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Havelock Europa PLC (HVE)

  Print      Mail a friend       Annual reports

Tuesday 27 September, 2005

Havelock Europa PLC

Interim Results

Havelock Europa PLC
27 September 2005




                   HAVELOCK EUROPA PLC - INTERIM ANNOUNCEMENT


Havelock, whose business is education furniture and supplies, point of sale
display, and retail interiors, announces a satisfactory first half, increasing
its profit in what is traditionally much the weaker half of the year.

FINANCIAL HIGHLIGHTS

These results are the Group's first financial statements issued under
International Financial Reporting Standards ('IFRS')

   •Group turnover increased by 20.3% to £40.3m; the like-for-like increase
    was 11.3%.
   •Operating profit before financing costs increased to £1,039,000 from
    £671,000.
   •Pre-tax profit increased to £214,000 from £83,000.
   •Basic earnings per share were unchanged at 0.3p.
   •The interim dividend per share is increased by 12.5% to 0.9p.
   •With effect from 19 September 2005, Havelock (HVE.L) was reclassified
    into the Support Services Sector of the FTSE Listings.


COMMERCIAL HIGHLIGHTS


   •ESA McIntosh, the UK market leader in science laboratories and fitted
    furniture for schools, increased its turnover to £8.2m from £7.9m despite a
    particularly slack period around the time of the General and Local
    Elections.
   •The Point of Sale Display Division had a good first half and, whilst
    turnover was down at £11.8m (2004: £12.3m), the contribution to profit
    remained in line with budget.
   •The Retail Interiors Division increased its turnover by 30%, to £17.3m
    from £13.3m, reflecting markedly increased business with the financial
    services sector. The Division experienced a stronger first half than for
    many years and has made a positive contribution to the Group's results, in
    the first half of the year, for only the second time since 1998.
   •To realise the further synergies available in the Group and to make
    optimal use of the Group's assets, Richard Lowery has been put in charge of
    both ESA McIntosh and Retail Interiors and, within the Point of Sale Display
    Division, Jim Fletcher has taken charge of both Showcard Print and
    Hartcliffe.


Malcolm Gourlay, Chairman, stated 'The Board remains optimistic about the growth
opportunities in the Group's chosen markets, especially education interiors. The
Board anticipates further continued progress in the full year, with additional
growth in 2006 and 2007, particularly in the education PFI sector. In addition,
the Group will continue to study opportunities for further appropriate
acquisitions.'

Enquiries:

Havelock Europa PLC                                              01383-820 044

Hew Balfour (Chief Executive)                                     07801 683851
Graham MacSporran (Finance Director)                              07801 683803

Bankside Consultants Limited

Charles Ponsonby                                                 020-7367 8851
                                                 charles.ponsonby@bankside.com



                              HAVELOCK EUROPA PLC
                              INTERIM ANNOUNCEMENT

Havelock has had a satisfactory first half, increasing its pre-tax profit in
what is traditionally much the weaker half of the year.

FINANCIAL REVIEW

These results are the Group's first financial statements issued under
International Financial Reporting Standards ('IFRS'), which became effective for
public companies listed on the London Stock Exchange with financial years
commencing on or after 1 January 2005. Outline details of the resulting changes
are shown in Note 10 to the Financial Statements. Prior year comparatives have
been adjusted to conform with these standards.

The changes in accounting standards have had the effect of reducing profits
before tax by approximately £130,000, the principal changes being in respect of
goodwill, revenue recognition and amortisation of intangibles. Net assets have
been impacted by approximately £8.8 million, largely as a result of the
inclusion of the pension deficit in the balance sheet.

Group turnover for the six months ended 30 June 2005 was £40.3 million (2004 :
£33.5 million), an increase of 20.3%. The 2005 figure includes a first half
contribution from both TeacherBoards and Clean Air, acquired in June 2004 and in
July 2004 respectively. The like-for-like increase in turnover was 11.3%. This
incorporated a significant improvement in the level of business transacted by
the Retail Interiors Division, which has experienced a stronger first half than
for many years and has made a positive contribution to the Group's results, in
the first half of the year, for only the second time since 1998.

Group operating profit was £1.0 million (2004 : £0.7 million). The Group profit
before tax, after financing costs, was £214,000 (2004 : £83,000). Basic earnings
per share were 0.3 pence (2004 : 0.3 pence).

