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Maclellan Group (MLG)

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Monday 22 March, 2004

Maclellan Group

Final Results

Maclellan Group PLC
22 March 2004

MacLellan Group plc



Preliminary announcement of results for the year ended 31 December 2003



CHAIRMAN'S STATEMENT



Results



I am pleased to report another record result for the year ended 31 December
2003. During the year we have strengthened the Group with the implementation of
a new operating structure and the extension of the range of our service
capabilities by the acquisition of Tasker (U.K.) Limited and Attlaw Security &
Protection Limited.



The financial highlights for the year are as follows:



•         Turnover from continuing operations increased by 19% to £153.3 million
          (2002: £129.2 million)



•         Profit before exceptional items, goodwill amortisation and taxation
          increased by 28% to £5.5 million (2002: £4.3 million)



•         Profit before taxation increased by 27% to £3.3 million (2002: £2.6
          million)



•         Underlying fully diluted earnings per share increased by 14% to 5.0
          pence (2002: 4.4 pence)



•         FRS14 basic earnings per share were 2.6 pence (2002: 2.7 pence)



•         Dividend increase of 50% to 0.75 pence per share (2002: 0.5 pence)
          which, subject to shareholder approval, will be paid on 1 July 2004



•         Period end net debt was £7.1 million (2002: £4.0 million) with net
          interest covered 18 times by operating profit from continuing 
          operations before goodwill amortisation and exceptional items (2002: 
          16 times)



•         Forward order book of £485 million



Operational Review



During the year we consolidated our operations into three new divisions. Our
largest division, Facilities Services, has national coverage and is the result
of the consolidation of two previously separate operating structures. Today's
Group has been formed from the acquisition of eight separate companies which
have been purchased since 1998. An exceptional restructuring charge of £1.0
million reflects the fact that this integration exercise was a substantial one
which in financial terms was largely offset by an exceptional credit of £0.9
million which arose from the settlement of an outstanding legal claim.



Net operating margins before goodwill amortisation and exceptional items from
continuing operations increased to 3.8% (2002: 3.6%). Net cash inflow from
operating activities during 2003 was £6.5 million. The Group's net debt
increased during 2003 by £3.1 million as a result of the acquisitions of Tasker
(U.K.) Limited and of Attlaw Security & Protection Limited which included the
assumption of £3.9 million of net debt at the date of acquisition and had a cash
cost of £2.9 million. The Group remains conservatively financed with year end
bank debt of £5.5 million compared to available bank facilities of £19.5
million.



New business wins and organic growth accounted for a 16% increase in 2002's
turnover from continuing operations. We continue to grow organically and our
current forward order book stands at £485 million.



We were delighted to win for the second successive year the coveted Best
Partnership Trophy at the Premises & Facilities Management Partnership Industry
Awards held in November 2003 .  This is the first time in the 10 years of these
awards that an organisation has been recognised in consecutive years for its
outstanding performance.   This is a testament to the dedication and hard work
of all our management and employees and on behalf of the Board I thank them all
for their effort and support during 2003.



Acquisitions



We purchased Tasker (U.K.) Limited in June 2003 in order to create a national
commercial window cleaning business.  The acquisition of Attlaw Security &
Protection Limited was formally completed in December 2003 in order to further
develop our security offering to customers on a national basis particularly in
the retail sector.



Strategy



We are proud of our industrial background and how we apply our knowledge to
other market sectors.  We believe in and practice the benefits of self
performance and are foremost in process and technical improvement in the
facilities services environment.



We are now in a position to broaden the range of services offered to our
customers by developing sector specific competencies and a tailored proposition
to attract new customers in our chosen market sectors.



We will continue to pursue the path of increasing our range of service
capability both organically and by suitable bolt on acquisitions.



Outlook



2004 has started well with sizeable new contract wins in a number of key market
sectors.  The Board is therefore confident that the Group will make further
positive progress in 2004.







