"Strong financial controls in place across the Group"

Kevin Thompson, Finance Director

At £48.3 million, profit before taxation and goodwill amortisation was 3% (£1.4million) below last year's record on similar turnover. The Group continues to operate at a high rate of profitability with return on sales at 18%, having exceeded a figure of 17% for 10 consecutive years.

Costs continue to be well managed with materials purchase cost being driven down, thereby maintaining gross margin levels, despite sales price pressure in some markets. The overhead cost base has been reduced through the year, a pattern accelerated in the second half, so that Group headcount finished the year 9% below March 2001. As a result of changes to the cost base, approximately £1.5 million of reorganisation costs were incurred and have been charged against operating profit.

Good cash generation and consistently high returns were a feature of this year as in previous years. Free cash flow (the cash left over from our operating activities and interest but after funding capital expenditure, working capital and tax) was £33 million, equalling the record achieved last year. We finished the year with net cash in excess of £30million. This strong cash generation will finance a dividend increase of 15%, giving a total distribution to shareholders of more than £19 million for the year.

Return on capital employed is an excellent performance measure for the Group. It combines profitability (return on sales) with efficiency (asset turns). The Group's return on capital employed was over 40% for the nineteenth consecutive year. If we exclude the high levels of cash (on which we earn a lower return) from the calculation, the return is an exceptional 55%.

The effective rate of tax on profit before goodwill amortisation was 31.5%. Going forward, we expect the effective tax rate to be slightly higher as we increasingly earn profits in higher tax jurisdictions.

Three new Accounting Standards have become applicable in these accounts.

FRS 17 (Retirement Benefits) requires extra disclosure. When FRS 17 is implemented in full in 2004 the effect on profit is not expected to be material. Under FRS 17 the Group's defined benefit pension schemes had an aggregate deficit of £9 million net of tax at the end of March 2002. This is primarily the result of the decline in interest rates and the fall in the world stock markets, as well as the relatively prudent assumptions of FRS 17. To protect the Group against future volatility in pension costs, the defined benefit schemes will shortly be closed to new members and a defined contribution scheme established.

FRS 18 (Accounting Policies) required no adjustment to the Group accounts.

FRS 19 (Deferred Tax) required full rather than partial provision for deferred tax and caused an increase in the effective tax rate. A deferred tax provision of £4 million is now included in the Consolidated Balance Sheet, also as a result of the new Accounting Standard. Comparative figures have been restated accordingly.