Net debt at 30 June 2005 stood at £22.2 million (2004 : £19.2 million). Of this
figure, £6.9 million relates to cash or loan notes arising from the acquisition
of TeacherBoards and Clean Air and, within that figure, £2.3 million represents
additional consideration paid in January and April 2005. Interest cover for the
full year is expected to remain substantial.

DIVIDEND

The Board is pleased to declare an interim dividend of 0.9 pence per share, an
increase of 12.5%. This dividend will be paid on 28 December 2005 to
shareholders on the register at close of business on 11 November 2005.


RECLASSIFICATION

With effect from 19 September 2005, the Company's share quotation was
reclassified by FTSE from the Construction and Building Materials sector into
the Support Services sector.

TRADING REVIEW

Education furniture and supplies

As indicated in the Chairman's Statement to the AGM on 24 June 2005, ESA
McIntosh, the UK market leader in science laboratories and fitted furniture for
schools, started the year more slowly than originally expected. After a
particularly slack period around the time of the General and Local Elections,
enquiries and orders picked up sharply. Turnover for the first six months was
£8.2 million (2004 : £7.9 million).

TeacherBoards, whose specialism is teaching aids and display boards, had a
strong first half, recording an increased contribution ahead of budget, on a
turnover of £2.2 million. Clean Air, which manufactures fume cupboards, had a
more modest first half, stemming largely from the much slower than anticipated
activity in the schools refurbishment market, outlined above, and recorded a
turnover of £0.8 million.

Point of Sale Display

The Point of Sale Display Division had a good first half and, whilst turnover
was down at £11.8 million (2004 : £12.3 million), the contribution to profit
remained in line with budget.

Within this Division, our investment programme continues. A new high volume
digital printing press has been installed at Hartcliffe in Bristol, which will
confer significant advantages in the production of point of sale ticketing, for
both our customers and ourselves, in terms of speed and collation. This press
was commissioned earlier this month.

Retail Interiors

In the Retail Interiors Division, the level of activity has been strong, despite
the reported
slow-down in the High Street, with turnover increasing by 30% to £17.3 million
(2004 : £13.3 million). A high level of enquiries was received from the
financial services sector.

MANAGEMENT CHANGES

With a view to achieving further synergies between the Education, Healthcare and
Retail Interiors businesses, both ESA McIntosh and Retail Interiors have been
placed under the direction of Richard Lowery, previously Managing Director of
Retail Interiors. There has been a further restructuring of responsibilities
under him to provide improved customer service and a launch pad for the further
significant growth expected over the next two years.

Within the Point of Sale Display Division, the activities of Showcard Print and
Hartcliffe are being co-ordinated by Jim Fletcher, the Managing Director of
Showcard, enabling these two businesses to work together. As a result, a
significant rationalisation has taken place at Hartcliffe. A key aim of this
process will be to maximise the capacity of the two plants, with specific
specialised capability for lithographic and digital reproduction being developed
in Bristol and for large format screen printing and digital graphics at
Letchworth. These moves will avoid duplication of capital investment and
significantly improve customer service levels within this Division, enabling the
development of a wider customer base. A small exceptional charge relating to
this consolidation will be incurred in the second half.

At the end of the year, Graham MacSporran, who has been the Group Finance
Director since August 2000, plans to retire, on the approach to his 59th
birthday, in accordance with his wishes, expressed some 18 months ago. Following
a detailed search, the Board is delighted to announce that Grant Findlay, CA,
LLB, 49, presently the Finance Director of the Education Division of Findel PLC,
will be joining the Group with effect from 1 November 2005. Grant has wide
industrial experience, including service as Finance Director of two listed
companies, Charles Sidney PLC and, prior to that, TIP Europe PLC.



PROSPECTS

Within the education businesses, ESA McIntosh's order intake from Local
Authorities has recovered since the half year end. With PFI subcontractor
business broadly at the same level as last year, McIntosh is expected to record
another satisfactory result, although additional costs have been incurred on
extra resources recruited to support the 2006 programme. TeacherBoards has had a
slower start to the second half but anticipates a good result for the year.
Clean Air's activity levels have remained at a lower level than last year, but
are expected to improve in 2006 as PFI business picks up.

July and August were unusually slow months in the Point of Sale sector but an
upturn has occurred in September and another good result for the year is
expected in this Division.

The Retail Interiors Division is performing above expectation and the prospects
for this business are likely to improve as a result of continuing success in
financial services and the recent entry into education in support of ESA
McIntosh.