A L R Morton

Chairman



22 March 2004





GROUP PROFIT AND LOSS ACCOUNT

for the year ended 31 December 2003



                                 Before                                       Before
                             goodwill &     Goodwill &                    goodwill &     Goodwill &
                            exceptional    exceptional                   exceptional    exceptional
                                  items          items          Total          items          items          Total
                                   £000           £000           £000           £000           £000           £000

Turnover
Continuing operations
Existing operations             150,087              -        150,087        129,242              -        129,242
Acquisitions                      3,181              -          3,181              -              -              -
                           ------------   ------------   ------------   ------------   ------------   ------------
                                153,268              -        153,268        129,242              -        129,242
Discontinued operations               -              -              -         12,296              -         12,296
                           ------------   ------------   ------------   ------------   ------------   ------------
                                153,268              -        153,268        141,538              -        141,538

Cost of sales                 (132,402)          (219)      (132,621)      (123,156)              -      (123,156)
                           ------------   ------------   ------------   ------------   ------------   ------------

Gross profit                     20,866          (219)         20,647         18,382              -         18,382

Administrative
   expenses
Goodwill amortisation                 -        (2,139)        (2,139)              -        (1,580)        (1,580)
Other                          (15,023)            111       (14,912)       (13,841)          (734)       (14,575)
                           ------------   ------------   ------------   ------------   ------------   ------------
                               (15,023)        (2,028)       (17,051)       (13,841)        (2,314)       (16,155)
Operating profit
Continuing operations
Existing operations               5,570        (3,020)          2,550          4,596        (2,314)          2,282
Acquisitions                        273          (108)            165              -              -              -
                           ------------   ------------   ------------   ------------   ------------   ------------
                                  5,843        (3,128)          2,715          4,596        (2,314)          2,282

Discontinued operations               -            881            881           (55)              -           (55)
                           ------------   ------------   ------------   ------------   ------------   ------------
                                  5,843        (2,247)          3,596          4,541        (2,314)          2,227
Profit on disposal of
discontinued operations               -              -              -              -            707            707
Net interest                      (317)              -          (317)          (288)              -          (288)
                           ------------   ------------   ------------   ------------   ------------   ------------
Profit on ordinary
   activities before
   taxation                       5,526        (2,247)          3,279          4,253        (1,607)          2,646
                           ------------   ------------                  ------------   ------------
Tax on profit on
   ordinary activities                                        (1,263)                                        (804)
                                                         ------------                                 ------------
Profit for the
   financial year                                               2,016                                        1,842
Dividends - including
non-equity                                                      (583)                                        (388)
                                                         ------------                                 ------------
Retained profit for
   the financial year                                           1,433                                        1,454
                                                         ------------                                 ------------
Earnings per share
Underlying diluted                 5.0p                                         4.4p
Underlying undiluted               5.2p                                         4.6p

FRS14 basic                                                      2.6p                                         2.7p
FRS14 diluted                                                    2.6p                                         2.6p
                                                         ------------                                 ------------



The above figures are stated on an historical cost basis.



GROUP BALANCE SHEET

at 31 December 2003


                                                                                      2003            2002
                                                                                      £000            £000
Fixed assets
Intangible assets                                                                   49,584          37,241
Tangible assets                                                                      6,120           6,274
Investments                                                                          1,752           1,852
                                                                              ------------    ------------
                                                                                    57,456          45,367
                                                                              ------------    ------------
Current assets
Stocks                                                                                 608             393
Debtors                                                                             28,663          24,113
Cash at bank and in hand                                                             1,701           2,324
                                                                              ------------    ------------
                                                                                    30,972          26,830
                                                                              ------------    ------------
Creditors: Amounts falling due within one year
Borrowings                                                                         (5,809)         (3,111)
Other creditors                                                                   (25,427)        (23,312)
                                                                              ------------    ------------
                                                                                  (31,236)        (26,423)
                                                                              ------------    ------------
Net current (liabilities)/assets                                                     (264)             407
                                                                              ------------    ------------
Total assets less current liabilities                                               57,192          45,774

Creditors: Amounts falling due after more than one year
Borrowings                                                                         (2,991)         (3,173)
Other creditors                                                                    (3,000)               -
                                                                              ------------    ------------
Net assets                                                                          51,201          42,601
                                                                              ------------    ------------
Capital and reserves
Called up share capital                                                              4,464           4,291
Ordinary shares to be issued                                                         4,600               -
Share premium account                                                               37,713          35,319
Other reserves                                                                         204             204
Profit and loss account                                                              4,220           2,787
                                                                              ------------    ------------
Total shareholders' funds                                                           51,201          42,601
                                                                              ------------    ------------
Analysis of shareholders' funds
Equity                                                                              49,201          40,601
Non-equity                                                                           2,000           2,000
                                                                              ------------    ------------
Total shareholders' funds                                                           51,201          42,601
                                                                              ------------    ------------





GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

for the year ended 31 December 2003


                                                                                  2003               2002
                                                                                  £000               £000

Profit for the financial year                                                    2,016              1,842
Currency adjustments offset in reserves                                              -                (5)
Total recognised gains for the year                                              2,016              1,837

Prior year adjustment                                                                               1,171
Total gains recognised since last annual report                                                     3,008





RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS

for the year ended 31 December 2003


                                                                                  2003               2002
                                                                                  £000               £000

Profit for the financial year                                                    2,016              1,842
Dividends                                                                        (583)              (388)
                                                                                 1,433              1,454


Ordinary shares issued including premium (net of expenses)                       2,567             17,934
Currency adjustments                                                                 -                (5)
Ordinary shares to be issued                                                     4,600                  -

Net increase in shareholders' funds                                              8,600             19,383


Opening shareholders' funds                                                     42,601             23,218


Closing shareholders' funds                                                     51,201             42,601






GROUP STATEMENT OF CASH FLOWS

for the year ended 31 December 2003


                                                                                      2003                   2002
                                                               Note                   £000                   £000

Net cash inflow from operating activities                      A                     6,470                  6,566

Returns on investments and servicing of finance
Interest received                                                                      142                    172
Investment income                                                                        -                     32
Interest paid                                                                        (317)                  (286)
Interest element of finance lease payments                                           (162)                  (105)
Preference dividends paid                                                              (9)                      -
Net cash outflow from returns on investments and servicing of
finance                                                                              (346)                  (187)
                                                                                     

Taxation                                                                             (309)                  (413)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                                  (1,074)                  (947)
Disposal of tangible fixed assets                                                       13                    672
Redemption of shares in unquoted company                                               100                     75
Disposal of shares in quoted company                                                     -                    984
Net cash (outflow)/inflow from capital expenditure and
financial investment                                                                 (961)                    784
                                                                                     

Acquisitions and disposals                                     E
Purchase of subsidiary undertakings                                                (2,617)                (1,490)
Overdraft balances acquired with subsidiary undertakings                           (3,747)                (4,357)
Additional consideration on acquisitions made in prior year                          (293)                      -
Disposal of subsidiary undertakings                                                      -                  (240)
Cash balances disposed with subsidiary undertakings                                      -                  (119)
Net cash outflow from acquisitions and disposals                                   (6,657)                (6,206)

Equity dividends paid                                                                (379)                      -

Net cash (outflow)/inflow before financing                                         (2,182)                    544

Financing
Ordinary shares issued                                                                  67                     39
Expenses incurred in issue of ordinary shares                                            -                  (238)
Loans due within one year:
-   increases in term debt                                                           2,004                      -
-   repayments in year                                         C                   (3,164)                (1,000)
Loans due after one year:
-   increases in term debt (net of issue costs)                                      1,546                      -
Capital element of finance lease payments                      C                     (791)                  (792)
Net cash outflow from financing                                                      (338)                (1,991)

Decrease in cash in the year                                   B, C                (2,520)                (1,447)





NOTES TO THE GROUP STATEMENT OF CASH FLOWS

for the year ended 31 December 2003



A.         RECONCILIATION OF OPERATING PROFIT TO NET
           CASH INFLOW FROM OPERATING ACTIVITIES







                                                                                      2003                   2002
                                                                                      £000                   £000
Operating Activities
Operating profit                                                                     3,596                  2,227
Amortisation                                                                         2,139                  1,580
Depreciation                                                                         1,989                  1,593
Loss/(profit) on disposal of tangible fixed assets                                       8                   (75)
Profit on disposal of investments                                                        -                   (22)
Investment income                                                                        -                   (32)
Exchange differences                                                                     -                    (9)
Increase in stocks                                                                   (178)                  (233)
Decrease in debtors                                                                    563                    237
(Decrease)/increase in creditors                                                   (1,647)                  1,300
Net cash inflow from operating activities                                            6,470                  6,566



