Half Yearly Report

Low & Bonar PLC

Half-Year Results for the six months to 31 May 2013

GOOD MOMENTUM RESUMED,

UNCHANGED FULL YEAR OUTLOOK

Low & Bonar PLC ("Low & Bonar" or "the Group"), the international performance materials group with leading positions in niche industrial markets, today announces its half-year results for the six months ended 31 May 2013.

Highlights:

·; Good growth in Flooring, Industrial and Transport sectors

·; Civil Engineering and Building Product sectors adversely affected by abnormal weather conditions across Europe

·; Improved performance by Yarns

·; Continued investment in organisational capability to support global growth strategy

·; Interim dividend increased by 6.3% to 0.85p per share

·; Good sales momentum carried into traditionally stronger second half

·; On track to meet expectations for the full year

Martin Flower, Chairman, said:

"The strategy and strong fundamentals of the Group remain unchanged and we have continued to invest and build organisational capability to support future growth.

"In the first half of the year an extended period of abnormal weather across Europe temporarily interrupted our progress and has led to lower profits. Outside of Europe and in sectors largely unaffected by the weather the business has continued to show good growth. With sales momentum renewed as the Group enters the traditionally stronger second half we remain confident of meeting expectations for the full year."

1 The impact of exchange rates for H1 was negligible

2 Before amortisation and non-recurring items

3 Full year comparative includes a non-recurring impairment charge of £11.2m in relation to the Yarns business

4 Last 12 months' operating profit as a percentage of operating capital employed

For further information, please contact:

Interim Statement

Results overview

1 The impact of exchange rates for H1 was negligible

2 Before amortisation and non-recurring items

3 Full year comparative includes a non-recurring impairment charge of £11.2m in relation to the Yarns business

4 Last 12 months' operating profit as a percentage of operating capital employed

Sales growth trend interrupted by poor weather

In the first half of the year, sales declined by 1% on a constant-currency basis. Sales within Europe were 4% lower than the first half of last year due to abnormal weather conditions across the region, which persisted until mid-April. Performance outside of Europe was positive with sales in North America and Asia Pacific up by 7% and 5% respectively.

Our Flooring, Industrial, Transport and Leisure sectors were largely unaffected by adverse weather conditions and continued to perform well with sales 5% in aggregate ahead of last year. Sales in our construction related sectors, Civil Engineering and Building Products, which together represent some 40% of Group sales, suffered badly due to the long and harsh winter in Europe which delayed many projects and the start of the construction season generally. These two sectors saw an 8% decline in sales during the first half despite a strong end to the period when weather patterns reverted to seasonal norms. Encouragingly, in the last six weeks of the half-year, Group sales per working day were 7% higher than the corresponding period last year and this momentum has continued.

Pressing ahead with internal growth initiatives

The Group has strong positions in attractive niche markets and remains committed to its medium-term target to grow sales at least 3% above Eurozone GDP growth. Consequently, the Group has continued to press ahead with initiatives to deliver higher growth rates and build a global business.

Last year, we merged Colbond and Fabrics, the two major businesses within the Performance Technical Textiles division, to create a new division called Bonar, to accelerate growth outside of Europe. The changes provide greater clarity, focus and accountability for international sales growth and development. This reorganisation, which started in the middle of last year, has progressed well. We have made a significant investment in the recruitment of high calibre people, particularly in sales and marketing, both in North America and Asia, and Bonar is now organised regionally to drive faster growth outside of Europe. We have recruited a new Group Marketing and Strategy director and introduced new Global Business Director positions to drive and support a greater strategic focus on target markets. Following the leadership change last year, we have also strengthened the management team in the Technical Coated Fabrics division to support its strategy of driving growth through expansion in attractive niche markets and operational efficiency improvements. Both divisions now have much stronger foundations from which to execute their strategies.

The Group's Saudi Arabian manufacturing facility, which will provide a strong platform to access the fast growing civil engineering market in the Middle East, begins commissioning this month. We have also set up a sales office and distribution facility in China to help accelerate sales growth in this region.

The significant contribution to sales from new and modified products continues to reflect improved returns from our investment in all activities which support good innovation. The Group's strengthened commercial teams are building stronger development partnerships with key customers which will augment future growth and improve customer traction.