Trading conditions in the Middle East have been buoyant and it is anticipated
that the Middle East joint venture will show an improved contribution relative
to that of last year.

The Board remains optimistic about the growth opportunities in the Group's
chosen markets, especially educational interiors. The rate of progress towards
financial close of a series of PFI contracts in the education and healthcare
sectors is encouraging, with 13 of the 18 PFI contracts, rated by the Group as
high probability wins in the education sector in 2006, having now reached
financial close. Four of the remaining five are expected to reach financial
close before the end of the year. Eight of these contracts are located in
Scotland, where the Group has had an unrivalled record of previous success.
Accordingly, the Board anticipates further continued progress in the full year,
with additional growth in 2006 and 2007, particularly in the education PFI
sector. In addition, the Group will continue to study opportunities for further
appropriate acquisitions.

Malcolm Gourlay

Chairman                                                     27 September 2005


                         CONSOLIDATED INCOME STATEMENT

                For the 6 months ended 30 June 2005 (unaudited)


                                              Unaudited   Unaudited    Audited
                                               6 months    6 months       year
                                                  ended       ended      ended
                                               30.06.05    30.06.04   31.12.04
                                                  £'000       £'000      £'000
                                       Note

Revenue                                          40,310      33,464     86,526
Cost of sales                                   (32,949)    (27,875)   (69,988)
                                                _______     _______    _______
Gross profit                                      7,361       5,589     16,538
Administrative expenses                          (6,322)     (4,918)   (10,996)
                                                _______     _______    _______
Operating profit before financing                 1,039         671      5,542
costs
                                                _______     _______    _______

Financial income - interest receivable                -           -          4
Expected return on defined benefit
pension                                             623         535      1,070
plan assets
Financial expenses - on bank
borrowings and                                     (807)       (491)    (1,366)
finance leases
Interest on defined benefit pension
scheme                                             (711)       (663)    (1,325)
liabilities
                                                _______     _______    _______
Net financing costs                                (895)       (619)    (1,617)

Share of profit of associates                        70          31        121
                                                _______     _______    _______
Profit before tax                                   214          83      4,046

Income tax expense                        2        (117)          9     (1,152)
                                                _______     _______    _______
Profit for the period attributable to
equity                                               97          92      2,894
holders of the parent
                                                _______     _______    _______
                                   ===    ===   =========   =========  =========

Basic earnings per share                  3         0.3p        0.3p       9.1p

Diluted earnings per share                3         0.3p        0.3p       8.7p

            CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE


                For the 6 months ended 30 June 2005 (unaudited)


                                             Unaudited   Unaudited    Audited
                                              6 months    6 months       year
                                                 ended       ended      ended
                                              30.06.05    30.06.04   31.12.04
                                                 £'000       £'000      £'000

Exchange differences on translation of
overseas associate                                  40         (11)       (42)
Actuarial losses on defined benefit pension
plan                                            (1,357)       (372)      (975)
Tax on items taken directly to equity              407         112        292
Cash flow hedges:
Effective portion of changes in fair value        (235)          -          -
                                               _______     _______    _______
Net expense recognised directly in equity       (1,145)       (271)      (725)

Profit for the period                               97          92      2,894
                                               _______     _______    _______
Total recognised income and expense for the
period                                          (1,048)       (179)     2,169
                                               _______     _______    _______
                                               =========   =========  =========



                  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


                For the 6 months ended 30 June 2005 (unaudited)

                                               Unaudited   Unaudited    Audited
                                                6 months    6 months       year
                                                   ended       ended      ended
                                                30.06.05    30.06.04   31.12.04
                                                   £'000       £'000      £'000
                                        Note
Shareholders' funds at beginning of               10,278       5,524      5,524
period
Implementation of IAS 32 and 39            9        (165)          -          -
                                                 _______     _______    _______
Adjusted shareholders' funds at
beginning                                         10,113       5,524      5,524
of period
                                                 _______     _______    _______
Total recognised income and expense for
the period                                        (1,048)       (179)     2,169
Ordinary dividends                                  (823)       (653)      (928)
Issue of ordinary shares                             210         751      3,406
Movements relating to share-based
payments                                            (291)         51        107
and ESOP trust
                                                 _______     _______    _______
Shareholders' funds at end of period               8,161       5,494     10,278
                                                 _______     _______    _______
                                                 =========   =========  =========