B.         RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT


                                                                                      2003                   2002

                                                                                      £000                   £000
Decrease in cash in the year                                                       (2,520)                (1,447)
Net cash flow from changes in debt                                                     405                  1,792
New loan notes                                                                       (647)                      -
New finance lease agreements                                                         (216)                (1,829)
Finance leases acquired with subsidiary undertakings                                 (141)                  (792)
Finance leases disposed with subsidiary undertakings                                     -                    119
Exchange movements                                                                    (20)                      -
Movement in net debt in the year                                                   (3,139)                (2,157)
Net debt at beginning of year                                                      (3,960)                (1,803)
Net debt at end of year                                                            (7,099)                (3,960)



C.         ANALYSIS OF CHANGES IN NET DEBT DURING THE YEAR


                                     At                                                                       At
                                     31                    Other                                              31
                               December        Cash     non-cash        Exchange         Debt of        December
                                   2002        flow      changes       movements    acquisitions            2003
                                   £000        £000         £000            £000            £000            £000
Cash at bank and in hand          2,324       (623)            -               -               -           1,701
Overdraft                             -     (1,897)            -               -               -         (1,897)
                                  2,324     (2,520)            -               -               -           (196)

Debt due within one year        (2,312)       1,160      (1,764)             (8)               -         (2,924)
Debt due after one year         (1,922)     (1,546)        1,117               -               -         (2,351)
Finance lease agreements          (799)         791        (857)            (12)           (111)           (988)
-   within one year             (1,251)           -          641               -             (30)           (640)
-   after one year                                                          

                                                                               
                                (6,284)         405        (863)            (20)           (141)         (6,903)


                                (3,960)     (2,115)        (863)            (20)           (141)         (7,099)




NOTES TO THE GROUP STATEMENT OF CASH FLOWS continued

for the year ended 31 December 2003



D.         MAJOR NON-CASH TRANSACTIONS



During the year the Group entered into finance lease arrangements in respect of
assets with a total capital value of £216,000.  Of the consideration for the
acquisition of Attlaw Security & Protection Limited £2.5 million was by way of
shares and £647,000 by way of loan notes.  Further details of acquisitions are
set out in note E below.



E.         ACQUISITIONS



On 18 June 2003 the Group acquired the entire issued share capital of Tasker
(U.K.) Limited and legal completion of the acquisition of the entire issued
share capital of Attlaw Security & Protection Limited took place on 15 December
2003.  The acquisitions have been accounted for using acquisition accounting
principles.  The net assets of the businesses acquired have been adjusted to
bring accounting policies into line with those adopted by the Group and to state
these at their provisional fair values to recognise recoverability of debtors,
accrued expenses and the related tax effect.  Under the terms of the acquisition
agreements, further consideration is payable dependent upon the performance of
the business.  This further consideration may be satisfied by cash and/or the
issue of shares.  The Directors estimate that a total of £4.6 million of that
consideration will be satisfied in shares to be issued.  The summary of net
assets acquired is as follows:

                                       
                                                              Alignment
                                               Net assets            of              Fair       Fair
                                                       on    accounting             value      value
                                              acquisition      policies       adjustments   acquired
Attlaw Security & Protection Limited                 £000          £000              £000       £000
Tangible fixed assets                                 122           (2)                 -        120
Stocks                                                  2             -                 -          2
Debtors                                             4,489          (18)                 -      4,471
Taxation                                            (235)             5                15      (215)
Creditors                                         (1,752)          (50)              (50)    (1,852)
Finance leases                                       (49)             -                 -       (49)
Net overdraft balances                            (2,248)             -                 -    (2,248)
                                                      329          (65)              (35)        229
Goodwill                                                                                      11,057
Consideration                                                                                 11,286




Satisfied by:
Earnout consideration
- shares to be issued                                                                          3,000
- cash payable                                                                                 3,000
Shares issued                                                                                  2,500
Guaranteed loan notes                                                                            648
Cash paid                                                                                      1,852
Acquisition expenses                                                                             286
                                                                                              11,286



In the period from acquisition to 31 December 2003 there was a cash inflow of
£518,000; there was no capital expenditure. The results of this business in the
period prior to acquisition showed turnover of £9.3 million, operating profit
before acquisition adjustments of £394,000, a profit after interest but before
acquisition adjustments and taxation of £314,000 and a profit after taxation but
before acquisition adjustments of £120,000.  In the year to 31 March 2003 the
business recorded a profit after taxation of £325,000.