Full year outlook unchanged

Since the middle of April sales have improved and the Group has entered its traditionally stronger second half of the year with good momentum. Given capacity constraints in the supply chain, it is unlikely that all of the weather-related losses in the first half will be recovered in the second half of the year; however, with internal growth initiatives coming through and with the benefit of more favourable exchange rates being felt, the Group is confident that full year results will be in-line with expectations.

Divisional review

Bonar

(Our Bonar division supplies products such as geosynthetics, carpet tile and automotive carpet backings, roofing components, agrotextiles and construction fibres to the civil engineering, flooring, transport, industrial and building products markets)

Sales in the division decreased by 5.3% on a constant-currency basis. As a result of lower volumes and recent investments to build organisational capability, largely outside Europe, operating margins declined from 8.6% to 6.0%. Operating profits were £3.5m lower than last year.

The growing use of carpet tiles in the flooring market and a recovering housing market both contributed to a strong sales performance from the North American region. The Asia Pacific region also performed well with increased export business supporting a subdued Chinese flooring market. In Europe sales to the Civil Engineering, Building Products and Agricultural sectors, which account for more than 80% of sales, were adversely impacted by the long winter in the region and led to regional sales being 10% lower than last year. Roofing components for commercial buildings and all subterranean Civil Engineering products were worst affected; however, construction fibre sales continued to grow strongly. Encouragingly, since weather patterns returned to seasonal norms in the middle of April, demand in Civil Engineering and most niches within Building Products has improved.

Technical Coated Fabrics

(Our Technical Coated Fabrics division, Mehler Texnologies (MTX), supplies products such as side curtains for lorry trailers, advertising banners, tensioned architectural structures, marquees and containers to the transport, building products, leisure and industrial markets)

Sales in the Technical Coated Fabrics division grew by 3.6% on a constant-currency basis, and operating margins improved from 8.7% to 9.1% with operating profit advancing 10.2% on a constant-currency basis.

The more balanced approach to volume and margin quality established in the second half of last year continued and resulted in robust sales and profit growth being maintained in the first half of the year. Sales growth in Western European markets was driven by market share gains achieved despite challenging market conditions. Outside of Europe sales also developed positively. The division enjoyed particularly strong growth in industrial markets with the container and mining sectors performing well and advertising banner volumes stabilising. In the Transport sector, sales to the trailer side curtain market developed well despite a lacklustre new truck market. The Building Products sector had a slow start to the year. Activity in the European semi-permanent building market was lower; however, the pipeline of projects for permanent structures is good and we anticipate positive developments for the remainder of the year. In the Leisure sector sales to boat and pool markets continue to suffer from reduced discretionary spending, particularly in Southern Europe.

Yarns

(Our Yarns division supplies yarns used in artificial turf installations and the manufacture of woven carpets)

Sales in the Yarns division grew by 14.7% on a constant-currency basis and enabled the division to record a small profit in the first half of the year compared to a small loss in the first half of last year. Volumes improved in both our artificial turf and carpet yarns activities. Early season demand in the artificial grass market was better than last year; however, pricing remained competitive. Greater operating efficiencies on both sites augmented the positive sales development and we are continuing to work on additional measures to improve performance.

Health & Safety

Following significant investments over the last two years, we are pleased to note that the Group improved health and safety performance and reached its key "time lost to accident" target one year ahead of schedule. Whilst there still remains much to do to embed outstanding health and safety management and culture across the Group, the progress already made has been significant.

Amortisation and non-recurring items

The charge for amortisation of acquired intangible assets was £2.8m in the period, compared with £3.0m in the first half of last year. During the period, the Group incurred £0.6m of non-recurring items, principally on setting up our joint venture in Saudi Arabia. In the six months to 31 May 2012, non-recurring costs of £0.3m were incurred, most of which related to the acquisition of XeroFlor International GmbH.

Increased dividend

To reflect the Board's continuing confidence in the Group's future, we are declaring an interim dividend of 0.85 pence per share, an increase of 6.3% on last year, payable on 26 September 2013 to shareholders registered on 30 August 2013.

Cash flow

Net debt, which is seasonally higher at the half year, increased to £106.8m from £82.6m at the start of the year. The increase also reflects bridging finance to our Saudi Arabian joint venture of £6.1m and additional inventories due to lower first half sales. We expect net debt at the year-end to be similar to last year with adverse foreign exchange movements being offset by cash generation. In comparison to last year, working capital efficiency was 27% compared to 23%.

Return on capital

The Group's operating return on capital on an annualised basis was 14.1% compared to 16.5% in the first half of last year. We expect return on capital will be close to 17% by year-end.