                           CONSOLIDATED BALANCE SHEET


                         As at 30 June 2005 (unaudited)

                                              Unaudited   Unaudited    Audited
                                                  as at       as at      as at
                                               30.06.05    30.06.04   31.12.04
                                                  £'000       £'000      £'000
                                       Note
Assets

Non-current assets
Property, plant and equipment                    13,066      12,673     13,687
Intangible assets                         5      14,321       8,937     14,467
Investments in associates                           722         554        612
Deferred tax assets                               3,000       2,520      2,583
                                                _______     _______    _______
Total non-current assets                         31,109      24,684     31,349
                                                _______     _______    _______
Current assets
Inventories                               6      13,337      11,609      9,629
Trade and other receivables               7      16,596      15,643     16,777
Cash and cash equivalents                             -           -        627
                                                _______     _______    _______
Total current assets                             29,933      27,252     27,033
                                                _______     _______    _______
Total assets                                     61,042      51,936     58,382
                                                _______     _______    _______
Liabilities
Current liabilities
Bank overdraft                                   (5,385)     (5,372)         -
Other interest-bearing loans and
borrowings                                       (2,418)     (1,320)    (1,322)
Derivative financial instruments                   (400)          -          -
Income tax payable                                 (947)     (1,001)      (954)
Trade and other payables                  8     (18,558)    (16,719)   (21,112)
                                                _______     _______    _______
Total current liabilities                       (27,708)    (24,412)   (23,388)
                                                _______     _______    _______
Non-current liabilities
Interest-bearing loans and borrowings           (14,431)    (12,545)   (13,842)
Retirement benefit obligations                  (10,000)     (8,400)    (8,610)
Other payables                            8           -        (472)    (1,426)
Deferred tax liabilities                           (742)       (613)      (838)
                                                _______     _______    _______
Total non-current liabilities                   (25,173)    (22,030)   (24,716)
                                                _______     _______    _______
Total liabilities                               (52,881)    (46,442)   (48,104)
                                                _______     _______    _______
Net assets                                        8,161       5,494     10,278
                                                _______     _______    _______
                                                =========   =========  =========
Equity
Issued share capital                              3,476       3,186      3,430
Share premium                                     1,971         979      1,808
Other reserves                                    3,177       1,585      3,136
Revenue reserves                                   (463)       (256)     1,904
                                                _______     _______    _______
Total equity attributable to equity
holders of the parent                             8,161       5,494     10,278
                                                _______     _______    _______
                                                =========   =========  =========


                      CONSOLIDATED STATEMENT OF CASH FLOWS

                For the 6 months ended 30 June 2005 (unaudited)

                                              Unaudited   Unaudited    Audited
                                               6 months    6 months       year
                                                  ended       ended      ended
                                               30.06.05    30.06.04   31.12.04
                                                  £'000       £'000      £'000

Cash flows from operating activities
Profit before tax                                   214          83      4,046
Adjustments for:
Depreciation                                        940         849      1,772
Amortisation of intangible assets                   236          83        452
Gain on sale of property, plant and equipment         -         (17)       (30)
Net financing costs                                 895         619      1,617
Share of profit of associate                        (70)        (31)      (121)

Decrease in trade and other receivables             181         514        224
Increase in inventories                          (3,708)     (3,720)    (1,411)
(Decrease)/ increase in trade and other
payables                                         (2,508)     (3,220)       731
Movement relative to defined benefit pension
scheme                                              (55)        (73)      (593)
                                                _______     _______    _______
Cash (absorbed by)/generated from operations     (3,875)     (4,913)     6,687
                                                _______     _______    _______
Interest paid                                      (737)       (475)    (1,205)
Income taxes paid                                  (231)          -     (1,244)
                                                _______     _______    _______
Net cash from operating activities               (4,843)     (5,388)     4,238
                                                _______     _______    _______
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment                                             -           6         84
Acquisition of property, plant and equipment       (320)     (1,010)    (2,856)
Acquisition of intangible assets                    (88)        (32)       (51)
Acquisition of subsidiaries, net of cash
balances acquired                                (1,274)     (2,470)    (6,256)
                                                _______     _______    _______
Net cash from investing activities               (1,682)     (3,506)    (9,079)
                                                _______     _______    _______
Cash flows from financing activities
Proceeds from the issue of share capital            210           -      1,656
Increase in bank loans                            1,255       2,847      4,650
Purchase of own shares and proceeds from
exercise of share options                          (291)         12         95
Repayment of bank borrowings                       (625)       (624)    (1,250)
Repayment of finance lease liabilities              (36)        (61)      (103)
Dividends paid                                        -           -       (928)
                                                _______     _______    _______
Net cash from financing activities                  513       2,174      4,120
                                                _______     _______    _______
Net decrease in cash and cash equivalents        (6,012)     (6,720)      (721)
Cash and cash equivalents at 1 January              627       1,348      1,348
                                                _______     _______    _______
Cash and cash equivalents at end of period       (5,385)     (5,372)       627
                                                _______     _______    _______
                                                =========   =========  =========


