CHEP - CONTAINER BUSINESS

The Reuseable Plastic Container (RPC) business grew revenues by 19% in the six
months to December 2003, with growth particularly strong in Europe and RoW. The
global focus on operational efficiencies and process standardisation has
resulted in lower wash and transportation costs in all regions.

                                        9

CLEANAWAY
                                 
                         First half 2004  First half 2003     % Change
                        As       Constant                    As       Constant
£m                    Reported   Currency                  Reported   Currency
--------------------------------------------------------------------------------
Revenue                    518        489            474          9          3
Comparable operating
profit 1                    43         40             50        (14)       (20)

Operating cash flow
after capital 
expenditure                 32         29             39          -          -

1 A definition of comparable operating profit and a reconciliation to statutory
profit before tax are shown on page 20.

In the first half, as expected, Cleanaway continued to face difficult trading
conditions in two of its market segments. As a result in constant currency,
comparable operating profit was 20% below the previous year although revenue was
3% higher. The lower profit resulted from a pension cost adjustment of £2
million in the UK and also in the UK, lower profits in C&I (£3 million) and
Technical Waste (£2 million). Lower average waste paper prices in Germany
impacted profits and comprised the balance.

The reasons for the performance and the outlook for the second half are
described below.

Operating cash flow was impacted by the lower profit although an increase in
capital expenditure, largely to support new municipal contracts, was more than
offset by a further improved working capital performance. Operating cash flow
after capital expenditure was £32 million, compared with £39 million in the
previous year.

In the UK revenue was 5% higher at £225 million. Comparable operating profit
however was lower than the previous year. In part this was due to additional
pension contributions of £2 million, which resulted from a new actuarial
valuation. Additionally and as expected, the C&I business was under pressure and
delivered lower profits, as did Technical Waste which suffered from slack
conditions in the pharmaceutical and chemical industries.

The municipal business continued to perform well, supported by recent contract
wins such as Croydon and Tower Hamlets. Work on the new Materials Recycling
Facility site in Greenwich has started. Cleanaway's proven expertise in advanced
waste technologies continues to position it to benefit from the trend towards
increased recycling of waste. This trend is strongly endorsed by the UK
Government, with stringent recycling targets being placed on local authorities.
In the last year, Cleanaway has achieved a success rate on tenders of almost 80%
and the municipal order book at the end of December stood at £785 million.

A re-organisation of the UK business into four, more customer-focused segments
was announced in January 2004. The increasing clarity and focus around the core
business segments is designed to ensure lowest cost operations, with increased
levels of customer service.

In Germany, although revenue and comparable operating profits were below the
previous year, our business continues to be remarkably resilient to recent
industry weakness. Reasons for the profit shortfall included lower average waste
paper prices and the impact of the drinks container deposit directive. Although
the future of this directive remains uncertain, Cleanaway has developed a
leading position in the retail sector and this has in part offset the reduction
in DSD volumes which arose from the scheme's introduction in January 2003.

                                        10

Following the DSD re-tendering, approximately 50% of Cleanaway's contracts were
awarded for three years and the remainder for one year. The new contracts
commenced 1 January 2004. Cleanaway's revenues from DSD have remained stable
after this first round of re-tendering, as market share gains have largely
offset price erosion. The resulting pressure on margins has been further
mitigated by a limited restructuring programme which commenced in July 2003. It
has resulted in the closure of ten plants and a reduction in the workforce of
around 380 people.

The performance in Cleanaway Australia and New Zealand was satisfactory, with
revenue 10% higher than the previous year at £100 million. The municipal
business continued to benefit from recent contract wins but competition remained
difficult in the C&I market in Victoria and Queensland. The municipal contract
order book stood at A$540 million at the end of December 2003.

In Asia, trading was very much in line with the prior year.

Restructuring costs of £4 million have been charged in the period as an
operating exceptional cost within Cleanaway. There may be further limited costs
in the second half.

In all its businesses, Cleanaway's global quality programme 'Clean Run' is
helping to facilitate sustainable improvements to customer service and
productivity.

Looking forward, the UK business is expected to perform markedly better in the
second half. This will be driven by both a turnaround in C&I and strong growth
in municipal. Across our other territories the Municipal sector should continue
to be strong, and there are expected to be firmer paper prices in Germany. The
performance of Cleanaway overall in the second half should be closer to that of
the second half of the last financial year.

RECALL                  First half 2004    First half 2003     % Change
                       As      Constant                       As      Constant
£m                  Reported   Currency                    Reported   Currency
--------------------------------------------------------------------------------
Revenue                    137        133            118         16         13
Comparable operating
profit 1                    21         20             19         11          5

Operating cash flow
after capital 
expenditure                 15         14              1          -          -

1 A definition of comparable operating profit and a reconciliation to statutory
profit before tax are shown on page 20.

In constant currency, Recall's revenue grew by 13% overall, of which 7% was
organic growth. The Americas accounted for half of the total revenue and
Europe's proportion increased to 30%. Seven acquisitions were made during the
period including those in the key markets of Houston and Sydney.

Growth was particularly strong in the Document Management Services (DMS)
business, where revenues were 13% higher than the previous year. In Europe, the
growth was supported by acquisitions made previously in UK and in Scandinavia
but following Iron Mountain's acquisition of Hays Information Management
business there have been some pricing pressures which held back profit growth.
In South America, there were new major contract wins including the court of
justice system of the state of Sao Paulo (Tribunal de Justica). In North America
however, growth has slowed since June 2003 as destruction rates and customer
turnover levels have increased.

