DS Smith Plc

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DS Smith Plc

• Interim Results 2004/05

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• Antony Hichens
• Chairman

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Headlines

• PBT 1 34.9m (39.3m)
• EPS 2 6.8p (8.2p)
• Further progress in Corrugated Packaging
• Weaker result in Paper
• Linpac Containers operating profit contribution
  6.8m
• Pension charge reduced operating profit by 8.0m
• Cash inflow before dividends and acquisitions
  26.0m (18.0m)
• Interim dividend unchanged at 2.6p

1 before amortisation of intangibles but
including the pension charge of 8.0m in
2004/05 2 before amortisation of intangibles and
restated for the bonus element of the rights issue
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Financial Review

• Gavin Morris
• Group Finance Director

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Profit and Loss Account
1 before associates and amortisation of
intangibles
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Profit and Loss Account (cont.)
1 monthly average
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Linpac Containers Business

• H1 2004/05
• Turnover 78.4m
• Operating profit 6.8m
• Results in line with our expectations

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Paper and Corrugated Packaging
1 before associates and amortisation of
intangibles 2 monthly average
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Plastic Packaging
1 before associates and amortisation of
intangibles 2 monthly average
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Office Products Wholesaling
1 before associates and amortisation of
intangibles 2 monthly average
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Office Products Manufacturing
1 before associates and amortisation of
intangibles 2 monthly average
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Earnings and Dividends
Number of shares in issue at 30/10/04 - 387.4m
1 includes a pension charge in 2004
2 before amortisation of intangibles
3 restated for the bonus element of the rights
issue
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Pensions

• Triennial valuation almost complete
• Discussing with Trustees
• - key assumptions
• - funding commitments
• - amendments to Scheme
• Preliminary estimate, in results, of annual SSAP
  24 PL costs - 16m 8m in H1
• H1 5m cash paid in

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Group Balance Sheet
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Free Cash Flow
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Net Cash Flow
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Borrowings Movements
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Funding update

• 200m (109m) US private placement completed in
  August to refinance Linpac bridging facility
• 10- and 12-year money
• 41m swapped into fixed-rate sterling
• Balance in floating rate euros
• Average borrowings maturity now 5.7 years
• Gearing of 50.2 net debt/EBITDA 1.9x

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IFRS

• Conversion programme well under way
• Provide a separate reconciliation of UK GAAP 2005
  results to IFRS post Preliminary announcement
• Accounting effects
• Pensions similar impact to FRS17
• Goodwill and other intangibles
• RD capitalisation of development expense
• Detailed assessment of IFRS impact continuing
• No problematical issues identified to date

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Guidance

• Paper Corrugated seasonality UK paper weaker
  in second half, compounded by high gas prices
• Tax rate 24.6 2004/05 31 2005/06
• Cash capital expenditure slightly below
  depreciation
• Pensions estimated 16m annual SSAP 24 PL
  cost, subject to final agreement with Scheme
  Trustees cash cost at least 10m (2003/04 10m)

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Guidance
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Operational and StrategicDevelopment

• Tony Thorne
• Group Chief Executive

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Paper and Corrugated PackagingExternal
environment
Contribution drivers
CCMcapacity
Recoveredpaper price
Paper
Corrugated
PRN price
Energy costs
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Paper and Corrugated PackagingStrategy
UK
Continental Europe
Major integrated position Turnover c.
690m Improve returns
Targeted approach Turnover c. 270m Develop
selectively
Recovered Paper
Paper
Corrugated
N.B. Indicative relative sizes of operations
not drawn strictly to scale
Capital employed 663.2m
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Paper and Corrugated PackagingUK Paper
Contribution squeeze (CCM prices vs input costs)
Cost reduction

• Raising contribution
• Domestic sales
• Differentiated product
• Energy management
• Linpac integration

Tonnes/employee
Productivity index 2001/02 100
Fixed cost/tonne

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Paper and Corrugated PackagingGenerating Linpac
synergies

• Integration progressing rapidly
• Customer network expanded
• HQs merged by calendar year end
• CCM - better market mix
• Manufacturing competitiveness
• Erith closed
• Glasgow closure proposal announced
• Devizes/Bristol to be run in tandem at lower cost
• Confident of 14.5m synergies 75 before end
  05/06

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Plastic PackagingKey issues

• Liquid packaging and dispensing
• Higher tap volumes
• Erosion of bag sales value
• RTP
• Polymer cost rise
• Customers deferring orders
• Smaller businesses impacting results

Total Turnover (2003/04) 209m
Liquid packagingand dispensing91m
RTP89m
Others 29m
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Plastic PackagingManagement priorities

• Core markets
• Driving sales focus on identified segments
• Raising productivity
• Polymer costs
• Seeking price increases
• Small businesses
• Action to improve contribution

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Office Products WholesalingStrategy
Spicers European Locations

• Strengthen position in established markets
  UK, Ireland France
• Develop market position in Germany, Spain Italy
• Leverage European network
• Best practice
• IT
• Buying

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Office Products WholesalingOperational progress

• Established businesses
• UK
• Sales growth in Q2
• Further efficiency gains
• France
• Increased dealer numbers
• Cost reduction

• Developing businesses
• Germany
• Emphasis on dealer sales
• Good financial disciplines
• Spain
• Extending sales area
• Italy
• Good launch November 04

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Outlook and Priorities

• Trading conditions remain challenging
• BUT
• Management actions
• Generate Linpac synergies paper and corrugated
• Paper achieve contribution improvement
• Drive profitable sales esp Plastic Packaging
  and Spicers
• Recover polymer costs
• Fix low performing small operations
• Continued emphasis on cash flow and balance sheet

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Appendix
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2004/05 H1 Divisional Operating Profit adjusted
for Pension Costs