Notes to the financial statements

1. Principal accounting policies

Havelock Europa PLC is a company domiciled in the United Kingdom. The
consolidated interim financial statements for the six months ended 30 June 2005
comprise the Company and its subsidiaries (together referred to as the Group)
and the Group's interest in its associate. The directors approved the
consolidated interim financial statements on 27 September 2005.

Basis of preparation

European Union law (IAS Regulation EC 1606/2002) requires that the next annual
consolidated financial statements of the Group, for the year ending 31 December
2005, be prepared in accordance with International Financial Reporting Standards
(IFRS) adopted for use in the European Union (EU).

These consolidated interim financial statements ('financial statements') have
therefore been prepared in accordance with IFRS as endorsed by the EU and its
interpretations adopted by the International Accounting Standards Board subject
to the exemptions contained in IFRS 1 First-time Adoption of International
Financial Reporting Standards that the Group has elected to use. The interim
statements do not include all the information required for full annual financial
statements.

These interim financial statements have been prepared on the basis of the
recognition and measurement requirements of IFRS in issue that either are
endorsed by the EU and effective (or available for early adoption) at 31
December 2005 or are expected to be endorsed and effective (or available for
early adoption) at 31 December 2005, the Group's first annual reporting date at
which it is required to use adopted IFRS. Based on these adopted and unadopted
IFRS, the directors have made assumptions about the accounting policies expected
to be applied, which are set out below, when the first annual IFRS financial
statements are prepared for the year ending 31 December 2005.

In particular, the directors have assumed that the amendment to IAS 19 Employee
Benefits, covering actuarial gains and losses, group plans and disclosures, will
be adopted by the EU in sufficient time that it will be available for use in the
annual IFRS financial statements for the year ending 31 December 2005.

In addition, the accounting standards adopted by the EU that will be effective
(or available for early adoption) in the annual financial statements for the
year ending 31 December 2005 are still subject to change and to additional
interpretations and therefore cannot be determined with certainty. Accordingly,
the accounting policies for that annual period will be determined only when the
annual financial statements are prepared for the year ending 31 December 2005.

The financial statements are presented in pounds sterling, rounded to the
nearest thousand. They are prepared on the historical cost basis except for
intangible assets acquired in a business combination, which are stated at their
fair values and derivative financial instruments, which from 1 January 2005, are
stated at their fair values.

The preparation of financial statements in conformity with IFRS requires the
directors to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expense. The estimates and judgements are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.

The accounting policies that the Group intends to apply for the year ending 31
December 2005 are set out in the document referred to below. The accounting
policies have been applied consistently to all periods presented in these
financial statements, subject to the exemptions contained in IFRS 1 that the
Group has elected to use, and except in relation to financial statements where
the accounting policies for periods prior to 1 January 2005 are different. The
impact of the adoption of IAS 32 Financial Instruments: Disclosure and
Presentation and IAS 39 Financial Instruments: Recognition and Measurement by
the Group prospectively from 1 January 2005 is shown at note 9.

Transition to IFRS

The date of transition to IFRS was 1 January 2004, which was the beginning of
the comparative period for the six months ended 30 June 2004 and year ended 31
December 2004. A detailed review of the changes in the Group's accounting
policies and reconciliations of the Group's financial statements from UKGAAP to
IFRS at key dates has today been published at the London Stock Exchange and is
available on the Group's website at www.havelockeuropa.com.

A reconciliation of profit before tax and net assets under UKGAAP and IFRS at 30
June 2005, 30 June 2004 and 31 December 2004 is provided at note 10.

Status of financial information

Comparative figures for the financial year ended 31 December 2004 are not the
company's statutory accounts for that financial year. Those accounts, which were
prepared under UKGAAP, have been reported on by the company's auditors and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.