                                        11

In SDS (Secure Destruction Services), the low waste paper prices in the period
held the overall sales growth rate to 5%. DPS (Data Protection Services)
continued to show steady growth, up 5%, whilst recent contract wins in the US
and Europe meant that the Integrated Data Services business more than doubled in
size.

Comparable operating profits increased by 5%, although the comparison has been
impacted by last year's insurance claim (£0.6 million) and the current year
reduction in paper price (£0.6 million).

Recall continues to use its 'Perfect Order' methodology to improve operational
performance and hence quality of service to its customers. The annual customer
satisfaction survey was completed in the first half and showed a significant
increase in positive responses when compared with the previous year.

Improvements in working capital saw Recall's cash flow after capital expenditure
increase by £14 million. Recall's debtor days globally were reduced by six days
as a result of improved collections in all regions.

Recall's established geographical coverage, high quality product offerings and
strong focus on customer service position it well to continue its organic growth
and acquisition investment strategy in future years.


BRAMBLES INDUSTRIAL SERVICES
                       First half 2004     First half 2003     % Change
                          As      Constant                   As       Constant
£m                     Reported   Currency                 Reported   Currency
--------------------------------------------------------------------------------
Revenue                     144        130           137          5         (5)
Comparable operating         17         16            13         31         23
profit 1

Operating cash flow
after capital 
expenditure                  16         14            22          -          -

1 A definition of comparable operating profit and a reconciliation to statutory
profit before tax are shown on page 20.

As expected, in constant currency, revenue in Brambles Industrial Services (BIS)
was 5% lower than the previous year, reflecting the disposal of a number of
small non core industrial maintenance and cranes businesses in Australia.
Excluding the impact of these disposals, revenue would have been similar to last
year. Comparable operating profit however was 23% higher, with improvements seen
in each territory, though prior year results included an asset write-off
resulting from a customer bankruptcy.

The increased focus on selected industries and key customers has resulted in
significant improvements in margins, up from 6% in 2001 to 12% in the six months
to December 2003.

Operating cash flow after capital expenditure reduced from £22 million to £16
million. Capital expenditure remained steady.

The Australian business represented 54% of the total BIS revenue. Despite the
previously mentioned divestments, profits improved slightly. The improvement was
most marked in the Steel Services business, with the PCI coal injection plant
managed for BlueScope Steel continuing to perform well.

                                        12

In the Northern Hemisphere, volumes improved particularly at Port Talbot and
Teesside in the UK and in the US.

Brambles Industrial Services has in-depth technical knowledge and strong,
focused positions in a selected number of industrial sites, and its mission is
to add value to selected customers. Further steady growth is anticipated.


REGIONAL BUSINESSES
                      First half 2004     First half 2003     % Change
                        As       Constant                    As       Constant
£m                    Reported   Currency                  Reported   Currency
--------------------------------------------------------------------------------
Revenue                     52         54             63        (17)       (14)
Comparable operating
profit 1                     -          -              3          -          -

Operating cash flow
after capital 
expenditure                  -         (1)             3          -          -

1 A definition of comparable operating profit and a reconciliation to statutory
profit before tax are shown on page 20.

Although demand experienced by the Interlake racking business remained depressed
during the first three months of the year, the second quarter saw some positive
signs of recovery due principally to a cost reduction programme but also to
stronger market conditions. The market recovery is expected to continue during
the second half, in spite of a sharp rise in steel prices which may constrain
margins somewhat.

The goodwill of £19 million held in respect of Interlake has been written off.
This reflects a conservative assessment of the likely profitability of the
business in future years, notwithstanding some recovery in the trading results
of the business. Within the Regional Businesses, this was more than offset by
the £30 million profit on the sale of Meineke Car Care Centers.

The operating environment for Eurotainer remained difficult and was exacerbated
by the weakness of the US dollar. A restructuring programme is underway to
improve overhead costs and a one-off increase in repair costs to improve fleet
quality has already generated improvements in utilisation rates.

TCR, though still a small business, showed good growth resulting from the recent
contract wins at major airports in the UK, France and the Netherlands.

                                        13

OUTLOOK

The outlook for the full year as indicated at the AGMs remains unchanged.

Although trading for the first half was weaker than the prior year, cash flow
was considerably stronger and we expect a better performance in the second half
leading to good progress for the year as a whole.

CHEP Americas profits should rebound in the second half, as the short term costs
of reducing excess pallets have now been eliminated and revenue will continue to
grow.

CHEP Europe should see continued revenue growth. The pan European
re-organisation programme remains on track. Pricing initiatives have been
implemented and the results should start to be seen in the second half of the
year.

CHEP in the Rest of the World is expected to continue to perform strongly.

In Cleanaway, a marked improvement is expected in the second half in the UK and
municipal growth is expected to continue in all markets.

Both Recall and Brambles Industrial Services should continue to grow.

This year we are planning to update the market on second half progress in mid
May.

Looking further ahead, Brambles has today released Objectives and Milestones
which provide a strategic framework within which the Group will operate. It
reaffirms Brambles' approach and commitment to delivering significant
improvements in shareholder value, setting out clear targets for revenue growth,
cash flow, return on capital and financial gearing. These targets will provide a
context for monitoring performance as Brambles drives to maximise its full
potential.

                                        14



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