                                                              Alignment
                                               Net assets            of              Fair       Fair
                                                       on    accounting             value      value
                                              acquisition      policies       adjustments   acquired
Tasker (U.K.) Limited                                £000          £000              £000       £000
Tangible fixed assets                                 474          (48)                 -        426
Stocks                                                 75          (40)                 -         35
Debtors                                             1,209          (82)              (55)      1,072
Taxation                                              328             -             (157)        171
Creditors                                           (894)         (189)              (84)    (1,167)
Finance leases                                       (81)          (11)                 -       (92)
Net overdraft balances                            (1,499)             -                 -    (1,499)
                                                    (388)         (370)             (296)    (1,054)
Goodwill                                                                                       3,132
Consideration                                                                                  2,078




Satisfied by:
Earnout consideration
- shares to be issued                                                                          1,600
Cash paid                                                                                        400
Acquisition expenses                                                                              78
                                                                                               2,078



The acquired business has been integrated into the existing businesses of the
Group and, consequently, it is not practicable to separately identify the cash
flows, cost of funds or capital expenditure of the acquired businesses.  The
results of this business in the period prior to acquisition showed turnover of
£2.0 million, operating profit before acquisition adjustments of £31,000, a loss
after interest but before acquisition adjustments and taxation of £27,000 and a
loss after taxation but before acquisition adjustments of £27,000.  In the year
to 31 December 2002 the business recorded a loss after taxation of £1.1 million.



The Company incurred further costs of £293,000 relating to a prior year
acquisition; this has been adjusted through goodwill.   There have been no
changes to the fair values previously reported.





1.                   SEGMENTAL ANALYSIS


                                                                      Continuing                         2003
                                                       Existing    Acquisitions      Discontinued       Total
                                                           £000            £000              £000        £000
Turnover                                                150,087           3,181                 -     153,268

Cost of sales
- normal                                              (130,408)         (1,994)                 -   (132,402)
- exceptional restructuring expenses                      (219)               -                 -       (219)


Gross profit                                             19,460           1,187                 -      20,647

Administrative expenses
- normal                                               (14,109)           (914)                 -    (15,023)
- goodwill amortisation                                 (2,031)           (108)                 -     (2,139)
- exceptional restructuring expenses                      (770)               -                 -       (770)
- exceptional claim settlement                                -               -               881         881

Operating profit                                          2,550             165               881       3,596


                                                                   Continuing                          2002
                                                    Existing    Acquisitions      Discontinued        Total
                                                        £000            £000              £000         £000
Turnover                                             129,242               -            12,296      141,538

Cost of sales
- normal                                           (112,175)               -          (10,981)    (123,156)



Gross profit                                          17,067               -             1,315       18,382

Administrative expenses
- normal                                            (12,471)               -           (1,370)     (13,841)
- goodwill amortisation                              (1,580)               -                 -      (1,580)
- exceptional restructuring and rebadging
  expenses                                             (734)               -                 -        (734)

Operating profit                                       2,282               -              (55)        2,227


                                                                             2003                      2002
Turnover                                                                     £000                      £000
Geographical market analysis by origin:
UK                                                                        150,748                   138,342
Rest of Europe                                                              2,520                     3,196
                                                                          153,268                   141,538
Geographical market analysis by destination:
UK                                                                        150,702                   138,342
Rest of Europe                                                              2,566                     3,196
                                                                          153,268                   141,538



The Group's main activities in the provision of specialist facilities management
services comprise one business segment.  Further analysis of operating profit
and net operating assets by geographical area is not provided as the Directors
are of the opinion that such disclosure would be prejudicial to the interests of
the trading companies within the Group.