The financial statements for the year ended 31 December 2004 have been extracted
from a restatement of the financial information taken from the company's
statutory accounts for that financial year and the auditors have issued a
special purpose report on that financial information. This audit report can be
found on the Group's website.

2. Income tax

A charge for current taxation has been included at 33% (2004: 33%), being the
effective rate likely to be applied to the result for the full year to 31
December 2005. The results of the associate, being a Middle East entity, are not
subject to taxation.

3. Earnings per share

Basic earnings per share

The calculation of basic earnings per share for the period ended 30 June 2005
was based on the profit attributable to ordinary shareholders of £97,000 (2004:
£92,000) and a weighted average number of ordinary shares outstanding during the
period ended 30 June 2005 of 33,832,907 (2004: 30,041,093), calculated as
follows:

Profit attributable to ordinary shareholders

                                              Unaudited   Unaudited    Audited
                                               6 months    6 months       year
                                                  ended       ended      ended
                                               30.06.05    30.06.04   31.12.04
                                                  £'000       £'000      £'000

Profit for the period                                97          92      2,894
                                                _______     _______    _______

Weighted average number of ordinary shares
In thousands of shares

Issued ordinary shares at 1 January              34,300      31,069     31,069
Effect of shares issued in 2004                       -           9      1,536
Effect of own shares held                          (691)     (1,037)      (967)
Effect of shares issued in 2005                     224           -          -
                                                _______     _______    _______
Weighted average number of ordinary shares at
end of period                                    33,833      30,041     31,638
                                                _______     _______    _______

Diluted earnings per share

The calculation of diluted earnings per share at 30 June 2005 was based on
profit attributable to ordinary shareholders of £97,000 (2004: £92,000) and a
weighted average number of dilutive ordinary shares outstanding during the
period ended 30 June 2005 of 34,529,434 (2004: 31,311,083), calculated as
follows:

Weighted average number of ordinary shares
In thousands of shares
Weighted average number of ordinary shares    33,833       30,041       31,638
Effect of share options on issue                 696        1,270        1,540
                                             _______      _______      _______
Weighted average number of ordinary shares
(diluted) at end of period                    34,529       31,311       33,178
                                             _______      _______      _______


4. Equity dividends

The directors approved an interim dividend per equity share of 0.9p after the
balance sheet date. In accordance with IFRS accounting requirements, this
dividend has not been accrued in the interim consolidated financial statements.

5. Intangible assets

Carrying amount                       Unaudited       Unaudited        Audited

                                          as at           as at          as at

                                       30.06.05        30.06.04       31.12.04

                                          £'000           £'000          £'000

Computer software                           238             261            201
Goodwill                                 12,403           7,791         12,403
Brands                                      675             450            713
Customer relationships                      389             173            453
Contracted customer relationships            64              79             75
Order backlog                                 -              53              -
Non-compete clauses                         144             130            192
Design rights                               408               -            430
                                        _______         _______        _______
                                         14,321           8,937         14,467
                                        _______         _______        _______

The amortisation charge in the consolidated income statement in respect of these
items was £236,000 (June 2004: £83,000; December 2004: £452,000).

6. Inventories

                                    Unaudited        Unaudited         Audited
                                        as at            as at           as at
                                     30.06.05         30.06.04        31.12.04
                                        £'000            £'000           £'000

Raw materials and consumables           3,545            3,300           3,312
Work in progress                        2,442            2,543           1,454
Finished goods                          7,350            5,766           4,863
                                      _______          _______         _______
                                       13,337           11,609           9,629
                                      _______          _______         _______

7. Trade and other receivables

                             Unaudited            Unaudited            Audited
                                 as at                as at              as at
                              30.06.05             30.06.04           31.12.04
                                 £'000                £'000              £'000

Trade debtors                   15,076               14,161             15,429
Other debtors                      560                  410                340
Prepayments                        960                1,072              1,008
                               _______              _______            _______
                                16,596               15,643             16,777
                               _______              _______            _______



8. Trade and other payables

                                              Unaudited   Unaudited    Audited
                                                  as at       as at      as at
                                               30.06.05    30.06.04   31.12.04
                                                  £'000       £'000      £'000

Amounts disclosed in current liabilities
Trade creditors                                  12,156      11,316     14,125
Other taxes and social security                   1,330         928      2,584
Accruals                                          2,787       2,404      2,180
Dividends                                           823         653          -
Deferred consideration relating to business
combination                                       1,462       1,418      2,223
                                                _______     _______    _______
                                                 18,558      16,719     21,112
                                                _______     _______    _______
Amounts disclosed in non-current
liabilities
Deferred consideration relating to business
combination                                           -         472      1,426
                                                _______     _______    _______