4 July 2013

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward looking statements". These forward looking statements can be identified by the use of forward looking terminology, including, but not limited to, the terms "believes", "estimates", "anticipates", "expects", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts.

By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity may differ materially from the impression created by the forward looking statements contained in this announcement. In addition, even if the results of operations, financial condition, and liquidity are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: changes in the competitive framework in which the Group operates and its ability to retain market share; the Group's ability to generate growth or profitable growth; the Group's ability to generate sufficient cash to service its debt; the Group's ability to control its capital expenditure and other costs; significant changes in exchange rates, interest rates and tax rates; significant technological and market changes; future business combinations or dispositions; and general local and global economic, political, business and market conditions. In light of these risks, uncertainties and assumptions, the events described in the forward looking statements in this announcement may not occur.

Other than in accordance with its legal or regulatory obligations, the Group does not undertake any obligation to update or revise publicly any forward looking statement, whether as a result of new information, future events or otherwise.

LOW & BONAR PLC

Condensed Consolidated Income Statement

LOW & BONAR PLC

Condensed Consolidated Balance Sheet

LOW & BONAR PLC

Condensed Consolidated Cash Flow Statement

LOW & BONAR PLC

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Changes in Equity

LOW & BONAR PLC

Notes on Interim Report 2013

Responsibility Statement

We confirm that to the best of our knowledge:

·; the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

·; the interim report includes a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

1. Segmental information for the six months ended 31 May 2013

For the purposes of management reporting to the chief operating decision maker, the Group is organised into three reportable operating divisions: Bonar, Technical Coated Fabrics and Yarns. Financial information for each operating division is also available in a disaggregated form in line with the identified cash generating units. Segment assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. The Group's reportable segments have changed to reflect the integration of the Group's principal Performance Technical Textiles operations into a single global business, Bonar, and comparative information has been restated on the same basis.

Unallocated items comprise mainly cash and cash equivalents, interest-bearing loans and borrowings, derivative assets and liabilities, post employment benefits, taxation balances and corporate assets and liabilities. Inter-segment sales are not material.

Segmental information for the six months ended 31 May 2012

Segmental information for the year ended 30 November 2012

Geographical information

Revenues arising in the UK, which is the parent company's country of domicile, were £10.7m (six months ended 31 May 2012: £11.8m; year ended 30 November 2012: £24.2m). The net book value of non-current assets located in the UK at 31 May 2013 was £2.8m (31 May 2012: £3.3m; 30 November 2012: £3.2m). More than 10% of the Group's revenues arose in Germany. The net book value of non-current assets located in Germany at 31 May 2013 was £89.0m (31 May 2012: £87.0m; 30 November 2012: £86.4m) and revenues arising in Germany in the period to 31 May 2013 were £31.0m (six months ended 31 May 2012: £31.7m; year ended 30 November 2012: £65.4m).

2. General information

Low & Bonar PLC is a company domiciled and incorporated in Scotland. The interim condensed consolidated financial statements (the 'interim financial statements') of the Company as at and for the six months ended 31 May 2013 comprise the Company and its subsidiaries (together the 'Group') and the Group's interests in its associates. The consolidated financial statements of the Group as at and for the year ended 30 November 2012 are available on request from the Company's head office or from the Group's website at www.lowandbonar.com.

3. Basis of preparation

The interim financial statements are prepared in accordance with IAS 34, 'Interim Financial Reporting', as endorsed and adopted for use in the European Union. This interim condensed consolidated financial information has not been audited or reviewed by the Group's auditors in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. The information has been prepared on the basis of accounting policies consistent with those applied in the consolidated financial statements for the year ended 30 November 2012, except as noted below.

The Group has adopted the Amendments to IAS 1 'Presentation of Financial Statements', which revised the way Other Comprehensive Income is presented.

The interim financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements for the Group as at and for the year ended 30 November 2012.

The comparative figures for the financial year ended 30 November 2012 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The financial statements are presented in Pounds Sterling, rounded to the nearest hundred thousand Pounds. They are prepared on the historical cost basis except for the valuation to fair value of certain financial instruments.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Except as described below, in preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation were the same as those applied to the consolidated financial statements as at and for the year ended 30 November 2012.

There have been no related party transactions or changes in related party transactions described in the latest annual report that could have a material effect on the financial position or performance of the Group in the first six months of the financial year.