2.         TAXATION


                                                                                       2003                2002

                                                                                       £000                £000
UK corporation tax  at 30% (2002: 30%)
- charge on results for the year                                                        938                 270
- adjustment in respect of prior period                                               (159)                (43)
Total current tax                                                                       779                 227

Deferred tax
- origination and reversal of timing differences                                        462                 981
- adjustment in respect of prior period                                                  22               (404)
Total deferred tax                                                                      484                 577

                                                                                      1,263                 804



Current tax

The current tax charge for both the current and prior years is lower than the
standard rate of corporation tax in the UK (30%).  The difference is explained
as follows:


                                                                                       2003                2002
                                                                                       £000                £000

Profit on ordinary activities before tax                                              3,279               2,646

Profit on ordinary activities multiplied by
standard rate of corporation tax in the UK at 30% (2002: 30%)                           984                 794

Effects of:
Expenses not deductible for tax purposes including goodwill amortisation                681                 641
Claim settlement                                                                      (264)                   -
Profit on disposal of subsidiary                                                          -               (212)
Utilisation of tax losses                                                             (473)               (730)
Capital allowances in excess of depreciation                                           (11)               (251)
Overseas tax losses not provided for                                                      -                  28
Adjustment to tax charge in respect of previous years                                 (159)                (43)
Other                                                                                    21                   -

                                                                                        779                 227






3.         DIVIDENDS



If approved at the Annual General Meeting, the dividends of 0.75 pence per
ordinary share and 0.2625 pence per preference share will be paid on 1 July 2004
to shareholders on the register on 4 June 2004.



4.         EARNINGS PER SHARE



The FRS14 basic and diluted earnings per share have been calculated on the
following earnings and weighted average number of shares in issue:


                                                 2003                                  2002
                                      Earnings            Number of           Earnings         Number of
                                          £000               shares               £000            shares

Profit for the financial year            2,016                                   1,842
Less: preference dividends                (13)                                     (9)
Basic EPS:
Earnings available to ordinary           2,003           76,059,846              1,833        67,942,504
shareholders
Effect of dilutive securities:
Convertible preference shares               13            1,750,000                  9         1,750,000
Options                                      -              857,053                  -         1,425,305
Diluted EPS:
Adjusted earnings                        2,016           78,666,899              1,842        71,117,809



 The Directors consider that a more appropriate measure of the performance of
the Group excludes, principally, the effect of goodwill which is a non-cash
item.  This measure, the underlying earnings per share, has been calculated on
the above profit adjusted for exceptional items, goodwill amortisation and
related taxation.  The calculations of earnings per share can be reconciled as
follows:


                                                      Diluted                              Undiluted
                                                  2003             2002                 2003             2002
                                                 pence            pence                pence            pence

FRS14 basic                                        2.6              2.6                  2.6              2.7
Effect of:
- exceptional items                              (0.2)            (0.4)                (0.2)            (0.4)
- goodwill amortisation                            2.6              2.2                  2.8              2.3
Underlying basis                                   5.0              4.4                  5.2              4.6



5.         FINANCIAL INFORMATION



The financial information set out above does not constitute statutory accounts
as defined in Section 240 of the Companies Act 1985.  The financial information
for the year ended 31 December 2003 has been extracted from the statutory
accounts on which the auditors have issued an unqualified audit report and which
will be delivered to the Registrar of Companies in due course.



The financial information for the year ended 31 December 2002 has been extracted
from the statutory accounts for that year; the auditors gave an unqualified
report on the financial statements for that year and the full accounts have been
delivered to the Registrar of Companies.



6.         ANNUAL GENERAL MEETING



The Annual General Meeting will be held on 6 May 2004 at MacLellan House, Clews
Road, Oakenshaw, Redditch, Worcestershire, B98 7ST commencing at 12 noon.  It is
expected that the Notice of Meeting, together with the Report and Financial
Statements will be mailed to shareholders on 13 April 2004.



7.         ANNOUNCEMENT



Copies of this announcement are available from the registered office of the
company: Enterprise House, Chamber Court, Castle Street, Worcester WR1 3AD.




Enquiries:


John R Foley                                          Trevor Bass
Chief Executive                                       Financial PR Consultant
MacLellan Group plc                                   Tel: 020-7067-0700
Tel: 01905 744400
Mobile: 07785 333480



Stephen R Shipley
Finance Director
MacLellan Group plc
Tel: 01905 744400




                      This information is provided by RNS
            The company news service from the London Stock Exchange