9. Adoption of IAS32 and IAS 39 from 1 January 2005

Financial instruments

As permitted by IFRS 1, the Group has elected to adopt IAS 32 and IAS 39 on a
prospective basis from 1 January 2005. The accounting treatment under UKGAAP has
been retained for comparative purposes. There is therefore no impact on the
results and financial position for the six months ended 30 June 2004 and year
ended 31 December 2004.

The principal areas of future impact are in respect of interest rate swaps, and
hedge accounting. Under UKGAAP, only accrued interest under interest rate swaps
is recognised on the balance sheet. Under IAS 39, the fair value of interest
rate swaps is recognised. Interest rate swaps will be revalued at each reporting
date. Changes in fair value will depend on market factors that by their nature
cannot be forecast.

Treatment of the effective portion of the resulting gain or loss depends on
whether the interest rate swap qualifies for hedge accounting as a cash flow
hedge. Gains and losses on interest rate swaps that qualify as effective hedges
are recognised in the consolidated statement of recognised income and expense,
with any ineffective portion recognised in the consolidated income statement,
which may result in earnings volatility.

Interest rate swaps

Under UKGAAP, only accrued interest under interest rate swaps was recognised on
the balance sheet. Under IAS 39, the fair value of interest rate swaps is
recognised. The effect is to increase Derivative financial instruments by
£165,000 and reduce Revenue reserves by the same amount at 1 January 2005.

Interest bearing loans and borrowings

Under UKGAAP, interest accrued on borrowings was included in Trade and other
payables. Under IAS 39, interest accrued on borrowings is included within Other
interest-bearing loans and borrowings. The effect is to reduce Trade and other
payables by £76,000 and increase Other interest-bearing loans and borrowings by
£76,000 at 1 January 2005.


10. Explanation of transition to IFRS

Reconciliation of profit before tax

                                               6 months   6 months       Year
                                                  ended      ended      ended
                                               30.06.05   30.06.04   31.12.04
                                                  £'000      £'000      £'000

Profit before tax under UKGAAP as previously
stated                                              347        524      4,486
Defined benefit pension scheme:
- adjustment to reflect current service cost         55         73         93
- net interest charge on scheme's net
liabilities                                         (88)      (128)      (255)
Charge for share options and incentive
schemes                                             (24)       (46)       (13)
                                                 ______     ______     ______
Profit before tax under UKGAAP as restated          290        423      4,311

Deferred revenue recognition                       (215)      (486)      (260)
Goodwill amortisation not required under IFRS       379        126        547
Amortisation of intangible assets arising on
business combinations                              (184)         -       (291)
Other adjustments relating to acquisition of
subsidiaries                                          -          -       (141)
Interest charge on deferred consideration           (76)         -       (120)
Other adjustments                                    20         20          -
                                                 ______     ______     ______
Profit before tax under IFRS                        214         83      4,046
                                                 ______     ______     ______

Reconciliation of net assets

                                                  As at      As at      As at
                                               30.06.05   30.06.04   31.12.04
                                                  £'000      £'000      £'000

Net assets under UKGAAP as previously stated     16,951     12,804     17,273
Defined benefit pension deficit, net of
deferred tax                                     (8,148)    (6,694)    (7,175)
Dividends (recognised only when formally
approved)                                           322        255        823
Financial instruments - fair value of
interest swaps                                     (400)         -          -
Share options and incentive schemes                  27       (119)       (52)
                                                 ______     ______     ______
Net assets under UKGAAP as restated               8,752      6,246     10,869

Deferred tax on revalued property, plant and
equipment                                          (140)      (220)      (140)
Deferred revenue recognition, net of deferred
tax                                                (671)      (678)      (500)
Goodwill amortisation not required under IFRS       889        126        547
Amortisation of intangible assets arising on
business combinations, net of deferred tax         (389)         -       (237)
Other adjustments relating to acquisition of
subsidiaries                                          -          -       (141)
Interest charge on deferred consideration          (196)         -       (120)
Other adjustments                                   (84)        20          -
                                                 ______     ______     ______
Net assets under IFRS                             8,161      5,494     10,278
                                                 ______     ______     ______




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