The Group's business has a slight seasonal bias towards the second half of the financial year due to higher levels of infrastructure and civil engineering spend in the Northern hemisphere summer period.

This interim report was approved by the Board of Directors on 4 July 2013.

4. Taxation

Taxation on the operating profit after interest has been provided at a rate of 27% for the six months ended 31 May 2013 which is the estimated rate of tax for the full year (six months ended 31 May 2012: 27%; year ended 30 November 2012: 26%).

5. Dividend

The Board has declared an interim ordinary dividend of 0.85p per share payable on 26 September 2013 to Ordinary Shareholders on the register of members at close of business on 30 August 2013. In accordance with IAS 10 "Events after the Balance Sheet Date", this dividend has not been reflected in the interim accounts. During the period a final dividend of 1.6p was paid to Ordinary Shareholders in respect of the financial year ended 30 November 2012.

6. Earnings per share

Basic earnings per share and earnings per share before amortisation and non-recurring items are based on the weighted average number of Ordinary Shares in issue during the half year. The calculation of fully-diluted earnings per share is based on the weighted average number of Ordinary Shares in issue plus the dilutive effect of outstanding share options and the Low & Bonar 2003 Long-Term Incentive Plan (the '2003 LTIP') awards (to the extent to which performance criteria had been achieved at 31 May 2013).

During the period 4,831,846 ordinary shares were issued (six months ended 31 May 2012: no shares issued; year ended 30 November 2012: 20,501 ordinary shares issued).

The weighted average number of Ordinary Shares and diluted weighted average number of Ordinary Shares are set out below.

The directors consider that the calculation of earnings per share before amortisation and non-recurring items gives a more meaningful indication of the Group's underlying performance. For the six months ended 31 May 2013, this figure was 1.74p per share (six months ended 31 May 2012: 2.40p; year ended 30 November 2012: 6.28p).

7. Amortisation and non-recurring items

Current period

During the period the Group incurred £0.3m (six months ended 31 May 2012: £0.1m; year ended 30 November 2012: £0.2m) of initial costs in respect of Bonar Natpet LLC, its joint venture in Saudi Arabia; £0.1m (2012: £nil) in respect of setting up a sales and distribution office in China; and £0.2m (six months ended 31 May 2012: £nil; year ended 30 November 2012: £0.5m) of costs relating to the integration of the Group's principal Performance Technical Textile operations into a single business, Bonar.

Prior period

The Group incurred £0.7m of costs in the year ended 30 November 2012 (six months ended 31 May 2012: £0.2m) in connection with the acquisition of the trade and assets of Xero Flor International GmbH and in connection with another potential acquisition.

In the year ended 30 November 2012, an impairment charge of £11.2m (six months ended 31 May 2012: £nil) was recognised against the carrying value of the Yarns business, in response to deteriorating market conditions, of which £8.4m was allocated to goodwill and £2.8m was allocated to property, plant and equipment.

8. Pensions and other post employment assets and liabilities

The Group operates a number of pension schemes in the UK and overseas. These are either defined benefit or defined contribution in nature. The assets of the schemes are held separately from those of the Group.

The movement in the Group's UK and overseas defined benefit schemes' deficits in the six months ended 31 May 2013 is summarised below.

The actuarial gain in the period in respect of the UK schemes arose largely due to an increase in the level of returns from scheme assets.

9. Reconciliation of net cash flow to movement in net debt

10. Risks and uncertainties

The Board has considered the principal risks and uncertainties affecting the Group in the second half of the year. The Group has in place processes for identifying, evaluating and managing key risks. The principal risks and uncertainties, together with the approach to their mitigation, are discussed in the Business Review on pages 22 and 23 of the 2012 Annual Report, which is available on the Group's website at www.lowandbonar.com, remain relevant and there are no significant changes. In summary, the Group's principal risks and uncertainties are:

The Directors have reviewed the Group's medium-term forecasts along with possible changes in trading performance arising from these uncertainties to determine whether the Group's committed banking facilities are sufficient to support its projected liquidity requirements and whether the forecast earnings are sufficient to meet the covenants associated with its facilities. The Directors believe that the Group's current committed borrowing facilities, which comprise a €130m revolving loan facility maturing in February 2015 and a €45m private placement note maturing in September 2016 are sufficient to support the current requirements of the Group, and that the Group will continue to operate within the associated covenants.

After making enquiries, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future, and have continued to adopt the going concern basis in preparing the interim financial statements.